Legislature(2017 - 2018)HOUSE FINANCE 519
02/15/2018 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB79 | |
| HB38 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 38 | TELECONFERENCED | |
| += | HB 79 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 38
"An Act relating to the calculation and payment of
workers' compensation benefits in the case of
permanent partial impairment; relating to the
calculation and payment of workers' compensation death
benefits payable to a child of an employee where there
is no surviving spouse; relating to the calculation
and payment of workers' compensation death benefits
for an employee without a surviving spouse or child;
relating to notice of workers' compensation death
benefits; and providing for an effective date."
2:09:56 PM
Co-Chair Seaton commented that the bill had one committee
hearing during the prior session.
REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, provided a
refresher of the legislation. The bill had originated
because he had learned that a woman was killed in an
electrical accident at the workplace in Anchorage. She had
no dependents and was unmarried therefore, the workers'
compensation system only paid for her funeral expenses up
to $10 thousand. He indicated that it was against the law
for her estate to sue for wrongful death. He also
discovered that the formula for one-time payments for
permanent, partial disability had not increased since 2000.
He reported that he filed a similar bill in the 29th
legislature. The current bill had two prior hearings in the
House Labor and Commerce committee. He listed the
provisions in the bill. He explained that the bill
considered what the partial impairment rate should be in
2017 based on the established formula. He referenced
legislative research (copy on file) ["Impact of Inflation
on Statutory Compensation for Partial but Permanent
Impairment under the Alaska Workers' Compensation Act"
Legislative Research Services] that confirmed the
multiplier, based on inflation, would be $255.506 thousand
by degree of impairment of a bodily part. He exemplified
that the impairment of a shoulder would result in "x"
dollars based on the formula. He noted that Alaska was
somewhere in the range of 30 out of other states with a
current payment of $177 thousand. The provision included a
Consumer Price Index (CPI) feature, which was common in
other laws. He offered that Section 4 included a notice of
death benefits that provided more time for the family or
the estate of the deceased to understand their rights.
Section 5 provided a death benefit for the parents or
estate of the deceased.
2:13:42 PM
Representative Josephson provided an example. He
hypothesized that if and customer and worker were in an
elevator at a store and the elevator crashed killing both,
the worker in Alaska was entitled to a $10,000 funeral
expense and the customer's estate would be able to sue for
civil liability under Title 9. The bill provided a $70
thousand benefit that was bestowed to the surviving
parent(s) of the deceased or the estate if the parents were
deceased. He emphasized that the amount was not chosen
randomly. He accessed a research document that he had
corroborated with the National Conference of State
Legislatures (NCSL) work that showed in Minnesota the
amount was $60 thousand, in New York the amount was $50
thousand, and in Louisiana the amount was $75 thousand per
parent. He offered that many states employed a formula that
the number was derived from. Out of the states that
provided a whole number Louisiana was the most generous and
Alaska would fall in the 2nd or 3rd position at $70,000. He
believed that the merits were twofold. First, Alaska would
provide a death benefit to the estate. Secondly, the
provision acted as further incentive for the willingness of
an employer to ensure the safety of their workers. He
provided an example of a construction fatality last year in
Anchorage. The worker had no dependents or spouse and noted
that the incidents were not unusual. He furthered that in
relation to the death of the electrical worker, Abigail
Caudle, the Workers' Compensation Board issued a ruling
that there was nothing that could be done for her mother
and that the issue needed to be addressed via legislation.
Ms. Caudles mother, Marianne Burke understood that although
she would not receive any compensation she wanted her
daughter's tragic loss of life to mean something. He noted
that she hired the law office of Eric Chancy Croft and the
case was before the Alaska Supreme Court.
2:17:36 PM
Representative Neuman asked how a step child who had not
been legally adopted would fit into the picture.
Representative Josephson believed that the step-parent
would have to prove dependency. He read a section in
current law "if there was no widow or widower or child or
children then for the support of father, mother,
grandchildren, brothers, and sisters if dependent the
deceased at the time of injury?" [not cited] and surmised
that if an individual could prove dependency they would get
a benefit depending on the factors in each case like the
age of the deceased, etc. He exemplified a grandparent who
did not adopt the deceased grandchild, but dependency was
proven; a death benefit would be paid.
2:20:05 PM
Representative Neuman asked for the definition of how a
person would prove to be a dependent. He wondered if it
would be beneficial to have language defining dependency
included in the legislation. Representative Josephson
replied that he did not want to complicate the issue in
law. He explained that typically, in the absence of a rule,
the court created a logical test that included 3 or 4 major
elements and would consider elements like how long a
dependent lived with the deceased and whether they were
wholly reliant on the deceased. He stated the example was
prevalent in case law. He thought defining dependency would
become complicated and deduced that it existed in statute.
He clarified that he was not changing the system that was
already in statute. Representative Neuman thought it was
important to hear about the sponsor's intent. He had
personally dealt with the issue in the past, which was the
reason for his familiarity with the subject. Representative
Josephson referenced AS 23.30.215 relating to compensation
for death. He shared that case law relating to the statue
was included. He shared a case regarding "sole dependency
not condition of award" and stated the case was Employers
Liability Insurance Corporation versus Dole from 1966. He
indicated that an attorney would examine the statute since
it was still relevant law. He listed other cases regarding
dependency cited in statute and noted that the Supreme
Court had weighed in on prior cases relating to dependency.
2:24:24 PM
Representative Ortiz referenced testimony that Alaska
ranked 30th out of other states. He asked what category he
had been referencing. Representative Josephson replied that
according to DOL statistics the amount the state paid for
loss or injury to a body part placed Alaska in the 30th
ranking among states. Representative Ortiz asked whether
the state also ranked 30th for death benefits.
Representative Josephson answered in the negative. He
deduced that the state was "roughly on par with Minnesota
and New York." He relayed how Hawaii calculated its death
benefit. He reported that the formula was "25 percent of
312 times the effective maximum weekly death benefit rate
to the non-dependent parents." He offered that he was
perplexed by the formula. He believed that "fundamentally,
a life is a life." He wanted to dignify the lives of single
individuals without dependents. He commented that the
situation that Ms. Burke experienced by only receiving
funerary expenses was "profoundly hurtful and offensive."
He voiced that the issue was also what his bill "was
about."
2:27:12 PM
Representative Neuman referred to Ms. Burke's court case
mentioned earlier in the meeting. He wondered if passing
legislation could change the statute and affect the court
case. Representative Josephson believed the court would
rule based on existing law. He deferred the question to the
attorney representing the case.
ERIC CROFT, ATTORNEY, ANCHORAGE (via teleconference),
indicated that he was an amicus for Ms. Burke and her case.
He explained that she represented herself and appealed her
case to the Alaska Supreme Court. She lost previous cases
but one year ago the court issued an order and asked a
question. He read from the court order, "Under what
circumstances if any can the amount of benefits provided
under the Alaska Workers' Compensation Act be so low as to
deprive an injured worker or his beneficiaries of a
substantial remedy such that the statute violates a
workers' right to due process." He believed the court was
struggling with the concept that no benefit was given to a
category of workers. He delineated that when the Workers'
Compensation Act was implemented many years ago most 26
year old persons were married. Currently, approximately 80
percent of 26 year olds in the workforce were unmarried.
The problem exacerbated over time. He believed the courts
were "troubled" with not providing benefits to the category
of workers. He deduced that the courts were uncomfortable
with the results but also uncomfortable with "doing the
legislatures job" of "writing something into statute." He
thought they would welcome a fix to a problem they were
having difficulty solving.
2:31:41 PM
Co-Chair Seaton asked for clarification on Representative
Neuman's question.
Representative Neuman clarified that he was interested in
how the bill would impact the current court case.
Representative Josephson replied that the effective date of
HB 38 would change to January 1, 2019. The current law
would apply at the time of a ruling. He speculated that the
court may deny Ms. Burke's claim if the legislature
addressed the issue.
Representative Ortiz referenced a letter in members'
packets from the National Federation of Independent
Business (NFIB) [dated February 12, 2018] (copy on file)
and noted that according to the federation the state
remained the 5th highest at 145 percent of the median for
the workers compensation program in costs to employers. He
asked how much the bill would increase costs to employers.
Representative Josephson replied that opposition to the
bill was scarce. He pointed out the Division of Risk
Management, Department of Administration (DOA) indicated
that the workers would absorb some of the costs for the
state. The formula would spread the cost of $500 thousand
among 20 thousand state workers. He agreed the state's
workers compensation rates were higher because the state's
medical costs were much higher.
2:35:12 PM
Representative Wilson MOVED to ADOPT Amendment 1, 30-
LS0160\O.3 (Wallace, 4/20/17) (copy on file):
Page 1, line 1, following "Act":
Insert "relating to the exclusiveness of
liability of an employer in the case of
permanent partial impairment or death;"
Page 1, following line 10:
Insert a new bill section to read:
"* Sec. 2. AS 23.30.055 is repealed and reenacted to
read:
Sec. 23.30.055. Exclusiveness of liability. (a)
The liability of an employer prescribed in AS
23.30.045 is exclusive and in place of all other
liability of the employer and any fellow
employee to the employee, the employee's
legal representative, husband or wife, parents,
dependents, next of kin, and anyone otherwise
entitled to recover damages from the employer or
fellow employee at law or in admiralty on account
of the injury or death. The liability of the
employer is exclusive even if the employee's claim is
barred under AS 23.30.022.
(b) Notwithstanding (a) of this section, an injured
employee, or the employee's legal representative in
case death results from the injury, may
elect to claim compensation under this chapter or
to maintain an action against the employer at law or
in admiralty for damages on account of the injury or
death, if
(1) an employer fails to secure payment of
compensation as required by this chapter; or
(2) the injury to the employee results in permanent
partial impairment, permanent total disability, or
death and was caused by gross negligence of
the employer.
(c) In an action under (b) of this section, the
defendant may not plead as a defense that the
injury was caused by the negligence of a fellow
servant, or that the employee assumed the risk of
the employment, or that the injury was due to the
contributory negligence of the employee.
(d) In this section, "employer" includes, in
addition to the meaning given in AS 23.30.395, a
person who, under AS 23.30.045(a), is liable for or
potentially liable for securing payment of
compensation."
Renumber the following bill sections accordingly.
Vice-Chair Gara OBJECTED for discussion.
Representative Wilson explained the amendment. She
emphasized that there was a difference between an accident
and negligence; the employer had received violations. She
recalled that the death of Abigail Caudle "probably did
not have to happen." She reiterated that the survivors had
no right to sue. She explained that her amendment would
apply to page 1, lines 21 through 23 of the legislation and
inserted the following language:
(2) the injury to the employee results in permanent
partial impairment, permanent total disability, or
death and was caused by gross negligence of
the employer.
Representative Wilson elaborated that gross negligence was
a much higher standard than just an accident. She opined
that if a child was lost to an employer who received
violations and ignored them causing the death of the child
the survivors should have the option to sue. She believed
that the law was unfair and that an accident and a
preventable incident resulting in death were not on the
same level.
Vice-Chair Gara wanted to understand the amendment. He
provided his understanding of the workers' compensation
system and characterized it as a no-fault system. The
injured worker received less compensation than in a civil
lawsuit but did not have to prove employer negligence. He
asked how the amendment would change the balance.
Representative Wilson understood that the amendment did not
change the balance at all. She detailed that the employee
or survivors could opt for the existing process but once
they chose to engage in a civil lawsuit the court ruling
stood even if the workers' compensation system would have
awarded more. She emphasized that gross negligence had to
be proven.
2:38:19 PM
Vice-Chair Gara stated that generally negligence did not
have to be proven in the workers' compensation system and
the worker received less compensation as a tradeoff. He
emphasized that workers compensation was the only remedy.
He did not understand what the amendment did. He wondered
why gross negligence was being proposed for a no fault
system. Representative Wilson agreed that currently the
system was a no fault system. She explained that if the
worker or survivor knew the injury or death was caused by
gross negligence the amendment would provide the
opportunity to engage in a lawsuit. The bill offered the
option to choose civil law or the no fault system. She
opined that gross negligence could be proven in many cases.
It was her understanding that in the story brought by
Representative Josephson the employer received many
violations that were ignored and resulted in the death of
the worker.
Co-Chair Seaton asked about gross negligence, which he
believed was determined at the court level. He stated it
was not determined prior to a court proceeding. He was
trying to understand if he was missing something.
Representative Wilson replied that her intent was ensuring
the spouse or family received "the full value of what they
had" if a company could have possibly prevented a worker's
death. She voiced that she was not an attorney and was
dependent on legal advice.
2:42:11 PM
Representative Josephson believed that some employers and
business owners may be concerned by the amendment. He
stated the amendment would leave employers exposed to all
Title 9 [Code of Civil Procedure] remedies. He was
concerned about who would pay for the injured worker's
medical care while the court case was proceeding that could
take a year or more for a resolution.
MARIE MARX, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, stated her
understanding of the question related to the amendment's
impact to the. She answered that it would allow the injured
worker to recover in court for gross negligence which would
provide full and just compensation. However, the workers'
compensation system was a "social contract? founded on the
bargain" of limited quick prompt benefits in exchange for
forfeiting the right to sue their employer. She described
the bargain as the "underpinning of our whole system." She
shared that the system had been put in place during the
Industrial Revolution to protect workers who often lost and
received nothing in court and to protect employers from
being put out of business from very large court awards.
The amendment would implement a completely different system
and remove the benefit of the bargain for employers. She
emphasized that the employers benefit of the bargain would
be reduced, which was a concern. She offered that most
states allowed tort suits for "intentional conduct." The
exemption did remove the party from the workers'
compensation system. She could not find any states that
allowed a worker to sue for gross negligence. She
questioned how the lawsuit would work procedurally and
administratively for the system.
2:46:37 PM
Representative Wilson understood the no-fault system. She
stated that in both cases; a company that ensured worker's
safety and a company where repeated violations were
ignored, and a worker died, were treated the same in the
workers' compensation system. She asked if she was correct
to state that in both cases the monetary compensation was
the same. Ms. Marx answered in the affirmative. The Alaska
Supreme Court had decided that to take oneself out of the
workers' compensation system there had to be an intent to
harm; gross negligence did not remove the employer from the
system. Workers' Compensation was a no-fault system. The
issues of work place safety were addressed through the
Division of Occupational Safety and Health and may
separately offer mechanisms to address workplace safety
issues. She summarized that the workers' compensation
system was a no-fault system unless there was clear intent
to harm.
Representative Pruitt asked whether currently if an
individual elected not to go through workers' compensation
the person could sue. Ms. Marx answered in the negative.
She clarified that currently "it was an exclusive remedy;
both parties must proceed through the workers' compensation
system unless the employer failed to carry workers'
compensation, which was required by law.
2:49:02 PM
Representative Guttenberg asked how far the amendment would
walk away from the exclusive remedy and the no-fault
system. He wondered about degrading the system and the
social compact if the amendment was adopted whereby,
workers' compensation would not be the exclusive remedy any
longer and everyone had to prove gross negligence. He
imagined a scenario where an employer denied remedies for
everything and the worker had to engage in lawsuits for
everything; the exclusive remedy was gone, and the system
was broken due to the amendment. He asked for comment. Ms.
Marx answered that it may be because of the issues
Representative Guttenberg mentioned that Alaska and other
state's Supreme Courts had drawn a bright line between
nonintentional conduct and intent to harm. She surmised
that the reason may be that once the bargain was chipped
away at the underpinning of the workers' compensation
system began to erode. Allowing an employee to elect a
remedy deprived the employer the benefit of the bargain;
the employer was not sued in exchange for prompt benefits.
Representative Guttenberg agreed that the employer did not
get sued, but the employee was not made whole. Ms. Marx
affirmed that his statement was the crux of the social
contract.
2:52:12 PM
Co-Chair Seaton referenced Amendment 1. He provided a
scenario of someone who received workers' compensation and
subsequently sued and received a remedy from the court. He
wondered if the individual would have to repay the workers'
compensation system. Representative Wilson stated it was
her understanding that a person could choose one or the
other but not both and could not choose worker's
compensation once the court proceedings began and could not
sue once workers' compensation was chosen. She understood
the system was a compromise. She was concerned that the
current system did not seem fair in gross negligence cases.
She WITHDREW Amendment 1.
2:55:08 PM
Vice-Chair Gara MOVED to ADOPT Amendment 2, 30-LS0160\R.2
(Wallace, 2/15/18) (copy on file):
Page 4, line 8:
Delete "2018"
Insert "2019"
Co-Chair Seaton explained the amendment. He indicated that
the amendment changed the effective date of the bill
because it was offered in the prior session.
There being NO OBJECTION, it was so ordered.
2:56:49 PM
Representative Neuman knew of companies that were
financially stable and could be self-insured. He asked how
the workers' compensation system addressed self-insured
companies. Ms. Marx replied that the state was a self-
insured employer. She explained that the Workers'
Compensation Act applied to employers but in practice
either the insurance company paid benefits or self-insured
employers paid the benefits directly. The benefit due by an
employer was paid by either the insurance company who
represented the employer or the self-insured employer paid
the benefit directly.
SCOTT JORDAN, DIRECTOR, DIVISION OF RISK MANAGEMENT,
DEPARTMENT OF ADMINISTRATION, agreed with Ms. Marx's
statements.
Representative Neuman related a story from personal
experience of a constituent who worked for a self-insured
employer and was injured and could not work for the rest of
his life; his ability to get compensation was limited
because the business was self- insured. He questioned his
recollection. Mr. Jordan asked whether the individual was
an employee of the company. Representative Neuman answered
that the person was an employee. Ms. Marx answered that the
limits on benefits and the restrictions on lawsuits were
the same regardless of whether the employer was self-
insured or was represented by its insurance company. She
delineated that if Representative Neuman's constituent was
an employee of a self-insured company the benefits would
flow through the Worker's Compensation Act. She deduced
that it sounded like the person may have been an
independent contractor. Independent contractors were not
eligible for workers' compensation benefits. Representative
Neuman relayed that some employers were firing their
employees and asking them to return as an independent
contractor due to high insurance rates in Alaska.
3:02:05 PM
Co-Chair Seaton stated that a question that had arisen in
the discussion was whether there was not an impetus for
employers to have a safe work environment. He asked if
everyone paid the same for the workers' compensation
insurance. He wondered if some businesses had to pay higher
workers' compensation rates if they had a claims history
due to an unsafe work environment. Ms. Marx answered that
"generally yes." She elaborated that workers' compensation
premiums were approved by the Alaska Division of Insurance.
The premiums began with a base rate and increased in terms
of risk, employer experience, size of payroll, and other
considerations. The amount could be increased or decreased
and varied by employer.
Representative Wilson asked whether building code or other
violations especially when an employee did sustain an
injury impacted the workers' compensation rate. She had
heard of cases where Occupational Safety and Health
Administration (OSHA) cited employers for unsafe
conditions.
3:04:19 PM
Ms. Marx deferred to the Division of Insurance that was
responsible for setting the rates. She relayed that in
addition, the National Council on Compensation Insurance
proposed rates to the division and regulated disputes over
rates. She understood that the experience of the employer,
which included its injury history was taken into
consideration. She deferred to the division for details.
HB 38 was HEARD and HELD in committee for further
consideration.
Co-Chair Seaton reviewed the schedule for the following
day.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB038 Supporting Document - FY19 DRM WC Projections with HB38 PPI Cost Increase Estimate 2.12.18.pdf |
HFIN 2/15/2018 1:30:00 PM |
HB 38 |
| HB 79 CS version R.pdf |
HFIN 2/15/2018 1:30:00 PM |
HB 79 |
| HB 38 Rep Josephson WC HFC Oppose ltr.pdf |
HFIN 2/15/2018 1:30:00 PM |
HB 38 |
| HB 79 - Changes from version U to version R.pdf |
HFIN 2/15/2018 1:30:00 PM |
HB 79 |
| HB 38 amendments #1 and #2.pdf |
HFIN 2/15/2018 1:30:00 PM |
HB 38 |
| HB 79 -Amendment #1.pdf |
HFIN 2/15/2018 1:30:00 PM |
HB 79 |