Legislature(2023 - 2024)BARNES 124
02/02/2024 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB147 | |
| HB186 | |
| HB192 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 251 | TELECONFERENCED | |
| *+ | HB 237 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| *+ | HB 147 | TELECONFERENCED | |
| += | HB 192 | TELECONFERENCED | |
| + | SB 37 | TELECONFERENCED | |
| += | HB 186 | TELECONFERENCED | |
HB 186-VOLUNTEER LABOR COMPLIANCE OFFICER PRGM
3:49:37 PM
CHAIR SUMNER announced that the next order of business would be
HOUSE BILL NO. 186, "An Act relating to volunteer labor
compliance officers; and providing for an effective date."
3:49:56 PM
ALICIA MALTBY, President, Alaska Building Contractors Alaska,
read her written testimony in opposition to HB 186 [included in
committee packet], which read as follows [original punctuation
provided]:
Associated Builders and Contractors of Alaska ("ABC"}
is the voice of the Alaska construction industry,
advocating the ideals of free enterprise, developing
training for the workforce, and providing contractors
the resources required to compete in the ever-changing
environment.
ABC opposes House Bill 186 "An Act relating to
volunteer labor compliance officers".
ABC supports enforcement of Alaska's labor laws but
while we may have a common goal to ensure compliance
the solution contained in House Bill 186 is the wrong
approach and would set a dangerous precedent for
enforcement of Alaska laws and regulations.
Enforcement of Alaska labor laws and regulations often
requires site visits to private property, private
businesses and place the investigator on construction
sites. These types of activities should be the
responsibility of trained public employees, who should
not have any conflicts of interest, while operating
under Alaska ethics laws where the State can be held
responsible for their actions.
While HB 186 deals with construction the underlying
premise would support expansion to other agencies
where complaints arise of inadequate enforcement
allowing citizen investigators in a myriad of sectors
such as the Alaska Public Offices Commission or food
safety inspectors of restaurants. Simply put, the bill
seems to indict the Department of Labor and the
current Administration as failing to do their job in
enforcing state labor laws and regulations. The
solution proposed would have privately paid
"investigators" stepping in to do the Department's
work. We believe a better path would be to better
identify and define problems, if any, and work with
the Department to ensure they have the tools necessary
to do their job.
With regard to this bill, when looking at the
information from the Department of Labor there does
not seem to be a significant issue that justifies such
a radical approach to change current enforcement
programs, but ABC is willing to engage and collaborate
with stakeholders to further understand any potential
issues.
With regard to specific concerns, we offer the
following preliminary thoughts:
- While the bill prohibits investigators from having a
conflict of interest there is no definition of what a
conflict is. This should be defined in great detail
and not left for regulations. Would a union employee
investigating a nonunion contractor have an inherent
conflict of interest? Alaskans should know before
passing the bill what is intended within the context
of "conflict of interest." Additionally, there should
be some public disclosure of the " investigator's"
personal interests such as who they have worked for,
if they own a business in construction, and who is
paying them to be an "investigator."
- The bill inadequately addresses liability. Who will be
liable for any accidents or injuries that are a result
of the "investigators" on site activities? Will it be
the investigator personally or the entity paying the
"investigator"? How much liability coverage will they
be required to cover?
- The bill is insufficient in how it deals with
conflicts of interest. By simply removing the person
from having authority to continue investigating, this
leaves little to no deterrence for malfeasance or
holds anyone accountable for any actions of the
"volunteers." At a minimum, investigating a private
business with a conflict of interest should be a
crime. Who will manage the complaints over conflicts
of interest? If the underlying concern is the
Department does not have the resources to investigate
labor violations, how would they have the resources to
investigate conflicts of interest or other complaints?
What type of due process procedure is envisioned to
deal with complaints? One suggestion would be to add
"volunteer" citizen hearing officers/investigators to
the bill to investigate the investigators?
- We do not understand the prohibition on an employee of
the State taking leave and "volunteering" to be an
investigator. What is the rationale for excluding
state employees?
Enforcement of State of Alaska laws and regulations is
the sole responsibility of the State. When the full
power and authority of the State of Alaska is behind
individuals performing said enforcement, those
individuals should have the same consequences for
improprieties than any other State of Alaska employee
has. In short ABC of Alaska feels strongly that any
labor compliance should be performed by the State of
Alaska, and volunteers would not be appropriate or
suitable to perform these duties.
ABC is willing to collaborate with you and the
legislature to better define any problems with
enforcement and if any exist ensure the Department of
Labor has the tools to solve those problems but cannot
support the radical idea to delegate such an important
responsibility to "volunteers."
We do appreciate your interest in seeing Alaska's
labor laws and regulations enforced and Alaska
businesses and workers being protected. We look
forward to further engagement and collaborating with
you on this matter.
3:56:15 PM
TANYA KEITH, Director, Division of Labor Standards and Safety,
Department of Labor and Workforce Development (DLWD), said she
is present to take questions.
3:56:35 PM
REPRESENTATIVE FIELDS offered his understanding that there has
been declining staffing in Departments of Labor across the
country. He asked Ms. Keith how she would characterize DLWD'S
approach to standards and safety.
MS. KEITH answered that the department uses a strategic
approach, with 10 to 12 investigators across the state; it
covers 21,000 businesses in the state, as well as the 2,400
public projects that have been started since 2021.
REPRESENTATIVE FIELDS asked how the department looks at
staffing, whether it's per man hour, per a certain number of
dollars in the industry. He asked whether industries with
higher union density have more complaints.
MS. KEITH responded that investigations are prioritized through
complaints received; the department's authority of enforcement
is tied to an assignment received from an employee. She said
that union representation doesn't necessarily correlate into
more complaints. She explained that job sites with unions
typically have a person who advocates for the employees, and in
some cases, takes care of issues before they come to the office.
She said the division receive many complaints from low-wage
workers because they have no other avenue of recourse.
4:00:09 PM
REPRESENTATIVE PRAX asked whether the state has people that just
monitor complaints.
MS. KEITH answered yes, most agencies that have contracts do
have project managers who oversee projects.
REPRESENTATIVE PRAX inquired about grant agencies and whether,
if they are operating under a grant or contract with the state,
the state would audit those companies as it relates to wage and
hour and job safety.
MS. KEITH explained that only public construction is audited
regularly. She shared that some industries, like assisted
living, are subject to licensing requirements; many reports of
violations in that industry come from other state agencies that
monitor the industry.
4:02:29 PM
REPRESENTATIVE SADDLER asked where else the department looks for
volunteers to enforce labor standards and safety and whether
there are regulations allowing people to report an unsafe or
illegal labor practice they witnessed.
MS. KEITH stated that the department does not have volunteers
who enforce labor laws. She said it takes tips or calls from
anybody on a job site that sees an issue. In response to a
follow-up question regarding what is typically reported in tips
and how many, she said the department gets calls everyday. She
explained that if someone is having issues with their employer,
it usually isn't limited to just their pay. If the complaint
deals with another department, the complaint is referred to the
other department. She listed the sorts of tips they get,
including no final paycheck, unsafe work practices, and
harassment.
REPRESENTATIVE SADDLER pointed out that testifiers said they
don't see a need for this legislation. He asked if the proposed
volunteer program would be helpful in improving compliance with
labor practice laws.
MS. KEITH stated that she has no opinion.
4:05:11 PM
CHAIR SUMNER asked how the department would process a labor law
violation report from a third-party non-employee.
MS. KEITH explained that, based on how egregious the violation
was, there are several steps the department could take. She
said those steps include calling the employer, sending a letter
notifying them about the issue, informing them on what the laws
are, and going to site visits, which could lead to an
investigation.
CHAIR SUMNER asked whether it is department policy to only
respond to employee complaints.
MS. KEITH answered no, it is not policy to only respond to
employee complaints. She commented that third party information
is taken and considered, but investigations cannot begin from a
third-party report because enforcement comes from investigating
complaints. To take court action, there needs to be an
assignment from the employee.
4:07:31 PM
REPRESENTATIVE FIELDS asked about wage theft, as well as which
groups of employees are less aware of their labor rights.
MS. KEITH answered that Alaska law does not define wage theft,
but many employees don't receive a final paycheck, for example.
She explained issues that DLWD finds, like an employer not aware
of overtime laws, or another that didn't pay based on the wage
rate they promised to the employee. She said many reports are
from immigrants who are not aware of their rights.
4:10:37 PM
REPRESENTATIVE PRAX offered his understanding that employers,
union shops, and merit shops, as examples, would be quick in
addressing a contractual problem. He said the previous
testimony made it sound like the state was getting involved in
the contractual relationship between employer and employee. He
asked whether the state should be involved in contractual
violations, as opposed to state labor law.
MS. KEITH responded that the department does not get involved in
labor issues or contracts. She explained that, when a public
construction site is investigated, DLWD verifies that all
employees and contractors are getting paid the prevailing wage
for the classification of work they are doing; on a private
construction site, the department enforces wage and hour laws,
which requires that employes are paid minimum wage and overtime
for all of the hours they are working.
4:13:04 PM
CHAIR SUMNER asked how labor laws are enforced with out-of-state
employees.
MS. KEITH answered that it is the same with Alaska employers.
Upon notification of an awarded contract, the department ensures
receipt of notice of work from the contractors, determines
whether they have current licensure, and provides education the
employee might need.
CHAIR SUMNER sought clarification as to whether it is the
position of DLWD that Alaska labor laws do not apply to out-of-
state contractors.
MS. KEITH answered no, all employees working in the state of
Alaska are subject to labor laws. She stated that the location
of the employer makes no difference, as the department routinely
does investigations into businesses that are out of state.
4:14:30 PM
REPRESENTATIVE SADDLER questioned the need to deputize labor
compliance officers.
MS. KEITH commented that the department is not receiving a
significant number of complaints about public projects. She
explained that staff within the wage and hour division audits
certified payroll and catches issues. In response to a follow-
up question regarding private construction projects, she said
the department is not receiving a significant number of
complaints in that area either. She pointed out that in 2023,
one public construction complaint and 11 private construction
complaints were filed.
4:16:36 PM
The committee took an at-ease from 4:16 p.m. to 4:22 p.m.
4:21:52 PM
BRONSON FRYE, President, Alaska Local 1959, stated that he is
testifying in support of HB 186. He explained the bidding
process as the summation of four categories: the materials, the
overhead, the profit, and the labor. Material costs are the
same for everyone, as is overhead and profit, but labor is
variable. He said the construction industry is faced with an
issue where whoever can reduce labor costs, whether through
honest or dishonest means, is often rewarded by getting the job.
He stressed that wage theft is real in Alaska, and that the
easiest employee to fall victim to wage theft are those who are
already victims of human trafficking. Another example is when
an employer requires that each employee get a business license
and self-perform the work as an independent contractor; this
makes it so the employer is no longer required to provide
worker's compensation, which in the construction industry is
typically about 30 percent of labor costs. He pointed out a
combination of employee misclassification, wage theft, no
overtime, and victimizing those being human trafficked;
contractors are incentivized to adopt dishonest business models
and are awarded for doing such. He commented that he is
mystified as to why the Associated Builders and Contractors are
not in full support of the bill, since their mission is to help
qualified and responsible low bidders with an emphasis on
honesty and fairness. He stated that the reality is that the
responsible, honest contractors are the ones being cheated out
of the opportunities to do the jobs. He offered that a
contractor would be happy to support something that prevented
dishonest employers from gaming the system. He detailed that an
employee who is being trafficked is disincentivized from self-
reporting to the department due to the fear of retaliation. He
said honest contractors are being cheated, and dishonest
contractors are incentivized to adopt unscrupulous business
models. He stated that it is reasonable that the state takes
the position that there would be utility in a voluntary
compliance officer program, like the one proposed in the bill.
He stressed that there will be $4 billion to $6 billion of
construction work coming to Alaska over the next decade, and
that the state should not be a place that rewards cheating,
dishonest, and unscrupulous contractors that victimize
employees.
4:28:23 PM
REPRESENTATIVE PRAX noted that there are contractors that work
on small and big projects. He asked whether the practices Mr.
Frye referred to are prevalent in small, medium, or large-scale
projects.
MR. FRYE answered, "All of them." He shared that he has
recently been on small, medium, and large projects and has seen
it.
REPRESENTATIVE PRAX offered his understanding that, in using the
term "prevailing wage," a condition of the contract would be
that the employer would pay whatever the prevailing wage might
be. He asked if Mr. Frye is talking about projects that are
under written contract that pay a prevailing wage until it's
found out that they are not.
MR. FRYE explained that when an employee becomes a self-
contractor, the main business does not have them listed for a
prevailing wage. He detailed a hypothetical: while there may be
five drywall painters on a site, certified payroll only shows
one person. He stressed that dishonest employers are gaming the
system.
REPRESENTATIVE PRAX asked Mr. Frye if he had personally
witnessed what he is alleging.
MR. FRYE answered, "Yes, all over the state."
REPRESENTATIVE PRAX suggested that this issue would be something
that the union handles. He asked if Mr. Frye works with the
union.
MR. FRYE confirmed that he works for the union, and that the
projects he referred to were open bid with both union and non-
union workers on them.
REPRESENTATIVE PRAX offered that if a person is working on a
union contract, it would seem to be the job of the union to
represent their members. He asked why the union is not
representing their members.
MR. FRYE answered that he is a union organizer, and that his job
is to talk to workers. He stressed that he is testifying on
authority and with certainty regarding what is going on.
4:33:56 PM
REPRESENTATIVE CARRICK said the bill as written would allow a
current construction worker to be a voluntary compliance
officer. She asked about people that work for a company's
competitor on a project.
MR. FRYE responded that owners of construction companies are
mindful of their budget, and so he cannot imagine a company
investing in going around and abusing the proposed compliance
officer. He stated that he does not believe that would be an
issue.
REPRESENTATIVE CARRICK pointed out that the bill also requires
construction experience in order to be a volunteer compliance
officer. She asked if there is a pool of former construction
people, not currently employed, who can volunteer for the
position.
MR. FRYE answered that there are many industry groups that want
to see honest employers do good. He said it is fair to expect a
pool of people that'll step up.
4:36:16 PM
REPRESENTATIVE PRAX said Mr. Frye must be getting his info from
non-union job sites. He asked how he gets on these job sites.
MR. FRYE stated that he's not a union contractor, he's a union
organizer. He said it is easy to find construction workers and
talk to them about such information.
4:37:19 PM
REPRESENTATIVE SADDLER pointed out that DLWD says there is not a
problem, and that total wage claims have reduced from 250 to 50
since 2018.
MR. FRYE answered that there is a lot of ground to cover with
only just 12 investigators. He highlighted that most wage theft
victims are disincentivized from self-reporting for fear of
retaliation.
REPRESENTATIVE SADDLER asked about employees being independent
contractors, and asked if this bill would solve that.
MR. FRYE responded yes, and that it would be done by asking if
each individual employee is covered by a worker's compensation
policy. He said most of the time, workers are not covered; once
an employer classifies the worker as an independent contractor,
the employer is no longer responsible for worker's compensation
premiums.
4:39:51 PM
MATT CAPECE, Representative of the General President, United
Brotherhood, Carpenters and Joiners of America, read his written
testimony on HB 186 [included in committee packet], which read
as follows [original punctuation provided]:
Dear Representative Sumner,
I am writing on behalf of the United Brotherhood of
Carpenters and Joiners of America ("UBC") to give our
support for House Bill 186, An Act Relating to
Volunteer Labor Compliance Officers.
The focus of my work for the UBC is on the growing
problem of illegal employment practices in the
construction industry. My work on the topic began in
1989 when I was associate general counsel for my local
carpenters' union in Connecticut. Since then I was
hired by the UBC, which has put me in the position of
witnessing the spread of illicit and immoral
employment practices throughout the country that harm
workers, responsible construction businesses and
taxpayers.
The illicit and immoral employment practices in our
industry sadly do not stop at tax fraud, wage theft
and workers' compensation premium fraud. They also
include labor trafficking, child labor, mail fraud,
wire fraud, immigration-law violations, money
laundering and racketeering.
In one outrageous case in Minnesota, a subcontract
labor provider, Ricardo Batres, was sent to jail for
labor trafficking and employer workers' compensation
premium fraud. He kept his construction workers packed
in living quarters without hot running water. Whenever
his workers complained about their housing and unsafe
working conditions, he threatened to call immigration
authorities to keep them quiet. Those unsafe working
conditions resulted in one of his workers suffering a
broken back. Batres' response was to insist that he be
brought to a massage therapist.
Conditions in our industry have become so alarming
that the U.S. Department of the Treasury's Financial
Crimes Enforcement Network ("FinCEN") has issued a
notice to banks, money service businesses and other
financial institutions requiring them to report the
suspicious transactions of their construction account
holders. In its notice, FinCEN wrote:
The Financial Crimes Enforcement Network (FinCEN) is
issuing this Notice to call financial institutions'
attention to what law enforcement has identified as a
concerning increase in state and federal payroll tax
evasion and workers' compensation insurance fraud in
the U.S. residential and commercial real estate
construction industries.
Every year across the United States, state and federal
tax authorities lose hundreds of millions of dollars
to these schemes, which are perpetrated by illicit
actors primarily through banks and check cashers. As
described in this Notice, many payroll tax evasion and
workers' compensation fraud schemes involve networks
of individuals and the use of shell companies and
fraudulent documents. These schemes further affect the
local and national construction job markets, and put
legitimate construction contractors and their
employees at a competitive disadvantage.
By now you may have been made aware of the data on
illegal practices in our industry nationally and in
Alaska, so please bear with me as I summarize here.
Nationally, up to 2.1 million construction workers, or
19 percent, are either misclassified as independent
contractors or paid off the books.5 Those are
conservative estimates. State and federal tax losses
amount to $10 billion. Construction workers suffer
$1.9 billion of wage theft, and workers' compensation
insurers lose $5 billion a year to employer premium
fraud. To add insult to injury, working families
suffer a $5.1 billion tax increase, because crooked
contractors foist the employment taxes they should be
paying onto the backs of their workers. Nationally,
this race to the bottom has led to 39 percent of
construction worker families relying on some form of
public assistance to make ends meet, costing state and
federal taxpayers $28 billion a year.6 It is no wonder
that under these conditions the industry is having
difficulty attracting and retaining a skilled
workforce.
In Alaska, up to 19.2 percent of the construction
workforce is either misclassified as independent
contractors or paid off the books.7 The workers suffer
$4.7 million in wage theft a year and the state is
losing $5.8 million a year in unpaid unemployment
insurance contributions, and the offloading of
employment-tax obligations result in Alaska
construction workers having their taxes increased by
$12.9 million. Unpaid workers compensation premiums
are $12.4 million. You can bet that workers'
compensation insurers are passing along those fraud
losses to honest construction employers who then see
their premiums go up, making them less competitive
against the cheaters.
How did things get this bad? There are a combination
of factors, chief among them include a marketplace
favoring the lower bids of the crooks, workers'
compensation insurer practices that enable fraud,
failed immigration laws, the industry's adoption of a
labor provider (whom we call "labor brokers") fraud
model that protects upper-tier contractors from
liability, the absence of accountability for upper-
tier contractors that use law-breaking labor brokers,
the underfunding of law enforcement, the industry
giving up on self policing, and the lack of knowledge
and understanding of the construction industry and the
severity of the problem.
This now brings us to our support of House Bill 186.
The bill wisely improves the state's enforcement
capabilities at little cost. The fiscal notes on the
legislation put the yearly cost at $464.6 thousand a
year. This is far less, for instance, than the $5.8
lost to the state unemployment trust fund and the $4.7
million in wage theft. The volunteer compliance
officers will be trained by the Department of Labor
and Workforce Development ("DLWD"). The legislation
includes safeguards that ensure the impartiality and
professional conduct of the volunteers. The volunteers
will not be issuing citations-they will serve as a
vanguard, reporting suspected violations of state
labor law to DLWD who can conduct further
investigations that can lead to citations. The
volunteers amount to a much-needed force multiplier
for DLWD, thus improving law enforcement capabilities
for the construction industry, especially when DLWD
uses volunteers with industry expertise. This checks
many of the boxes needed to improve compliance with
state employment, tax, and anti-labor trafficking
laws.
The UBC and it [sic] affiliates simply seek a level
playing field for all law-abiding construction
employers and a ticket to the middle class for the men
and woman who do the hard work. HB 186 assists in
getting there. For these reasons we support the
legislation and urge its adoption.
4:48:29 PM
REPRESENTATIVE PRAX noted that there may be competing companies
that seek to suppress competition. He asked how conflict of
interest is defined in other states.
MR. CAPECE answered that, in the construction industry, the
marketplace is favoring employers who cheat; there's a
suppression of business for law-abiding employers. He said that
law-abiding employers need protection from cheating competitors.
He said he cannot answer the conflict-of-interest question, but
pointed out that the bill provides for people to be trained by
DLWD on how to act professionally, and how to not benefit any
one person or entity. He said the volunteers would be "eyes and
ears," as they are not issuing citations; whatever they see,
they will report to DWLD, who will handle the investigation and
issue citations.
4:51:10 PM
REPRESENTATIVE FIELDS said there are many worker advocacy
groups. He asked where immigrant advocacy groups are.
MR. CAPECE commented that in every state there are going to be
low-wage employee advocacy/protection groups. He shared an
anecdote about such a group in Minnesota.
4:52:50 PM
CHAIR SUMNER announced that HB 186 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB192 Letter of Support - Uber Eats.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |
| AK HB 192 - letter of support FINAL.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |
| DOLWD HB 186 Response.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 186 |
| HB 147 I am oppossed to the non-payment for the license..docx |
HL&C 2/2/2024 3:15:00 PM |
HB 147 |
| HB192 Support Letter HLC 2-13-24.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |
| HB192 Amendments Updated.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |