Legislature(2003 - 2004)
04/29/2003 01:37 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CSHB 214(JUD)-PUNITIVE DAMAGES AGAINST EMPLOYERS
CHAIR BUNDE announced CSHB 214(JUD) to be up for consideration.
REPRESENTATIVE RALPH SAMUELS, sponsor of HB 214, said this bill
adds a section to the punitive damages statute that would create
a guideline for damages against an employer under vicarious
liability. It stipulates that an employer shall not be
responsible for paying punitive damages unless the employer
okays the act or knew about it later or that the employer knew
the employee to be unfit and recklessly employed them. One
example would be a construction company owner that requires drug
testing and training and specifically tells his employee that he
cannot drive the forklift or truck because the employee has not
been trained. If the employee does so anyway and someone gets
injured, then the company should still be on the hook for
compensatory damages to pay for the pain and suffering, but the
company should not be punished if it has not done anything
wrong. Their policies would not be changed and the punitive
damage factor should not apply.
REPRESENTATIVE SAMUELS explained that the bill does not affect
any portion of the law with respect to direct liability. If the
company, itself, does something wrong, the current law would
apply and this does nothing to change that. It does not affect
the ability of the plaintiff to get compensatory damages. The
language came almost word for word from a restatement of tort,
which is an amalgamation of case law from across the country.
The standard also comes from the Laidlaw Case, heard before the
Supreme Court, which commented if this had been brought up at a
trial, it would have ruled with language that is in the case
right now.
MR. STEVEN CONN, AkPIRG, cautioned against passage of this bill
because although a small employer would deserve immunization
from punitive damages in that particular instance, the only way
to motivate larger corporations is with punitive damages.
Hopefully, a message will be sent to big companies to tighten up
and improve their hiring and training practices. He opposed the
bill for its broad reach and asked them to trust civil juries.
MS. MARSHA DAVIS, General Counsel, Era Aviation, said the Exxon
Valdez punitive damages issue had been raised in the House Labor
and Commerce committee and the actual issues had been pretty
well clarified there. The $5 billion in punitive damages that is
being batted around in court right now was a direct assessment
against Exxon, therefore this bill would not touch that. This
bill does not affect employers' direct liability for their
compensatory damages or direct liability. What would be at stake
would be the $5,000 in punitive damages that was assessed
against Mr. Hazelwood and the question is would Exxon, in
addition, be vicariously liable for that $5,000. The issue of
big versus small is also a red herring. She told members:
The size of the employer isn't the issue; it's whether
or not an employer should be held strictly liable for
punitive damages assessed against their employee.
While the punitive damages are intended to motivate a
change in behavior, then it does no good to make
strict liability, because you have disconnected the
employer's behavior from the liability outcome. Only
where the employer's behavior affects the outcome of
that liability do you have a motivation. For example,
at Era Aviation, we do our best to make sure that
employees are screened for drug and alcohol usage
problems. We do drug and alcohol testing on a pre-hire
basis. We do required random testing at a set
percentage established by the FAA regulations. We also
have a right to do for cause drug and alcohol testing
anywhere we have suspicions of abuse. We do annual
training of all supervisors to spot drug and alcohol
problem usage amongst employees so that we can
activate our for cause program.
Yet, we had a situation several years back where an
employee stopped at their lunch break, drank a few
beers, drove the company van and hit a motorcycle. If
there's strict liability for the punitive damages that
would be assessed against our employee, what, if
anything, could Era have done differently? The answer
is nothing. So, in that instance, where Era does not
have a fault, has not done something wrong, it makes
no sense to make us vicariously liable for the
punitive damages assessed an employee who may have
acted outrageously or recklessly. Rather, the
standards set out in this bill are totally reasonable.
They have been tested and tried throughout the
nation...We strongly support the bill and encourage
its passage.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
stated support for fairness in the civil justice system and said
CSHB 214(JUD) brings a greater degree of fairness to the
system. Punitive damages are intended to punish wrongdoers, who
through outrageous conduct and acts of malice or indifference
have harmed or caused loss to another. To hold employers liable
for punitive damages when their acts have no affect on an
employee's behavior is not what punitive damages were intended
for.
MS. JESSICA GRAHAM, Anchorage Society of Human Resources
Management, said she is also an employment lawyer. She strongly
seconded Marsha Davis's comments and added that in the last
several years when she has been litigating employment cases, she
has not seen a complaint that has not included a claim for
punitive damages. She feels this is a feather in the cap of the
plaintiff's bar that they regularly use to up the ante against
employers. It increases the cost for litigation regardless of
whether the claim actually has any merit or not. She commented:
Secondly, in the greater scheme of things, under the
current system, if an employer is held strictly liable
for the actions of an employee, regardless of whether
the employer did anything to encourage it or benefited
in any way, what happens at the end of the day is that
the employer can pay out an enormous sum of money and
do enormous damage to their ability to continue
business while the employee, who actually did the harm
probably gets fired, walks off essentially scott free,
goes and gets another job at a different employer,
does not disclose where he previously works and a new
employer is going to be ultimately responsible for the
same kind of conduct that can happen again and again.
In the general spirit of Alaska independence you want
to put the responsibility where it lies and put it on
the individuals who are doing these kinds of
activities that give rise to these punitive damages.
If you want to stop the conduct, tell the employee who
sexually harasses someone that they will hold them
personally liable rather than tagging that on the
employer who has otherwise done everything right.
SENATOR FRENCH said he heard her and others mention strict
liability with respect to assigning fault to an employer for the
acts of their employees and asked what cases in Alaska have set
forth that standard.
MS. DAVIS replied in 1986 the Alaska Supreme Court initially
enunciated the standard that is called the Scope of Employment
Rule for liability for punitive damages in the Alaskan Village
versus Spaulding case. That case was over a dogfight in a
trailer court and was later cited by the Alaska Supreme Court in
the Laidlaw case and others as the standard in Alaska. She
continued:
Essentially the public employment rule as the Supreme
Court enunciated it is if an employee is acting within
the scope of their employment at the time the injury
or damage is incurred and the jury assesses punitive
damages against that employee, the employer will be
vicariously liable for those damages the same as it
would be for the comparative or the standard damages.
That stands in contrast to the restatement, which
essentially sets out a set of four criteria that needs
to be met before an employer could be held liable for
those punitive damages.
SENATOR FRENCH asked if that is what she would call strict
liability.
MS. DAVIS replied that it's strict liability if you assume that
acting within the scope of employment is a given on both of
those standards. For instance, the employee was hired to drive,
and while the employee wasn't hired to drive drunk, the employee
was doing something in furtherance of the employer's conduct -
as opposed to them employee driving the company vehicle on his
own time at night to a bar when the vehicle wasn't supposed to
be used.
CHAIR BUNDE asked if the legal arguments could be deferred to
the Judiciary Committee. Representative Samuels indicated
concurrence and the Chair set HB 214 aside.
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