Legislature(2013 - 2014)BARNES 124
02/10/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB213 | |
| HB276 | |
| HB211 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 276 | TELECONFERENCED | |
| *+ | HB 211 | TELECONFERENCED | |
| *+ | HB 213 | TELECONFERENCED | |
HB 276-MOTOR VEHICLE DEALER EMPLOYEES
3:48:12 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 276, "An Act making the Alaska Wage and Hour Act
inapplicable to certain employees of motor vehicle dealers; and
providing for an effective date."
3:48:20 PM
REPRESENTATIVE STEVE THOMPSON, Alaska State Legislature, as
sponsor, said this bill would clarify that auto sales staff,
auto service writers, and auto finance personnel are exempt from
Alaska's minimum wage and hour act. These employees are paid on
commission and have never been hourly employees. He explained
that HB 276 was drafted in response to confusion caused by the
regulation, 8 AAC 15.910 (a) (16), which read, "straight
commission" means a fixed percentage of each dollar of sales an
employee makes; ...." This regulation became interpreted to
mean that the commission must be applied to the gross amount of
the sale. While this interpretation might be appropriate for
some commission sales, such as real estate, it is not
appropriate or customary for auto sales. An auto dealership
must pay for the vehicle first from the sale price. Advertising
laws prevent an "add on charge" to an advertised sale price to
accommodate a commission. Thus, if a net sale is three percent
of the gross, the dealer cannot pay a commission of five
percent. This bill will clarify the long-standing employment
practices of the industry by maintaining a commission based
employment system that works well for both employer and
employees. The DLWD has been helpful and amended its
regulations; however, as a result of litigation it is necessary
to seek final clarification in statute.
3:50:59 PM
REPRESENTATIVE JOSEPHSON asked for the distinction between auto
sales transactions and other industries. He asked whether this
requirement should apply to other retail sales' businesses.
JANE PIERSON, Staff, Representative Steve Thompson, Alaska State
Legislature, said she did not think store sales commissions are
supplemented by salaries. For example, it would take a lot of
shoes to make a living. She related her understanding that auto
sales are one of the few industries in which the dealership is
selling a product it purchased from the manufacturer.
3:52:26 PM
REPRESENTATIVE JOSEPHSON remarked department stores likely own
the goods. He related his understanding that the definition for
straight commission applied to gross, but not net cost for the
dealership.
MS. PIERSON answered yes.
REPRESENTATIVE JOSEPHSON asked whether this bill would exempt
all auto dealership employees from the wage and hour statutes.
MS. PIERSON deferred to Marten Martensen, president of the
Alaska Auto Dealers Association to answer.
3:53:22 PM
REPRESENTATIVE JOSEPHSON asked whether federal wage and hour
regulations would offer protections to auto employees.
MS. PIERSON answered no; that this provision falls under AS
23.10.055(a), which pertains to exemptions, compensation of
executives, administrators, and professionals.
REPRESENTATIVE JOSEPHSON asked whether it was her understanding
that federal law would not apply, in instances in which a
salesperson did not earn sufficient commissions.
MS. PIERSON answered no.
3:54:29 PM
REPRESENTATIVE JOSEPHSON said under HB 276, the car sales person
would not have a guaranteed minimum wage or straight commission,
but would earn a commission on net sales.
MS. PIERSON answered yes.
REPRESENTATIVE JOSEPHSON asked whether the employee negotiates
with the dealer on the definition of net sales.
MS. PIERSON understood that the employee would have an idea of
the approximate purchase price and adjust the sale accordingly,
such as make the decision to take a three percent commission
rather than not sell the car.
3:55:49 PM
REPRESENTATIVE JOSEPHSON said he was surprised that the service
writer who isn't selling anything is also on commission.
MS. PIERSON deferred to Mr. Martensen to answer.
3:57:36 PM
REPRESENTATIVE REINBOLD asked whether any issues were identified
prior to adoption of these regulations. She clarified she was
interested in the reason the DLWD adopted the regulations.
GREY MITCHELL, Acting Assistant Commissioner, Department of
Labor & Workforce Development (DLWD), said the department wanted
to change the regulatory definition of straight commission from
a very narrow definition to ensure that the explanation the DLWD
provides employers and employees pertaining to straight sales
matched the regulatory definition. The department said that its
application of the narrow definition of straight commission
wasn't being used and the regulation changes addressed this.
3:58:55 PM
REPRESENTATIVE REINBOLD asked whether the department received
any "pushback" during public comment.
MR. MITCHELL recalled that the department did not receive a
significant number of comments. He suggested that the
department may have received approximately five comments, with
three in support, with two opposed.
REPRESENTATIVE REINBOLD asked whether the DLWD realized that
these changes represented significant impacts to the industry.
She suggested that the dealerships weigh in to brief the
committee on how the regulations impact them.
MR. MITCHELL agreed.
4:00:04 PM
CHAIR OLSON asked whether other industries were impacted by the
regulation changes.
MR. MITCHELL offered his belief that the bill has a definition
for "motor vehicle dealers' under AS [08.66.350], which involves
more than just cars, for example, boats. He deferred to the
sponsor to answer.
CHAIR OLSON remarked boats are a form of transportation.
REPRESENTATIVE JOSEPHSON pointed out that the definition in
proposed Sec. 2 of the bill refers to a separate definition for
motor vehicles. He clarified that this section refers to AS 45.
MR. MITCHELL agreed that proposed Sec. 2, referred to AS
[45.25.990] and the definition under [AS 08.66.350]. In
response to a question, he said he was not certain of the
nuances in paragraph (3) of proposed Sec. 2.
4:02:13 PM
REPRESENTATIVE JOSEPHSON said he wanted to grasp the concept of
commissions. He expressed interest that the auto dealership's
financing staff is also on commission since that job is more
administrative in nature.
MR. MITCHELL answered that the questions pertain more to
industry question since the DLWD hasn't done a study on car
dealership employees. He assumed employees fell under a variety
of salary payment methods, which might be the reason for the
attempt to exempt the employees. For example, if the employees
were paid on a straight commission, they would be excluded from
overtime. Thus, changing the law and excluding this specific
group would mean it wouldn't matter if the employees were paid a
straight commission or an hourly rate.
4:04:20 PM
MARTEN MARTENSEN, President, Alaska Auto Dealers Association
(AADA), offered to provide in layman's terms the reason the AADA
supports HB 276. He said that two years ago, an AADA member
came to the board and explained the business was being sued for
not paying their commission sales staff overtime. He said that
car dealers don't pay sales associates overtime since they are
exempt under AS 23.10.055, and earn a straight commission. The
plaintiff's attorney argued that the employees are not paid on
straight commission since the employees do not receive a
commission based on the fixed percentage of each sales dollar as
defined in regulations 8 AAC 15.910. At this point, the AADA
met with DLWD's Commissioner Bishop and Mr. Mitchell to express
concern over 8AAC 15.910. The AADA explained the standard
industry practice of dealerships is to pay sales associates
based on the net sales value or "profit."
4:06:40 PM
MR. MARTENSEN related a scenario in which in which the dealer
has an on the lot vehicle for sale at $20,000, after having paid
$18,000. The Continental Motors would pay its sales associates
25 percent of the $2,000 profit, or $500. The department
considered this and later agreed to change the regulation, which
was accomplished in September 2012.
MR. MARTENSEN said that with the regulation change the
dealership thought it was finally paying its sales staff within
the law, but the plaintiff's attorney argued that federal law 29
CFR 779.413 [pertaining to straight salary or hourly rates]
defines straight commission as Alaska's law. Since the
regulations help to clarify the law, the judge agreed with the
plaintiff's attorney so the auto dealers still have problems.
Therefore, the AADA supports HB 276 to change the statutes.
Finally, a federal law, 29 USC 213 (b) (10) (a), exempts car
sales associates from overtime, but Alaska statutes does not.
4:08:37 PM
REPRESENTATIVE JOSEPHSON said he was amazed that this has
recently arisen. He asked whether in the past 20 years anyone
has raised the issue and asked for clarification of the federal
statutes.
MR. MARTENSEN answered no; the issue has never been raised, and
it caught the industry off guard. He explained that, by law,
dealers must have written pay plans. He said his dealership has
been in business for 45 years and has had written pay plans that
clearly identify the salary provisions. Employees sign pay plan
agreements that specify straight commission. Unfortunately,
this seems to represent a loophole and the judge agreed that his
dealership is not abiding by law.
4:10:03 PM
REPRESENTATIVE REINBOLD summarized that the lawsuit ensued, that
the state sided with plaintiff and overturned the traditional
practices. She asked if she understood the issue correctly.
MR. MARTENSEN answered yes.
4:10:33 PM
REPRESENTATIVE JOSEPHSON remarked that his sense of this is
different; the state tried to support clarification of
regulations helpful to the industry, but the court system did
not support the practice.
MS. PIERSEN, in response to an earlier question, said that motor
vehicles fall under AS 28.10, which is where the definition
exists. The DLWD worked "hand-in-hand" with the auto dealership
to change the regulation, which was not recognized by federal
law. This bill would place the regulation into statute. She
did not think this bill would impact industry pay practices
since its payment practices haven't changed; in fact, this is
how the system has worked.
REPRESENTATIVE JOSEPHSON remarked that he was glad to hear about
the written pay plan.
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 276.
4:12:45 PM
REPRESENTATIVE REINBOLD moved to report HB [276] out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, HB 276 was reported
from the House Labor and Commerce Standing Committee.