04/27/2006 01:30 PM Senate LABOR & COMMERCE

     CSHB 409(L&C)-NO WORKERS' COMP. FOR REAL EST. LICENSEE                                                                 
                                                                                                                                
CHAIR BUNDE announced CSHB 409(L&C) to be up for consideration.                                                                 
                                                                                                                                
REPRESENTATIVE  BOB  LYNN,  sponsor  of HB  409,  introduced  his                                                               
staff,  Nancy Manly,  and disclosed  that he  is a  licensed real                                                               
estate  broker acting  in  the capacity  of  broker associate  in                                                               
Alaska.                                                                                                                         
                                                                                                                                
REPRESENTATIVE LYNN said  that every state has  laws that require                                                               
most companies  to purchase  workers' compensation  insurance for                                                               
their employees. However, most real  estate agents are considered                                                               
independent contractors  and not employees. The  question is what                                                               
is the difference.                                                                                                              
                                                                                                                                
REPRESENTATIVE LYNN  explained that first  of all, a  real estate                                                               
licensee signs an independent contractor  agreement with a broker                                                               
and pays for his own services.  He doesn't receive a wage, salary                                                               
or benefits.   He receives payment for  services directly related                                                               
to his  sales and other output.  He is required to  pay estimated                                                               
quarterly  income tax,  his  own social  security  taxes and  the                                                               
portion of  social security tax  that an employer  would normally                                                               
pay  for an  employee.  He  pays for  all  his business  expenses                                                               
including   licensing   fees,   continuing   education   classes,                                                               
advertising,  mailing,  supplies,   long  distance  phone  calls,                                                               
design  and implementation  of a  personal website  - everything.                                                               
"They are in fact a business within a business."                                                                                
                                                                                                                                
The  broker has  no  control  over the  hours  spent  or how  the                                                               
licensee  conducts the  business  so  long as  it  is within  the                                                               
boundaries of  the law. The  IRS considers qualified  real estate                                                               
licensees as  independent contractors.  The purpose of  this bill                                                               
is  for  the  state  to recognize  these  people  as  independent                                                               
contractors and not employees - the same as the IRS.                                                                            
                                                                                                                                
CHAIR BUNDE clarified  that if this bill  passes, the independent                                                               
contractor has to buy his own  insurance and would not be able to                                                               
avail himself of the state  system of workers' compensation - and                                                               
it might be more expensive.                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN  responded that was about  right; real estate                                                               
is a risky business.                                                                                                            
                                                                                                                                
SENATOR SEEKINS  said he understood  that under  current workers'                                                               
compensation  law,  realtors  would  be  exempt  from  having  to                                                               
provide any insurance for themselves.                                                                                           
                                                                                                                                
NANCY  MANLY,  staff to  Representative  Lynn,  replied that  was                                                               
correct as long as the realtor didn't have employees.                                                                           
                                                                                                                                
CHAIR BUNDE remarked that if he  were working for a business with                                                               
workers' compensation,  he couldn't  sue the  business if  he got                                                               
injured.  If he  were working  for  a business  that didn't  have                                                               
worker's compensation, he  could sue the owner of  the business -                                                               
whether the suit had merit or not.                                                                                              
                                                                                                                                
2:00:25 PM                                                                                                                    
PEGGY ANN MCCHONNICHIE, Alaska  Association of Realtors, heartily                                                               
supported HB 409 saying it would  clear up a problem that Alaskan                                                               
realtors had been dealing with for  a long time. According to the                                                               
Internal Revenue  Service (IRS),  realtors have  been independent                                                               
contractors since  the early 70s.  The State Department  of Labor                                                               
sees  realtors as  independent businesses,  but  the Division  of                                                               
Insurance doesn't know  for sure. So, this lack  of continuity in                                                               
business status has  caused some problems. HB  409 clarifies that                                                               
realtors  have  a  contract  with their  broker  and  don't  need                                                               
workers' compensation insurance.                                                                                                
                                                                                                                                
2:02:15 PM                                                                                                                    
SENATOR SEEKINS  disclosed that Ms.  McChonnichie's father  was a                                                               
long-time  good friend  of  his.  He then  moved  to report  CSHB
(L&C)  from  committee  with  individual  recommendations  and                                                               
attached  fiscal  note.  Senators   Ellis,  Seekins,  Davis,  Ben                                                               
Stevens and  Chair Bunde voted  yea; so CSHB 409(L&C)  moved from                                                               
committee.