Legislature(1999 - 2000)
04/12/2000 01:55 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 419
An Act relating to the weekly rate of compensation and
minimum and maximum compensation rates for workers'
compensation; specifying components of a workers'
compensation reemployment plan; adjusting workers'
compensation benefits for permanent partial impairment,
for reemployment plans, for rehabilitation benefits,
for widows, widowers, and orphans, and for funerals;
relating to permanent total disability of an employee
receiving rehabilitation benefits; relating to
calculation of gross weekly earnings for workers'
compensation benefits for seasonal and temporary
workers and for workers with overtime or premium pay;
setting time limits for requesting a hearing on claims
for workers' compensation, for selecting a
rehabilitation specialist, and for payment of medical
bills; relating to termination and to waiver of
rehabilitation benefits, obtaining medical releases,
and resolving discovery disputes relating to workers'
compensation; setting an interest rate for late
payments of workers' compensation; providing for
updating the workers' compensation medical fee
schedule; and providing for an effective date.
Representative J. Davies noted a change to Amendment 1, 1-
LS1418\I.2, Ford, 4/12/00. [Copy on File]. The change
would be to Page 1, Line 14, inserting "sub" before
"contractor".
Representative J. Davies MOVED to ADOPT Amendment #1. Co-
Chair Therriault OBJECTED for the purpose of discussion.
Representative J. Davies commented on the intent of the
amendment. Present law states that the contractor is
responsible for providing workmen's comp insurance for the
employees of the subcontractor. The law was written to
protect those employees. It was not written to require the
contractor to provide insurance for the subcontractor. At
present time, it is the practice to interpret it that way.
That in fact makes the subcontractor an employee of the
contractor. The amendment would clarify that the statute
means insuring just the employees and not the subcontractor,
himself. Representative J. Davies pointed out that there
currently are court cases over this issue. The proposed
language provides clarification. The consequences of
leaving the language vague, creates circumstances where
there would be people working without being insured. He
reiterated that the proposed language would clarify the
understanding.
Vice Chair Bunde asked why the contractor would be
responsible for the subcontractor's employees.
Representative J. Davies advised that this is a public
policy issue decided in the past. The question lies in
regard to where the subcontractor with no employees "falls".
This needs to be defined one way or another.
Representative Phillips stated that was already contained in
state law. She understood that the contractor does take
care of insurance for the employees but not for an
independent subcontractor. Representative G. Davis
addressed that the language of the amendment would clarify
the conflict.
DWIGHT PERKINS, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR AND
WORKFORCE DEVELOPMENT, agreed that there does exist a
problem and recognized that there is a timing issue in the
legislation. He noted that there had been discussion in HB
378, a similar bill, previously. Mr. Perkins noted that the
Labor Union does have a concern with the legislation. He
noted that the Department would defer to the ad hoc
committee's recommendations. Mr. Perkins interjected that
the Department wanted to work with the homebuilders. He
noted that there is concern that the legislation could weigh
down the worker's comp fee bill, which previously passed the
House floor.
PAUL GROSSI, DIRECTOR, DIVISION OF WORKER'S COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, stated that
the Department does not have a major position on the
amendment. He additionally deferred to the ad hoc committee
recommendations. He emphasized that the Department did not
want to stop the bill.
Co-Chair Therriault questioned the proposed problems
presented from organized labor. Mr. Perkins responded that
those concerns were along the line of why a subcontractor
was not considered an employee and why shouldn't that
individual be covered by the contractor's worker's
compensation insurance. Mr. Perkins pointed out that law
requires that if there are employees, that they must be
covered by worker's comp. The conflict arises within the
Division of Insurance.
Representative J. Davies noted that the law states that the
contractor is responsible for the subcontractor's employees
if the subcontractor does not have insurance. The
assumption is that the subcontractor will carry the
insurance.
Representative Phillips stressed that would be a separate
issue from employee insurance. Mr. Grossi interjected that
the general contractor would have liability; a sole
proprietor subcontractor is not required in current statute
to have worker's compensation insurance.
Vice Chair Bunde stated that any subcontractor who did not
have the insurance would have a competitive advantage over a
subcontractor who did pay the insurance costs. Mr. Grossi
agreed that their costs would be less.
Representative J. Davies pointed out the Letter of Intent
which provides further clarification of the amendment.
Co-Chair Therriault WITHDREW his OBJECTION to the amendment.
He advised concern that it could change the title. He
requested further information from the ad hoc group.
KEVIN DAUGHTERY, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE,
explained that he did have concern with the amendment. He
noted that there has always been concern when traditional
business practices change. He stated that the amendment
would provide a modification to current law.
Mr. Daughtery commented that when an owner/operator works as
a subcontractor, then the general contractor must insure
that proper worker's comp insurance is available. If that
were removed, it would change the current process.
Mr. Daughtery spoke to the seriousness of this problem. He
suggested that language be added to the fee bill. He noted
that there is currently an ongoing disagreement with the
Department. He acknowledged that this is serious business
and that these problems in the construction industry are
being addressed on the national level. He reiterated that
he was opposed to the amendment as drafted.
Representative Phillips stressed that the provision is not a
modification to current law but rather a clarification of
current law. She emphasized that the amendment clarifies
the existing practice.
Co-Chair Mulder pointed out that the amendment was drafted
to address the subcontractor who does not have employees.
Mr. Daughtery argued that the amendment would be a
modification to current practice. In the construction
industry, if there is a situation where everyone on a job
claims to be an owner/operator, the problem is the safety of
the workers. They would be disadvantaged by the process.
He reiterated that it would be a statutory change and would
impact the industry. Co-Chair Mulder asked if this was a
subversion of what was intended.
Mr. Daughtery explained that there are rules, which start on
the federal level. He noted that this language would be
wrong, and would "loosen" the law. Co-Chair Therriault
suggested that making it tighter would be a clear
modification to the existing law.
MITCH GRAVO, LOBBYIST, STATE HOME BUILDERS' ASSOCIATION,
Juneau, testified on the amendment. He stressed that the
amendment would restate Section #1 in the statutes in a
different manner. The amendment only addresses if the
contractor would be required to cover with insurance for a
subcontractor with no employees. There is no statutory
authority for the contractor to cover the subcontractor. He
added that there currently are a couple of homebuilders
dealing with a dispute regarding coverage with an insurance
company. Mr. Gravo stressed that the intent of the
legislation clarifies that if a contractor has hired a
subcontractor and there are no employees, the contractor
would not be required to purchase workmen's compensation
insurance for that worker.
There being NO further OBJECTION, Amendment #1 was adopted.
Representative J. Davies MOVED to ADOPT the House Finance
Committee Letter of Intent.
Representative G. Davis spoke in support of the Letter of
Intent. There being NO OBJECTION, it was adopted.
Co-Chair Therriault MOVED to ADOPT Amendment #2, 1-
LS1418\I.1, Ford, 4/11/00. [Copy on File.] Mr. Grossi
discussed Amendment #2. He stated that the amendment would
mitigate concerns regarding the waiver of reemployment
benefits and that a doctor would have to recommend
reemployment benefits. There being NO OBJECTION, it was so
adopted.
Representative Foster MOVED to report CSHB 419 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 419 (FIN) was reported out of Committee with a "no
recommendation" and with a House Finance Letter of Intent
and fiscal notes by the Office of the Governor dated
3/29/00, Department of Labor and Workforce Development dated
3/29/00 and University of Alaska dated 3/29/00.
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