05/02/1995 01:40 PM Senate L&C

          SB 160 EXCLUSIONS FROM UNEMPLOYMENT COVERAGE                        
                                                                              
 CHAIRMAN KELLY called the Senate Labor and Commerce Committee                 
 meeting to order at 1:40 p.m. and announced SB 160 to be up for               
 consideration.                                                                
                                                                               
 DWIGHT PERKINS, Department of Labor, was not able to testify, but             
 submitted this statement:                                                     
                                                                               
    The Department of Labor opposed SB 160, for the following                  
 reasons:                                                                      
                                                                               
  1.  The Employment Security Act already goes far enough in                   
 excluding employment of children by their parents and excluding               
 employemnt of students by educational institutions.  Coverage of              
 student workers should not be further eroded.  AS 23.20.526 (d)(5)-           
 (6) excludes service by a regularly enrolled student, or a student            
 enrolled in a work study program for a school, college, or                    
 university.                                                                   
 AS 23.20.526(a)(4) excludes service for a parent by a minor.  The             
 bill would go much further. It would exclude service for any                  
 employer whatsoever, by a worker of any age, so long as the                   
 employer is a parent and the worker is a student between terms.               
 For example, a thirty-five year old worker with a family, who                 
 happened to be working in a parent-operated business, could be                
 excluded from coverage shortly after entering training to improve             
 his or her skills.  The worker would be denied UI protection if the           
 training were interrupted, or the new occupation did not                      
 materialize, or the current employment came to an end.  There is no           
 reason to subject these employees to greater risk than others, just           
 because they happen to be working for their parents and going to              
 school when the wage credits are earned.                                      
                                                                               
 2.  The bill would also create a conflict with federal coverage               
 provisions.  It would exempt students of any age.  However Section            
 330(c)(5) Federal Unemployment Tax Act (FUTA) does not exempt                 
 service of a worker age 21 or older (student or otherwise) in the             
 employee of his or her parents.  An employer would, therefore,                
 still be liable for the full FUTA tax on affected employees who are           
 21 or older.  Employers are eligible for a credit against the FUTA            
 tax if the FUTA taxable service is covered under state law, but the           
 credit would not be available on this particular service, since the           
 employer would not be paying state taxes on the service under an              
 approved state law.  If reducing the tax burden is an object of the           
 legislation, very little will be gained by removing the state tax             
 liability and replacing it with the full federal FUTA liability.              
                                                                               
 3.  The tax burden on the affected students is minimal and the                
 number of such students is very small.  A full-time employee will             
 pay maximum of $119.50 in UI contributions for the entire calendar            
 year 1995.  A student employed between school terms would pay much            
 less.  The bill addresses only students employed by their parents,            
 a tiny fraction of the work force.                                            
                                                                               
 4.  The bill would create an unjustifiable disparate impact on                
 student workers.  It would not affect other similarly situated                
 workers who happen not to be employed by their parents.  The                  
 Department firmly believes that expanding the exemption to these              
 other students is an even worse idea, but there is no sound policy            
 reason for targeting a subset of workers on the basis of family               
 relationship.                                                                 
                                                                               
 5.  The terms of the exclusion are vague and there is no feasible             
 way to base tax liability on a worker's "intention" to remain in              
 school.  Would coverage be retroactive if the worker did not return           
 to school?  Would employer be allowed to certify to the worker's              
 intentions?  The provision would be difficult to enforce and easy             
 to abuse.                                                                     
                                                                               
 SENATOR TORGERSON explained that SB 160 is just a relief for mom              
 and pop buisnesses that have the burden of paperwork slapped on               
 them by undue regulations.  It exempts parents from paying                    
 unemployment tax when a child is in college and comes back and goes           
 to work for them.                                                             
                                                                               
 SENATOR KELLY said he supported this bill.                                    
                                                                               
 SENATOR TORGERSON moved to pass SB 160 from committee with                    
 individual recommendations.  There were no objections and it was so           
 ordered.