Legislature(2003 - 2004)
04/14/2004 05:45 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 323-WORKERS COMPENSATION AND CONTRACTORS
CHAIR SEEKINS informed members that a proposed committee
substitute to SB 323, labeled version I, was before the
committee.
SENATOR THERRIAULT moved to adopt version I as the working
document before the committee.
CHAIR SEEKINS noted the only change made in version I was the
definition of a project owner on page 2, which was suggested by
Jack Miller.
SENATOR OGAN expressed concern, on behalf of a former
constituent, that it may be impossible to pursue the original
employer of a subcontractor and that the State of Alaska, being
the largest project owner in the state, could be liable for
workers' compensation if someone doesn't do their homework.
CHAIR SEEKINS asked what statute the constituent cited.
SENATOR OGAN replied AS 23.30.045.
CHAIR SEEKINS noted the only liability is for compensable
damage. He then asked Mr. Miller to comment.
MR. JACK MILLER, counsel to the Alaska State Chamber of Commerce
[the Chamber], said he spoke with the risk manager for the State
of Alaska who had input on this bill. He said the current law
requires that if contractors and subcontractors don't secure
workers' compensation coverage for their employees, the payment
obligation is pushed "upstream" to the project owner to enhance
protection for injured workers. At the same time, the statute
requires all employers to have workers' compensation coverage,
which includes contractors and subcontractors who contract on
state projects. If that coverage has not been obtained, the
state is authorized to withhold payment to secure that
insurance. Therefore, the state, municipalities and private
companies are fully protected through the standard indemnity
provisions in private contracts.
SENATOR OGAN said, from personal experience as a contractor and
subcontractor, there are ways to get around that requirement.
This will require due diligence on the part of a project owner.
He expressed concern that a lot of folks work without workers'
compensation coverage because it is expensive and this
legislation will now transfer that liability to the project
owner. He questioned whether this bill will motivate contractors
and subcontractors to "skate" more because they will not be
liable in the end.
MR. MILLER told members:
...In fact there is no relief of liability of the
subcontractor for the payment if for a short period of
time or if for a longer period of time, the
subcontractor can't actually secure the payments or
illegally did not obtain workers' compensation
insurance. The current law now imposes that payment
liability on contractors and this bill simply runs
that up the line to project owners. I can say that the
State of Alaska, all the municipalities, the State
Chamber of Commerce members and the members of the
Associated Builders and Contractors of Alaska all
fully support this law because it provides enhanced
protection for injured workers and at the same time
recognizes that receipt of workers' compensation
benefits is the exclusive remedy for injured workers
and they cannot pursue court remedies against parties
involved in their project.
8:00 p.m.
SENATOR OGAN said that the trial attorneys go after the "deep
pockets" so although a subcontractor might be legally liable,
the subcontractor may have no assets.
MR. MILLER responded that in reality, the trial attorneys in
fact assert tort claims against project owners after a
contractor has paid workers' compensation benefits for an
injured worker. He explained:
This bill recognizes that workers' compensation
benefits are reasonable compensation for work related
injuries, and forecloses the possibility of tort
claims against the deep pocket companies that -
essentially project owners or the State of Alaska or
municipalities in the State of Alaska. I think you
also have to recognize that under current practice,
the state, municipalities, and private companies all,
through indemnity provisions - insurance provisions,
impose the liability for both the workers' comp
payments and the tort remedies back onto the
contractor that has essentially paid the workers'
compensation benefits to the contractor's employee so
they have a double liability under current law. We're
trying to work through this bill to prevent that. I
think that this is a very good balance for the
business community and it enhances protection for
injured workers and it's fully supported by the
business community, the State of Alaska and
municipalities in Alaska
CHAIR SEEKINS announced that a proposed amendment [Amendment 1],
prepared by Representative Holm, had been distributed (labeled
D.4) that addresses a concern expressed at an earlier hearing
about sole proprietors.
SENATOR OGAN declared a conflict of interest, as he is a sole
proprietor.
CHAIR SEEKINS offered to sponsor Amendment 1 and moved its
adoption. He clarified that Amendment 1 says that a sole
proprietor or a member of a partnership who agrees in writing
with a project owner or contractor that neither have an
obligation to secure workers' compensation, can opt out of
having to purchase workers' compensation.
SENATOR OGAN asked if a sole proprietor or partner will not need
workers' compensation coverage as long as the project owner is
indemnified and agrees.
CHAIR SEEKINS said that is correct.
SENATOR FRENCH objected to Amendment 1.
SENATOR THERRIAULT asked if he subcontracted as a sole
proprietor with a housing developer, he could, by written
agreement, release the housing developer from having to carry
workers' compensation on him.
CHAIR SEEKINS said that the sole proprietor would be releasing
the housing developer of any upstream claim so that the sole
remedy for the sole proprietor, if he was injured, would be
against himself.
SENATOR THERRIAULT asked if the sole proprietor would have to
obtain coverage for any employees he had.
CHAIR SEEKINS said that is correct. It only exempts the sole
proprietor himself, or the member of the partnership.
SENATOR OGAN said during the many years he did not have workers'
compensation, he would not have dreamed of suing someone else if
he got injured. He believes if people are willing to take the
risk and take responsibility, they should be able to opt out.
CHAIR SEEKINS said that is what Amendment 1 accomplishes.
SENATOR FRENCH clarified that the sole proprietor or partner has
not given up his right to sue the project owner if injured
through negligence of the project owner.
CHAIR SEEKINS said he asked that the amendment be drafted so
that the sole proprietor or partner would have no claim except
against him or herself but he would make sure that is the case.
SENATOR THERRIAULT asked if he was a sole proprietor and was
injured because another employee dropped something on his head,
he would have no right to get compensation.
MR. TODD LARKIN, representing himself as a sole proprietor,
said, in response to Senator French's statement, that regarding
a tort against a project owner, the sole proprietor would fall
under standard civil actions. The burden of proof would be on
the sole proprietor. [Ms. Craver] said the standard is fairly
high to bring a tort claim.
CHAIR SEEKINS responded:
Well, we're going to have to amend that because
basically the instructions that we were trying to give
to them was that the - if you're injured on that job
and you were covered under workers' comp, workers'
comp would cover you and that protects everyone up the
line because your sole remedy is workers' comp. In
this case we would want your sole remedy, if you
choose not to carry workers' comp, to be against
yourself and not to the project owner of the company.
I'm going to clarify that with the drafter.
MR. LARKIN said that was the original intent of the language.
CHAIR SEEKINS offered to speak with Ms. Craver. He clarified the
intent was that if a sole proprietor who chose not to carry
workers' compensation, no one else would be required to carry it
for that person and his or her sole remedy would be against him
or herself.
SENATOR THERRIAULT said employers carry workers' compensation to
spare themselves tort claims. Therefore, if two parties agree
there will be no workers' compensation coverage but the right to
bring tort claims is held against the employer, there would be
no reason for the employer to not just add the sole proprietor
to his workers' compensation policy.
CHAIR SEEKINS repeated that he would check with the drafter.
MR. MILLER suggested that since HB 311 has already passed out of
the House Labor and Commerce Committee, which specifically deals
with this issue, the committee not adopt Amendment 1 and deal
with this issue when HB 311 moves to the Senate.
TAPE 04-41, SIDE B
CHAIR SEEKINS withdrew his motion to adopt Amendment 1. He then
adjourned the meeting at 8:15 p.m.
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