Legislature(2003 - 2004)
04/16/2004 08:08 AM 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
TAPE 04-42, SIDE A
CHAIR RALPH SEEKINS called the Senate Judiciary Standing
Committee meeting to order at 8:08 a.m. Senators Ogan, French
and Chair Seekins were present. Chair Seekins announced the
committee would take up SB 323 first and reminded members that
during the last hearing on the bill, the committee discussed the
exclusiveness of liability and an amendment [Amendment 1] that
allows sole proprietorships and partnerships to opt out of
workers' compensation coverage in exchange for accepting
exclusive liability for any injuries. After discussing several
alternatives, that amendment was withdrawn.
CHAIR SEEKINS said he had another amendment drafted to address
sole proprietors and partnerships. He also considered using SB
311 as the vehicle to address the issue, but he does not believe
SB 311 will pass this session. He then moved to adopt the new
amendment [Amendment 2], which reads as follows.
23-LS1498\D.6
Craver
4/15/04
A M E N D M E N T 2
OFFERED IN THE SENATE
TO: SB 323
Page 1, line 1, following "compensation":
Insert ", sole proprietors and partnerships without
employees,"
Page 2, following line 2:
Insert a new bill section to read:
"* Sec. 3. AS 23.30.045 is amended by adding new subsections
to read:
(g) Notwithstanding (a) of this section, a project
owner, contractor, or subcontractor is not liable for and
is not obligated to secure the payment of compensation to a
sole proprietor or member of a partnership if the sole
proprietor or member of a partnership agrees in writing
that the project owner, contractor, and subcontractor do
not, in regard to the sole proprietor or member of a
partnership, have
(1) an obligation to secure compensation; and
(2) liability for compensation payable under
AS 23.30.041, 23.30.050, 23.30.095, 23.30.145, and
23.30.180 - 23.30.215.
(h) A sole proprietor or member of a partnership who
has agreed under (g) of this section may not maintain an
action against the project owner, contractor, or
subcontractor, or an insurer of the project owner,
contractor, or subcontractor, at law or in admiralty for
damages on account of injury or death."
Renumber the following bill section accordingly.
SENATOR FRENCH objected for the purpose of discussion.
CHAIR SEEKINS informed members that Amendment 2 would prohibit
sole proprietors and partners who opt out of workers'
compensation coverage from having any recourse against a
contractor or project owner for injuries.
SENATOR OGAN stated support for Amendment 2 because he believes
many sole proprietors would prefer to carry their own health
insurance and accept the risk of being injured at the workplace.
He then declared a conflict of interest and asked to be excused
from voting, as he is likely to be a sole proprietor in the
future.
CHAIR SEEKINS objected and informed Senator Ogan he is required
to vote.
SENATOR FRENCH asked the status of the law now with respect to
sole proprietors' ability to sue for accidents caused by
negligence of the project owner. He expressed concern that
Amendment 2 will give the sole proprietor very little; it will
no longer require the project owner to provide workers'
compensation coverage but will take away a sole proprietor's
right to sue for negligence.
CHAIR SEEKINS responded:
I will guarantee you that I will not hire a sole
proprietor or a member of a partnership to perform any
work for me unless they have workers' compensation
insurance and neither would any other project owner,
simply because if they choose not to have insurance
under the way this law is read and they could - then I
could be liable for that at a later date. So, I have
120 employees, approximately; 119 of those are covered
by workers' comp - I'm not. So my only action for a
workers' comp accident in my dealership would be
against myself and what I'm saying here is that if
you're a contractor and you have workers' comp
insurance and you're a sole proprietor or partner and
you want to work for a project owner or another
contractor, a contractor would not hire you unless
they would have the same kind of recourse as if you
carried the insurance. That's what this amendment
does....
SENATOR FRENCH said in his thinking, the worker gets nothing out
of this benefit. He suggested giving project owners two choices:
either covering all workers with workers' compensation or being
subject to liability for any torts caused by negligence on the
project site. That way, the economic choice lies with the person
best able to control [safety at the work site].
CHAIR SEEKINS replied, "...I don't have any objection to leaving
the bill the way it is and putting small contractors out of
business if you don't, Senator." He said any subcontractor or
partnership with employees would have to cover his or her
employees. Amendment 2 will only allow the owners of the
business to exempt themselves and look only to themselves for
remedy in case of injuries that would normally be covered under
workers' compensation. He pointed out that many sole
proprietorships consist of single employees and, under the
current bill, they will have the choice of getting workers'
compensation coverage or not being hired. With Amendment 2, they
could opt out of workers' compensation coverage if they are
willing to take the risk themselves.
SENATOR THERRIAULT asked:
...If I own a company that does tile work and I employ
the three of you I will have to have insurance on the
three of you but I don't have to carry it on myself as
the owner of the company, why would you make me carry
it on myself if I have no employees? What's the
difference? I still own the business. It's just an
issue of whether I have employees or not, and whether
I have employees or not dictates whether I cover my
employees so why would I be held to a different
standard just because I have employees for coverage
for myself?
SENATOR OGAN said he was under the impression that Amendment 2
will allow a sole proprietor with no employees to opt out of
workers' compensation.
CHAIR SEEKINS agreed and said Amendment 2 will exempt the sole
proprietor or partner from carrying workers' compensation
coverage on himself and instead make his sole remedy against
himself, regardless of whether he has employees or not. He
explained that under the current law, the sole proprietor or
partner is not required to carry workers' compensation coverage
but there is no way under SB 323 to limit him to a single
remedy.
SENATOR OGAN said having been a sole proprietor for many years
and being willing to accept responsibility for his own actions,
he believes Amendment 2 needs to pass. As a sole proprietor, he
is aware of how difficult it is to wear many hats and deal with
business expenses. He noted without allowing them to be
accountable for their own actions, SB 323 is a nonstarter
without Amendment 2.
8:28 a.m.
SENATOR FRENCH opined that SB 323 has flaws and will be made
worse with Amendment 2 because a sole proprietor who is injured
on the worksite now can sue someone up the line. He explained:
"...if the crane swinging lumber over your head - if
the wire rope on that crane snaps and drops a load of
lumber on you, you can sue someone up the line for
their negligence, for not inspecting the cable, for
not hiring - for not following safe safety practices.
That's your remedy against the negligence against the
folks on the job site. This amendment is going to say
give it up. This amendment isn't going to cover you
with workers' comp, isn't going to make the project
owner cover you with workers' comp and, moreover is
going to take away your right to be made whole due to
the negligence of people upstream from you. So, I
don't see how the little guy in this situation is any
better off after the passage of this bill than he is
right now. Right now he's got 1,000 years of common
law protecting him and what he's going to have after
this is a statute that says you better go get workers'
comp and if you don't get workers' comp, you're on
your own when you step on to the job site. So I am not
under the impression that this is good for a small
business.
SENATOR THERRIAULT asked if, under the scenario presented by
Senator French, the small business owner with several employees
who does not carry workers' compensation on himself would have a
different remedy than a sole proprietor with no employees and no
coverage.
CHAIR SEEKINS asked if the objection to adopting Amendment 2 is
maintained.
SENATOR FRENCH interjected and attempted to answer Senator
Therriault's question. He maintained that someone without
workers' compensation coverage has the right to sue, therefore,
sole proprietors with and without employees are treated equally
under the law right now.
CHAIR SEEKINS added that if he were a major contractor who hired
a subcontractor with employees who did not cover himself, he
would ask the subcontractor to sign a waiver on himself, require
him to get workers' compensation coverage or not come on the job
site. He noted:
What we're contemplating is the small sole proprietor,
more than likely, who comes on the job site to perform
a job. If I was a major contractor and I never came on
that job site, there wouldn't be a risk, but I think
if I was the project owner and you were going to come
on that job site, I would want to protect myself from
that kind of risk by asking you either to make sure
you have coverage or that you have signed a waiver
yourself.... What this bill, quite frankly, when we
talk about the little guy, is it mandates that there
be coverage for that little guy but it also says you
can only take against any other party upstream from
you the same exclusive remedy that you can take
against your employer as if you were the only party
involved. So if that contractor or that business owner
was the only entity involved and something happens,
that employee's exclusive remedy is against workers'
comp....
SENATOR FRENCH argued the exclusiveness of the remedy has always
come in exchange for workers' compensation insurance coverage.
For giving up the right to sue, the employee gets covered by a
workers' compensation insurance policy. He said he sees this as
a bad bargain for working Alaskans.
CHAIR SEEKINS said if a person chooses not to have a policy,
that person should assume the risk.
SENATOR FRENCH maintained his objection to the adoption of
Amendment 2, therefore a roll call vote was taken. The motion to
adopt Amendment 2 carried with Senators Ogan, Seekins and
Therriault in favor, and Senator French opposed.
SENATOR OGAN repeated that he believes that SB 323 has improved
a lot and he appreciates the work done on it. He said his only
concern with the bill is that if a subcontractor or contractor
chooses not to have workers' compensation, liability could be
transferred to the project owner [for negligence]. However,
nothing in the bill will allow the project owner to pursue the
subcontractor or contractor who has no insurance. He expressed
concern that there will not be a lot of enforcement to ensure
that employers have workers' compensation and suggested adding a
provision to the bill to allow the project owner to pursue a
subcontractor or contractor.
CHAIR SEEKINS asked Mr. Miller to address Senator Ogan's
concern.
MR. JACK MILLER, counsel to the Alaska State Chamber of
Commerce, replied:
Yes, in fact, under normal subrogation law, if a - for
example, current law allows and, in fact, this is the
law that's in place, if a subcontractor's employee is
injured and the subcontractor does not have the
required workers' compensation coverage for that
employee, that employee can receive workers'
compensation benefits from the contractor. Once that
contractor - the contractor's insurer pays the
workers' compensation benefits, they are subrogated to
the rights of the injured worker to pursue a claim
against the subcontractor.
CHAIR SEEKINS affirmed that is already in place.
SENATOR OGAN asked if anything in SB 323 would change that.
MR. MILLER said SB 323 would not. If a contractor has to step in
and pay for workers' compensation benefits for an injured worker
down the line, once the payment is made, the project owner or
contractor is subrogated to the rights of the injured worker to
pursue a claim for compensation against the employer of that
injured worker. He noted that since that is existing law,
nothing needs to be added to SB 323 on that point.
SENATOR OGAN pointed out that the bill says, "If the employer is
a contractor and fails to secure the payment of compensation to
its employees of a subcontractor, the project owner is liable
for and shall secure the payment...." He asked for further
explanation of subrogation.
CHAIR SEEKINS said if he was a contractor and Senator Ogan
subcontracted with him and one of Senator Ogan's employees was
hurt and Senator Ogan did not have workers' compensation
coverage, Chair Seekins would have to make sure that employee
receives all benefits due him under workers' compensation. Then,
Chair Seekins' insurance company would sue Senator Ogan for the
cost of that claim.
MR. MILLER affirmed that is correct and repeated that is the
current subrogation law in Alaska.
SENATOR FRENCH maintained his objection to SB 323 and referred
to an e-mail from Mr. Miller that said the bill will have no
effect on the obligation of the parties to procure workers'
compensation coverage. He expressed concern that it will exclude
from liability any person who was liable for or potentially
liable for securing payment of compensation.
MR. MILLER responded:
Let me just say, Senator French has mentioned this
several times. When he first mentioned it, I actually
contacted him. I didn't want to make a big deal of it
on the record and I told him he had been
misrepresenting me and he actually sent me an e-mail
apologizing for doing that. So let me now, on the
record, state clearly that that is a misrepresentation
of that e-mail. The question I was asked is are
insurance policies going to have to change. Is there
going to be some expanded need for more workers'
compensation coverage with this bill and the answer is
no. However, the injured workers have expanded rights
because they now have rights again from the
subcontractor to contractor to the project owner and,
again, the benefits of this bill are that all
[indisc.] parties [indisc.] to a project can integrate
their safety practices and I believe dramatically
reduce work related injuries.
SENATOR FRENCH said his question goes right back to the
sentence: Is there anything in this bill that forces a project
owner to buy a workers' compensation policy to cover a
subcontractor's employees?
MR. MILLER said project owners already have it. All workers'
compensation policies in the state must fully comply with the
terms of the workers' compensation act. He opined that Senator
French is asking the wrong question because if a project owner
has a workers' compensation policy, it complies with the
workers' compensation act and will automatically cover the
subcontractor's employees if injured.
SENATOR FRENCH questioned what would happen if the project owner
does not have a workers' compensation policy.
MR. MILLER replied, "If the employee does not have a workers'
compensation remedy against anyone, under those circumstances
only, they would default into another section of the statute,
which allows for a tort claim."
CHAIR SEEKINS asked if no one has that policy upstream, the
employee has a direct action against the project owner.
MR. MILLER said the employee could sue either for workers'
compensation benefits or for a tort remedy against his direct
employer if neither the subcontractor, the contractor, nor the
project owner have coverage.
SENATOR OGAN moved CSSB 323(JUD) from committee with individual
recommendations and attached fiscal notes. He stated that
today's discussion cleared up a lot of questions he had about
the bill and that he appreciates the amendment.
SENATOR FRENCH objected.
The motion carried with Senators Ogan, Therriault and Seekins in
favor and Senator French opposed.
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