Legislature(2005 - 2006)HOUSE FINANCE 519
03/07/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB81 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | HB 81 | ||
HOUSE BILL NO. 81
An Act establishing an administrative fine and
procedure for construction contractors in certain
circumstances; increasing the amount of a civil penalty
for persons acting in the capacity of contractors or
home inspectors; modifying the elements of a crime
involving contractor registration and residential
contractors; and exempting the administrative hearings
for imposing an administrative fine on construction
contractors from the hearings conducted by the office
of administrative hearings in the Department of
Administration.
Co-Chair Meyer noted that the bill had been held in order to
get clarification on the fiscal notes.
Representative Holm MOVED to ADOPT Amendment #1. (Copy on
File). Representative Hawker OBJECTED.
Representative Holm noted that the amendment was brought
forward by one of his former staff members who currently
makes his living as a handyman. He is concerned that
passage of the legislation will take away some of his
current business. Representative Holm requested that Mr.
Larkin testify on the amendment.
1:44:09 PM
TODD LARKIN, HANDYMAN CONTRACTOR, FAIRBANKS, explained that
under existing language of the proposed legislation, for a
person with a handyman license, the common business practice
would be that if a fully bonded general contractor wanted to
have the handyman on the building site, they would now be
precluded. The new fine structure would be in the amount of
$1500 dollars per day if they accepted that work. The work
consists of the miscellaneous items done between trade
contractors.
However, given the strictest reading of the law, after about
$3200 dollars worth of work, as indicated on Page 4, Line
18, the contract arrangement would be illegal. If the
license were exceeded from working on a project valued over
$5000 dollars, the exemption would go away and the handyman
would be subject to the fines.
Mr. Larkin pointed out that the amendment clarifies that if
the handyman was working on a project over $5000 dollars,
they would be exceeding their license and therefore should
be fined; however, if working for different contractors, the
handyman becomes solely the "customer". He thought that the
handyman should not be punished for that. Mr. Larkin
explained that is common business practice. When the law
was amended last year that language slipped by, as most
handymen were not reading the law and there was not
significant enforcement. Mr. Larkin claimed that it had
been written in an unfortunate way and would definitely
preclude most handyman business practices.
Representative Holm asked when a handyman is working for a
general contractor, would the handyman give the general
contractor the same release for workers compensation. Mr.
Larkin replied that he personally does, however, it is not
worth the paper it is written on. The bill does not address
liability. Last year, the wording "project/owner" was
added, indicating whom ultimately is liable for workers
compensation coverage, even if they were not carrying the
policy. He stressed that everyone on the job site is forced
to be covered by a workers compensation scheme.
1:49:18 PM
Representative Holm inquired if the handyman could become an
employee. Mr. Larkin responded that insurance companies now
are insisting that anyone on a job site is covered. Strict
reading of the law contends that the handyman is not an
employee. Contractors do not have control over the
handyman. He reiterated that by law, that person would not
be considered an employee.
Representative Hawker observed that Amendment 1 would
restrict legitimate work by the handyman. He thought that
the second sentence would provide assurance to protect the
State. He thought that language regarding the purpose of
the evasion could provide sufficient latitude. He added
that clause acts as a catch for unscrupulous behavior.
1:52:46 PM
Co-Chair Meyer agreed.
Representative Hawker WITHDREW his OBJECTION to Amendment 1.
Vice-Chair Stoltze OBJECTED in order to hear from the
sponsor.
JON BITTNER, STAFF, REPRESENTATIVE TOM ANDERSON, advised
that the amendment was outside the scope of the bill's
purpose, thus, the sponsor does not know the full indication
to the current contracting laws. He recommended that the
Committee defer to the actual contractors and the Department
of Labor & Workforce Development.
1:54:19 PM
GREY MITCHELL, DIRECTOR, DIVISION OF LABOR STANDARDS AND
SAFETY, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT,
pointed out that last year, there was a change in the level
of projects that a person with a handyman's license could
perform. The change dropped the level of job income from
$10000 dollars to $5000 dollars. The intent was to make
sure that the project size was made clear regarding what a
handyman can legally perform.
Mr. Mitchell pointed out that there are many specialty
subcontractors that are licensed and the language will
protect them. The sub contractors wanted to delineate
themselves from the handymen; he stressed the different
category of business license. The language would eliminate
the possibility of competition between the sub contractor
and the handyman.
Mr. Mitchell stated that accepting the amendment would be a
significant change. Any size project would then be
available for a handyman to work on. The amendment requires
that the general contractor assume more liability and risk
than if they had licensed the sub contractors to do the
work.
1:56:55 PM
Representative Holm understood that the handyman would not
be able to work in the aggregate for more than $5000
dollars. Mr. Mitchell responded that current law restricts
individuals with a handyman's license on any job over that
amount. They would also be prohibited from doing small
parts for those jobs.
Co-Chair Meyer understood that the handyman could be working
on multiple jobs, but none could be worth more than $5000
dollars. Mr. Mitchell replied that was correct. He
reiterated that they would need to be "set jobs" and not
part of a larger project.
1:58:29 PM
Co-Chair Meyer thought it would be a "big step" to move from
handyman to contractor. Mr. Mitchell agreed it would be a
fairly large step. He knew that there was a different
license cost but that the main issues were bonding and
insurance. There are significant costs associated with
being a general contractor. The costs for workman's
compensation are essentially the same no matter what type of
license the person has.
2:00:02 PM
Co-Chair Chenault questioned what happens to a handyman
injured on a job site. Mr. Mitchell thought that it would
depend on what the courts decided. Initially, there is a
presumption that the handyman is covered.
Co-Chair Chenault explained that as a general contractor, he
is required to make sure that all the sub contractors have
proper credentials to be on the job site. If an employee
gets hurt, there is a good possibility that the contractor
will have to pay or the corporation authorizing the work
will pay the costs.
Mr. Mitchell admitted that he did not know about workers
compensation law.
Vice-Chair Stoltze requested that someone from the
homebuilders testify.
2:02:19 PM
ALAN WILSON, GENERAL CONTRACTOR, LEGISLATIVE CHAIR FOR THE
ALASKA STATE HOMEBUILDING ASSOCIATION, JUNEAU, pointed out
that HB 81 is an enforcement bill. The handyman issue is a
separate concern. He commented that handymen are truly
that, handy men and they do not have a roll to play in a
general contractors day to day business. He state that if
he had a job for $500 dollars that needed to be sub
contracted out, he would sub contract it out to sub
contractors, protecting him from any liability.
Mr. Wilson explained that the manner in which the handyman
issue relates to the construction industry is that some of
the employees eventually go off and get their handyman
license, which he believes is part of the licensing latter.
The system works overall as a step-by-step process. The
handyman issue "muddies the waters" and that HB 81 cleans up
those concerns.
2:04:36 PM
JOHN BITNEY, LOBBYIST, ALASKA STATE HOME BUILDING
ASSOCIATION (ASHBA), echoed testimony provided by Mr.
Wilson. He explained that the way workers compensation
works is that if you come on a job site, there would be an
exemption if you were a sole individual business company.
You are not required under the workmen's compensation to
have your own policy. The underwriting standards in which
the insurance company assesses your premium and the person
on the job site, who does not have a certificate, then the
insurance company can retroactively increase the premium for
that general contractor.
2:05:40 PM
Representative Holm asked why they should preclude hiring
someone that poses a greater risk. Mr. Bitney replied that
is current business practice and it is up to them to
understand and agree to the risk that they are taking on
having an uncovered person on the job site. It is a
question of exasperating the large retroactive assessments
by the insurance company on those premiums.
Mr. Wilson acknowledged that this is a major concern
throughout the industry and that purchasing a sub
contractors license could exempt a person from workers
compensation. When coming to work for a general contractor,
the handyman could be exempt from workers compensation until
audit time with the insurance agent. It is very confusing
within the industry. The Association has attempted to clean
that language up because "as a guy leaves the roof and hits
the ground, they become your employee". He stressed, it is
a mess.
2:08:44 PM
Representative Holm noted that he did not want to exclude
the entrepreneurial person but also did not want to create a
difficult situation for the contractors.
Co-Chair Meyer acknowledged that HB 81 would not be the
correct vehicle to address the handyman concerns, since it
is an enforcement bill.
2:09:35 PM
Representative Croft pointed out that the old law
distinguished between two varying operational concepts with
exemptions:
· The operation of a job, and
· The intent to obey.
Representative Croft continued, the amendment adds the idea
of the $5000 worth of work for any of sub contractors as
long as there are different contractual relationships with
each. Mr. Wilson assumed that was the intent of the
amendment.
Representative Croft asked what was wrong with the
amendment. Mr. Wilson explained that it would put
subcontractors out of business. It would establish two
standards with which to accomplish the same thing. He
emphasized that from the workers compensation and licensing
side, he would prefer that his employees be licensed,
insured and bonded.
Representative Croft asked the main step of moving from a
handyman to a sub contractor. Mr. Wilson stated that
currently, to become a handyman requires that you buy a
business license. A sub contractor is required to have a
business and a sub contractor license, bonding and general
liability.
2:12:30 PM
Co-Chair Meyer asked the cost of bonding and insurance for a
sub contractor. Mr. Wilson responded that the bonding costs
run between $500 - $600 dollars per year for a $5000 sub
contractors bond; the liability ranges between $1500 to
$3000 dollars per year.
2:13:40 PM
Representative Kelly asked if there had been previous
testimony regarding the pros and cons of the legislation.
Mr. Bitney pointed out that was language included in the
House Labor and Commerce Committee that attempted to address
abuses and problems that came up during testimony. HB 81
began as an enforcement piece for people not registered.
Following testimony, it was determined that some business
not registered as contractors, were operating through
various exemptions. Current law clarifies that if a person
was acting as their own contractor, they could build one
house or commercial building per year. Testimony has
indicated that a large family could allow every member of
that family to build one of these units every year;
essentially, that family would then be operating a
substantial general contracting business. That type
operation exceeds the intent of the law. The language only
intends that a person can "build their own home". The
legislation tightens up the language to prohibit it from
acting as a loophole.
2:17:31 PM
Vice-Chair Stoltze maintained his objection to Amendment 1.
A roll call vote was taken on the motion to adopt Amendment
1..
IN FAVOR: Moses
OPPOSED: Croft, Foster, Hawker, Holm, Kelly, Stoltze,
Chenault, Meyer
Representative Joule and Representative Weyrauch were not
present for the vote.
The MOTION FAILED (1-8).
2:19:32 PM
Representative Hawker stated that he was inclined to support
the "intent behind the amendment". He advised that his "no"
vote was not a vote against the concept.
Co-Chair Meyer agreed; however, commented that HB 81 was not
the correct vehicle.
Representative Holm added that he did not want to see the
Committee voting on legislation that removes one group of
workers from the job market.
Representative Kelly acknowledged that the handyman is an
apprentice group that feeds into the system. He admitted
that he was supportive of small business people, however,
the legislation will create more definition for the
homebuilders.
2:21:40 PM
Representative Foster MOVED to report CS HB 81 (L&C) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HB 81 (L&C) was reported out of Committee with a "no"
recommendation and with zero note #1 by the Department of
Community & Economic Development and zero note #2 by the
Department of Labor & Workforce Development.
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