Legislature(1995 - 1996)
03/15/1995 01:09 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HJUD - 03/15/95 HB 115 - DAMAGE AND ATTY FEES FOR UNPAID WAGES CHAIRMAN PORTER called Representative Pete Kott to come forward and introduce HB 115. REPRESENTATIVE PETE KOTT, sponsor of HB 115, introduced the bill. This is an act related to the Alaska Wage and Hour Act as it relates to minimum wage and overtime compensation, and subsequent awarding of liquidated damages. Until recently, aggrieved employees seeking to enforce their rights to overtime compensation for minimum wage had several avenues to obtain redress. They could settle the matter directly with their employers, they could file a complaint with the Department of Labor (DOL), or they could take their employers to Superior Court and sue them. Employees who elected to settle their claims directly with their employers had the option of waiving all or part of their liquidated damages. This is a key part of this proposal. There was some flexibility built into statute prior to the 1991 Kinney court case. At that point in time, the Supreme Court of Alaska interpreted the law to cause a significant change to the way we were doing business. Part of the decision was that full liquidated damages would be required in all settlements, even when the employer acted in good faith. This is a significant component of what we are trying to change here. Measure HB 115 seeks to cure a couple of deficiencies. First, the bill grants to the court, in actions filed pursuant to the Alaska Wage and Hour Act the discretion to award less than full liquidated damages. It also may decline to award liquidated damages at all. This is a good feature of this proposal as it allows some discretion. But even if the court has the discretion, and the burden of proof is met by the employer by showing they acted in good faith and with reasonable grounds, the court still has the discretion to award full or partial liquidated damages. It is not a guarantee. There is still a lot of discretion that rests with the court. REPRESENTATIVE KOTT said, secondly, what this legislation attempts to do is to allow the DOL the opportunity to negotiate with the employer on behalf of the employee. They also can omit all or part of the liquidated damages. That is if the employee agrees to the settlement that is negotiated by DOL. Third, we are trying to institute the provision whereby employees may directly settle with their employers, providing that the employer meets certain safeguards, laid out in the bill, that are granted to the employee. If the employer does in fact, provide those safeguards, and the employee is in agreement, then they can promulgate the settlement, thereby, preventing this measure from going back to DOL, or into court. Finally, the last significant component of the bill changes existing law with respect to the award of attorney fees and costs. As the law now stands, reasonable attorney fees and costs are awarded to the prevailing party. This measure would award attorney fees and costs to whichever party prevails under existing court rules. Those are the major four components of the bill. We are primarily trying to take ourselves back to the "pre-Kinney" days, allowing for some flexibility and discretion within the system. When we look at it from a rational approach, those opportunities for discretion and flexibility should curb the amount of litigation in our courts. Number 170 PAM NEIL, President, Alaska State Chamber of Commerce, spoke in support of HB 115, and provided written testimony as follows: "As Alaska law now stands, an employer who is in violation of the state's minimum wage and overtime compensation laws is automatically liable for liquidated damages, regardless of the circumstances. "In federal Fair Labor Standards Act (FLSA), the court may waive liquidated damages in whole or in part if it can be shown that the employer acted reasonably and in good faith. An Alaska Supreme Court interpretation of Alaska's Wage and Hour Act prevents the courts and the Commissioner of the Alaska Department of Labor from applying this standard of fairness. "Under the provisions proposed in HB 115, employees will still be fully protected under the law, but the courts and the Commissioner will be allowed to consider the circumstances of a case in determining the awarding of liquidated damages. "The Alaska State Chamber of Commerce believes that HB 115 will bring fairness to this section of the law, and we urge passage of this legislation." Number 200 SHERRI GOLL, Lobbyist, Alaska Women's Lobby, spoke in opposition to the bill. We are trying to return to the days before the court decided on a case where the employer settled with numerous employees for 30 cents on the dollar. Take into consideration the position of a minimum wage or hourly wage worker, in relationship to the employer, and what kind of a level playing field they have. We called that settlement over-reaching and contrary to the policies and purposes of the Federal and State Wage an Hour Acts. Referring to the FLSA, the changes proposed today are contrary to the protections of the federal level, and the protections that have been provided here in Alaska. Alaska has a long history of protecting its workers. That is why we have things like mandatory liquidated damages. It is not really an accident. It is a stiff penalty for people who violated the wage and hour laws. Think about a person who is an employee, making minimum or hourly wage. When they have a claim, the laws are not so complex that an employer cannot become familiar with these laws, and then provide the appropriate overtime or wages that are appropriate under the law. When one of these workers has a claim, they should have access to the courts, to have the employer be able to say, "Well, if you take me to court, I'll put every lawyer that I can think of on this case, and when you lose, you will have to pay for all of my lawyers." The fact is that the FLSA says that the prevailing plaintiff will receive the attorneys fees. It does not provide for the defendant to recover attorney fees. We are not talking about people of equal bargaining power. The reason this is a women's lobby issue is the fact that many people who are in these categories of work are women, and it is going to be very difficult for a woman who is not paid properly to go up against an employer and risk losing her home in order to collect a couple of thousand dollars that is fairly owed to her. We are tipping the balance, and making it far more difficult for low wage earning people to have a fair hearing. Number 300 REED STOOPS, delivered a letter on behalf of Lynden, Incorporated: "Lynden, Inc. is one of Alaska's major employers. We have reviewed the bill through our counsel, Bogle and Gates, and believe that is a fair and reasonable mechanism to settle compensation claims in good faith disputes with employees. "Thank you for considering this legislation and we urge legislative approval this session." Number 315 C.J. ZANE, Past Director, Community Relations and Government Affairs, Holland America Lines, explained he currently is a contractor representing Holland America, Alyeska Pipeline, and a service company in Washington D.C. He said he has been working on this legislation for two years. Mr. Zane explained the committee substitute before is the result of some good faith negotiations and compromises between employers, the State Chamber of Commerce, and others who support this legislation. They had many meetings with Commissioner Cashen of the DOL, and his assistant, Ed Flannigan. Tireless effort was put into reaching a compromise. To summarize, this bill is nothing more than an attempt to restore some balance and fairness in the way that employers deal with overtime claims. The bill does four things. It allows for, in very restrictive instances, the employer or defendant to recover, possibly, some attorney's fees from the plaintiff, but only in the most egregious situations. This committee substitute would allow only those attorney's fees to be collected by the employer/defendant, only in a case where they have: 1. outright won the case; 2. where there has been a previous offer of judgment; and 3. they can show by clear and convincing evidence that they acted in good faith. It is a very restrictive category of cases whereby the defendant/employer would be able to collect those fees. The other thing the bill does is allow for private settlements. The current bill, as opposed to the committee substitute, does not. It compromises further, inasmuch as the department wished to be able to supervise and to review those private settlements. The employers agreed to that provision, so it is currently in the committee substitute. The bill also allows for a good faith and reasonable belief defense against the automatic doubling or litigated damages. In previous versions, preponderance of evidence was the standard required, and in this committee substitute, the standard used is clear and convincing evidence, a tougher standard, to prove that the employer operated in good faith and reasonable belief. CHAIRMAN BRIAN PORTER asked Mr. Bob Blasco to describe changes made in the committee substitute since he had worked on it. Number 400 BOB BLASCO, Attorney, Roberts, Monagle and Eastaugh, began to speak in favor of the bill. REPRESENTATIVE DAVID FINKELSTEIN stopped Mr. Blasco and asked him what his firm's interest was in this legislation. He asked which participant his firm represents. MR. BLASCO answered that he was hired by Holland America, as a consultant, and so forth. CHAIRMAN PORTER noted that Mr. Flannigan was present to keep Mr. Blasco honest. MR. BLASCO noted the committee substitute is attempting more compromises. First, the committee substitute applies only to overtime compensation claims, whereas the original bill applied to all minimum wage and overtime compensation claims. The next major change, 3(d), is that portion requiring that any court application of anything other than full damage, and liquidated damages, requires the employer to make a clear and convincing evidence show of good faith. That is a change from the preponderance of evidence requirement in the original bill. The next two portions, under (e), as Mr. Zane had pointed out, the other bill would have just applied court rules as they apply now - whoever is the prevailing party then gets whatever costs and fees they are entitled to. This committee substitute has compromised that considerably to where, first the clear and convincing evidence standard would continue to apply, and the circumstances would be such where the employer has made an effort to settle the case by making a reasonable offer of judgement; which, in fact, has been refused by the employee; and then the employee recovers either nothing or less than the offer that has been made by the employer. In those circumstances, we get to sections 1 and 2, and eventually to Section (f), where either there is no award of attorney fees, or if we have all of those situations existing, where the employer, as a defendant, has prevailed entirely, meaning nothing has been awarded to the employee, and had made an offer anyway; which, obviously was an effort to settle, even though there was no liability at all, and the plaintiff employee is unable to demonstrate to the court that the case was brought in good faith to begin with; then in those circumstances the court may award attorney fees according to court rule, as it now exists. Section (j) gives the ability to have a private settlement between an employer and employee, if the DOL has reviewed it. Number 490 REPRESENTATIVE FINKELSTEIN asked what Section (j) was trying to resolve. Number 495 CHAIRMAN PORTER answered there are three areas mentioned here that he will be offering amendments on. These amendments would basically return the language to what was originally agreed upon. REPRESENTATIVE AL VEZEY wanted to know why anyone felt that version F was superior. He thought it was a step backwards. MR. BLASCO said Version F was the result of a good faith effort by a number of parties working closely with DOL, to come up with agreeable language. REPRESENTATIVE JOE GREEN asked if the sponsor had reviewed the committee substitute, and if he agreed with it. REPRESENTATIVE KOTT did agree with the changes in the committee substitute, and understood there would be a couple of amendments which he would probably support also. REPRESENTATIVE GREEN offered "Work Draft F" as the committee's working document. Hearing no objection, it was so ordered. Number 540 REPRESENTATIVE FINKELSTEIN asked Mr. Flannigan about the idea of having the settlement review be automatically approved, when not disapproved. What will this mean in practice, for the department? Will there be time to review these? ED FLANNIGAN said that issue, as well as the 30 day time frame, should be addressed. This was one of their major concerns. They do not want to have these private settlements that the department never sees. When they asked their Wage and Hour people if this was something they could do in 60 days, they replied they could do it within 30 days. REPRESENTATIVE FINKELSTEIN asked what the minimum would be that a plaintiff would get out of this. MR. FLANNIGAN answered they would get the minimum owed to them, and attorneys fees by court rule, rather than reasonable attorneys fees; assuming employers met the good faith standard. Number 735 CHAIRMAN PORTER said he had three amendments to offer. He asked Anne Carpeneti to describe the first one. ANNE CARPENETI, Judiciary Committee Aide, Alaska State Legislature, described the first amendment. In Work Draft Version F, on page 2, line 16, eliminate paragraph 1, and continue with subsection (e), to read, "unless the defendant shows by clear and convincing evidence that the act or omission giving rise to the action was made in good faith, and that the defendant had reasonable grounds for believing that the act or omission was not in violation of AS 23.10.060, in which case, (1), the court may award attorneys fees to the plaintiff in accordance with court rules; or (2), if the defendant would be entitled to attorneys fees if the action were subject to the standards under court rule offers of judgment, in which case, neither the plaintiff or the defendant is entitled to attorneys fees." CHAIRMAN PORTER said basically what they are doing is just taking the parentheses away from line 16, number 1, making lines 15 and 16 flow together without the "(1)" in between. Then we are putting a (1) between the words "case" and "the", on line 19, and continuing on then with (2). The effect of that basically is to establish for sure that the standard of clear and convincing evidence applies to both (1) and (2), and not to just (1). This makes the intent clear. He offered his amendment. Hearing no objection, the was adopted. MS. CARPENETI explained Amendment Number 2: On page 2, subsection (g), beginning on line 31, instead of the language in that subsection in work draft "F", the following language would be inserted: TAPE 95-30, SIDE B Number 000 MS. CARPENETI continued. "Failure to inquire into Alaska law is not consistent with a claim of good faith under this subsection." CHAIRMAN PORTER asked if there was objection. Hearing none, it was so ordered. Number 036 MS. CARPENETI explained Amendment Number 3: On page 3 of Work draft "F" on line 17, the sentence beginning, "If the Department does not act within 30 days after receiving the agreement, the agreement is considered approved." That language would be omitted, and the following would be inserted, "The Department will approve or deny an agreement within 30 days of receipt." Hearing no objection, the amendment was adopted. Number 080 REPRESENTATIVE FINKELSTEIN offered Amendment Number 4: To: CSHB 115(JUD) "C" version dated 3/14/95 Page 1, line 2: Delete "and attorney fees" Page 1, line 3: Delete "; and amending Alaska Rules of Civil Procedure 68 and 82" Page 1, line 10, through page 2, line 4: Delete all material. Renumber the following bill sections accordingly. Page 2, lines 13 - 30: Delete all material. Reletter the following subsections accordingly. Page 2, line 31: Delete "(d) - (f)" Insert "(d) and (e)" Page 3, line 19: Delete "AS 23.10.110(i), added by sec. 3" Insert "AS 23.10.110(g), added by sec. 2" Page 3, line 21: Delete "AS 23.10.110(j), added by sec. 3" Insert "AS 23.10.110(h), added by sec. 2" Page 3, lines 25 - 31: Delete all material. REPRESENTATIVE VEZEY objected. REPRESENTATIVE FINKELSTEIN explained the obvious rationale. These are not the salaried employees of the state. These are, generally speaking, people who are having a tough time, and because we are only talking about prevailing cases, these are only cases where they were right, and the employer was wrong. They did not get paid overtime when they deserved it. We ought to let them come out of the process with at least the money they should have been paid, and their attorney fees. That is reasonable. A roll call vote was taken. Representatives Finkelstein and Davis voted yes. Representatives Toohey, Vezey, Bunde, Green, and Porter voted no. Amendment Number 4 failed on a vote to two to five. Number 200 REPRESENTATIVE FINKELSTEIN offered Amendment Number 5: It basically returns all attorneys fees to Amendment Number 4, version "C.1". CHAIRMAN PORTER objected and asked for a roll call vote. Representatives Finkelstein and Davis voted yes. Representatives Toohey, Vezey, Bunde, Green, and Porter voted no. Amendment Number 5 failed on a vote of two to five. REPRESENTATIVE BUNDE made a motion to move CSHB 115(JUD), as amended, with individual recommendations, out of committee. Hearing no objection, CSHB 115 moved out of committee.
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