Legislature(1995 - 1996)
03/31/1995 01:03 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 237 - WORKERS' COMPENSATION AMENDMENTS Number 140 REPRESENTATIVE ELDON MULDER, sponsor of HB 237, introduced the bill. Sponsor statement: "For the past 13 years, the Ad Hoc Committee on Workers' Compensation, a private citizen initiative group with representatives from both management and labor associations from around the state, has been working to find solutions to the concerns surrounding Alaska's Workers' Compensation system. Through their efforts the Ad Hoc Committee has been very instrumental in getting several pieces of major workers' compensation reform passed by the legislature. "In October of 1993, the Ad Hoc Committee began meeting regularly and came up with the framework of what is now House Bill 237. The Ad Hoc Committee addressed six specific problem areas in Alaska's workers' compensation laws and came up with solutions agreeable to both labor and management. The six issues dealt with by the Ad Hoc Committee and now House Bill 237 are: Death benefit revision;, immunity for workplace safety inspections (also known as Van Biene); design professional construction site liability limit; contractor premium adjustable rate; determination of spendable weekly wages (also known as Gilmore); and workers' compensation fraud. Attached to this sponsor statement is a letter from the Ad Hoc Committee giving a break down of these six issues. "It is my hope that the effort put forth by this group will be recognized for its importance and House Bill 237 will be accepted without change." The six sections mentioned above, addressed by the Ad Hoc Committee, are as follows: - DEATH BENEFIT REVISION - The current death benefit has a ten-year cap and also calls for the reduction of benefits at the five and eight year time frame. Although the ten year cap is still retained to control the cost of claims, it was suggested that the reduction intervals could create hardships for a surviving spouse with small children. It has been estimated that the elimination of the five and eight year reductions will result in an average premium increase of 0.6 percent. - VAN BIENE - This portion of the bill provides immunity for insurance carriers, trade associations and other persons providing work site safety inspections. These inspections are often voluntary and are conducted in the interest of promoting safety in the workplace. Without this immunity, many of the workplace safety inspections will be curtailed to the disadvantage of both employees and employers. - DESIGN PROFESSIONAL CONSTRUCTION SITE LIABILITY LIMIT - Design professionals (i.e. architects, engineers and land surveyors) have limited involvement at the construction site with their main function being periodic observation for conformance to design requirements. While the role of design professionals is clearly defined in contract language, they have been drawn into lawsuits based simply on their presence at the site. The proposed statute still allows the injured employee of the contractor to bring suit against the design professional based on negligent plans and specifications. However, the statute prevents the more general charge of professional negligence through failing to detect potentially dangerous conditions during observation of construction. The recognition and correction of such conditions is the sole responsibility of the construction contractor who has control of the work. Fourteen other states provide a similar immunity, with eight states utilizing nearly identical language. - CONTRACTOR PREMIUM ADJUSTMENT RATE - The construction industry has long sought a more equitable method of distributing the cost of workers' compensation premiums. With the large variance in pay scale, higher paying employers pay a larger cost for workers' compensation although some costs related to injuries are fixed regardless of wage (e.g. medical, vocational rehabilitation). To bring about a more equitable system, twelve states have adopted regulations establishing a premium adjustment program for the contracting classifications. The process is handled administratively by the rate setting authority. -DETERMINATION OF SPENDABLE WEEKLY WAGES - A recent Supreme Court decision in the Gilmore case has resulted in confusion regarding the calculation of compensation benefits. The proposed legislation provides a fair, efficient and predictable method of calculating compensation benefits. The methods developed are patterned after model language suggested by the court in the Gilmore ruling. The legislation recognizes the importance of establishing a fair approximation that does not rely on various litigation for both the injured worker and their employers. - FRAUD - The revised section broadens the definition of misrepresentation and gives the Board the authority to order reimbursement of monies fraudulently obtained. ROYCE ROCK testified via teleconference. He said Representative Mulder stated the bill perfectly. There has been a lot of work between labor and management, and we have a good balance from both sides on this. He urged the committee's support on HB 237. Number 250 MIKE SCHNEIDER, Attorney, testified via teleconference. He previously handled a lot of workers' compensation cases. He commented on Section 3 of the bill - Immunity for third party design professionals. We have several liability laws, under which you only pay your assessed percentage of fault, and thus there is no reason to give immunity to anyone. Responsibility is the order of the day, and there is no real reason to eliminate someone's responsibility for their own negligent or wrongful conduct. He has a huge problem with Section 3, because if you did not have the factors listed in (b) (1 -3), you would not have a claim against a third party design professional anyway. We need to look at what this is going to accomplish. The real problem is in Section 9. There is no evidence he is aware of that safety inspections are not being performed, or that those performing them are being sued with regularity. We have immunized the insurance industry and trade associations, under this bill, from getting stuck with more than their percentage of fault. There is no reason to do this. It gives them a benefit that none of the rest of us are entitled to. Number 330 STEVE CONN, Alaska Public Interest Research Group (AKPIRG) testified via teleconference, speaking of the problems within the bill. The workers' compensation system needs a massive overview. This bill leaves out matters such as penalties for fraudulent or misleading acts. There are a great deal of fraudulent attempts to receive workers' compensation benefits in this state. What we are not seeing, is whether or not employers are paying their premiums. He felt portions of the section would end up being used by claims adjusters to batter injured workers. Injured workers have been left out of the dialogue, but we are going to make sure that changes. He felt this bill was an inadequate reflection of the problems that exist, and suggested it be held over, until the legislature can convene a commission to take a brand new look at workers' compensation. The system does not deliver what it promises to, in exchange for civil litigation. Number 450 SCOTT MCENTIRE, injured worker, testified via teleconference. He explained how after he went through seven pre-hearings, both sides represented by attorneys, he asked the board what he could do to resolve his case, and their only response was to schedule another pre-hearing. He hoped the committee would take the time to read the letter he had sent. In that letter, he mentioned the fact that the board is well aware that the workers' compensation established in Alaska violates the Americans With Disabilities Act (ADA), yet this Ad Hoc Committee seemed to fail to address that problem. He understood that the workers' compensation system is supposed to be reviewed by the Workers' Compensation Board, the Division of Workers' Compensation, Legislative Attorneys, Legal Counsel, and the Administrator of the Regulation Review Commission. They have all failed to correct this problem. Another problem is using the third edition of the (American Medical Association (AMA) guidelines. The statute for those injuries would appear to be covered underneath that guideline, yet they are not. They are covered under the 1965 American Academy of Orthopedic Surgeons. The statutes would award him with 25 percent more if he moved to San Jose, California. He considers these to be problems that he would like to see addressed. Number 525 REPRESENTATIVE BUNDE told Mr. McEntire that he understands that he is going through the system, and is probably justifiably frustrated. He wanted Mr. McEntire to know that he has taken great personal offense to a statement on page 4 of Mr. McEntire's letter. He quoted, "Perhaps the Judiciary Committee could take time to read the bill and ponder the implications instead of just sounding out the words." Representative Bunde said that impugns the integrity of this entire committee, and he is sorry, but it does not add to his enthusiasm for accepting Mr. McEntire's point of view. REPRESENTATIVE TOOHEY asked Mr. McEntire if he was working now. MR. MCENTIRE said no, he had not been released by his doctor to return to work yet. It had been three years since his injury. Number 500 WILLIE VANHEMMERT, Manager, Ad Hoc Committee, testified via teleconference. He said there had been requests for changes which they have tried to deal with on an individual basis. He commented that he really had no testimony to give, but was available for any questions the committee might have. PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor, was also present for questions. REPRESENTATIVE FINKELSTEIN asked who would be the best person to describe what the bill does. REPRESENTATIVE MULDER gave an overview of the sectional analysis. He explained that Section 2 prohibits an increase in insurance rate filings for workers' compensation, if that insurance rate increase is based only on wage rate. In the construction industry, the risk only consists of a higher wage rate. In other words, an employer who pays a higher wage to his employee for the same work, will not be assessed a higher wage or a higher rate. REPRESENTATIVE FINKELSTEIN asked how workers' compensation insurance rates are regulated. Do we review and approve the rates? MR. GROSSI answered that the Division of Insurance handles the rates. He understood the current system to be based on salary paid, and various other load factors. There may be reductions for safety inspections and things like that. It is not based strictly on wages. The premium is based on how much you have paid out in salaries. If two employees have the same type of business; one employer pays the employees $12 per hour, and the other employer pays the employees $10 per hour, your rate cannot be established upon how much you pay your employees, but according to the risk of the industry in which you are employing them. CHAIRMAN PORTER restated that. You should not be penalized as an employer if you have seen your way clear to pay your employees more than somebody else does. REPRESENTATIVE MULDER said Section 3 provides some protection to design professionals who provide services for construction projects. It makes them not civilly liable for injury to a person if that person is injured on the job, with the exception of when they are on the job and actually have a management function. REPRESENTATIVE MULDER explained that Section 4 changes the second independent medical examination of an injured employee from mandatory to optional, at the request of the Board; in cases where there is medical dispute over workers' compensation coverage. REPRESENTATIVE FINKELSTEIN asked why we wanted to make the second opinion optional. MR. GROSSI answered that right now, it is mandatory, so that if a medical dispute exists between an employer's medical evaluator, and the employee's attending physician, a third examination must be performed. This does not take into account that there are some cases that the board can make a decision on. For example, if there is a 2 percent difference of opinion between the doctors on permanent and partial impairment, a mandatory examination would be required. Instead of this examination being mandatory, the board could make a decision based on the evidence, not needing a third medical examination. This process would be faster, so injured employees do not have to wait on the decision for a longer period of time than necessary. REPRESENTATIVE MULDER continued to say that Section 5 requires that benefits paid to recipients residing outside of Alaska be calculated on wages earned in Alaska. Section 6 changes death benefits to provide that benefits not be diminished at five and eight year intervals. Currently under workers' compensation, if a worker is killed on the job, the surviving widow receives compensation for up to ten years. After the first five years, she would receive benefits at 100 percent; from the fifth through the eighth year, it is diminished to 66 and 2/3 percent; and from years eight through ten, it is diminished to 50 percent. This provision would allow that benefit to remain whole throughout the entire ten years. REPRESENTATIVE MULDER said Section 7 provides a calculation for an employee's gross weekly earnings. This is in response to the Gilmore case, which pertained to the 1988 Reform Act, where the Supreme Court threw out the provision in that computation; so Section 7 basically follows the guidelines of what the Supreme Court has allowed us to do. REPRESENTATIVE MULDER described Section 8, which relates to fraud, and imposes penalties for fraudulent or misleading acts relating to workers' compensation benefits. This allows a more expedient method for the board to deal with fraud, seeking redress and back pay from the employee who made the fraudulent claim. Section 9 provides safety inspectors to not be civilly liable for acts or omissions in performing certain workplace safety services, unless that act or omission constitutes intentional misconduct. This pertains to the so-called Van Biene case, which was a part of the 1988 Reform Act, which provided for workplace safety inspection programs. It gave employers a 5 percent discount for the inspection programs. While we felt this was an incentive to promote work safety, the trial lawyers found it to be a potential deep pocket, and exploited that opportunity; so we are attempting to close that gap through Section 9. Once that vulnerability or liability was discovered, virtually nobody offered workplace safety inspection programs anymore; hence, both the employer lost out, in terms of higher premiums, and the employees lost out, in terms of a less safe workplace environment. REPRESENTATIVE MULDER explained that Section 10 deals with the definitions of seasonal and temporary work. He had an amendment for that to propose to the committee. Section 11 is a transition section for certain insurance rate filings. Section 12 is the applicability for Section 2. Section 13 is the effective date. CHAIRMAN PORTER offered Amendment one: Page 3, line 19, after "occurred;: Insert "or" CHAIRMAN PORTER felt that was just correcting a drafting error. REPRESENTATIVE BUNDE made a motion to move Amendment one as described. Seeing no objection, the amendment was adopted. REPRESENTATIVE BUNDE made a motion to move Amendment two which would do the following: Page 8, lines 20 -21: Delete "does not continue through an entire calendar year" Insert "is not intended to continue through an entire calendar year, but recurs on an annual basis" REPRESENTATIVE MULDER explained that this is simply a clarification of terminology in relation to the definition of seasonal work. It is a more accurate reflection of what constitutes seasonal work. REPRESENTATIVE FINKELSTEIN asked where this would make a difference. REPRESENTATIVE MULDER asked Mr. VanHemmert if the language on seasonal work relates to the Gilmore part of Section 7. MR. VANHEMMERT said that was correct. He explained that page 6, line 11, talks about the time of injury being exclusively seasonal or temporary. Then you take all the wages that the injured party has earned during the year, and divide it by 50, which is an approximation of a weekly wage. This balances out the occasions where employees may have had a high paying job for a short period of time, and it was anticipated to be seasonal or part time, then they would not get the entire benefit. It kind of evens out both ends. CHAIRMAN PORTER asked if there was further discussion on Amendment two, or objection. Seeing none, the amendment was adopted. REPRESENTATIVE VEZEY offered and explained his amendment, which was Amendment three: Page 1, line 7, after ";": Insert "repealing the limitation on the hours a person may be employed in a mine; making a related technical amendment to avoid changing the penalties for failing to make payments into an employee benefit fund;" Page 3, after line 5: Insert new bill sections to read: "Sec. 3. AS 23.10.045(b) is amended to read: (b) Each violation of this section is a separate offense and a person found guilty of a violation is punishable under (c) - (d) of this section [IN ACCORDANCE WITH THE SCHEDULE OF PUNISHMENT SET OUT IN AS 23.10.415]. Sec. 4. AS 23.045 is amended by adding new subsections to read: (c) A person who, whether as principal or agent, violates this section is guilty of a misdemeanor and upon a first conviction is punishable by a fine of not less than $100 nor more than $500 or by imprisonment in a jail for not less than 60 days, nor more than six months, or by both. (d) Upon a second conviction for a violation of this section, the punishment is imprisonment in jail for not less than 60 days, nor more than one year. A "second conviction" under this section means a conviction for a violation of this section that was committed within two years after a previous conviction for a violation of this section. Other convictions are first convictions." Renumber the following bill sections accordingly. Page 8, after line 24: Insert a new bill section to read: "Sec. 13. AS 23.10.405, 23.10.410, and 23.10.415 are repealed." Renumber the following bill sections accordingly. He said this amendment would be beneficial to the mine workers, who would like to work ten hour days. REPRESENTATIVE MULDER opposed the amendment. The bill, as it currently exists, is a balancing act. There are provisions within here that provide additional protection for injured workers, and there are provisions with the bill that provide additional benefits to the employers. He felt this amendment would tip the balance of the bill in a direction that would no longer constitute equilibrium. He felt this amendment would be a bill killer, but would perhaps be appropriately offered as a separate piece of legislation. Currently, this bill has the support of the Workers' Compensation Commission of Alaska, organized labor, the Administration, and also the Department of Labor. TAPE 95-40, SIDE B Number 000 A roll call vote was taken on Amendment three. Representative Vezey voted yes. Representatives Bunde, Toohey, Finkelstein and Porter voted no. The amendment failed, four to one. REPRESENTATIVE FINKELSTEIN offered Amendment four. He wanted to put the phrase "except for seasonal or temporary work" into Section 7. He did not want to pick a particular spot for it. CHAIRMAN PORTER opposed the amendment, saying that this bill does not seek to deal individually with businesses or types of businesses like cannery workers. It tries to balance across the state for all businesses. REPRESENTATIVE FINKELSTEIN felt his amendment would take care of people at the very bottom of the ladder. There was a debate on whether or not the bill excluded overtime. CHAIRMAN PORTER noted that on page 6, line 11, it says that if at the time of injury, the employment is exclusively seasonal or temporary, then, notwithstanding subsections 1 through 5, which is the exclusion of overtime, weekly earnings are calculated at 1/50th of the total wages, which would include overtime. REPRESENTATIVE FINKELSTEIN felt this was a very confusing section, and did not understand how you would pick which category you are in. You can be both seasonal or temporary, AND calculated by day, hour or output. Number 250 ANNE CARPENETI, Committee Aide, House Judiciary Committee, noted that because it says, "notwithstanding those sections," paragraph 6 would prevail. Their benefits would be calculated under paragraph 6. CHAIRMAN PORTER and Mr. Grossi agreed. REPRESENTATIVE FINKELSTEIN decided to modify his proposed amendment. Another way of doing the same thing, would be, in subsection 10, expanding it beyond permanent disability to also include seasonal and temporary work, so that subsection 10 allows the board to determine the calculations if it does not fairly reflect the employee's earnings. This would put it up to the board's discretion. Number 375 CHAIRMAN PORTER announced that for those people waiting to testify or listen to the hearing on HB 234 or HB 130, the committee would not have time to hear those two bills, and would postpone them until next Monday. In addition, the committee substitute for HB 10 would be heard on Wednesday. There was a short discussion on the best ways to calculate benefits on seasonal and temporary wages. Number 545 REPRESENTATIVE FINKELSTEIN restated his proposed amendment. CHAIRMAN PORTER requested a roll call vote. Representative Finkelstein voted yes. Representatives Vezey, Bunde, Toohey, and Porter voted no. The amendment failed four to one. REPRESENTATIVE BUNDE made a motion to move CSHB 237(JUD) out of committee, with individual recommendations and attached fiscal notes. Hearing no objection, it was so ordered.
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