Legislature(1997 - 1998)
04/28/1997 01:52 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 232 - INDEPENDENT DIV. OF ADMIN. HEARINGS Number 0582 CHAIRMAN GREEN announced the next item of business was House Bill No. 232, "An Act establishing the independent division of administrative hearings in the Department of Administration in order to provide a source of independent administrative hearing officers to preside in contested cases; relating to administrative hearing officers; relating to contested case proceedings; and providing for an effective date." Number 0588 REPRESENTATIVE SCOTT OGAN, prime sponsor, discussed the branches of government, suggesting all three powers of government have been delegated to what he calls the fourth branch, the bureaucracy. He stated, "They are the executive - we give them legislative powers by allowing them to write law, which is administrative law or regulation, and they also have judicial powers because they adjudicate that regulation. And I think there's a lack of separation of powers and a lack of impartial, fair hearings." REPRESENTATIVE OGAN recounted how he had previously been on the big game commercial services board, where they routinely had administrative hearing findings placed before them, relating to a guide who broke the regulations, for example. He had been disturbed by the fact that they would pass a sometimes-very-serious judgment against an individual, even revoking that person's livelihood by permanently revoking a license, but that members were not allowed to question that person or any witnesses. "We simply read the findings of the hearing officer and either accepted them or rejected them or modified them," he stated. REPRESENTATIVE OGAN said once in the legislature, he decided to look at that. He stated, "And we decided to try to break the administrative adjudicators out of the administration, at least out of the bureaucracy that they work for, and create a separate division, under the Department of Administration, and get professional hearing officers that would give a fair and impartial hearing to these cases." Number 0779 REPRESENTATIVE OGAN advised members that several other states have done this. Modeled after legislation in a couple of different states, this is a hybrid that he believes is a good model. He asked Dave Stancliff to address technical aspects. Number 0817 DAVID STANCLIFF, Legislative Administrative Assistant to Representative Scott Ogan, reported that in exploring the separation of the hearing functions of agencies, he had located two administrative law judges (ALJs) from other states: Ed Felter from Colorado, who would join them on teleconference shortly, and John Hardwicke from Maryland. MR. STANCLIFF advised members that Maryland has what is considered to be the best model in any of the states. However, the model before the committee was unanimously adopted by the American Bar Association's House of Delegates and was "several notches beyond that." Mr. Stancliff stated, "They're very excited that Alaska is the first state to have that particular model." MR. STANCLIFF said he had contacted Mark Boyer, Commissioner, Department of Administration; Mike Abbott, the Governor's business liaison; and Teresa Williams, Assistant Attorney General, Fair Business Practices Section, Civil Division (Anchorage), Department of Law. Mr. Stancliff stated, "The administration is intrigued with this idea and has shown a willingness to work with this committee and with the legislature." Number 0876 MR. STANCLIFF referred to the "administrative tax law judge concept" that Chairman Green had worked on in previous legislation. He said the higher level of due process in fair hearings accomplished in that effort can be extended in the bill before the committee. MR. STANCLIFF explained that there are two dimensions to this bill, structure and flavor; he would explain the structure. Key points that Representative Ogan had considered were whether legislators should set the structure entirely apart or place it within the administration and, if the latter, how deep within the administration it should be. While some states have set the structure into the judiciary, most have put it within the administration. MR. STANCLIFF stated, "After consulting with Commissioner Boyer, Representative Ogan decided that this administration was willing to work with the legislature, as they did with you, Mr. Chairman, and that we should put it within the administration because, after all, it does serve an administrative function. So, the independent division was put, in this bill, in the Department of Administration." Number 0980 MR. STANCLIFF said that after considerable consultation with the two out-of-state ALJs and review of written findings in law journals, Representative Ogan decided to place final decision- making authority within the administration. He explained, "And the idea there was - and we discussed this with `Legal' - if it was very autonomous, perhaps a recommendation-type approach would be best. If it was deep within the administration, then perhaps final decision-making authority would be a good balance there." Mr. Stancliff suggested that Judge Felter could discuss other practical and administrative advantages of the final decision-making authority. MR. STANCLIFF reported that other options, such as grandfathering in present hearing officers, laterally transferring them into this new structure, were included in this bill. Instead of the legislature establishing a code of conduct in the bill, that authority is given to the new chief administrative hearing officer. Mr. Stancliff stated, "And also, rather than the governor appoint someone, as they do in other states, by creating it ... at the division level, this gives the commissioner, through the governor, of course, the ability to appoint this person. All three of those negotiable items were included, because to offset that was the final decision authority, over on the right side of that balance." MR. STANCLIFF said by keeping the hearing function as an integral part of the administration, it will be more able to withstand any constitutional challenges. He advised members that committee packets contained a memorandum from Legislative Legal and Research Services, which states that it is the legislature's prerogative to decided where in the administrative/executive branch of government the adjudication decisions will be made. He commented, "You can't transfer it away from them. But you can explain ... at what level you want them to be made." Number 1091 MR. STANCLIFF said the Maryland courts had found that their legislature was fully able to delegate adjudicative powers. He stated that another power that HB 232 gives solely to the executive is the option of the chief officer to adopt an official code of conduct. In this bill, however, it suggests that the code be based on those sections of judicial canon applicable to conflicts of interest, fairness and impartiality. MR. STANCLIFF explained that Legislative Legal and Research Services personnel had been unsure what hearings the independent division would handle; they had suggested that the cleanest and most efficient place to start was those already listed under the Administrative Procedure Act (APA) section of the statute. Mr. Stancliff noted that other legislatures "have deemed that those folks should fall under APA procedure." He indicated although the list could be broadened, that was probably the most logical place to start, in an expansion of the effort begun last year. MR. STANCLIFF indicated that Mr. Felter's experience has shown that once this new structure is up and running, administrators soon avail themselves of it. Of the 18 states that have adopted the central panels or this separation of powers, not one has repealed the law. And in every state, money and time have been saved. Mr. Stancliff said that Judge Felter's division receives a public approval rating of better than 97 percent for judges and 96 percent for staff. He concluded by saying the independent panels sell themselves. Number 1208 EDWIN L. FELTER, JR., Director and Chief Administrative Law Judge, Division of Administrative Hearings, testified via teleconference from Colorado, saying he had helped Hawaii in 1990 with its central panel and had held his current position in Colorado for 14 years. He had shepherded the model act, mentioned by Mr. Stancliff, through the House of Delegates from its beginnings. He had also shepherded the model code of judicial conduct for state ALJs through the National Conference of Administrative Law Judges. He stated, "But in dealing with Representative Scott Ogan's office, I really believe that Alaska is ready to adopt a central panel model and to do it for good government reasons." JUDGE FELTER said there are two reasons why central panels come into existence. Usually, it is because of a scandal or perceived conflict of interest. However, more recently they have come into existence for good government reasons, because everyone believes there is more accountability to the citizens. JUDGE FELTER said a central panel's primary product is fairness. He believes that in Colorado and all other states with central panels, citizens and industry groups perceive them as fair. Other important products are a high degree of professionalism in adjudication, efficiency, and dignified adjudications, to which he believes citizens are entitled. Number 1345 JUDGE FELTER said he would outline why legislatures and administrations alike support central panels and why they make sense in terms of economics and adjudications. He would also try to dispel the myth of agency expertise and share a bit of Colorado's experience, in addition to making two or three recommendations on funding and how the administration of the panels is set up. JUDGE FELTER explained that legislatures and administrations like central panels because of public perception; the panels are apolitical and provide high-quality due process to citizens. "It's really a citizen focus," he explained. "That's one of our by- words, `citizen-focused service.' We're accountable for fairness and efficiency in adjudications only, not in anything else. One of the cornerstones of an effective central panel is that there's decisional independence yet there's accountability to the public." JUDGE FELTER noted that Maryland has a large central panel; much of their work is motor vehicle hearings, but they handle other areas such as licensing boards. He explained, "Before the central panel, the budget for all the administrative adjudication was $6.8 million; that was 1989. It went up temporarily, but by 1993, inflation and all, it was a $6.7-million budget. So, it's proven to be cost-effective." Number 1412 JUDGE FELTER continued, "Why it makes adjudication sense, in terms of perceptions of fairness and actual fairness, is central panel hearing officers or ALJs really are not susceptible to unwritten or in-house policies that only the agency knows. Central panels force agencies to adopt good rules because the agencies realize that the primary obligation of the hearing officer or ALJ of the central panel is to the statutes. If a rule conflicts, the ALJ has to go with the statute, knock down the rule." JUDGE FELTER indicated that losing favor at both federal and state levels is the idea that hearing officers are needed in the agencies because of agency expertise. He explained, "There are serious due process problems with this approach, because how does a citizen cross-examine some secret information or knowledge in the mind of the so-called expert hearing officer for the agency?" He said the primary thinking today is that expertise is best presented through experts to a professional judge or professional adjudicator. JUDGE FELTER continued, "Colorado experience, in brief: We came into existence in 1976. ... Your mission statement looks a lot like ours. It's to deliver high-quality ... and efficient adjudication services to the citizen, with respect for the due process rights and dignity of the citizens." He said prior to workers' compensation reform in 1991, it took 11 months to get a hearing. After the reform, they became efficient and were now providing hearings within three months. He stated, "It took two months to get a decision out before; we were doing it in about nine days afterwards, on the average. And that is a finding of the legislative audit committee." JUDGE FELTER noted that Senator Bishop had praised them on the senate floor in 1993 for reducing the backlog in workers' compensation cases by 95 percent, providing hearings in at least one-third of the time and providing decisions in 9.6 days. Number 1554 JUDGE FELTER continued, "The private bar that represents citizens that come before us in regulatory law has been one of our foremost defenders. When agencies have come to appreciate the role we provide for them, and that is being independent adjudicators, it takes the monkey off their backs, where they can focus on rule- making, investigating and prosecuting the cases, without worrying about conflicts and nasty issues being raised on appeal to the courts." Number 1584 JUDGE FELTER said the chief and the hearing officers or ALJs need some protections for their "decisional independence." The personnel system offers protections and the model act builds protections in. "It's not a good idea to have at-will ALJs," he added. Noting that he himself is a civil servant, he said other chiefs are appointed by the governor for a fixed term, with the advice and consent of the senate. He suggested that ideally, the best model is for the independent central panel and the executive, at least the chief judge, to have the status of a cabinet officer, if possible under the constitution. However, it is not possible under Colorado's constitution, which limits principal departments to 22. He himself is in the Department of General Support Services, which is the most neutral department because it has no adjudication business per se. Number 1639 JUDGE FELTER continued, "Funding mechanism: We had the Oregon plan, which is cash-funded. It's not the greatest thing in the world when the central panel has to worry about revenue shortfalls, when that's not really the principal mission. It's falling into disfavor throughout the United States. Only two jurisdictions - I'm kind of sad to say Colorado is one of them - still have the Oregon plan." He indicated Colorado would be going to another system as well, a modified general fund model, `modified' because Colorado has sources of funds other than general funds, such as licensing fees and others. Number 1678 JUDGE FELTER concluded by suggesting if Alaska has a shot at the ideal central panel, that is the best way to do it. It takes agencies out of the adjudication business and puts them where they are more effective for the citizens, in the areas of rule-making, investigations, prosecutions and enforcement. Number 1704 CHAIRMAN GREEN asked, "How many ALJs do you have and how many cases, roughly, a year?" JUDGE FELTER replied that they have 17 ALJs statewide, with regional offices in Grand Junction, Fort Collins and Colorado Springs. For '95-'96, based on three-fourths of the fiscal year, there were 6,967 hearings for 13,596 docketed cases, including high-volume cases such as workers' compensation and human services cases. There were 13,839 decisions rendered. Judge Felter said, "One may ask why more decisions than cases docketed or hearings held. The reason is, you can get three or four decisions in one case. This is all done by, actually, 14.6 full-time employee judges. We have some part-timers." Number 1765 CHAIRMAN GREEN said that was a pretty hefty load, over 1,000 per judge. JUDGE FELTER agreed but said it is "sort of apples and oranges." He offered to break it down. Number 1774 CHAIRMAN GREEN indicated that was unnecessary. With Alaska being far less populated than Colorado, he stated concern that establishing a pool of judges might be cost-prohibitive. He mentioned a statute passed the previous year having to do with taxation appeals; rather than having a pool, there was a different avenue to establish the ALJ under that statute. He suggested that with as many ALJs as Colorado has, there would be no problem with recusals. CHAIRMAN GREEN asked whether there is a delay in bringing an ALJ up to speed on intricate cases. JUDGE FELTER said no, because they actually have more expertise, even in esoteric areas, than judicial branch judges have. He said administrative law is a limited area. They have sections for workers' compensation, regulatory law and human services. He stated, "The regulatory law section demands a high degree of expertise, which all our judges have; it's just through experience and training, a medical board, for instance, transportation, in water quality. No, there's no delay at all." He added that they also must hire "hit-the-deck-running types." Number 1871 CHAIRMAN GREEN, referring again to the previous year's legislation, responded, "We kind of hit a snag with ours because Alaska's a little bit unique, having to do with tax cases. We have relatively few, but they're magnificent in size. And so, it required, perhaps, especially there, to get into really some of the very strange nuances and tracking crude [oil] price around the world and so on and so forth. It appears that in a state like Colorado or a more populous state that you would be covering far more cases, but perhaps not any in such intricate detail." JUDGE FELTER replied, "Oh, we do. There are some cases that we do that are in intricate detail, and we have not had a problem." He said the detriments of having an in-house specialist who may be perceived to be too cozy with the agency are outweighed by the benefits of the perception, by both sides, of having a fair and impartial process; the only way to get that is by having a judge who is outside of the agency. JUDGE FELTER restated that they have had no problems, although they handle some fairly esoteric, specialized cases. He explained, "The way to do that is you zone in, if you have a broad array of talent. And you have to have a smaller pool within the larger pool that is equipped to hit the deck running on these highly specialized, technical, high-profile cases." Number 1939 REPRESENTATIVE CROFT noted that scattered through Alaska's statutes are a number of "special structure" hearing panels. For example, the one for workers' compensation contains a labor representative, a business representative and a neutral one. In addition, there are a number of citizen panels. He asked whether this would cut a swath through all of those, with all the different types of adjudication being under one administrative law judge, for example, who would or would not have a specialty. JUDGE FELTER said that would depend on how broad they want it to be. Under the model act, the governor or legislature is given the prerogative of exempting certain agencies. Central panels differ. For example, Colorado is one of only two states that has workers' compensation in its central panel system. JUDGE FELTER cited another example, saying Colorado had replaced its industrial commission with an industrial claim appeals panel, which contains lawyers with five years' experience, like the ALJs, who are classified as ALJs in the personnel system. "And it's worked," Judge Felter said. "The perceptions are a lot better now. Adjudication is one thing. You lose? You appeal on up into the courts, all the way to the supreme court, if necessary." He restated that the structure depends on what the legislature wants the central panel to do, adding, "And you can leave windows of time to bring them in or exempt them out." Number 2021 REPRESENTATIVE CROFT asked what Colorado exempts. JUDGE FELTER provided examples. The public utilities commission is exempted; they are at the same level as Judge Felter's agency. He stated, "The personnel board has ALJs who are at the same level as we are, and they're within our department but then those ALJs are accountable to the personnel board. Then we have unemployment insurance appeals referees, who are at a different level than we are; they're at a lower level. They're within the department of labor and employment. And we have the motor vehicles hearings officers; that's drivers' licenses. They're at a lower level. They were exempted out." JUDGE FELTER concluded that there is no total, all-encompassing central panel anywhere. There are always some exemptions. Number 2066 REPRESENTATIVE OGAN thanked Judge Felter for his time. He asked what the budget is for his agency. JUDGE FELTER said right now, it is $2.8 million per year. They had been able to demonstrate efficiency by analyzing costs per case. Number 2092 REPRESENTATIVE OGAN advised the committee that more than $6 million in adjudication costs had been identified for the state of Alaska, for an estimated 3,500 to 4,000 cases per year. CHAIRMAN GREEN thanked Judge Felter for his testimony. JUDGE FELTER replied, "My pleasure. Hope I can come up there some time and help you out with your new central panel, if you go that way." Number 2142 NANCY WELLER, Medical Assistance Administrator, Division of Medical Assistance, Department of Health and Social Services, came forward to testify. She stated, "We have one hearing officer in the Department of Health and Social Services whose appeals come under the Administrative Procedure Act, and that's the hearing officer who hears to rate-setting and audit appeals for the Medicaid Rate Advisory Commission. And the advisory commission sets rates for the health care facilities that Medicaid pays; it's about 50 percent of our budget. So, there is a great deal of money at risk for those hearings." MS. WELLER said the department has concerns because the rate- setting process is so complex and practically requires that a person be an accountant and be able to read cost reports in order to understand it. Therefore, they are concerned about how a judge would be picked. MS. WELLER said their other concern is that the centralization of functions in the Department of Administration have not always gone incredibly well, in the perception of the other departments. For example, functions have been delegated back to departments because they are better able to do those functions themselves. Number 2213 CHAIRMAN GREEN asked what the process is now. He asked whether an appeal would go to the ALJ or whether a case would go directly to the ALJ. MS. WELLER replied, "We have a hearing officer who hears the rate appeals. They go to that hearing officer, and then they go to court." CHAIRMAN GREEN said the ALJ, then, would be the hearing officer. He asked whether that would be the first appeal. MS. WELLER said yes. CHAIRMAN GREEN asked, when it went to court, whether it would be de novo or whether the de novo would be "a one-shot deal to the ALJ." MS. WELLER said she was not sure. Number 2249 REPRESENTATIVE PORTER asked whether the hearing officer would be hearing cases appealed from decisions of the commissioner. CHAIRMAN GREEN said he was likewise wondering if it was the first or second appeal. MS. WELLER said she did not believe that the commissioner of the Department of Health and Social Services had ever been involved in the hearing decisions. REPRESENTATIVE PORTER asked whether it was not a department decision that was being contested. MS. WELLER said that the Medicaid Rate Advisory Commission determines the rates. It would be that commission's decision that would be appealed. REPRESENTATIVE PORTER asked whether the further appeal from that would be to superior court. (There was no audible response.) Number 2282 CHAIRMAN GREEN said, "So, you're not sure whether by having that intermediate hearing -- that's actually the first appeal, so that the superior court still could, then, have a de novo hearing, in your case." MS. WELLER replied, "I'm assuming that the process would not change, only the position would be relocated from our (indisc.-- simultaneous speech)." CHAIRMAN GREEN explained that he was honing in on this because it was one problem with the tax issue he had mentioned relating to previous legislation. Number 2316 REPRESENTATIVE JAMES said she had arrived late and missed part of the presentation but was fairly familiar with the bill. As to the arguments that what they are doing works fine and that it is so complicated that no one else can do it, Representative James said she did not like those two reasons. Saying she would have to review the statute, she asked whether the hearing officer was a "sit-in" for the commissioner, with the commissioner actually making the decision, or whether the statute specified that it goes to this person for the appeal of rate-setting decisions. MS. WELLER replied, "The hearing officer hears the appeals and they are signed off `approved' by the commissioner." Number 2384 CHAIRMAN GREEN asked whether it was provided in HB 232 that the right of de novo was at the superior court level or in the purview of the hearing officer/ALJ. MR. STANCLIFF replied that the issue had not been raised and therefore was not in the bill. He suggested that the committee may want to look at Chairman Green's experience along those lines. CHAIRMAN GREEN asked whether a fiscal note would be prepared, noting that he saw in the packets "some costs having to do with other appeals." MR. STANCLIFF answered that the agencies were trying to assess what the costs may be, which will be based on the ultimate direction taken by the committee. He said there were two fiscal notes, but they were how-do-we-calculate-this types. Number 2440 CHAIRMAN GREEN stated concern that with a low number of cases, they may end up with a pool of highly-qualified people who may not be utilized fully. There was a potential waste of money because these hearing officers would be fairly expensive. MR. STANCLIFF agreed and said the model act requires cross- training. TAPE 97-69, SIDE B Number 0006 MR. STANCLIFF stated that cross-training is an absolute necessity, which is why the bill includes requirements for additional training. He said Mr. Felter's division has accomplished that well. Number 0021 REPRESENTATIVE OGAN referred to the fiscal note question and said they had a difficult time even identifying through Legislative Research the approximately $6 million of costs. He stated, "They didn't get all the information from all the agencies. And I don't think anybody's ever quantified the exact costs of administrative hearings." He suggested that will be a valuable exercise with this legislation. Number 0041 REPRESENTATIVE JAMES asked Representative Ogan: Under HB 232, if an administrative hearing was heard by this panel and a person was unhappy with the result, would there be binding arbitration or some other appeal provided before that person could go to court? REPRESENTATIVE OGAN replied that a clause allows the administrative hearing officer to have people seek other forms of mediation or dispute resolution before going to the hearing officer. However, the hearing officer will have the final say. "So, it's appealed to the superior court," he added. Number 0082 REPRESENTATIVE JAMES said she was a little confused. She asked whether this panel would provide a formal appeal following an administrative appeal if there was a problem, or whether the regular administrative appeal itself would go through the panel. MR. STANCLIFF replied, "The regular administrative appeal." Number 0106 REPRESENTATIVE JAMES asked, "Do you know whether their going to court is an original appeal or whether it's appealing the decision of the commissioner, in which case they would have to provide the information that the commissioner used ... to base their decision on. In other words, is it de novo? Do they start all over ... or do they appeal the decision?" Number 0135 MR. STANCLIFF replied that under the bill, if a person appeals a regulation, the commissioner would request a hearing officer and an ALJ or hearing officer would be assigned, whose decision would be final. The only appeal beyond that would be to the courts. Mr. Stancliff stated, "And that first appeal would be considered that first decision of record. And then the docket is shipped to the court for final review." REPRESENTATIVE JAMES said it would not be a de novo trial, then. CHAIRMAN GREEN asked, "Unless the court so chose?" Number 0161 MR. STANCLIFF explained, "There is a provision in the bill, if the court remands it back, and, as they can now, under administrative law, there is a provision for the hearing officer to handle that. The committee should also know that the long list of people who aren't included in this bill, the commissioners can, as an option, use the agency. They can also say to the agency, `You have final decision-making authority.' They don't necessarily have to say that. In that case, ... if they don't agree with the decision, then the commissioner can take it under review, unless they've given final decision authority. So, there's an option for people to start using the agency, even though they're not included on the mandatory list, as set out under the APA." Number 0189 REPRESENTATIVE JAMES said she understood the theory because it is one she has pursued for a long time from another angle. She suggested that when those who write the regulations also enforce them and determine the appeals, it resembles tyranny. This would remove the appeals, so they would be conducted separately. However, she needed to study the bill further to see how it would physically work. Number 0223 REPRESENTATIVE CROFT said he would also like to study the bill more. He asked how it differs from the model upon which it was based, whether it was from the American Bar Association, Maryland or Colorado. He noted that there was a lot of overlap. Number 0240 REPRESENTATIVE OGAN said other states had found that when a case is adjudicated before an independent hearing officer, it tends to be done a little more carefully. He speculated that agencies, in hearing their own regulations in-house and answering to that commissioner, know that the appeal may be before the same hearing officer. Under the proposed system, other states have found that less administrative problems spill over into superior court because the job is being done better and more impartially. REPRESENTATIVE JAMES suggested that from an open, unbiased perspective, one could better see whether it was the writing of the regulation or the enforcement that was flawed. Pride of authorship in that process, on the other hand, created a problem of separating those issues. She noted that the appeal is where the decisions are made. She emphasized that she supports that kind of separation if it is possible and financially feasible. CHAIRMAN GREEN announced that before hearing from David Cruz via teleconference, they would take up another matter. HB 232 - INDEPENDENT DIV. OF ADMIN. HEARINGS CHAIRMAN GREEN again brought HB 232 before the committee and called upon David Cruz to testify. Number 0408 DAVID CRUZ testified via teleconference, saying he is one of the owners of Cruz Construction, Incorporated, a general contractor with a specialty in clearing land. MR. CRUZ recounted how he had been involved with the hearing procedure under the Department of Labor. His company was the successful subcontractor for clearing the right-of-way for a highway, a large project for the Department of Transportation and Public Facilities (DOT/PF). A provision in their specifications said that all timber became the possession of the contractor, for sale and removal. MR. CRUZ reported that they had sold the wood, of salvage value, to a sawmill operator for one dollar. Mr. Cruz's company did the clearing and got the wood to the side of the road. The sawmill operator picked up what he wanted. Mr. Cruz noted that the sawmill operator was not required by the DOT/PF to be a subcontractor. MR. CRUZ explained that one of the sawmill operator's employees filed a labor claim against the operator. The Department of Labor came out and investigated, questioning Mr. Cruz and people working for both him and the sawmill owner; they then ruled that the work for which the wood had been purchased was subject to Davis-Bacon wage requirements. MR. CRUZ pointed out that he'd had the option of burning the wood by the side of the highway but had chosen to salvage it out of good stewardship. MR. CRUZ said they went through the process with the hearing officer, the investigator. He stated, "He's not a lawyer; neither am I. He cited some cases that had no relevance to what went on to the job here." Mr. Cruz indicated although the claim was not against him, he was working with the sawmill operator, who couldn't get anywhere. Speaking of the hearing officer, he said, "This guy was just jury and executioner. We did not have an appeal process with anybody else other than him. He made his ruling; we had to appeal back to him." MR. CRUZ believed that if they had gone to an unbiased third party who could look at whether a contract issued to the DOT/PF required a subcontract, the person who bought the wood would have had his eyes opened and there wouldn't have been any question about the Davis-Bacon wage rates. Mr. Cruz stated, "This was never done. And so, we were just basically railroaded into it. It was not enough money to sue for. It was $7,000. And so, we couldn't go to ... a court for that kind of dollars." Number 0549 MR. CRUZ said the sawmill operator could not pay the wage claim and therefore the Department of Labor issued an order to the DOT/PF to retain it from Mr. Cruz's contract; it cost Mr. Cruz $7,000. He believed that had there been a process by which he could appeal to an impartial board or judge, the outcome would have been different. Mr. Cruz concluded by stating he was fully supportive of HB 232. Number 0581 REPRESENTATIVE JAMES asked the sponsor where in this process the hearing officer being considered under HB 232 would fit in. Specifically, would be in appealing the decision of the person from the Department of Labor who investigated on-site? Number 0621 MR. STANCLIFF said that was correct. The decision would have come down; the contractor would have taken issue with the decision; and theoretically, the hearing officer under this scenario would have been involved. MR. STANCLIFF advised members that he had been present at that first hearing. He said, "I also want to state for the record that I was there when the person from the Department of Labor suggested, in no uncertain terms, that the two people, Mr. Cruz and Mr. Bell (ph), should tone down their rhetoric or other activities that they were involved in would be looked into. And ... the Labor person did that knowing fully well who I was, as a staff person for our representative at the time. I was shocked." Number 0670 REPRESENTATIVE JAMES mentioned delineating where the complaint was. She asked: If the employee complained that the sawmill operator was not paying him, did that employee ever, in this procedure, say that he was working for the contractor that had the contract with the DOT/PF? She noted that the contractor ended up paying. MR. STANCLIFF said that was part of the problem. He explained, "The wood was, in fact, by contract, the private possession of the subcontractor. The person he sold it to was not ... any part of the contract. But because they saw an opportunity to perhaps exploit, in my opinion, they filed a grievance for Davis-Bacon wages." He said under HB 232, the department would have made an initial finding and then the contractor would have appealed it to an independent hearing officer. Number 0720 CHAIRMAN GREEN suggested that, with the exception that there may be arbitration or some form of mediation before it would go to the ALJ, there would be only the one review within a particular department. MR. STANCLIFF affirmed that and said there is an encouragement within the bill to use alternative dispute resolution, if possible, before it gets to that level. Number 0742 REPRESENTATIVE JAMES said, using this case as an example, that it is not one internal review but rather one internal decision; the appeal of that decision would go directly to this group. She added that there is nothing to dispute until there has been a decision. CHAIRMAN GREEN said as he understood it, it would have been reviewed internally and then would have gone to the ALJ. REPRESENTATIVE JAMES said her question was whether they would have had that review under this bill. "And they said no," she stated, adding that the decision would have gone directly to the panel. Number 0775 CHAIRMAN GREEN expressed concern about where the internal appeal would be, other than perhaps some sort of dispute resolution prior to going to the ALJ. REPRESENTATIVE OGAN responded, "I think it's up to the discretion of the administrative law judge where that might be. And I'm not sure how the other states work." He added that he would doubt that an ALJ would threaten someone who contested a case with looking into more cases. Number 0807 CHAIRMAN GREEN announced that because there were unanswered questions and they needed to digest the information, the committee would hold HB 232 over.
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