Legislature(1993 - 1994)
02/02/1994 01:15 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 277 - INDEMNIFICATION OF PUBLIC EMPLOYEES Number 025 REP. BRIAN PORTER, Prime Sponsor of HB 277, explained to the committee that HB 277 was currently in conceptual form and that he planned on briefing the committee on the concept and then next week will have it redrafted. Rep. Porter said currently the state and most municipalities have a policy that provide indemnification for their employees if they are working within the scope of their employment and have not exceeded some level of behavior, generally described as gross negligence or an intentional act. REP. PORTER explained there are a lot of public employees who, every time the mayor, city council, or governor changes, have this concern as to whether or not this policy that exists everywhere is going to be maintained, or whether for this one particular instance that policy might just be set aside for one person because of personality conflicts and things like that. He concluded that basically the bill will establish formal indemnification versus policy, which is the current practice. Number 091 STEVE TERRY, Director, Human Relations, Anchorage Telephone Utility (ATU), testified in support of HB 277. Mr. Terry explained that it is critical that public employers send the message to its employees, especially those employees who must make difficult and controversial decisions, that the employer will stand behind the employees when their actions are in the scope of their duties. Those employees that must make decisions, particularly of the employment nature, are being increasingly challenged legally and are resulting in substantial and often staggering awards. He said that individuals are increasingly being named as defendants or codefendants in addition to the deep pocketed employer, and attorney fees for that individual can run as high as $200,000, not to mention the jury's verdict, punitive damages, etc. MR. TERRY emphasized that it is not a theoretical problem; it has happened to him at ATU in a termination case. Number 194 SUSAN COX, Department of Law, Attorney General's Office, and BRAD THOMPSON, Risk Management, Department of Administration, were asked to answer questions from the committee. Number 249 REP. PORTER discussed with Ms. Cox a question posed by a city manager in Southeast Alaska, that if an employer has terminated an employee, are they then not required to provide the indemnification. The question was, would this not perhaps induce an employer to terminate an employee when they might not otherwise have done so. just to avoid indemnification? Rep. Porter said they toyed with the idea of saying termination for just cause, and asked Ms. Cox about exempt employees who may be terminated for unjust cause, rather than any kind of normal consideration that's used to represent employees. Number 249 MS. COX replied that it's possible to draft a bill if it isn't so drafted that a former employee can be subject to the same indemnification and defense if a claim arises out of their former employment, which is currently the practice of the state. Number 284 REP. PHILLIPS asked that the issue of a time frame also be addressed. Number 294 MS. COX replied that generally indemnification lasts as long as the case lasts, and there is a two-year tort statute of limitations. Number 309 REP. GREEN noted there was a zero fiscal note and asked if there were any costs to the state. Number 318 MR. THOMPSON responded that the state is currently self- insured up to $5 million, and they are already indemnify employees, and HB 277 would codify existing practice, so there would be no change in the costs. MS. COX added that it may affect what a municipality may experience if they don't have this as their existing policy. Number 330 REP. GREEN followed up by asking if there was a cost. He commented that certain benefits are taxable, and asked if indemnification would create a tax problem for people who are protected there under. He also asked if HB 277 would provide for public employees a situation that is above and beyond that which is provided in the private sector. Number 352 MS. COX replied that she had never heard of any tax liabilities with indemnification. MR. THOMPSON explained that most private sector employees of a substantial nature through either a self-insurance program or through a commercial insurance policy would have the same provision for their employees. Number 362 REP. PORTER asked if it was a fair statement that what HB 277 will say represents a reflection of existing law in terms of a requirement for an employer to be responsible for the acts of his or her employees. Number 373 MS. COX replied that the legislation doesn't affect the circumstances in which the employer is liable for the acts of the employee; it only discusses situations in which the employee is sued, when the employer will take care of that. Ms. Cox explained that the bill reflects essentially the state's existing policy and practice with respect to state employees. She said whether the state is required to do that is an open question, and the state probably doesn't have a duty of common law to do it, but it has long been the existing practice of the state of Alaska to afford that protection to all state employees. Ms. Cox went on to say that there are a great many thousand state employees that are covered by existing collective bargaining agreements and so the state has contracted for that requirement with them, but for those not covered by collective bargaining (and those would be the ones covered by this bill), it's something that the state does because they think it's right, but not necessarily because they are legally required to. Number 396 REP. PHILLIPS asked, when the state contracts out to bargaining units, does that become a bargaining point or is it an assumed benefit? Number 402 MS. COX responded that it is negotiated, so as a result, there is not total consistency. Number 420 REP. PHILLIPS asked if HB 277 would supercede the agreements. Number 424 MS. COX said HB 277 would only apply to those not covered by collective bargaining. Number 436 REP. NORDLUND discussed a provision in the bill in which the employee has to notify the employer within ten days, and said it seems too short of a time period. Number 440 REP. PORTER noted that it goes on to say unless good cause for the employee's failure to provide timely or proper notice. Number 445 MS. COX indicated that there is generally a twenty day time period for answering a complaint, but the ten days would only start running from the time of receiving the complaint, and as a practical matter, most often the employer most likely would get notice by other means, as well as from the employee. REP. PHILLIPS asked if anyone explored (she said she was playing the devil's advocate on this) not acts of intentional or willful, but acts of stupidity. Number 477 REP. PORTER replied that the normal terms of responsibility are that if you have an intentional act that's obviously the worst, then the next level down is gross negligence, which usually is just outrageous behavior, then there is simple negligence, and HB 277 covers simple negligence, which is an unintentional mistake. Number 499 REP. NORDLUND asked if you could terminate an employee to avoid liability. Number 512 MS. COX said that one solution would be to make clear that the obligation of defense applies to former employees if the claim pertains to something that occurred during their employment, and then there is no advantage to terminating an employee to get out of this obligation. Number 529 REP. KOTT asked Mr. Thompson, if the employee wants to continue legal action, but the employer doesn't want to, would HB 277 require the employer to continue with the action? Number 548 MR. THOMPSON replied that he could think of only one occasion where an individual was named that didn't want to participate in the settlement. He said in HB 277 they hope to address that, with a good faith effort in notification, cooperating in the defense, and participation in the settlement, so it would be an obligation for the employee to participate with the employer in a good faith settlement. Number 562 MS. COX said she would address the issue in the next draft of HB 277. Number 583 REP. PORTER asked for any other questions; and hearing none, closed the hearing on HB 277 until further notice. He then brought up HJR 48.