Legislature(1993 - 1994)

02/02/1994 01:15 PM House JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                      
  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                   
  Number 294                                                                   
  MS. COX replied that generally indemnification lasts as long                 
  as the case lasts, and there is a two-year tort statute of                   
  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                            
  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                       
  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                  
  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                       
  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.                                                           

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