Legislature(2005 - 2006)CAPITOL 120

04/06/2005 01:00 PM JUDICIARY

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SB 105 - OVERTIME WAGES FOR FLIGHT CREW                                                                                       
3:52:06 PM                                                                                                                    
CHAIR McGUIRE  announced that  the final  order of business  would                                                              
be  CS FOR  SENATE BILL  NO.  105(L&C), "An  Act  relating to  the                                                              
retrospective  application  and   applicability  of  the  overtime                                                              
compensation  exemption  for flight  crew  members; and  providing                                                              
for an effective date."                                                                                                         
REPRESENTATIVE  MARY KAPSNER,  Alaska  State Legislature,  relayed                                                              
that  her  district  is  a  good one  to  use  to  illustrate  the                                                              
importance of  the aviation industry  in rural Alaska  because the                                                              
communities  are completely reliant  on aviation  for any  kind of                                                              
transportation, including  transportation for medical  reasons and                                                              
the  shipping of  commodities,  especially  during "freeze-up  and                                                              
break-up."   She mentioned  that CSSB 105(L&C)  is in  response to                                                              
[an Anchorage  Superior Court]  case currently  being litigated  -                                                              
John  Harms and  Other Employees  Similarly  Situated v.  Hageland                                                            
Aviation  Services, Inc.,  L. Michael  Hageland  and James  Tweto.                                                            
She voiced  the concern that if  "we take retribution  against the                                                              
airlines  for not being  in compliance  with  the federal  laws on                                                              
overtime,"  it will  drive airlines  out of business,  will  put a                                                              
lot of people out  of work, will increase the cost  of air service                                                              
in rural  Alaska, and  will diminish  the level  of [air]  service                                                              
that rural Alaskans get.                                                                                                        
REPRESENTATIVE KAPSNER,  noting that there is a  lack of insurance                                                              
companies willing  to provide insurance  coverage in  Alaska, said                                                              
that if any  one part of the  aviation industry is hurt,  then the                                                              
whole aviation  industry suffers.   She  relayed how the  aviation                                                              
industry  operates in  her district  with regard  to how many  air                                                              
carriers provide  service and the types of services  they provide,                                                              
their typical  staffing levels,  what kind  of hours their  pilots                                                              
are flying and why,  and the different reasons why  it can be hard                                                              
for  air carriers  in rural  Alaska to  retain good  pilots.   She                                                              
mentioned that sometimes  air carriers allow a pilot  to work just                                                              
half a  day so  as to be  able to  catch the  last flight  back to                                                              
his/her home,  or allow a  pilot to miss  flying the  first flight                                                              
of the  day so  that he/she is  able to  spend the previous  night                                                              
with his/her family.                                                                                                            
3:57:31 PM                                                                                                                    
CHAIR  McGUIRE opined  that Representative  Kapsner's  perspective                                                              
is important and her comments helpful.                                                                                          
REPRESENTATIVE GRUENBERG  said he'd like evidence  that [the bill]                                                              
could  affect whether  an air  carrier  will go  out of  business,                                                              
whether employees  are afraid  for their  jobs, and whether  those                                                              
named as  plaintiffs in the  class action  lawsuit can opt  out of                                                              
REPRESENTATIVE  KAPSNER said that  a couple  of the problems  with                                                              
the current  opt-out system for  class action lawsuits are  that a                                                              
lot of  the pilots  named as  plaintiffs in  the Hageland  lawsuit                                                            
don't know  they've been named  in that  lawsuit and that  some of                                                              
them can't  be found because  the pilots  are part of  a transient                                                              
labor force.  In  terms of the stability of the  airline industry,                                                              
she  noted that  her  father  was a  commercial  pilot  who had  a                                                              
charter  service back  in  the 1970s  and that  he  often used  to                                                              
wonder how  he was going to be  able to continue in  business even                                                              
back  then  when  the  charter  airline  industry  was  much  more                                                              
lucrative that  it is now.  She  remarked that there are  very few                                                              
air  carriers  in Bethel  that  have  any  longevity at  all,  and                                                              
offered  her belief  that  the changes  in  federal law  regarding                                                              
bypass mail have  made it hard on cargo carriers  because there is                                                              
a preference for  giving the mail to passenger  carriers and this,                                                              
in turn, offsets passenger fares.                                                                                               
REPRESENTATIVE  GARA  mentioned  that  he is  not  thrilled  about                                                              
retroactively  changing  the law,  predicted  that  the bill  will                                                              
probably  succeed  in  moving  through   the  process,  and  asked                                                              
whether  the Hageland  case  is close  to  being resolved  without                                                            
legislative interference,  which could affect any  future lawsuits                                                              
against other air  carriers.  He also asked whether  it would make                                                              
sense to ban future lawsuits.                                                                                                   
REPRESENTATIVE  KAPSNER offered  her understanding  that that  has                                                              
already been  done, and  that SB  105 is  retroactive.   She noted                                                              
that she has never  heard any pilots in Bethel  complain about how                                                              
they were  treated as employees,  including the person  initiating                                                              
the  Hageland  litigation.   She  opined  that  Hageland  Aviation                                                            
Services,  Inc.,  ("Hageland  Aviation  Services")  has  not  been                                                              
unfair to its employees, "especially in terms of overtime."                                                                     
4:02:52 PM                                                                                                                    
REPRESENTATIVE  MIKE  KELLY,  Alaska  State  Legislature,  relayed                                                              
that he  is an airline  transport pilot and  at one point  in time                                                              
had  flown  in Bush  Alaska  for  two years,  and  concurred  with                                                              
Representative  Kapsner's testimony  regarding  the importance  of                                                              
the aviation  industry  in rural  Alaska.  He  opined that  fixing                                                              
"this" two  years ago was  the right decision,  that as  a result,                                                              
every pilot  "knew what  the rules  were."   He added his  belief,                                                              
however, that  there is a  gap that needs  to fixed at  this time,                                                              
and characterized  the issue as one of potentially  subjecting air                                                              
carrier  companies that  are currently  out of  business -  due to                                                              
the  changes in  the rules  regarding  bypass mail  - to  lawsuits                                                              
[regarding overtime  wages].  The legislation that  was originally                                                              
passed two  years ago  failed to  cover a  gap, he concluded,  and                                                              
encouraged the committee to close that gap.                                                                                     
4:06:58 PM                                                                                                                    
SENATOR  RALPH   SEEKINS,  Alaska   State  Legislature,   sponsor,                                                              
offered that  SB 105 is  attempting to  clarify the intent  of the                                                              
2003 legislation,  the goal of which  was to address the  issue of                                                              
how pilots in the  state were paid overtime.  He  said that at the                                                              
time the 2003  legislation was moving through the  process, he did                                                              
not realize  that it  contained the  aforementioned loophole,  and                                                              
suggested that it  was not the legislature's intent  to allow such                                                              
a loophole.   He  offered his  understanding  that the person  who                                                              
initiated  the Hageland  litigation  had originally  been  seeking                                                            
recourse  for alleged age  discrimination,  and that the  attorney                                                              
the man  had spoken  with relayed  his belief  that the  man might                                                              
have "a  wage and hour  complaint."   Senator Seekins  opined that                                                              
it  is  the  legislature's  job  to  fix  the  loophole  that  the                                                              
attorney  saw, and  that doing  so  would not  take away  anything                                                              
from the  pilot.   The goal of  SB 105, he  reiterated, is  to fix                                                              
the aforementioned  loophole in the  law regarding how  pilots are                                                              
paid,  to  ensure  that  no  one   gets  a  windfall  because  the                                                              
legislature  neglected  to  address  this  issue  initially.    In                                                              
conclusion, he  offered his belief  that SB 105 doesn't  raise any                                                              
constitutional issues.                                                                                                          
4:11:15 PM                                                                                                                    
REPRESENTATIVE  KOTT  noted that  the  minutes  of the  March  17,                                                              
2003,  House   Labor  and  Commerce  Standing   Committee  minutes                                                              
reflect   that  Senator   Donny   Olson,  sponsor   of  the   2003                                                              
legislation, said:                                                                                                              
     Because  of  their  unique  working  conditions,  flight                                                                   
     crews  have been  considered  professionals exempt  from                                                                   
     the standard  8-hour workday, 40-hour workweek,  and the                                                                   
     associated  overtime  pay. ...  Along  with the  maximum                                                                   
     flight    hours   set    by    the   Federal    Aviation                                                                   
     Administration  (FAA),  these  exemptions  at  both  the                                                                   
     state  and federal level  have allowed  the industry  to                                                                   
     structure   flexible    schedules   for    flight   crew                                                                   
REPRESENTATIVE  KOTT   also  noted  that  at  that   same  meeting                                                              
Representative  Anderson, chair  of the House  Labor and  Commerce                                                              
Standing Committee, said:                                                                                                       
     ...  [T]he  sponsor  statement notes  that  the  court's                                                                   
     interpretations  of  the  exemption  from  overtime  are                                                                   
     contradictory.   This  bill tightens  that exemption  so                                                                   
     it cannot be successfully challenged in court.                                                                             
REPRESENTATIVE  KOTT  remarked, thus,  that  the  House Labor  and                                                              
Commerce Standing  Committee didn't  recognize the  aforementioned                                                              
loophole   either.    He   offered  his   interpretation   of  the                                                              
aforementioned to  mean that at the time,  Representative Anderson                                                              
was certain that no court decisions would be forthcoming.                                                                       
4:12:57 PM                                                                                                                    
REPRESENTATIVE GARA  asked whether the original bill  was intended                                                              
to be retroactive or to change the rules for the future.                                                                        
SENATOR SEEKINS offered  his belief that the 2003  legislation was                                                              
intended to  do both, that it would  "make sure that there  was no                                                              
liability  for past  acts that were  outside  of the bargain  made                                                              
between the parties,  at the same time that it was  to clarify the                                                              
rule from  this date  forward" so  that [air  carriers] would  not                                                              
get sued before the statute of limitations expired.                                                                             
4:15:06 PM                                                                                                                    
THOMAS  M.  DANIEL, Attorney  at  Law,  Perkins Coie,  LLP,  after                                                              
relaying  that  his  law  firm   has  been  representing  Hageland                                                              
Aviation  Services in the  aforementioned  lawsuit, said  he would                                                              
be testifying in favor of SB 105.                                                                                               
CHAIR  McGUIRE   mentioned  that  members'  packets   include  Mr.                                                              
Daniel's written testimony.                                                                                                     
MR.  DANIEL relayed  that he  has  been involved  in the  Hageland                                                            
litigation since its beginning, adding:                                                                                         
     Under  the federal  law, pilots  have  been exempt  from                                                                   
     overtime  since  1949.   In  1980, the  Alaska  attorney                                                                   
     general's   office   issued  an   opinion   [memorandum]                                                                   
     indicating  that   pilots  of  interstate   carriers  in                                                                   
     Alaska  were   also  exempt   from  overtime,   and  the                                                                   
     [Department  of Labor  & Workforce  Development  (DLWD)]                                                                   
     has  followed that policy  since sometime  in the  '80s.                                                                   
     So the rules  of the game have been, for  over 20 years,                                                                   
     that  most airlines  in Alaska  thought  that they  were                                                                   
     exempt from both  the federal wage and hour  Act and the                                                                   
     Alaska  Wage and  Hour Act,  and  it was  not until  the                                                                   
     late  '90s that  a  few lawsuits  began  to be  brought,                                                                   
     challenging  that assertion  and  arguing  that in  fact                                                                   
     ... local airlines  ... in Alaska could be  [subject] to                                                                   
     the [Alaska] Wage and Hour Act.                                                                                            
     And there  are currently three lawsuits  pending against                                                                   
     airlines  on behalf  of pilots.   And it  was really  in                                                                   
     response  to that litigation  that started  in the  late                                                                   
     '90s  that the  legislature  passed  the bill  that  ...                                                                   
     explicitly  exempted airlines.   And then this  bill [SB
     105]  simply  makes that  law  retroactive.   The  other                                                                   
     point  I  would  like  to   make  is  that  I've  become                                                                   
     familiar with  Hageland Aviation [Services] as  a result                                                                   
     of this  litigation.  It's  a small air carrier,  it's a                                                                   
     true "rags  to riches" story:   Mike Hageland  came here                                                                   
     from  Minnesota back  in the '70s,  bought an  airplane,                                                                   
     started  flying  one  airplane in  Western  Alaska,  and                                                                   
     gradually  grew   into  ...  one  of  the   major  rural                                                                   
     So this is  a guy who has served rural  Alaska for many,                                                                   
     many  years, and  this lawsuit  threatens the  viability                                                                   
     of  Hageland Aviation  [Services].   It literally  could                                                                   
     put him out  of business because it has  been brought as                                                                   
     a class action  [lawsuit]; there's a claim  for doubling                                                                   
     of the  damages under  the [Alaska]  Wage and Hour  Act,                                                                   
     [and]  there's  a  claim for  full  [attorney  fees]  in                                                                   
     addition  to overtime.   So  when  you add  up what  now                                                                   
     appears to  be, potentially, 20 claimants,  it literally                                                                   
     could bankrupt the airlines. ...                                                                                           
MR. DANIEL went on to say:                                                                                                      
     Senator  Seekins  ... is  correct  in stating  that  the                                                                   
     pilot  who   ...  initiated   this  lawsuit,  the   main                                                                   
     plaintiff,  ... was  disgruntled because  he thought  he                                                                   
     was forced  to retire  because of his  age.  He  went to                                                                   
     the Human  Rights Commission, filed that  complaint, ...                                                                   
     [and]  was investigated.   The  Human Rights  Commission                                                                   
     ruled  against him  on his  age  claim.   But he  hasn't                                                                   
     pursued  the age  claim; what  he  pursued, through  his                                                                   
     counsel,  was  an overtime  claim,  and he  didn't  just                                                                   
     pursue  it on  behalf of  himself,  but on  behalf of  a                                                                   
     whole class of pilots.  So that's why we're here.                                                                          
     Now,  it has been  suggested ...  that this  legislation                                                                   
     is unconstitutional.   And the  short answer to  that is                                                                   
     that  both  the  U.S.  Congress   and  this  legislature                                                                   
     passed  legislation in  practically  every session  that                                                                   
     makes laws  retroactive, that  makes them applicable  to                                                                   
     pending  litigation  and,  in  some  cases,  makes  them                                                                   
     applicable to  litigation that is  even on appeal.   And                                                                   
     the  plaintiffs will  argue that  an un-litigated  claim                                                                   
     is a  property interest,  which can't  be taken  without                                                                   
     due  process of  law.  And  that is  a principle  that's                                                                   
     been recognized in both state and federal court.                                                                           
     But  the due  process  of law  is what  they're  getting                                                                   
     right  here,   in  this  legislative  body.     The  law                                                                   
     essentially  is,  as  long  as  the  legislature  has  a                                                                   
     legitimate purpose  in passing retroactive  legislation,                                                                   
     it's  constitutional.   The  attorney  general's  office                                                                   
     was asked, in  2003, about another retroactive  piece of                                                                   
     legislation that  amended the Alaska Wage and  Hour Act,                                                                   
     ...  and   the  attorney  general's  office   issued  an                                                                   
     opinion that  that law was  constitutional.  So  I think                                                                   
     the  law   is  constitutional;  ultimately,   that  will                                                                   
     probably  have to be  determined by  the courts,  but if                                                                   
     you look at  past history, it indicates to  me that this                                                                   
     law would be fully constitutional.                                                                                         
4:22:41 PM                                                                                                                    
REPRESENTATIVE  KOTT asked  Mr.  Daniel whether  he believes  that                                                              
pilots    of   air    carriers   consider    themselves   to    be                                                              
MR. DANIEL said yes.                                                                                                            
REPRESENTATIVE   KOTT   offered   his   understanding   that   the                                                              
Department of Labor  & Workforce Development (DLWD)  has said that                                                              
when that  is the case, then  no specific additional  exemption is                                                              
required,  that "professionals"  are  covered  under the  existing                                                              
exemptions.   He  asked how,  then,  after the  air carriers  have                                                              
received  such information  from  the DLWD  and  have been  acting                                                              
under the  assumption that  that information  is accurate,  that a                                                              
class action suit could be filed against them.                                                                                  
MR. DANIEL offered  his understanding that the  attorney general's                                                              
opinion and  the DLWD's policy was  that pilots were  just exempt,                                                              
period,  since they  were employees  of  interstate air  carriers.                                                              
There is also an  exemption in the [Alaska] Wage  and Hour Act for                                                              
professionals, for  which a pilot  might qualify, but  the problem                                                              
with qualifying  under that exemption,  he remarked, is that  as a                                                              
professional,  one  must be  paid  in a  certain  manner, and,  as                                                              
Representative  Kapsner testified,  a  pilot working  in the  Bush                                                              
isn't  always paid  in  that particular  manner.    Pilots in  the                                                              
Bush, he added,  are currently being paid under a  system that has                                                              
evolved over  time, and this  system generally consists  of paying                                                              
a pilot at a daily  rate and is also what has raised  the issue of                                                              
whether air carriers  have been in violation of  the [Alaska] Wage                                                              
and Hour Act.                                                                                                                   
REPRESENTATIVE    KOTT   asked    whether   the   definition    of                                                              
"professional" is a state definition or a federal definition.                                                                   
MR.  DANIEL said  he is  referring  to the  state definition,  but                                                              
noted   that   it  incorporates,   by   reference,   the   federal                                                              
regulations  regarding  the type  of  salary that  a  professional                                                              
must be paid.                                                                                                                   
REPRESENTATIVE  KOTT asked whether  similar litigation  is pending                                                              
in other states.                                                                                                                
MR. DANIEL said he is not aware of any.                                                                                         
4:26:05 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG   asked  whether  the   question  [being                                                              
raised in the Hageland litigation] is one of federal preemption.                                                              
MR.  DANIEL said  that  is just  one  of several  questions  being                                                              
raised in the litigation.                                                                                                       
REPRESENTATIVE  GRUENBERG  asked why  the  Hageland lawsuit  isn't                                                            
being addressed in federal court.                                                                                               
MR.  DANIEL  surmised that  it  is  because pilots  of  interstate                                                              
[air] carriers  are clearly  exempt from overtime  law, and  so it                                                              
would have been  a "short" lawsuit had it been  brought in federal                                                              
4:27:17 PM                                                                                                                    
MR. DANIEL,  in response to questions,  said the first  case [that                                                              
made mention  of an]  overtime claim  that he is  aware of  is the                                                              
case of Era Aviation,  Inc., v. Lindfors, which was  filed in 1997                                                            
and  decided  by  the  Alaska Supreme  Court  in  2000;  that  the                                                              
statute  of limitations  for claims  regarding  overtime wages  is                                                              
two years;  and that  the Hageland  litigation  was filed  in 2002                                                            
and relates back to [wages owed] beginning in June of 2000.                                                                     
4:28:50 PM                                                                                                                    
REPRESENTATIVE GARA  opined that that undercuts the  argument that                                                              
no  one  knew  that  overtime  was  supposed  to  be  paid,  since                                                              
starting  in 1997  there  were claims  that  "this"  law has  been                                                              
misinterpreted by the DLWD.  He went on to say:                                                                                 
     Nobody in  your case is  seeking damages for  any claims                                                                   
     from prior  to 1997.   So,  [beginning in] 1997,  people                                                                   
     are  on notice  that there's  a dispute  about what  the                                                                   
     [DLWD] has  said.   And it's not  until 2000 that  these                                                                   
     claims  will apply.    Does that  not  sort of  undercut                                                                   
     this sort of  fairness "God, we were  caught blindsided"                                                                   
     question?     By  2000,  shouldn't  Hageland   [Aviation                                                                   
     Services]  have thought,  "Well, gosh,  this a  disputed                                                                   
     issue; we'll  just use our  best judgment as  to whether                                                                   
     or not we should pay overtime"?                                                                                            
MR.  DANIEL  offered his  belief  that  the Era  Aviation  lawsuit                                                            
started the  move to  amend the  law so  as to clarify  explicitly                                                              
that  pilots  were  exempt,  and  that  "this"  led  to  the  2003                                                              
REPRESENTATIVE GARA  said his concern with  retroactively changing                                                              
the law is that  sometimes an industry is so influential  as to be                                                              
able to  influence an  agency, the  legislature, and the  attorney                                                              
general's  office  into  interpreting/changing   the  law  in  the                                                              
industry's  favor.   He  said that  according  to his  experience,                                                              
attorney  general's opinions  and  agency  opinions often  reflect                                                              
the  views  of   the  administration,  and  are   not  necessarily                                                              
objective  views  of the  law;  he  offered an  example  involving                                                              
opinions and  laws regarding pesticides  to illustrate  his point.                                                              
He asked why -  knowing that an attorney general's  or an agency's                                                              
opinion as  to what a  statute means is  just advisory  until it's                                                              
been tested  in court, and  knowing publicly  that as far  back as                                                              
1997 that "this"  was an issue of  dispute - should it  be assumed                                                              
that  the client  was caught  unawares in  2000 regarding  whether                                                              
overtime should have been paid.                                                                                                 
MR.  DANIEL   opined  that   although  people   such  as   he  and                                                              
Representative   Gara,  for   example,  know   that  an   attorney                                                              
general's opinion or  an agency's opinion is just  advisory, it is                                                              
reasonable to  expect that the  average businessman would  rely on                                                              
such an opinion as accurate.                                                                                                    
REPRESENTATIVE GARA  asked Mr. Daniel  whether, by  2000, Hageland                                                              
Aviation Services  had consulted an attorney  regarding applicable                                                              
overtime wages.                                                                                                                 
MR. DANIEL  said the record in  the case reflects that  his client                                                              
had not consulted an attorney prior to the lawsuit being filed.                                                                 
4:35:34 PM                                                                                                                    
REPRESENTATIVE  KOTT  offered  his   recollection  that  testimony                                                              
provided  during the hearings  on the  2003 legislation  indicated                                                              
that  the  legislative   liaison  for  the  Alaska   Air  Carriers                                                              
Association (AACA)  had consulted with the DLWD  numerous times on                                                              
this issue  and was  told repeatedly  that pilots were  considered                                                              
professionals  and,  as  such, were  covered  under  the  existing                                                              
statutory exemptions.   He asked  whether, if such  communications                                                              
had  been ongoing  for  a number  of years,  there  would be  some                                                              
assurance for  the air  carriers that they  were not  liable under                                                              
"this."  He  suggested that it would  also be fair to  assume that                                                              
employees who felt  they were not being paid  correctly would have                                                              
contacted  the DLWD on  that issue.   He  offered his belief  that                                                              
there are  two avenues  of thought:   one,  that the air  carriers                                                              
felt  comfortable  with the  DLWD  opinion  that said  they  "were                                                              
covered under  the exemption";  and the  other, that  dissatisfied                                                              
employees would have gone to the DLWD and complained.                                                                           
MR.  DANIEL said  that not  a single  pilot  working for  Hageland                                                              
Aviation Services,  not even the  original plaintiff, has  gone to                                                              
the DLWD and complained  about not being paid overtime.   He added                                                              
that  of  the  82 pilots  that  potentially  have  claims  in  the                                                              
Hageland lawsuit,  the majority  of them have affirmatively  taken                                                            
steps to  remove themselves  from the  lawsuit, and surmised  that                                                              
this is  an indication  that they  don't support  the lawsuit  and                                                              
feel that they were paid fairly.                                                                                                
REPRESENTATIVE  GRUENBERG asked  whether such  just shows  instead                                                              
that  the   pilots  were   ignorant  of   their  rights   and  are                                                              
particularly vulnerable.                                                                                                        
MR. DANIEL said  he did not think so because the  pilots that have                                                              
opted  out understand  that they  could potentially  get a  lot of                                                              
money from  Hageland Aviation Services  but have still  chosen not                                                              
to participate in the lawsuit.                                                                                                  
REPRESENTATIVE  GRUENBERG  asked   whether  that  might  not  just                                                              
reflect that  those who have  opted out  of the lawsuit  are still                                                              
employed by  Hageland Aviation Services  and are afraid  for their                                                              
jobs,  and  that those  who  have  not  opted  out are  no  longer                                                              
4:40:40 PM                                                                                                                    
MR. DANIEL  said that  is true in  part; there  is only  one pilot                                                              
currently employed that has not opted out.                                                                                      
REPRESENTATIVE GRUENBERG  asked how many pilots who  are no longer                                                              
employed have opted out of the lawsuit.                                                                                         
MR. DANIEL  said he  didn't know  that number off  the top  of his                                                              
head, but  added that 60  of those that  were named  as plaintiffs                                                              
have opted  out.  In response  to the allegation that  pilots have                                                              
been intimidated  or have been threatened with  losing their jobs,                                                              
he explained  that that  issue has already  been addressed  by the                                                              
court,  and offered  his  understanding that  none  of the  pilots                                                              
[remaining in the lawsuit] have claimed that such has occurred.                                                                 
4:42:35 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG  said  he  is  concerned,  on  a  policy                                                              
basis, about people being coerced or intimidated in any venue.                                                                  
MR.  DANIEL  offered  his  understanding  that  the  law  protects                                                              
[those  who  come  forth  to  testify]  against  retaliation,  and                                                              
reiterated  that he has  not heard  any testimony indicating  that                                                              
anyone is being threatened or intimidated.                                                                                      
REPRESENTATIVE  GRUENBERG  asked   how  many  of  those  named  as                                                              
plaintiffs  in  the  Hageland  lawsuit cannot  be  found,  and  so                                                            
presumably might not know that they are a part of the lawsuit.                                                                  
MR. DANIEL  offered his  understanding from  discussions  he's had                                                              
with the  plaintiffs' attorney that  four plaintiffs have  not yet                                                              
responded to communications.                                                                                                    
4:45:03 PM                                                                                                                    
MR. DANIEL submitted  a letter - dated April 5, 2005  - to members                                                              
regarding the constitutional issue.                                                                                             
REPRESENTATIVE GARA  asked what  the wage claims  currently amount                                                              
MR.  DANIEL  said  he  couldn't   provide  that  information,  but                                                              
offered  that the  [original]  plaintiff is  claiming  a total  of                                                              
$140,000.   He indicated  that if one  assumes that  the remaining                                                              
plaintiffs in  the lawsuit claim  a similar amount, then  it would                                                              
be about 20 times that amount.                                                                                                  
REPRESENTATIVE  GARA  asked  whether  Hageland  Aviation  Services                                                              
knew about  either the proposed  [2003] legislation or any  of the                                                              
lawsuits that had been filed before 2000.                                                                                       
MR. DANIEL  indicated that he didn't  know whether his  client was                                                              
aware of any  of the lawsuits, but offered his  understanding that                                                              
his client was aware of the 2003 legislation.                                                                                   
4:47:34 PM                                                                                                                    
BRUCE  McGLASSON, Owner/President,  Grant  Aviation, Inc.  ("Grant                                                              
Aviation"),  relayed that  his company  is  in direct  competition                                                              
with  Hageland Aviation  Services  in Western  Alaska and  employs                                                              
about  40 pilots  and  about 140  employees  total.   He said  his                                                              
company  pays  its pilots  the  same  way that  Hageland  Aviation                                                              
Services  does:     it's   a  daily  rate   based  on   a  pilot's                                                              
availability  to  work,  regardless  of  whether  he/she  actually                                                              
works and  regardless of how long  during the day  he/she actually                                                              
works.  Grant Aviation  went to that system because  of the belief                                                              
that  it's  a safer  way  to  pay  pilots,  since it  removes  the                                                              
financial  incentive  for  pilots  to fly  in  unsafe  conditions;                                                              
Grant Aviation  still uses this  method to pay pilots  despite the                                                              
Hageland  litigation,  both  because it  is  a  safer way  to  pay                                                            
pilots and  because of the company's  faith in the  legislature to                                                              
change the law such that [the exemption] is retroactive.                                                                        
MR.  McGLASSON offered  his belief  that both  Grant Aviation  and                                                              
Hageland  Aviation Services  have treated  their pilots fairly  by                                                              
negotiating  with   their  pilots  individually  prior   to  their                                                              
employment and  agreeing on  how their pilots  would be  paid, and                                                              
have  since   honored  those   agreements.     Opining  that   the                                                              
aforementioned  litigation  will  put Hageland  Aviation  Services                                                              
out of  business, he  said that  Grant Aviation  does not  believe                                                              
that such  would be right, and  remarked that if his  company were                                                              
to face  similar litigation,  it would bankrupt  him as  well; not                                                              
counting punitive  damages, he  calculated, he  could owe  as much                                                              
$800,000.     He  relayed  that   over  the  years,   on  multiple                                                              
occasions,  Grant Aviation  has  been told  by the  DLWD that  the                                                              
method  Grant  Aviation was  using  to  pay  its pilots  is  fair,                                                              
right,  and  in compliance  with  federal  law.   In  response  to                                                              
questions,  he reiterated  his explanation  of how Grant  Aviation                                                              
pays its pilots,  and listed some  of the reasons why  a pilot who                                                              
is  available to  work  might not  get to  work,  such as  weather                                                              
conditions, mechanical issues, and passenger numbers.                                                                           
4:54:02 PM                                                                                                                    
MICHAEL  HAGELAND,   Owner,  Hageland  Aviation   Services,  Inc.,                                                              
stated  that he  started  flying  in Western  Alaska  in 1972  for                                                              
other  carriers,  and  then  started his  own  business  in  1981.                                                              
Prior to  1981, he  said, he witnessed  all the different  manners                                                              
in which  pilots got  paid, though  most carriers  paid pilots  by                                                              
the  flight hour.   He  posited that  this caused  some pilots  to                                                              
take chances, and  possibly led to accidents as well.   So when he                                                              
started to  hire pilots, he decided  to pay his pilots  monthly so                                                              
that  the  pilots didn't  feel  under  pressure  to fly  when  the                                                              
weather  was bad.   Around  1999,  the work  schedule was  changed                                                              
because "pilots were  making plenty of money but  they didn't have                                                              
time to  spend it," therefore the  schedule was changed  such that                                                              
a pilot would work 20 straight days and then have 10 days off.                                                                  
MR. HAGELAND continued:                                                                                                         
     That was  still a legal way  under the law to  pay then,                                                                   
     and  of course,  we didn't  know  any different  anyway.                                                                   
     But  some  of  [the  pilots]  complained  that  in  some                                                                   
     months, because  [there are] 31 days in the  month, they                                                                   
     had  to work 21  days, so  they wanted  to get paid  for                                                                   
     the extra  time they worked.   So we said,  "Okay, we'll                                                                   
     pay you  the extra  days." ... So  that's how the  daily                                                                   
     rate  broke down.   About  ... 2001,  the airlines  were                                                                   
     hiring pretty  heavily ... and  it was hard to  keep ...                                                                   
     quality  pilots.  And  [so] to  keep quality pilots,  we                                                                   
     just  had  to  make better  working  conditions;  so  we                                                                   
     changed it to  a 15 and 15:  they worked  15 days on and                                                                   
     15 days  off, sometimes  16 ... and  we still kept  them                                                                   
     on  the  same monthly  pay.    They  also got  paid  for                                                                   
     weather days whenever they were on duty. ...                                                                               
MR. HAGELAND commented:                                                                                                         
     This  lawsuit came  as  a surprise  to  me because  I've                                                                   
     always considered  myself to be a fair person,  and I've                                                                   
     always paid my  bills on time, and I've  always paid the                                                                   
     pilots well.   It was a real surprise.   I was operating                                                                   
     under the  assumption that  pilots were exempt.  ... The                                                                   
     pilot that  brought this suit,  when we interviewed  him                                                                   
     down in  Florida where  he lives now,  ... he also  said                                                                   
     he was  paid fairly, and  he didn't have any  complaints                                                                   
     about the  way he was paid.   And he didn't know  he was                                                                   
     suing  me personally, he  didn't know  he was suing  ...                                                                   
     Ron Tweto's  widow and ...  children either,  but that's                                                                   
     the  lawsuit -  it's against  us personally  also.   And                                                                   
     I'm  sorry I  didn't  bring our  financials  or I  could                                                                   
     show you  that ...  [we'll go  bankrupt]. ... We  employ                                                                   
     180  people plus  72 village  agents  that are  contract                                                                   
     people.  It  won't ruin the state or anything  but it'll                                                                   
     sure make a hole in those persons' lives.                                                                                  
4:59:21 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG characterized  this  information as  key                                                              
for him  in his consideration  of this issue.   He stated  that he                                                              
has no  desire to get into  Mr. Hageland's financial  records, but                                                              
he said, "That's a most important statement that you've made."                                                                  
REPRESENTATIVE GRUENBERG  made a motion that the  witness be sworn                                                              
in and repeat his statement under oath.                                                                                         
The committee took an at-ease from 4:59 p.m. to 5:03 p.m.                                                                       
5:03:24 PM                                                                                                                    
CHAIR McGUIRE noted  that under AS 24.20.060, the  legislature has                                                              
the power  to administer  oaths, issue  subpoenas, and  compel the                                                              
attendance  of witnesses.   She asked  that Mr. Hageland  continue                                                              
with  his testimony,  and  if a  written oath  is  brought to  the                                                              
committee  from  Legislative  Legal  and  Research  Services,  the                                                              
committee will address the matter then.                                                                                         
REPRESENTATIVE  KOTT predicted  that  if all  the plaintiffs  came                                                              
forward, Mr. Hageland  might have to pay out  around $2.8 million,                                                              
and  asked  Mr.  Hageland  what  this  payment  would  do  to  his                                                              
MR. HAGELAND  said he'd have to  file for bankruptcy,  and pointed                                                              
out that  he has  sworn to this  in an  affidavit in court  during                                                              
prior testimony.                                                                                                                
REPRESENTATIVE  GRUENBERG asked that  that affidavit  be submitted                                                              
to the  committee, and noted  that no written  oath would  then be                                                              
CHAIR  McGUIRE remarked  that this  would be  the cleanest  way to                                                              
approach the situation.                                                                                                         
5:07:17 PM                                                                                                                    
REPRESENTATIVE GARA said:                                                                                                       
     I  want to  sort of  assess  the claims  that have  been                                                                   
     made  to me  about what  notice [Mr.  Hageland] was  on.                                                                   
     There's been  some testimony  here that starting  around                                                                   
     1997,  people started  to  file lawsuits  claiming  that                                                                   
     this  statute had  been wrongly  interpreted and  people                                                                   
     were entitled  to overtime.   And then somewhere  around                                                                   
     that time there  was an effort to change the  law in the                                                                   
     legislature.   Can  you tell  me, by 2000  ... were  you                                                                   
     aware of  any of ...  the efforts  to change the  law or                                                                   
     [of] the legal  disputes - that people had  been legally                                                                   
     challenging this rule?                                                                                                     
MR. HAGELAND  replied that  he doesn't  remember anything  about a                                                              
1997 lawsuit.   He said,  "If I had,  I would [have  assumed] that                                                              
it was  probably something  they were paying  by the hour  and not                                                              
the  way we  were paying."   He  explained that  his company  paid                                                              
pilots by the  month until 2000,  when it was switched  to a daily                                                              
pay rate  to accommodate  the pilots  that were  working a  little                                                              
extra.   He said that  the 2003 legislation  was the  first effort                                                              
to change the law that he knew of.                                                                                              
5:11:59 PM                                                                                                                    
RICHARD   CLARK,   Pilot,  Hageland   Aviation   Services,   Inc.,                                                              
testified that he  has been flying for Hageland  Aviation Services                                                              
for nine and  a half years.   He said, "They've always  been fair,                                                              
they've  always  been generous  and  honest."   He  remarked  that                                                              
pilots from  different companies talk  with each other and  he has                                                              
never  heard  any negative  statements  about  [Hageland  Aviation                                                              
Services] from the  pilots he works with.  He  commented that most                                                              
of  the pilots  from  other companies  want  to  work at  Hageland                                                              
Aviation  Services because  they  know it's  a good  company.   He                                                              
said  that he  was  first  made aware  of  the lawsuit  through  a                                                              
letter that said  he was in it  unless he opted out,  which he did                                                              
right away  and without reservation.   He  said:  "I  believe that                                                              
those pilots that  are still working for the company  that did opt                                                              
out didn't  do it because  of coercion or  fear for their job.   I                                                              
believe they  did it because  they like  the company.   They don't                                                              
want the  company to go bankrupt."   He remarked that  the general                                                              
consensus amongst  the pilots he  has spoken with is  that current                                                              
employees  are  worried that  the  lawsuit  will have  a  negative                                                              
effect on the company.                                                                                                          
REPRESENTATIVE  KOTT  asked  for  information  about  Mr.  Clark's                                                              
piloting experience.                                                                                                            
MR. CLARK answered  that he has been flying since  he was 17 years                                                              
old and  has logged in  about 14,000 hours.   He said that  he has                                                              
flown  every plane  that Hageland  Aviation Services  has, and  is                                                              
now flying the company's  largest plane.  He noted  that he took a                                                              
break for about  20 years, but he  missed the business.   He said,                                                              
"In the  aviation business, people  care about their job  and it's                                                              
a professional atmosphere."                                                                                                     
5:16:51 PM                                                                                                                    
REPRESENTATIVE KOTT  asked Mr. Clark if he would  consider himself                                                              
a professional.                                                                                                                 
MR. CLARK replied affirmatively.                                                                                                
CHAIR  McGUIRE  asked Mr.  Clark  to  discuss  the wage  and  hour                                                              
issue, and  to compare  current payment methods  to those  used 20                                                              
years ago.                                                                                                                      
MR.  CLARK commented  that he's  seen  companies that  pay by  the                                                              
flight hour as opposed  to a salary.  He said that  you can always                                                              
tell when  someone  is getting paid  by the  flight hour  because,                                                              
"they fly  a lot further  out before  they turn to  come in."   He                                                              
offered  his belief  that  pilots are  mainly  concerned with  not                                                              
breaking a regulation and he offered examples of this.                                                                          
5:19:52 PM                                                                                                                    
IGNATIUS  BEANS,  JR.,  Safety   Check  Pilot,  Hageland  Aviation                                                              
Services, Inc.,  testified in support  of SB 105.  He  stated that                                                              
he  has been  employed by  Hageland Aviation  Services for  almost                                                              
seven  years, that  he was born  and raised  in Mountain  Village,                                                              
Alaska, that  has known Mr. Hageland  for a long time,  that he is                                                              
retired from the  Alaska National Guard where he  served 23 years.                                                              
He said that  it was always  his intention upon retiring  from the                                                              
Alaska  National Guard  to  fly in  Western  Alaska, and  remarked                                                              
that Hageland  Aviation Services  has always  been very  fair with                                                              
him.   He said:   "I  took the  job knowing  what I  was going  to                                                              
make, knowing  what my  set times  were.  He  was pretty  up front                                                              
with me.   If I had a pay  problem, I called [Mr. Hageland  and he                                                              
took care of it]."   He stated that he was distressed  to learn of                                                              
the lawsuit, and  he immediately opted out.   He characterized the                                                              
lawsuit as bogus,  and said that he has not seen  any pilots being                                                              
pressured to opt out or to stay in the lawsuit.                                                                                 
REPRESENTATIVE KOTT asked Mr. Beans how long he has been flying.                                                                
MR. BEANS  answered that he  got his pilot  license in  1978, flew                                                              
with the  National Guard from then  until his retirement  in 1995,                                                              
and joined Hageland Aviation Services in 1998.                                                                                  
REPRESENTATIVE  KOTT asked Mr.  Beans if  he considered  himself a                                                              
MR. BEANS replied affirmatively.                                                                                                
5:25:17 PM                                                                                                                    
PETER   C  NOSEK,   Attorney  at   Law,  testified   that  he   is                                                              
representing  about 18-20  pilots that  have established  overtime                                                              
claims against  Hageland Aviation Services.   He pointed  out that                                                              
the Alaska  Department of Labor  and Workforce Development  (DLWD)                                                              
has never  taken the  position that air  carriers are  exempt from                                                              
Alaska law.  He said:                                                                                                           
     Since  1980  the  [DLWD]  position  has  been  that  ...                                                                   
     intrastate  air  carriers  such  as  [Hageland  Aviation                                                                   
     Services] are  subject to the  law and they  must comply                                                                   
     with  the  law.   So  this  isn't a  federal  preemption                                                                   
     issue; this  is, "Did Hageland Aviation comply  with the                                                                   
     law?"   And in fact there  is a 1984 attorney  general's                                                                   
     letter which  further explains its 1980 letter.   And in                                                                   
     1984, the attorney  general said in no  uncertain terms,                                                                   
     if  you fly  intrastate, you  are not  preempted by  the                                                                   
     federal Railway  Labor Act unless you have  a collective                                                                   
     bargaining   agreement.     And  that   also  has   been                                                                   
     submitted  to you.    So there  should  be no  confusion                                                                   
     that  the  [DLWD]  has  never  considered  air  carriers                                                                   
     exempt  from Alaska  law; they've always  had to  comply                                                                   
     with  Alaska   law,  and  that   is  [to]  treat   their                                                                   
     employees  as  professionals.    And  if  you  want  the                                                                   
     privilege of  paying a professional  a salary,  you have                                                                   
     to  follow  what  the  law  says.    [Hageland  Aviation                                                                   
     Services]  did  not do  that,  and there's  no  question                                                                   
     that [it]  did not do that,  and the superior  court has                                                                   
     already established that they violated the law.                                                                            
MR. NOSEK continued:                                                                                                            
     The issue  I would  like to address  is this [issue  of]                                                                   
     fairness.     This  has  been  portrayed  as   purely  a                                                                   
     technicality of  the law, and that's not  quite correct.                                                                   
     What Hageland  did in violating the law was,  if a pilot                                                                   
     showed up,  missed the  first part of  his day  of work,                                                                   
     he  got docked  a half day's  pay.   That's against  the                                                                   
     law.   If you  show up for  an hour,  you get your  full                                                                   
     salary.  ... [Hageland  Aviation  Services] also  failed                                                                   
     to  provide  any  additional  pay if  they  worked  over                                                                   
     eight hours  in a  day.  So  Hageland Aviation  tried to                                                                   
     have the  best of both worlds:   dock them if  they miss                                                                   
     part of  the day,  don't pay them  extra when they  work                                                                   
MR. NOSEK  stated that the pilots  want flight hours so  that they                                                              
can fly for a  larger carrier, and so the pilots  don't have a lot                                                              
of choice, "They  take what they can  get and get in  the hours in                                                              
hopes of going to a bigger carrier."  He stated:                                                                                
     The bill now  before this committee is not  really about                                                                   
     the  air carrier  industry.   The  law  was changed  two                                                                   
     years ago to  protect the industry; you can  only file a                                                                   
     lawsuit  for two years.   So  the industry has  received                                                                   
     the  protection it  desires.   What's at  issue here  is                                                                   
     whether   we're   going   to   retroactively   exonerate                                                                   
     Hageland Aviation  for its violations  of the law.   And                                                                   
     what  this committee  needs to understand  is that  that                                                                   
     law was changed  in 2003.  Hageland's lawsuit  was filed                                                                   
     in 2002,  long before there  was any change in  the law.                                                                   
     These pilots ...  went to the [DLWD] and  asked, "Are we                                                                   
     subject  to the Wage  and Hour Act?"   The [DLWD]  said,                                                                   
     "Yes."  And  that was in 2002, and that  letter has been                                                                   
     submitted  to the committee.   So  in good faith,  based                                                                   
     upon guidance  from the [DLWD]  under the law as  it was                                                                   
     written,  this  lawsuit was  filed  over a  year  before                                                                   
     there was any change in the law.                                                                                           
MR. NOSEK continued:                                                                                                            
     The  issue then  was very  simple:   Did Hageland  break                                                                   
     the   law  or   not?     And  that   has  already   been                                                                   
     established.    And that  raises  the  constitutionality                                                                   
     issue,  and that  is:   These  pilots  have  a right  to                                                                   
     overtime under  the law that governed  their employment.                                                                   
     In  fact,   that  law  is   part  of  their   employment                                                                   
     contract.    As  a  matter   of  law,  their  employment                                                                   
     contract  includes their  overtime rights,  and that  is                                                                   
     part of the  Alaska statute.  So these  pilots performed                                                                   
     the labor,  they're entitled  to it  under the law,  and                                                                   
     they  sought  to enforce  their  rights under  the  law.                                                                   
     And the court has granted them summary judgment.                                                                           
     That creates  a vested property right to  that overtime,                                                                   
     and to reach  back five years in time and  say, "We will                                                                   
     change  what the  law was  five years  ago," takes  away                                                                   
     that vested  property right, and I believe  it is simply                                                                   
     unconstitutional   under  either  the  federal   or  the                                                                   
     Alaska constitution.   And so if this bill  were to fail                                                                   
     ultimately  because of  the  unconstitutional nature  of                                                                   
     it, it  takes away the  protection for all  air carriers                                                                   
     by  overreaching  to  try and  take  away  that  summary                                                                   
     judgment  right  that's  already  been  established;  it                                                                   
     jeopardizes   the  entire  bill   that  is  before   the                                                                   
MR. NOSEK concluded:                                                                                                            
     Now  a lot has  been raised  about the  amount of  money                                                                   
     that is  at issue  in this lawsuit.  ... No one  started                                                                   
     this lawsuit  simply about  money.  Before this  lawsuit                                                                   
     was  filed  an  offer was  made  to  Hageland  Aviation:                                                                   
     $40,000 and  the lawsuit would be released,  waived, and                                                                   
     never filed.  ... And Hageland Aviation refused  to even                                                                   
     speak with us.                                                                                                             
5:31:08 PM                                                                                                                    
REPRESENTATIVE  DAHLSTROM   sought  clarification   regarding  the                                                              
$40,000 offer.                                                                                                                  
MR. NOSEK  explained that the offer  was made [by himself]  to the                                                              
president of  Hageland Aviation  Services and  their counsel.   He                                                              
said that as  a result of their  refusal to accept the  offer, the                                                              
lawsuit was filed.                                                                                                              
REPRESENTATIVE  DAHLSTROM  asked how  many  people  Mr. Nosek  was                                                              
representing when he made that initial offer.                                                                                   
MR. NOSEK  clarified  that at the  time he  was representing  only                                                              
one pilot.   He stated  that there are  currently about  18 pilots                                                              
and only  one pilot who has  not physically been  contacted, while                                                              
60 pilots have chosen  to opt out of the lawsuit.   He said that a                                                              
significant  number of  the pilots  have  told him  that they  are                                                              
opting out because  they are afraid of retribution  and afraid for                                                              
their  jobs.   He  gave the  example  of one  person  who, in  his                                                              
deposition,  said that  he supported  the lawsuit;  that same  day                                                              
the person  was called  in to  see his  current employer,  another                                                              
air carrier,  after  which he called  Mr. Nosek's  office  to back                                                              
out of the lawsuit.                                                                                                             
MR. NOSEK continued:                                                                                                            
     The issue  has been  raised about  whether or not  these                                                                   
     individuals  are professionals.    A professional  is  a                                                                   
     creation of  the Alaska statute,  and there  are several                                                                   
     requirements:   if you  want the  privilege of paying  a                                                                   
     salary you have  to treat them as professionals  and the                                                                   
     court  has  already determined  that  Hageland  Aviation                                                                   
     simply  did not  comply with  those laws.   And so  what                                                                   
     the  issue   before  the  committee  is,  "Is   there  a                                                                   
     justification   for   reaching    back   in   time   and                                                                   
     exonerating those violations of law?"                                                                                      
5:34:08 PM                                                                                                                    
REPRESENTATIVE  GARA noted  that he doesn't  like the  legislature                                                              
to choose  sides in  pending lawsuits,  and he  noted that  he has                                                              
never  voted to  retroactively  alter the  outcome  of a  lawsuit.                                                              
However,  he said that  the only  thing that  concerned him  a bit                                                              
was the  statement that  the lawsuit  could put Hageland  Aviation                                                              
Services  out of  business.   He  asked Mr.  Nosek  to comment  on                                                              
this.    He also  asked  if  Mr.  Nosek  had an  estimate  of  the                                                              
outstanding legal claims against the company.                                                                                   
MR. NOSEK acknowledged  that an affidavit was submitted  that said                                                              
that  a liability  of $250,000  would  bankrupt Hageland  Aviation                                                              
Services.  However,  he pointed out, the company does  not own the                                                              
aircraft it flies.   He commented, "It's a shell  corporation that                                                              
owns virtually  nothing."  He  explained that everything  is owned                                                              
by two other separate  companies which are both owned  by the same                                                              
two individuals who own Hageland Aviation Services.  He said:                                                                   
     To say  that Hageland Aviation  would go bankrupt  is to                                                                   
     say that an  empty shell corporation would  go bankrupt,                                                                   
     and  that is  precisely why  the  individual owners  who                                                                   
     also  own all  those  airplanes in  different  companies                                                                   
     have   also  been  sued.     The   Wage  and  Hour   Act                                                                   
     specifically   allows   individuals   to  be   sued   as                                                                   
     employers  precisely  for  that  reason -  so  that  you                                                                   
     can't hide assets  and simply allow a  shell corporation                                                                   
     to go bankrupt.                                                                                                            
MR.  NOSEK  noted  that  he has  seen  the  financials  for  those                                                              
companies.   He  said that  since  Mr. Hageland  has already  paid                                                              
$500,000 in  attorney fees,  he doesn't  see the $250,000  lawsuit                                                              
bankrupting  Hageland  Aviation Services.    He pointed  out  that                                                              
there  are  20  individuals  in  the  class  action  lawsuit,  and                                                              
perhaps  15 of  those will  file  a claim.   Because  some of  the                                                              
individuals  were  employed  by  Hageland Aviation  for  only  the                                                              
first few months  of the claim, those claims could  be as small as                                                              
$2,000 or  $5,000.  He estimated  that the larger claims  could be                                                              
around  $50,000.    The  court  has  already  ruled  that  because                                                              
Hageland did not,  in good faith, attempt to comply  with the law,                                                              
the pilots  are entitled  to liquidated  damages, he noted,  which                                                              
would equal double damages.                                                                                                     
MR. NOSEK  pointed out  that when  the lawsuit  began in  2002, it                                                              
was  agreed  that  the  documents  showing  hours  worked  by  the                                                              
employees would  be saved.   However,  he said, Hageland  Aviation                                                              
destroyed  all  of those  documents,  and  therefore there  is  no                                                              
longer  any  way to  determine  what  the  pilots  are owed.    He                                                              
surmised:  "But  it certainly will not be $140,000  per 18 pilots.                                                              
I do not believe it would ever grow that large."                                                                                
CHAIR McGUIRE  asked how much  the [law firm]  would be paid  as a                                                              
result of the settlement.                                                                                                       
MR. NOSEK  replied  that that would  be determined  by the  court.                                                              
He explained:   "In a  class action, the  amount of  attorney fees                                                              
is  up to  the  discretion  of the  judge.    So the  judge  could                                                              
identify a  method for determining  a reasonable attorney  fee, or                                                              
he could  simply  follow the  Wage and  Hour Act  and look at  the                                                              
number of hours that it took to pursue the action."                                                                             
CHAIR McGUIRE  asked Mr. Nosek if  he intends to make  a filing as                                                              
to which payment method he prefers.                                                                                             
5:40:38 PM                                                                                                                    
MR. NOSEK answered  that he has not thought about  that issue yet.                                                              
He said, "I imagine  it would just be asking for  our hourly rate,                                                              
but we wouldn't ask for a contingency fee or some enhanced."                                                                    
REPRESENTATIVE DAHLSTROM asked what Mr. Nosek's hourly rate is.                                                                 
MR. NOSEK responded that his hourly rate is $200.                                                                               
REPRESENTATIVE DAHLSTROM  asked if Mr. Nosek is  the only attorney                                                              
working on this case.                                                                                                           
MR. NOSEK  replied that he  is the primary  attorney on  the case,                                                              
and that there  is another attorney who occasionally  works on the                                                              
case.    In response  to  further  questions  from  Representative                                                              
Dahlstrom, he  said that  the other attorney  is more  senior than                                                              
himself and would therefore have a higher hourly rate.                                                                          
5:41:30 PM                                                                                                                    
REPRESENTATIVE  GARA asked  if  there are  any  pending offers  to                                                              
settle on the case.                                                                                                             
MR. NOSEK  replied that there  are none.   He reiterated  that the                                                              
first offer was  rejected with the message that  Hageland Aviation                                                              
Services would rather go bankrupt than settle with the pilots.                                                                  
CHAIR  McGUIRE  asked  Mr.  Nosek  whether,  if  this  legislation                                                              
continues  to move through  the process,  he is  swayed by  any of                                                              
the arguments  made regarding  the danger  that pilots  might face                                                              
from taking risks when receiving an hourly pay rate.                                                                            
MR. NOSEK  replied that  he is not  compelled by those  arguments.                                                              
He said:   "The  argument boils  down to this:   that  they cannot                                                              
safely  pay  a  pilot  and  comply with  the  law.  ...  And  that                                                              
argument  just  doesn't   hold  merit;  there  are   a  number  of                                                              
different  ways that pilots  could be  paid to  operate in  a safe                                                              
fashion  and comply  with  the  law."   He  pointed  out that  the                                                              
claims against  the company  are not  claims against the  industry                                                              
as  a whole,  but against  Hageland  Aviation in  particular.   He                                                              
     You  can pay  a  salary  to a  pilot.  ... He  gets  his                                                                   
     salary no matter  how much he works; he  doesn't have to                                                                   
     fly in nasty  weather.  But if you are paying  a salary,                                                                   
     you can't dock  them if they show up late.   That's what                                                                   
     Hageland did.   There are a  number of ways you  can pay                                                                   
     pilots, address  those safety concerns, and  comply with                                                                   
     the law.  So  there really is not an issue  of trying to                                                                   
     comply with the  law and be safe at the same  time.  And                                                                   
     as  far  as  the  concern   that  this  would  drag  the                                                                   
     industry down:   the law was changed two  years ago, and                                                                   
     there are no  claims for overtime from the  date of that                                                                   
     law forward.                                                                                                               
     I  think that  the constitutionality  of  taking away  a                                                                   
     vested  right  that has  been  recognized by  a  summary                                                                   
     judgment  could  be  easily accomplished  and  save  the                                                                   
     bill.  ... The  bill  reads that  it  is retroactive  to                                                                   
     January  of 2000 and  applies to  those claims that  are                                                                   
     not  determined by  final court  judgment  prior to  the                                                                   
     effective date.   By simply removing one word,  the word                                                                   
     "final,"  that avoids the  constitutionality problem  of                                                                   
     the  summary judgment  that a court  has already  issued                                                                   
     against Hageland  Aviation ...  and yet does  not expose                                                                   
     any  other  air  carrier  in   the  state  to  any  risk                                                                   
     whatsoever.   And  so it  would be  a balancing  between                                                                   
     recognizing  an  intent  to protect  the  industry,  and                                                                   
     recognizing  the valid and  established overtime  claims                                                                   
     that  have  been  established  in court  thus  far.  ...                                                                   
     Simply deleting  the word  "final" ... would  accomplish                                                                   
     both of those tasks.                                                                                                       
CHAIR McGUIRE  noted that the  legislature has passed  retroactive                                                              
legislation in  the past.   As policy makers,  they are  forced to                                                              
look  at the  broader impacts  of  legislation.   She offered  her                                                              
belief  that  the  costs  of class  action  lawsuits  are  further                                                              
reaching than  one would  anticipate.  She  surmised that  even if                                                              
Hageland Aviation did  stay in business, they would  have to raise                                                              
their passenger  rates and  thus impact people  who have  no other                                                              
way to travel to the small communities.                                                                                         
5:48:35 PM                                                                                                                    
MR.  NOSEK, in  response to  a question,  noted  that the  Railway                                                              
Labor Act exemption  used to be  part of Alaska law, and  1972 the                                                              
legislature  made a  policy  decision  that it  did  not want  the                                                              
Railway Labor  Act exemption to apply  under Alaska law  and so it                                                              
was repealed.    He said:   "So this  very exemption  that is  now                                                              
being sought  to be made retroactive  used to be a part  of Alaska                                                              
law ...  and the legislature  chose to  remove it.   So it  was an                                                              
affirmative  decision  to  remove  that  federal  preemption  from                                                              
Alaska  law."   He opined  that  this [continual  changing of  the                                                              
law] is  a harmful public  policy because it undercuts  confidence                                                              
in the law and creates confusion.                                                                                               
REPRESENTATIVE  GARA   commented:    "Isn't  their   argument  not                                                              
whether  ... the Alaska  Wage and  Hour Act  applies but  whether,                                                              
... under  the Alaska Wage and  Hour Act, Hageland  [Aviation] was                                                              
paying its employees  correctly? ... Isn't it their  position that                                                              
... under Alaska law, ... you don't have to pay overtime?"                                                                      
MR. NOSEK said he's heard it stated both ways.  He elaborated:                                                                  
     The position  from the [DLWD]  and the attorney  general                                                                   
     is  that Alaska  law  does apply  to  an intrastate  air                                                                   
     carrier  unless they  carry mail and  have a  collective                                                                   
     bargaining  agreement and so  forth.   It does apply  to                                                                   
     intrastate  air carriers.    The question  then is,  are                                                                   
     you complying  with the law and treating them  as exempt                                                                   
     professionals  as  is  laid out  in  the  law.   If  you                                                                   
     properly   fulfill  the  elements   of  a   professional                                                                   
     employee, then you don't have to pay overtime.                                                                             
5:53:45 PM                                                                                                                    
MIKE BERGT, General  Manager, Alaska Central Express,  Inc. (ACE),                                                              
after  explaining his  company's  background, noted  that ACE  has                                                              
been sued.   The suit was  filed in July  2004, and the  claim was                                                              
that ACE failed to  pay overtime to a pilot who  had been with the                                                              
company since  1998.  He  said that there  have been  two lawsuits                                                              
filed  since the  passage  of the  state exemption  in  2003.   He                                                              
noted that  ACE pays  its pilots  an hourly wage.   He  stated his                                                              
understanding that  it is not the physical flying  of the aircraft                                                              
that determines  whether an aircraft is intrastate  or interstate;                                                              
it's the  traffic that  it carries.   He offered  an example  of a                                                              
passenger  who is  traveling ultimately  between  two states,  but                                                              
only  taking the  particular air  carrier within  one state,  that                                                              
air  carrier is  still  considered to  be  an interstate  carrier.                                                              
Therefore carriers  that fly  mail originating  from all  parts of                                                              
the world would  be considered an interstate carrier.   He assured                                                              
the committee  that ACE has never  taken advantage of  its pilots,                                                              
and noted that the  pilot who filed the lawsuit had  never filed a                                                              
grievance with the company.                                                                                                     
MR.  BERGT  stated,  "I'm  here to  encourage  this  committee  to                                                              
support  SB 105."    He  opined that  the  suit that  was  brought                                                              
against  ACE  was  the  result  of  the  lawsuit  brought  against                                                              
Hageland Aviation.   He said that there are some  attorneys in the                                                              
state  that  have  learned  of   the  potential  windfall  in  the                                                              
Hageland  case,  and he  commented  that  the  pilot who  filed  a                                                              
lawsuit  against   ACE  had  originally  been  approached   by  an                                                              
attorney who  told him he had a  potential claim against  ACE.  He                                                              
noted  that  this attorney  has  been  disqualified by  the  state                                                              
district court because  the attorney worked for the  law firm that                                                              
acts as general counsel to ACE.  He said:                                                                                       
     I think attorneys  see an opportunity to  take advantage                                                                   
     of  the window  that was  created  when the  legislative                                                                   
     body passed  the state overtime  exemption in  2003, and                                                                   
     are  taking  advantage of  the  situation in  which  air                                                                   
     carriers,  large and  small, were acting  in good  faith                                                                   
     with the policy set forth by the [DLWD] 20 years ago.                                                                      
MR. BERGT pointed  out that larger air carriers have  had the same                                                              
difficulty and  confusion regarding  overtime-pay laws.   He said,                                                              
"This  bill is  not about  taking  away any  rights  of pilots  or                                                              
employees; it  is reaffirming what  has been the  general practice                                                              
of  air carriers  who've acted  in  good faith  and in  accordance                                                              
with state policy for the last 20 years."                                                                                       
6:00:19 PM                                                                                                                    
GRANT THOMPSON, President,  Cape Smyth Air Service,  urged that SB
105 be  passed.  He  relayed the makeup  of his company,  assuring                                                              
the committee that  his company would never try  to circumvent the                                                              
law.   He commented  that he  thought his  company was  paying the                                                              
pilots fairly  and never  thought that the  current method  was in                                                              
violation of the  law.  He noted that most carriers  pay pilots in                                                              
the same way.   He added that companies try to  take care of their                                                              
pilots because  if pilots feel that  they are not  treated fairly,                                                              
they will go to work elsewhere.                                                                                                 
CHAIR McGUIRE  asked whether  the lawsuit  against Cape  Smyth Air                                                              
Service  was against  just  the company  or  against Mr.  Thompson                                                              
personally as well.                                                                                                             
MR. THOMPSON  replied that the May  2004 lawsuit was  against both                                                              
the  company  and himself,  although  he  is  an employee  of  the                                                              
company; the company  is owned by the estate of  Thomas P. Brower,                                                              
who was Mr. Thompson's father-in-law.                                                                                           
6:04:02 PM                                                                                                                    
TOM NICOLOS, Cape  Smythe Air Service, testified in  support of SB
105.  He  pointed out that in  a September 3, 1986,  letter to the                                                              
executive director  of the Alaska  Air Carriers Association,  [the                                                              
DLWD]  stated that  it  had adopted  the  position  of the  United                                                              
State  Department of  Labor that  commuter aircraft  and air  taxi                                                              
pilots are  exempt only if  involved in interstate  transportation                                                              
of passengers  and/or substantial  hauling of  the mail;  if their                                                              
activities  are  solely intrastate  or  without the  mail  hauling                                                              
function,  none of  the exemptions  would  apply.   He noted  that                                                              
every carrier currently  being sued in Alaska  carries substantial                                                              
amounts of mail.                                                                                                                
MR. NICOLOS continued:                                                                                                          
     Through  your  own counsel  in  a memorandum  to  [Chair                                                                   
     McGuire]  dated January  [2005],  they  said a  person's                                                                   
     due  process  rights are  not  violated if  that  person                                                                   
     becomes  deprived of the  right to  sue under a  statute                                                                   
     which had  formerly given them  claim, but that  statute                                                                   
     was  changed   or  removed   prior  to  a  final   court                                                                   
     judgment.   So I would encourage  you both to  leave the                                                                   
     word  "final"  in this  bill,  and understand  that  the                                                                   
     [DLWD], in a  letter in September of 1996,  did give the                                                                   
     carriers  the understanding that  they were exempt  from                                                                   
     the Alaska state  statutes as long as they  were hauling                                                                   
6:06:21 PM                                                                                                                    
MARK  JOHNSON, Pilot,  Hageland  Aviation  Service, Inc.,  relayed                                                              
that he's been  in Alaska since  1980 and has worked for  a number                                                              
of  air carriers  in Western  Alaska.   He commented  that he  has                                                              
been paid  both hourly  and by salary,  and he  opined that  is it                                                              
far  safer  to  pay  pilots  a salary.    He  noted  that  he  has                                                              
witnessed  pilots  who  are paid  by  the  hour  fly in  very  bad                                                              
conditions just  so that they  can get  in their flight  hours and                                                              
get paid.   He said he would  vouch for Mr.  Hageland's integrity,                                                              
and that  this was  the best  job he'd  ever had.   Regarding  the                                                              
issue  of retroactivity,  he  said it  seems  to him  that in  the                                                              
interest  of justice,  either all  pilots should  get overtime  or                                                              
none of them should.                                                                                                            
6:12:18 PM                                                                                                                    
MICHAEL  CHARLIE,  Pilot, relayed  that  he  has been  flying  for                                                              
Hageland  Aviation  Services,  Inc.,  in  the Bethel  area  for  6                                                              
years,  and  that  he  anticipates  flying  for  the  company  for                                                              
another 25  years because he is  comfortable with the  company and                                                              
its  method of  payment.   He  surmised that  all  of the  [other]                                                              
pilots that  have opted  out of the  Hageland litigation  feel the                                                            
same way.   He  recounted how  he first  became familiar  with the                                                              
company, which  of his  relatives also work  for the  company, and                                                              
what  his  typical  workday  involves,   and  said  that  Hageland                                                              
Aviation  Services supports  local hiring  and is  much needed  in                                                              
the community.  In conclusion, he said he supports SB 105.                                                                      
6:14:27 PM                                                                                                                    
KAREN   CASANOVAS,  Executive   Director,   Alaska  Air   Carriers                                                              
Association (AACA),  after relaying that the AACA  represents more                                                              
than 67  air carriers operating  in Alaska and over  75 supporting                                                              
aviation  businesses,  said that  the  AACA  supports  SB 105  and                                                              
believes that  without passage  of the  bill, economic  burdens at                                                              
several  tiers will  impact the  air carriers  in the  AACA.   The                                                              
AACA's certificated  carriers ensure a  high level of  safety when                                                              
they operate,  she assured the committee,  as well as  fairness to                                                              
all  of their  employees,  and have  operated  in full  compliance                                                              
with  the DLWD's  1986  position.   Additionally,  the AACA  feels                                                              
that  [a failure  to adopt  SB 105]  will  dramatically alter  the                                                              
contractual  relationships  and  expectations  between  government                                                              
entities,  such as  the United  States Postal  Service, and  other                                                              
service  providers  that  continue  to  serve  communities  around                                                              
Alaska.  An  informal poll conducted  a few years ago  by the AACA                                                              
regarding  how pilots  were  paid revealed  that  flight crews  in                                                              
various  Alaska-based  companies  preferred "the  exempt  status."                                                              
In conclusion,  she reiterated that  the AACA supports  passage of                                                              
SB 105.                                                                                                                         
6:16:53 PM                                                                                                                    
REPRESENTATIVE  KOTT said there  seems to  be some controversy  or                                                              
misunderstanding  over  the  DLWD's   position  regarding  whether                                                              
pilots are exempt from "the overtime law."                                                                                      
GREY  MITCHELL,  Director,  Central   Office,  Division  of  Labor                                                              
Standards &  Safety, Department  of Labor & Workforce  Development                                                              
(DLWD), offered  that the confusion  probably stems from  the fact                                                              
that  there  are  two  different   questions  being  asked.    One                                                              
question is  whether pilots in general  are exempt due  to federal                                                              
preemption,  and   that  is  federal   preemption  based   on  two                                                              
different concepts:   one is found  in the Railway Labor  Act, and                                                              
the  other   is  found  in  the   commerce  clause  of   the  U.S.                                                              
Constitution  and limits  states, in  certain circumstances,  from                                                              
establishing  laws that tend  to impinge  on interstate  commerce.                                                              
The other  question is whether  "these pilots" are  exempt because                                                              
they qualify as professionals.                                                                                                  
MR.  MITCHELL offered  his  belief that  the  Department of  Law's                                                              
1980  memorandum only  applies to  the  two preemption  questions,                                                              
but does  not address  the question  of whether "these  employees"                                                              
fit  within  the  recently  enacted   provision  that  essentially                                                              
covers  all air carriers  that are  subject to  the Railway  Labor                                                              
Act, and noted that  the only air carriers subject  to the Railway                                                              
Labor  Act are those  that are  interstate air  carriers or  those                                                              
that  have a  contract to  carry the  U.S. mail.   It  is hard  to                                                              
imagine  that all air  carriers  in Alaska don't  qualify  for the                                                              
exemption  under the  Railway Labor  Act, that  there would  be an                                                              
air carrier in  Alaska that isn't engaged in  interstate commerce,                                                              
he remarked,  and suggested that  the question being  addressed by                                                              
the  Hageland  litigation  is  whether the  pilots  named  in  the                                                            
litigation  qualify for  an exemption  as professional  employees.                                                              
He  pointed  out  that  in order  to  qualify  as  a  professional                                                              
employee, one must  be paid on a salary- or fee-basis;  thus being                                                              
paid by an  hourly method or a  daily method could, in  most cases                                                              
- unless one  is paid a daily rate  of at least $300  - preclude a                                                              
person from being considered a professional employee.                                                                           
REPRESENTATIVE  KOTT used  a hypothetical  example wherein  one of                                                              
his employees  claims that  he isn't  complying with the  [Alaska]                                                              
Wage and  Hour Act, and asked  what the DLWD's procedure  would be                                                              
in such a situation.                                                                                                            
MR. MITCHELL said  that DLWD would first contact  the employer and                                                              
notify  him/her  that  a  claim  had been  filed  and  ask  for  a                                                              
response;  then, depending  on what  the  employer's response  is,                                                              
the DLWD  might perhaps file  a claim in  court.  He  offered that                                                              
unless the employee  is a child and is performing  dangerous work,                                                              
the DLWD would not resolve such a situation via an injunction.                                                                  
MR.  MITCHELL, in  response to  questions,  reiterated his  belief                                                              
that the  DOL's 1980 memorandum  does not address the  question of                                                              
whether  a  particular   pilot  qualifies  for   the  professional                                                              
employee exemption.                                                                                                             
REPRESENTATIVE  GARA asked  whether the 1980  memorandum  gave air                                                              
carriers the idea that they didn't have to pay pilots overtime.                                                                 
MR. MITCHELL  said  it would have  as long  as certain  conditions                                                              
were  being  met.    As  a  result  of  the  1980  memorandum  and                                                              
additional    clarification    provided    via    a    1984    DOL                                                              
opinion/memorandum,  the  DLWD  created  a  "decision  tree"  that                                                              
works through a  set of questions.  The first  question is whether                                                              
the  carrier  is  an  interstate  carrier;  if  it  is,  then  the                                                              
[Alaska]  Wage and  Hour Act  doesn't  apply due  to the  commerce                                                              
clause.   If the  air carrier  is not  an interstate air  carrier,                                                              
then the question  becomes whether the air carrier  transports the                                                              
U.S. mail;  if it does, then [Alaska]  Wage and Hour Act  does not                                                              
apply as  long as  the employee  is subject  to the Railway  Labor                                                              
Act,  which  generally  includes  any  worker  engaged  in  either                                                              
interstate  commerce or  in the  transport of  U.S. mail.   If  an                                                              
intrastate  air carrier  doesn't  carry the  U.S.  mail, then  the                                                              
question becomes whether  the worker is a member of  a flight crew                                                              
covered  by a  collective bargaining  agreement;  if the  employee                                                              
isn't, then  the [Alaska] Wage  and Hour  Act applies, but  if the                                                              
employee is  covered by a  collective bargaining  agreement, "then                                                              
we're  back  to  this Railway  Labor  Act  preemption  issue,"  he                                                              
concluded, "and there wouldn't be coverage."                                                                                    
6:27:44 PM                                                                                                                    
MR. MITCHELL, in  response to questions, reiterated  that once the                                                              
federal  preemption  issues  are  addressed,  then  the  issue  of                                                              
whether  an  employee  qualifies  for  the  professional  employee                                                              
exemption must still be addressed.                                                                                              
REPRESENTATIVE   GRUENBERG  asked   for  clarification   regarding                                                              
employees that are covered by a collective bargaining agreement.                                                                
MR.  MITCHELL  reiterated that  the  [Alaska]  Wage and  Hour  Act                                                              
would  apply to  employees who  are  not covered  by a  collective                                                              
bargaining agreement.                                                                                                           
[CSSB 105(L&C) was held over.]                                                                                                  

Document Name Date/Time Subjects