Legislature(1995 - 1996)
01/30/1995 03:03 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HL&C - 01/30/95
Number 435
HB 115 - DAMAGES AND ATTORNEY FEES FOR UNPAID WAGES
CHAIRMAN KOTT then introduced that HB 115 was the next order of
business. He then invited Representative Mulder to the table.
CHAIRMAN KOTT read the sponsor statement for HB 115. He stated the
following: "The Alaska Wage and Hour Act (AWHA) requires the
payment of minimum wage and overtime compensation under defined
conditions and contains procedures for the enforcement of these
requirements. The principal statute addressing remedies is AS
23.10.110(a), which provides that employers who violate AWHA are
liable to their employees for the amount of unpaid compensation as
well as an equal amount of `liquidated damages.'
"Until recently, aggrieved employees seeking to enforce their
rights to overtime compensation and minimum wage rates had several
avenues to obtain redress. They could settle the matter directly
with their employers. They could file a complaint with the
Department of Labor and obtain its assistance in effecting a
resolution. In addition, employees could sue their employers in
Superior Court.
"Employees who elected to settle their claims directly with their
employers had the option of waiving all or part of the liquidated
damages. Similarly, the Department of Labor could negotiate a
settlement containing terms waiving all or part of the liquidated
damages. This flexibility tended to encourage employers to settle
prior to the filing of a lawsuit because if their cases progressed
to court full liquidated damages were mandated.
"All of this was changed, though, as a result of a decision
rendered by the Alaska Supreme Court in McKeown v. Kinney Shoe
Company, 820 P.2d 1068 (Alaska 1991), which modified the law in an
extremely important respect. Full liquidated damages are now
required in all settlements, even when the employer acted
reasonably and in good faith. Furthermore, this is the case when
a settlement is negotiated by the Department of Labor.
"HB 115 acts to cure certain deficiencies in the law as it now
stands. First, it grants the court, in actions filed pursuant to
AWAH, discretion to award less than full liquidated damages. It
also may altogether decline to award liquidated damages. This
discretion may be exercised if, but only if, the employer proves
both that it acted in good faith and with reasonable grounds. The
employer has the burden of proof with respect to these elements
before the court can exercise its discretion. However, even
assuming both elements are proved, the court retains discretion as
to whether or not liquidated damages are awarded.
"Second, it permits the Department of Labor to negotiate
settlements omitting all or part of the liquidated damages. If
employee claimants agree to the terms of such negotiated
settlements, they waive their right to further assert their claims
for unpaid wages and liquidated damages.
"Third, employees may directly settle with their employers,
provided that certain procedural safeguards are satisfied. Such
safeguards are specifically tailored to apprise employees of their
rights and the consequences of their actions. If all procedural
safeguards are satisfied, the resulting settlements constitute a
waiver of claims for unpaid compensation and liquidated damages.
"Fourth, HB 115 changes existing law with respect to the award of
attorney fees and costs. As the law now stands, reasonable
attorney fees and costs are awarded to prevailing plaintiffs.
Defendants, when they prevail, are not entitled to costs and
attorney fees. Obviously, this creates a climate whereby those
with extremely weak and bogus claims have no financial
disincentives to bringing lawsuits. HB 115 takes a different
approach. It awards attorney fees and costs to whichever party
prevails. Moreover, instead of requiring the payment of
"reasonable" attorney fees, this bill specifies that such fees are
to be determined according to court rule, thus bringing these types
of cases in line with the treatment accorded other civil actions.
"It respectfully is submitted that HB 115 constitutes a significant
improvement on existing law. As recognized by the Alaska Supreme
Court in Kenney, `liquidated damages' in the context of wage and
hour cases are in reality a type of punitive damages. That being
the case, it makes very little sense to punish those who act
reasonably and in good faith the same as those who callously and
purposefully violate the law. In that regard, it may be noted that
the corresponding federal statute grants discretion to federal
courts to award no liquidated damages, or partial liquidated
damages, when employers establish that they acted reasonably and in
good faith. Thus, this bill acts to bring Alaska law into
conformity with federal law.
"It is also submitted that according the parties flexibility in
negotiating settlements, either directly or through the Department
of Labor, is desirable. The preponderant majority of such cases
can be settled to the satisfaction of all parties before they enter
the judicial system, which would have the effect of relieving an
already overburdened court case load. Finally, awarding attorney
fees to all prevailing parties, and not just to prevailing
plaintiffs, will discourage the filing of bogus lawsuits, thus
reducing the drain on Alaska's judicial and economic resources.
"Your support is appreciated."
Number 617
CHAIRMAN KOTT opened the testimony to the teleconference lines.
Number 621
ROBERT BLASCO, Attorney, Robertson, Monagle, and Eastaugh,
testified, via teleconference, from Sitka. He reaffirmed that the
summary read by the Chair was accurate. He stated that he supports
HB 115 because it corrects and improves deficiencies in the law and
because of a general philosophy of fairness that applies to all of
our civil systems. He stated that the double damage provision is
a punitive measure.
TAPE 95-3, SIDE A
Number 000
MR. BLASCO continued by saying that the change in procedure created
by this bill is not dramatic but from a fairness standpoint, the
change is very dramatic. He stated that the second portion of the
bill is very necessary to eliminate the question of who is liable
for attorney fees.
KEN LEGACKI testified, via teleconference, from Anchorage. He
stated that HB 115 does not address the language set forth in the
state case of Webster vs. Bechtel, citation 621 Pacific 2nd 890.
Mr. Legacki stated that the Webster case did an analysis of the
relationship between the Fair Labor Standards Act and The Alaska
Wage and Hour Act. Mr. Legacki quoted the Webster case that states
on page 897, "The state statute is void to the extent that it
actually conflicts with the valid federal statutes. A conflict
will be found where compliance with both federal and state
regulations is difficult in possibility or the state law stands
(Indecif)... "At page 900 which it states, we must include that the
Alaska Act can only be "void" to the extent that it actually
conflicts with the valid federal statues. Mr. Legacki stated that
this past Monday, January 30, 1995, the United States Supreme Court
reiterated the importance of the mandatory awarding of attorney
fees. HB 115 that would adopt our ruling too, it is specifically
prohibited by the Fair Labor Standards Act. Mr. Legacki cited a
case McEnnon v. Nashville Banner Publishing Co., and said the
violation of that case was Section 29 USC 626 which stops remedial
provisions of the Fair Labor Standards Act regarding attorney fees.
On the other provision of this bill the court stresses the
importance of adding full mandatory attorney fees to employees.
Mr. Legacki furthered that the private settlement provision of HB
115 is prohibited by the FLSA, Brooklyn Savings Bank v. O'Neil the
U.S. Supreme Court stated that "private settlements are void as
against public policy", Mr. Legacki related that you cannot have
them under the Fair Labor Standards Act. Another case that
reiterated that position was Lynn's Food Stores Inc. v. the United
States, that citation 679 F.2d 1350 (Eleventhth Cir.) 1982. It
again reiterates that private settlements are prohibited. Mr.
Legacki felt HB 115 would not survive judicial scrutiny. He
further stated that it didn't address the reasons behind the Wage
and Hour Act., which is to protect employees from overreaching
employers. He explained that the court has had to jump in because
the employee is economically dependent on the employer. He
detailed that if the employer tells the employee, take this
settlement or you're out of a job, the employee has no choice. Mr.
Legacki asked that this bill be re-thought, analyzed to see how it
helps the employee for which the policy of the act is mandated.
Number 160
CHAIRMAN KOTT asked if there were any more questions.
Number 165
REPRESENTATIVE BRIAN PORTER asked Mr. Legacki to fax the citations
stated.
Number 180
CHAIRMAN KOTT asked for testimony from Juneau.
ED FLANAGAN, Deputy Commissioner, Department of Labor, gave his
initial concern with HB 115, regarding its inflexibility with
settlements short of court. Mr. Flanagan believes department's
supervision is important so employees don't get coerced into
anything. Mr. Flanagan offered to work with committee on that
portion of HB 115. Mr. Flanagan stated that he had serious
concerns dealing with the change in attorney fees from the
plaintiff to the prevailing party. He mentioned that there was a
more recent case than that cited by Mr. Legacki, interpreting the
FSLA, that says plaintiffs can recover damages from defendants.
Mr. Legacki stated that it doesn't say either and that this has
been ruled by the Sixth Circuit Court of Appeals in D.C., to be
invalid. He further stated that this was an attempt to get damages
from the plaintiff. The issue is often minimum wage, and they
often can't find an attorney to take the case if they're faced with
prospect of a long drawn out case with the employer that has many
more resources at their command. This would eliminate a large
number of cases. Mr. Flanagan also had a concern with the
good-faith exception, and feels it would have to be much more
stringent than what was in the bill. If the exception is too
loose, ignorance of the law being permitted as defense, basically
then no employer has an incentive to obey the law. Mr. Flanagan
commented that all's he's going to pay in court is basically what
he should have paid in the first place. That is why the punitive
damages are in there. Also another concern of Mr. Flanagans was
Section 4, that states letter A section E, applies to agreements
entered into on or after the effective date of the act. Section B
F. 2310 110F applies to written agreement into on or after the
effective date. Letter C, except as provided in A and B of this
section both constitutionally permitted, this act applies to
actions commenced on or before the effective date of this act. In
the sectional analysis, what concerned Mr. Flanagan was that under
section 4C, to the extent constitutionally permitted the rest of
the act applies to actions in which a final judgment has not been
entered on the date the act takes effect. If this is to give
retroactivity to any actions that have been undertaken to try and
recover wages, he feels that it would be blatantly unfair to the
workers involved. Mr. Flanagan does not support this bill in the
present form but would work with the committee for changes.
Number 266
REPRESENTATIVE ELTON asked how long this hearing was to last. Are
we carrying this hearing over?
Number 275
CHAIRMAN KOTT stated there was another committee scheduled for 5:00
p.m., so they would continue questions with current witness, then
adjourn and hold the bill until Wednesday, at which point they
could bring the bill back.
Number 284
REPRESENTATIVE PORTER asked if HB 115 wouldn't be unfair to future
employees, then why is it unfair to present employees?
MR. FLANAGAN replied that because the present employees already
have actions going, they've engaged attorneys, exposed themselves
to retaliation and it seems it would be unfair to change the rules
after something is in effective. Mr. Flanagan also stated that he
had only seen this bill this morning.
Number 297
REPRESENTATIVE ELTON stated that he had made an assumption after
reading the sectional that maybe the provision in HB 115 changed
under Section 4, but the sectional may have been brought up from
last year and maybe they didn't change that provision in the
sectional. He further stated that this act would only apply to
actions that commence on or after the effective date and there
would not be any retroactivity.
CHAIRMAN KOTT stated that was also his understanding.
MR. FLANAGAN replied that he had last years bill, and that would
more accurately describe the last Section 4C of that bill, than the
current version.
CHAIRMAN KOTT asked if there were further questions or comments?
Seeing none, we will hold this bill over to the next committee
meeting of Wednesday.
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