Legislature(1999 - 2000)
04/21/1999 03:21 PM House L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 201 - OVERTIME COMPENSATION COMPUTATION
Number 0059
CHAIRMAN ROKEBERG announced the committee's first order of business
is HB 201, "An Act relating to the computation of overtime; and
providing for an effective date."
Number 0075
JANET SEITZ, Legislative Assistant to Representative Norman
Rokeberg, Alaska State Legislature, came forward to present HB 201
as aide to the House Labor and Commerce Standing Committee. House
Bill 201 was generated by a recent court decision regarding
overtime computation [Hallam v. Holland America Line, Inc., d/b/a/
Westours Motor Coaches, Inc.]. The court is approving what is
termed "pyramiding." For lack of a better description, Ms. Seitz
termed it "paying double for overtime." Ms. Seitz indicated that
if a person works 11 hours on Monday and 8 hours each subsequent
weekday including Friday, that person would receive 3 hours of
overtime pay for those 3 overtime hours on Monday and also an
additional 3 hours of overtime pay on Friday for those 3 hours
above 40 hours per week. In effect, the person would receive 6
hours in overtime, as Ms. Seitz understands it. House Bill 201 is
to make it clear that overtime is for 8 hours a day or 40 hours a
week.
CHAIRMAN ROKEBERG noted this has been the interpretation of the
department since statehood, asking if that was correct. He invited
Commissioner-designee Flanagan, Department of Labor, forward.
Number 0159
ED FLANAGAN, Commissioner-designee, Department of Labor, came
forward to testify in support of HB 201. This legislation corrects
an interpretation that goes against the common understanding and
interpretation by labor, management, and the Department of Labor
since, he thinks, Territorial days before 1959. The Department of
Labor strongly supports and will always advocate to retain its
overtime provision requiring the payment of overtime over 8 hours
in a day, but, in the department's opinion, it is ludicrous to
suggest that the employer should not be entitled to receive 40
hours of straight-time [per week]. Under the superior court's
interpretation, an employee working six 10-hour days [in a week]
would be required to be paid for 32 hours straight-time and 28
hours overtime, rather than the current 40 hours straight-time and
20 hours overtime.
COMMISSIONER-DESIGNEE FLANAGAN indicated the additional overtime
required by the court's decision results from including both
overtime and straight-time hours to determine when the weekly
40-hour mark has been reached. Commissioner-designee Flanagan
stated he thinks this is a necessary fix to preserve the state's
8-hour law, and he thinks the court's interpretation creates an
incredible, unjustified and unfair liability for the state's
employers who are paying according to the department's own
instructions and through what has been everyone's understanding for
decades. Commissioner-designee Flanagan commented the department
will support the bill, as currently written, strongly through the
process. He noted the title is rather broad but does not think it
will "invite any mischief" because the agreement is that this needs
to be done quickly and cleanly.
Number 0353
CHAIRMAN ROKEBERG noted there is a proposed committee substitute
(CS) the committee will be adopting and also a proposed amendment
from the department.
COMMISSIONER-DESIGNEE FLANAGAN responded he has reviewed those,
commenting he thinks the committee substitute's Section 2 is more
clear. Regarding the proposed amendment, Commissioner-designee
Flanagan added it was the suggestion of the department's assistant
AG [attorney general] that the legislation's findings section
should probably cite the specific case to eliminate any doubt.
Number 0387
REPRESENTATIVE MURKOWSKI made a motion to adopt Version D as the
proposed CS for HB 201. Version D is labeled 1-LS0872\D, Cramer,
4/15/99. There being no objection, Version D was before the
committee.
Number 0395
REPRESENTATIVE BRICE made a motion to adopt Amendment D.1 offered
by the chairman. Amendment D.1, labeled 1-LS0872\D.1, Cramer,
4/20/99, read:
Page 1, following line 14:
Insert a new paragraph to read:
"(2) the intent of this bill is to override
the superior court's decision in Hallam v. Holland
America Line, Inc., d/b/a/ Westours Motor Coaches,
Inc., 1JU-96-1734 CI, concerning the calculation of
overtime wages; the court in that case
misinterpreted the intent of AS 23.10.060(b);"
Renumber the following paragraphs accordingly.
Page 2, line 6:
Delete "(2)"
Insert "(3)"
CHAIRMAN ROKEBERG questioned if the committee understood the
amendment and if there were any objections. He recognized
Representative Harris regarding clarification.
REPRESENTATIVE HARRIS asked about the second part of the amendment,
page 2, line 6, indicating he thinks it is not correct upon
examining that portion of Version D.
CHAIRMAN ROKEBERG explained the findings become [subsection] (2)
and then it is renumbered according. The chairman commented he had
had the same question earlier. With that point clarified, the
chairman questioned if there were any objections to "Amendment 1"
moved by Representative Brice.
Number 0484
REPRESENTATIVE MURKOWSKI spoke to the amendment, commenting she is
certainly in support. However, she is questioning the last portion
of the amendment which states, "the court in that case
misinterpreted the intent". She wonders if it is necessary to go
so far as to specifically say that.
CHAIRMAN ROKEBERG indicated this was the assistant AG's
recommendation and he is willing to accept it in this instance
where the legislative and executive branches are in agreement, and
this is the interpretation which has been in existence since before
statehood. The chairman noted he appreciated Representative
Murkowski's comment as a member of the legal profession. There
being no further objection, Amendment 1 [Amendment D.1] was
adopted.
Number 0575
REPRESENTATIVE SANDERS asked for confirmation that this would still
mean that if a person works three 10-hour days, the person would
receive 24 regular hours and 6 overtime hours.
COMMISSIONER-DESIGNEE FLANAGAN replied that was correct.
REPRESENTATIVE MURKOWSKI questioned if there would be any negative
effects to taking the retroactivity back to May 4, 1959. She asked
if someone who felt he/she had an erroneously determined wage claim
in the 1970s could use this retroactivity to say the employer owes
that person all these dollars in overtime pay.
COMMISSIONER-DESIGNEE FLANAGAN answered that is exactly what the
retroactivity is attempting to avoid. He noted there is a two-year
statute of limitations for most wage claims. The department's
assistant AG had had a question about the retroactivity upon first
examination of the bill which she checked out with Deborah Behr
[Assistant Attorney General, Legislation and Regulations Section,
Civil Division (Juneau), Department of Law] who saw no problem with
that.
Number 0671
REPRESENTATIVE MURKOWSKI noted, then, it was being taken all the
way back to avoid any opportunity for anyone to bring claim.
COMMISSIONER-DESIGNEE FLANAGAN replied that is his understanding.
He believes the chairman came up with the 1959 date, but the
department does not see any problem with it. Commissioner-designee
Flanagan indicated the department does not interpret this as a
change in the existing wage and hour law; if this legislation is
not passed, the state is changing the rules on the employers in a
very deleterious manner. Commissioner-designee Flanagan thinks
they need to be fully retroactive and the department supports that.
CHAIRMAN ROKEBERG noted the committee had received a letter in
support of the legislation from Lynden Transport [Lynden, Inc.;
April 20, 1999]. The chairman questioned if there were any
witnesses.
Number 0766
DON ETHERIDGE, Alaska State District Council of Laborers, came
forward to testify in support of HB 201. He said
Commissioner-designee Flanagan has convinced them it is a good
idea.
Number 0809
THYES SHAUB, Lobbyist for the National Federation of Independent
Business (NFIB), came forward to testify in support of HB 201. She
indicated they are in full support of the legislation and would be
providing a written statement of support.
CHAIRMAN ROKEBERG asked Ms. Shaub if she had any idea what the
ramifications would be to small businesses around the state.
MS. SHAUB replied this would be a huge impact on small business,
especially for many tourism businesses that have a lot of overtime
hours during the summer.
Number 0858
PAM LaBOLLE, President, Alaska State Chamber of Commerce, came
forward to testify in support of HB 201. She indicated the Alaska
State Chamber of Commerce feels this to be a misinterpretation of
what everyone has understood overtime to be, and it would be a
tremendous impact on business should the court's interpretation be
allowed to stand.
CHAIRMAN ROKEBERG asked if anyone has any idea of what the failure
to pass this legislation would be. He wondered if any attempted
calculations of the impact had been made.
MS. LaBOLLE responded that no one has provided her with any
calculations they might have done.
CHAIRMAN ROKEBERG indicated this would be requested from the
Department of Labor. He asked her if she could narratively
indicate the impacts on business.
MS. LaBOLLE said it essentially has the potential of being twice
the overtime impact that they have had in their business. She
believes businesses make strong efforts to keep overtime costs
down. Ms. LaBolle added, "Considering they're already paying half
again what the regular wage is and then through this it's three
times what the regular wage is." She is sure that would be a very
significant impact.
Number 0944
CHAIRMAN ROKEBERG stated the committee would be asking the
department shortly to do some analysis, but he indicated something
from the Alaska State Chamber of Commerce would be helpful. He
noted, "Even a broad conceptual idea of the impacts on business,
business failures, and the totality on the economy ...."
MS. LaBOLLE responded she could send out a quick call for survey
information regarding the possible impact of this to their
membership.
CHAIRMAN ROKEBERG indicated he would also appreciate the
notification of other chambers of commerce throughout the state so
that they are aware of the situation.
Number 1031
BOB DINDINGER, Vice President of Government Relations, Alaska
Visitors Association (AVA), came forward to testify in support of
HB 201. He is pleased there is this corrective legislation; he
believes it is a misinterpretation or certainly an unanticipated
interpretation of Alaska labor law. Mr. Dindinger noted his
business, Alaska Travel Adventures, has approximately 200 employees
in the summertime. If they are typical of tourism businesses,
labor makes up about of 70 percent of their costs. Their average
employee receives between 15 and 20 percent of his/her hours at
overtime rates. It is pretty typical for his employees to receive
8 to 10 hours of overtime a week. Mr. Dindinger indicated the
short-term punitive effect of this new overtime interpretation
would be borne by the employer because the summer season is so near
and most of the recruitment has already occurred.
MR. DINDINGER believes, however, that over the long term, if he is
paying for hours not worked - which is the net effect of this - his
company will just hire more employees. Ultimately, those college
students and seasonal employees currently collecting those overtime
wages will be replaced with more full-time employees working fewer
hours. He thinks that would be a detrimental effect, and would be
considered a detrimental effect to much of his company's labor
base. Because what they sell in the tourism business is labor,
increasing the labor costs of small businesses by this percentage
over the short-term could lead many small businesses to the brink
of bankruptcy. Mr. Dindinger added that if there were class action
suits going back two years to recover these wages, that would
almost certainly bankrupt many small businesses; he emphasized
having a retroactive effect for the legislation is extremely
important.
Number 1149
REPRESENTATIVE MURKOWSKI observed she thinks Mr. Dindinger is going
into dangerous ground if he suggests possible impact of Judge
Weeks' decision is that Mr. Dindinger might be forced to hire more
full-time employees because they might view this as an opportunity
at the expense of those businesses. She agrees that it would be to
the ultimate detriment of those businesses to do it, but she
doesn't want anyone to get the wrong impression that this might be
a way to employ more Alaskans.
MR. DINDINGER noted the burden of paying those employees would come
from the existing employees. Instead of the existing employees
receiving the overtime rate on a significant portion of their
payroll, they will receive fewer hours to pay the additional
employees. He commented that would be the only way his business
could afford to deal with it over the long term. He added
Representative Murkowski's point is well-taken.
CHAIRMAN ROKEBERG commented he had intended to make the same point.
The chairman is concerned about Mr. Dindinger's statement because
he wondered if it was possible to have straight-time employees
picking up those portions of overtime that Mr. Dindinger's
employees performed. The chairman questioned whether Mr. Dindinger
could manage that that precisely, and if that is entirely
conceivable. Additionally, the chairman questioned if Mr.
Dindinger didn't want to have a certain overtime premium to hire
better quality people. He asked how that works.
Number 1227
MR. DINDINGER answered the more a person can make during the summer
season, the more attractive the job is in total to the person.
However, if the difference is the entire company profit, it is just
not an allowable expense. He noted his company has enough
employees - instead of having five people doing the job and working
six days a week, which is pretty typical in their business - they
would have their employees working five days a week, hiring seven
employees and rotating them through. It certainly might have a
downward effect of the quality of employees the company is able to
attract.
CHAIRMAN ROKEBERG noted on this point the idea of overtime is a
penalty to employers so they don't overwork their employees;
therefore, they need to take due care.
Number 1289
KIM ROSS, Executive Director, Alaska Air Carriers Association
(AACA), came forward to testify in support of HB 201. The
association represents about 180 airlines in Alaska and associated
aviation businesses. She offered AACA's support to HB 201 and
informed the committee this will be an issue addressed by the
association's board at its next meeting. Ms. Ross noted the board
could come up with a resolution if the committee desired.
CHAIRMAN ROKEBERG indicated that would be appreciated. The
chairman invited Mr. Perkins forward.
Number 1336
DWIGHT PERKINS, Deputy Commissioner, Department of Labor, came
forward.
CHAIRMAN ROKEBERG requested Mr. Perkins ask the department's
statisticians to make some very rough estimates of the costs and
ramifications to employment levels and the businesses of the state,
were this case law not to be repealed by this legislation.
MR. PERKINS indicated he will discuss this with the department's
research and analysis section to see what can be quickly provided.
CHAIRMAN ROKEBERG asked if the department has a contingency plan
regarding inquiries made. The chairman questioned if businesses
were going to be "enforced" to calculate [overtime] according to
the court's interpretation until this legislation is passed and
signed by the governor. The chairman asked if any emergency
regulations had been made.
MR. PERKINS answered they have not.
CHAIRMAN ROKEBERG asked if the department was going to check with
the Attorney General.
MR. PERKINS indicated the department would be checking with its
assistant attorney general, but it has not been advised to do so as
of yet. Mr. Perkins commented on part of the urgency expressed by
Commissioner-designee Flanagan about this legislation passing
through.
CHAIRMAN ROKEBERG asked Mr. Perkins to look into that and then
report back. The chairman confirmed there were no further
questions or suggestions for Mr. Perkins. Chairman Rokeberg
confirmed no one else wished to testify on HB 201.
Number 1429
REPRESENTATIVE MURKOWSKI made a motion to move the CS for HB 201
[Version D], as amended, out of committee with individual
recommendations and the attached zero fiscal note. There being no
objection, CSHB 201(L&C) moved out of the House Labor and Commerce
Standing Committee.
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