Legislature(2003 - 2004)
03/31/2003 03:17 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
HB 164-CLAIMS BY STATE-EMPLOYED SEAMEN Number 1125 CHAIR ANDERSON announced that the next order of business would be HOUSE BILL NO. 164, "An Act relating to the state's sovereign immunity for certain actions regarding injury, illness, or death of state-employed seamen and to workers' compensation coverage for those seamen; and providing for an effective date." Number 1154 SUSAN COX, Chief Assistant Attorney General, Civil Division (Juneau), Department Of Law, gave a brief overview of HB 164, which was introduced at the request of the governor. This legislation seeks to amend AS 09.50.250 [Actionable claims against the state] by which the legislature has waived the state's immunity from law suits. She said the specific purpose of this bill is to withdraw the state's waiver of immunity, or its consent to suit, and instead provide workers' compensation coverage for state-employed seamen in the case of injury, illness, or death. MS. COX explained that state-employed seamen, who work mostly aboard the Alaska Marine Highway System ("Marine Highways") [Department of Transportation & Public Facilities], have remedies today under federal provisions of maritime law and the Jones Act [46 U.S.C. 688], as do other seamen employed in the private sector. For eight years, the state had collective bargaining agreements with the unions representing the ferry workers and provided workers' compensation coverage in lieu of those maritime remedies. Then, a court decision in 1991 ruled that the state could not by contract or collective bargaining agreement waive the employee's individual rights to those remedies. However, in an earlier case, the Alaska Supreme Court wrote that if the state wished to provide workers' compensation coverage instead of subjecting itself to litigation by its seamen employees, the state could do so by changing the statute. Number 1263 MS. COX said the purpose of the bill is to get out of the business of litigating over injuries that occur when the employee is a seamen. The state would instead provide workers' compensation coverage. This would create a uniform system of workers compensation for all state employees; there would [no longer be] a separate scenario for state-employed seamen. This legislation would not affect the rights of seamen who are not state employees nor would it impose state law on federal maritime law. The bill withdraws the state's consent to be sued under federal maritime law. Number 1323 REPRESENTATIVE GATTO asked why the fiscal note is zero despite the cost savings to the state. MS. COX explained that the statute of limitations for a claim under the Jones Act is three years. The effective date of this bill is July 1, [2003]. She said this means that for any injury or illness that occurs prior to July 1, the seaman would still have up to three years to file a lawsuit, and the state would continue litigating these cases for several years. Number 1376 MS. COX explained that she is employed by the Attorney General's office to defend personal injury litigation; her position is funded by the Division of Risk Management ("Risk Management") [Department of Administration]. In the long term, the state expects to stop litigating seamen's claims, but she said she can't predict when there will be cost savings. She does expect a legal challenge to this bill by a seaman or by a group that prefers the old system under maritime law. She predicted the case will go to the Alaska Supreme Court before it is settled. Number 1412 REPRESENTATIVE CRAWFORD asked why the state was subject to the Jones Act instead of covering employees with workers' compensation. He questioned if seamen receive less benefits under workers' compensation. MS. COX provided background on HB 164. Before 1983, state- employed seamen were covered by federal maritime law. In 1963, the attorney general was asked whether Alaska ferry employees were covered by this federal law or whether the state's worker compensation law applied. The opinion of the attorney general at that time was that because the state had agreed in statute to be sued in personal injury actions, it had opened the door to maritime law jurisdiction, and so the federal law would apply unless the state closed that door. She said the purpose of HB 164 is to close the door a little. For a period of years, the state had Jones Act coverage for these employees, but in 1983, the ferry worker unions and the state decided through collective bargaining to use the workers compensation system. She said that system worked quite well for a period of eight years until it was invalidated by the Alaska Supreme Court. Number 1436 MS. COX explained the difference between workers compensation and the current remedies under the Jones Act and maritime law. Under maritime law, if workers are injured on the job, leave the vessel, and cannot return to work for weeks or months, they receive their wages to the end of the voyage, without the deduction of any sick leave; they also get a $45 dollar a day stipend until they have recovered sufficiently to return to work. They can use sick leave or vacation leave to add onto the $45 a day maintenance payment to get the equivalent of a regular check until they return to work. Number 1523 MS. COX noted that under workers compensation, if the workers were going to be off work for a period of weeks or months, they would receive a regular payment of 80% of their average net wage, tax free, at no cost to their sick leave or annual leave accounts. She said that for the employee who is not interested in suing anyone, the wage replacement of workers' compensation is a better deal than a $45 a day stipend. In both circumstances, the injured workers' medical bills are paid. MS. COX commented that under the Jones Act, employees who have more serious injuries can hire an attorney. They have to prove in court that the employer was somehow at fault for the injury. They can file a lawsuit within three years, and they can seek types of damages that are not recoverable under workers' compensation. Those damages are pain and suffering, as well as more money for their loss of earnings, and [repayment for] the use of their leave accounts. Number 1636 MS. COX testified that the other significant difference between the two systems is that workers' compensation does not cover an illness unless it's an occupational disease. Under the maritime law maintenance and cure system, if workers get sick aboard a vessel, regardless of whether it's related to working conditions, they're entitled to all of the benefits they'd receive for a work-related injury. MS. COX concluded that the two systems are not mirror images, but the administration thinks it's a fair trade [for state- employed seamen]. Number 1688 REPRESENTATIVE ROKEBERG asked if the seamen employees are going to consider this a fair trade. MS. COX said all state employees, except the seamen, are covered by the [Alaska Workers Compensation Act] and receive the same benefits. The seamen have the traditional maritime remedies as well as leave usage, retirement and benefits, occupational disability, and a variety of other state benefits. She said the litigation is costly and consumes a lot of resources which would not be consumed in a no-fault system like workers' compensation. Number 1746 REPRESENTATIVE GUTTENBERG asked if the savings are achieved by the seamen losing their procedural rights under the maritime law. MS. COX replied that the workers' compensation is a no-fault system. Under workers' compensation, there is a presumption that when there is an injury in the workplace it is work- related, so benefits flow in most cases without much dispute. If there is an issue, the employee is entitled to the full administrative hearing process as well as rights to appeal to the superior court. Under HB 164, the employee would no longer have the right to sue the State of Alaska for pain and suffering, emotional distress, the value of the used leave, attorneys fees, or interest. She summarized that the value of the claim under the Jones Act is completely different under workers compensation. The latter is an economic formula based on the employee's earning history and the degree to which the person is impaired. Number 1850 BRAD THOMPSON, Director, Division of Risk Management, Department of Administration, explained that his agency administers self- insurance programs for state agencies, including the maritime liability program. He explained the information contained in the members' bill packet, which analyzes the claims for the Marine Highways employees [under the Jones Act] compared to the claims from state employees covered by workers' compensation. The frequency of claims per 100 FTEs [full-time equivalents] was based on five years experience for all state employees. For the Marine Highways employees, the rate of claim was 41 per 100 FTEs, whereas the overall injury rate for other state employees was 8 claims per 100 FTEs. In contrast, the five state agencies with the highest number of claims had a rate of claim of 10 per 100 FTEs. The average cost per 100 claims was $197,000 for ferry employees compared to $64,000 for other state employees. MR. THOMPSON explained why his agency's fiscal note did not show a savings. He said the fiscal note reflects the agency's actual funding. Each year the agency receives an appropriation for the claims they expect to come due, a pay-as-you-go plan. The agency covers many other state programs besides the maritime unit and has unfunded liabilities of approximately $100 million. Number 2001 MR. THOMPSON estimated a significant savings from HB 164. Under workers' compensation coverage, he said he expects the average cost for 100 FTE seamen to drop from the $197,000 figure to $64,000 - typical for the other employees - or a reduction of $133,000 per 100 FTEs. He estimated that applying that savings to the 650 employees in the maritime unit would result in about $865,000 in direct expense reduction. He said he can't show that in a fiscal note because his agency is still dealing with the ongoing, outstanding liabilities. He said there will be significant savings down the road. Number 2049 REPRESENTATIVE GUTTENBERG said that he and Representative Crawford come from the construction industry which has a really high accident rate. He described these numbers as amazing. He asked how worker safety programs affect the equation. MR. THOMPSON replied that the Alaska Marine Highway System does have an active safety program with follow-up investigations of accidents onboard the vessels. His financial information shows the Risk Management dollars expended in claims, for the attorneys for both sides, as well as the remedies paid to the employee. He said there are other state costs that are not part of the Risk Management budget. For example, the Marine Highways budget must cover the unearned wages that are paid to the employees who are not able to finish their sailing, he said. Number 2107 REPRESENTATIVE ROKEBERG asked several questions about the comparative data on the frequency and cost of state-employed seaman claims. MR. THOMPSON replied that these numbers - on a per 100 FTE basis and a five year average - reflect the expected average savings, based on the injury rate for the top five departments. He said the average annual savings is based on a 100 FTE analysis, applied to the roughly 655 positions in Marine Highways. REPRESENTATIVE ROKEBERG asked Mr. Thompson whether he had researched the rates of injury by employment for other states. Number 2160 MR. THOMPSON said he has not seen comparisons of maritime units for other states. To a follow-up question from Representative Rokeberg, Mr. Thompson replied that the Department of Labor & Workforce Development, Division of Workers Compensation, analyzes the claims by job category. He recalled that those numbers are similar to the ones he presented today, about 8 injuries per 100 FTEs. He said the Division of Workers' Compensation would not have claim information on the maritime unit. Number 2193 REPRESENTATIVE CRAWFORD said he was dumbfounded as to why the legislature didn't hear about these potential savings last year. MR. THOMPSON replied that this [approach to saving money] has been thought of before but not presented [to the legislature]. CHAIR ANDERSON noted that there are two fiscal notes, one from the Division of Risk Management and the other from the Division of Workers' Compensation. Number 2252 DARRYL TSEU, Regional Director, Inland Boatmen's Union of the Pacific, Alaska Region, explained that he represents union members in both private and public employment. He said that union attorneys are reviewing HB 164. Number 2296 MR. TSEU said that his concerns involve the workers' claims for the more serious injuries. He said he has personally witnessed traumatic maritime accidents, for example, a fellow worker who was permanently disabled with broken legs and a skull fracture when a line separated. He said this worker was compensated for the work he was no longer able to do. He said the accident rates of ferry workers and other state workers are not easily compared. An office injury doesn't compare with falling down a stairway on a vessel. For example, on the MV Bartlett, the crew carries all food from the car deck to the galley up a 20 - 30 foot ladder with an angle of 60 degrees and six-inch wide steps. MR. TSEU noted that he is also concerned about the [lack of savings in] the fiscal note. MR. TSEU mentioned the problem of treating public employees in the union differently from the workers with private employers. TAPE 03-25, SIDE B Number 2378 MR. TSEU said private and public employers should have to follow the same rules in caring for their employees. As a merchant mariner employed by the state since 1991, he said he has personally seen the problems of getting medical bills paid through [Risk Management's agent]. He said it is not necessarily true that the state covers medical bills when there is a injury or accident on board the vessel. He said his union has been aggressively looking for health care outside the state but has had trouble getting key figures about costs and accidents from the state. He questioned whether there will be significant savings [by changing to the workers' compensation system]. He said the Marine Highways has become more active in lowering the injuries and costs through on-board safety programs. But, he said, maritime work, like construction, has a higher percentage of injuries on the job. On the ferries, things move around on the ships, and ships must navigate 20- and 30-foot seas. That movement of a vessel presents more occasions for injuries. Number 2271 REPRESENTATIVE GATTO said he understands that a job on a moving ship is more dangerous, but he asked how that related to insurance. He asked why one insurance plan is better than the other for [seamen]. MR. TSEU replied that the Jones Act set out more protection for sailors. The difference in compensation between vessel employees and other employees are significant. Vessel employees do not have the pay scales of the normal state worker, for example, merit increases. People with 20 years experience are often paid the same as those with 2 or 3 years experience. And he said that training requirements and costs are steep. He said no other state employee has to invest $500 in training just to get a job as a dishwasher. REPRESENTATIVE GATTO asked again why a person with a dangerous job needs to have different insurance. He said he understands that there will be more claims and the claims will be more expensive. Number 2164 MR. TSEU said that he could not answer that question because he's not an insurance expert. He said that workers' compensation limits what an individual may rightly deserve. Currently, the legal system helps determine how much an injury is worth. MR. TSEU, in responding to a question from Representative Gatto, said he didn't think merchant mariners deserve anything special; he said he's here to protect the existing rights of his fellow workers. Number 2097 REPRESENTATIVE CRAWFORD described his experience when he fell during construction work on the Sullivan Sports Arena. His workers' compensation benefit was divided by 52 weeks, so it amounted to about one-fifth of his weekly wage, and he missed the entire work season that year. He asked how such an accident would be treated for a seasonal employee of the Marine Highways. MR. TSEU replied that about 40 percent of the employees are seasonal, which means that in the seniority system, a person may work only two or three months in the first several years. Therefore, it takes three to five years of seasonal work to earn any benefits such as sick leave or vacation time. Under the Jones Act, a person receives maintenance and cure stipends of $45 a day. He said ferry workers don't tend to misuse their leave; they use it because it's easier to use than filing claims with Risk Management's insurer, Pacific Claims, Inc. He described problems with the company, such as checks being late and the figures not matching. Number 1949 REPRESENTATIVE ROKEBERG asked Mr. Tseu to clarify whether he's a business agent or a member of the union's professional staff. MR. TSEU replied that he's the regional director and a union member; he's an employee with the State of Alaska on leave without pay. REPRESENTATIVE ROKEBERG reminded Mr. Tseu that his union and 12 other bargaining units groups opted out of the state health insurance system several years ago. Number 1897 MR. TSEU explained that this change occurred before his time [as regional director]. He said the Division of Retirement and Benefits [Department of Administration] has had trouble providing the information the union needs to select another health care insurer. He said his union officials signed a letter of agreement with the previous administration, saying they would try to find other alternatives for health care. REPRESENTATIVE ROKEBERG noted that the prior governor forced several collective bargaining units out of the state [health insurance] pool. He asked if the union currently has health insurance. MR. TSEU said that whenever there is an injury on the vessel, it's the responsibility of the employer to pay for all expenses related to work injuries. He said that the insurance that is provided to all state employees should not have to be used to cover any accident or illness; the employer should pay these expenses. Number 1773 REPRESENTATIVE ROKEBERG asked Mr. Tseu to clarify whether the union supports or opposes the bill. MR. TSEU said the union neither supports nor opposes the bill but is looking at it carefully. The union is waiting for a response from the Attorney General's Office [Department of Law]. He expressed concern that there may be a savings of $850,000 [through Risk Management] but [increased] expenses of $2 million [in workers' compensation]. These numbers need to be examined, he said, whether it's here or in the House Judiciary Standing Committee [the next committee of referral]. CHAIR ANDERSON noted that the judiciary committee can look at the legal issues associated with coverage under the Jones Act. Number 1695 PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor & Workforce Development, appeared before the committee to answer questions. REPRESENTATIVE ROKEBERG asked Mr. Grossi about the incidents of injury per employment type as presented by Mr. Thompson. MR. GROSSI replied that there are no incidents of accidents for state employees as high as ferry workers at the rate of 41 per 100 FTEs, as noted by Mr. Thompson. The highest rates would be in the construction and timber industry, he said. He explained that the fishing industry, which is not covered under workers' compensation, also has a very high incident rate. He does not have accurate statistics on seamen [because they are currently covered by the federal maritime laws]. Upon questioning by Representative Rokeberg, he said that he has not researched national statistics for seaman claims. Number 1615 REPRESENTATIVE ROKEBERG noted that such statistics would be very interesting because there is such a large discrepancy between ferry workers and other state employees. MR. GROSSI said he will research the requested information. REPRESENTATIVE ROKEBERG asked if an employee's primary health insurance carrier is reimbursed when an employee wins a workers' compensation claim. MR. GROSSI said the private insurance carrier would be reimbursed by the workers compensation carrier. However, the state is self-insured for workers' compensation. MR. ROKEBERG said he was concerned to hear from Mr. Tseu that seamen's claims [through Risk Management's carrier] were not being properly reimbursed. Number 1559 MR. THOMPSON said the average loss rate of [41] per 100 FTEs comprises both injuries and illnesses. Workers' compensation typically only responds to an occupational illness, an illness that arises out of the scope of duties. A seaman has the ability to file a claim for any life illness, such as the flu or a toothache, for example. He said that's the real reason the frequency rate for seamen is significantly different than other occupational statistics. REPRESENTATIVE ROKEBERG asked about sick days in addition to the maintenance and cure stipends, whether this is an instance of double-dipping. MR. THOMPSON said that if a person becomes ill during the one- or two-week voyage, the person leaves the vessel and receives wages for the voyage plus the maintenance rate of $45 a dollar until reaching maximum medical cure. An employee can actually benefit [financially] for time away from work for an illness not occupationally caused. Number 1461 REPRESENTATIVE GUTTENBERG asked if the $45 a day was a type of per diem while stranded in a "foreign" port after getting ill or injured. MS. COX clarified that the system flies the worker back home to the duty port if the person leaves the ship sick. At home the person collects $45 a day until fit for duty. The person also collects a full paycheck for the voyage, and no sick leave is used. A person in that circumstance can get more money from the wages and the $45 a day than working a normal shift. After the end of the voyage, the person who is still out ill or injured collects the $45 a day and can file leave slips to bring the amount up to a normal pay check. MS. COX, answering a question from Representative Gatto, said that wages earned through workers' compensation are not taxable; it's a percentage of the average net paycheck. REPRESENTATIVE ROKEBERG asked Ms. Cox about the likelihood of lawsuits if the bill passes. Number 1321 MS. COX replied that the Office of the Attorney General has been contacted by the law firm that handles the claims for the injured and ill Marine Highways employees. The attorneys have raised legal issues and submitted a memo to the Senate Labor and Commerce Standing Committee, and her office is preparing a response. She said she expects if the bill passes, a seaman unhappy with the workers' compensation remedy would file a lawsuit; then the state would file a motion saying seamen no longer have the right to file lawsuits. Then, she said, there would be a legal challenge about whether this bill works, and it would probably end up in the Alaska Supreme Court. REPRESENTATIVE ROKEBERG said he supports the bill in terms of reducing the state budget. Number 1251 REPRESENTATIVE ROKEBERG moved to report HB 164 out of committee with individual recommendations and the accompanying two fiscal notes. Number 1234 REPRESENTATIVE GUTTENBERG objected. He said he would like to see concrete values for the [maritime law and workers' compensation] systems; he would like to see a side-by-side comparison of the benefits available. CHAIR ANDERSON said he will try to get that information from the Department of Law and suggested that Representative Guttenberg vote no recommendation on the bill. The bill could then move on to the judiciary committee where the legal issues would be reviewed. He said the House Labor and Commerce Standing Committee could forward the requested information. REPRESENTATIVE GUTTENBERG also requested information on other maritime industries to compare with Alaska's accident rates. Number 1150 REPRESENTATIVE GUTTENBERG said he maintained his objection. REPRESENTATIVE ROKEBERG suggested that this means of saving money might be preferable to grounding some ferries. REPRESENTATIVE CRAWFORD said he is troubled by the bill. He said if there's $890,000 to be saved, he wants to save it, but not at the expense of workers' protection. He said he does not favor moving the bill until the committee gets more information. Number 1064 A roll call vote was taken. Representatives Gatto, Rokeberg, Lynn, and Anderson voted in favor of moving HB 164 out of committee. Representatives Guttenberg and Crawford voted against it. Therefore, by a vote of 4-2, HB 164 was reported out of the House Labor and Commerce Standing Committee.
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