Legislature(1997 - 1998)

02/23/1998 03:21 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 347 - OVERTIME WAGE EXEMPTION FOR MECHANICS                                 
Number 0104                                                                    
CHAIRMAN ROKEBERG announced the committee's first order of business            
was HB 347, "An Act relating to an exemption from overtime wage                
requirements for certain motor vehicle mechanics."                             
REPRESENTATIVE JOHN COWDERY, the bill sponsor, stated his staff                
would present HB 347.                                                          
HB 347 read:                                                                   
     * Section 1.  AS 23.10.060(d) is amended by adding a new                  
     paragraph to read:                                                        
          (17) work performed by a mechanic primarily engaged                  
     in the servicing of motor vehicles if the mechanic is                     
     employed as a flat-rate mechanic by a nonmanufacturing                    
     establishment primarily engaged in the business of                        
     selling or servicing motor vehicles; in this paragraph,                   
     "motor vehicles" does not include boats or aircraft.                      
     * Sec. 2.  The amendment to AS 23.10.060(d) made by sec.                  
     1 of this Act applies to work first performed on or after                 
     the effective date of this Act.                                           
Number 0117                                                                    
MARCO PIGNALBERI, Legislative Assistant to Representative John                 
Cowdery, came forward to present some background information on HB
347.  He stated, speaking from a prepared statement which was                  
distributed to the committee members:                                          
     This bill is necessary to allow flat-rate mechanics,                      
     their employers and consumers, to be certain about the                    
     price of a particular repair job, whether or not that job                 
     extends into overtime.                                                    
     In current practice, a flat-rate mechanic is compensated                  
     on the basis of a percentage of the hourly shop rate.                     
     The flat-rate mechanic provides the skill and maybe the                   
     specialized tools to do the job.  The employer provides                   
     the garage and the overhead expenses.                                     
     If the flat-rate mechanic takes 8 hours or less to                        
     complete a job there is no problem.  However, if it takes                 
     more than 8 hours then the overtime law is triggered.                     
     Alaska's overtime law requires flat-rate mechanics'                       
     compensation to be based on a complex hourly rate formula                 
     that vitiates the flat-rate concept.  This is the                         
     fundamental reason for HB 347.  Hourly compensation and                   
     flat-rate compensation are fundamentally different                        
     animals and do not mix.  Flat-rate compensation cannot                    
     and should not be converted to hourly compensation.                       
     This legislation will bring our state statute in line                     
     with the federal statute by exempting flat-rate mechanics                 
     from overtime requirements.  The federal law recognizes                   
     the uniqueness of flat-rate compensation and therefore                    
     exempts flat-rate mechanics.  The language in the federal                 
     law is found at Title 29 of U.S. Code Section 213,                        
     subsection (10)(A) where it says:  "Any salesman,                         
     partsman, or mechanic primarily engaged in selling or                     
     servicing automobiles, trucks, or farm implements, if he                  
     is employed by an nonmanufacturing establishment                          
     primarily engaged in the business of selling such                         
     vehicles or implements to ultimate purchasers;".                          
Number 0269                                                                    
     Now HB 347 does not apply to partsmen.  It is mechanic                    
     specific to the mechanics who work in nonmanufacturing                    
     establishments that sell or service motor vehicles, but                   
     not boats or aircraft.                                                    
     Alaska's overtime pay requirement is stricter than the                    
     federal government's.  The federal requirement is that                    
     overtime pay be paid ... after 40 hours of work per week.                 
     Alaska's requirement is that overtime pay be paid after                   
     40 hours per week and after 8 hours per day.  Flat-rate                   
     mechanics are exempt from the federal requirement.  HB
     347 will exempt them from both the weekly and the daily                   
     overtime requirements in Alaska law.                                      
     For example, in Day 1 in the work life of Bob, the flat-                  
rate mechanic, if he does a job for 10 billable hours and does it              
in 9 hours, his agreement with his shop owner is that he gets ...              
40 percent of the shop rate, if we say the shop rate is $60 per                
hour.  Current law requires that Bob's compensation be calculated              
as follows and you'll see on page 1 of the testimony, the table                
[Mr. Pignalberi referred to Table 1 in his written statement], that            
you have to go through all the steps in each one of these columns              
to determine what Bob's compensation is for that particular job.               
Number 0367                                                                    
     A problem exists in that a daily calculation is just                      
     that, it's a daily calculation that is only good for one                  
     day.  It changes each day whenever there's a variance in                  
     the number of hours worked, or in the daily flat-rate                     
     total.  Any variation in either the length of the work                    
     day, or the flat-rate mechanic's daily earnings, will                     
     change the effective pay rate and thus the overtime rate.                 
     On Day 2, look at what happens if another customer comes                  
     in with exactly the same 9-hour job.  Say the mechanic                    
     has already worked a 3-hour job before he starts on the                   
     new 9-hour job.  ... The table [Table 2] there will show                  
     that the total compensation due the mechanic was                          
     different than he got for the same job on Day 1, it's $40                 
     Now current Department of Labor rules require the                         
     calculation of an effective hourly rate on a cumulative,                  
     weekly basis.  The flat-rate mechanic's compensation for                  
     the very same work will differ if his pay is calculated                   
     on a two-day work week vis- -vis, say, a five-day work                    
     Now this calculation assumes that the flat-rate mechanic                  
     will work no more the rest of the week.  If he works                      
     more, then the effective hourly rate and hence the                        
     overtime rate will change.  This situation prevents the                   
     employee and employer from knowing what is each day's                     
     compensation because it depends on knowing the exact                      
     amount of work for the whole week in advance.  For                        
     example, the compensation for a job completed on                          
     Wednesday will differ depending on whether the employee                   
     is paid on that Wednesday or whether he works additional                  
     days that would cause the calculation of Wednesday's                      
     compensation to change.  The law forces absurdity, which                  
     is probably why the federal government provides the                       
Number 0498                                                                    
     Now to progress to the third day in this hypothetical                     
     life of Bob the flat-rate mechanic, no flat-rate jobs                     
     were available that day, they didn't come in, and he                      
     stands by for 10 hours, and he has a standby rate of $12                  
     per hour.  Now we simply do that calculation in the table                 
     [Table 3] so that we'll be able to see how it affects his                 
     overall weekly total at the end of Day 6.                                 
     Now this Day 3 table shows Bob's compensation as if it                    
     was a stand-alone day.  However, if Bob got sick and                      
     didn't work Day 4 and didn't work Day 5, then his pay                     
     would have to be calculated differently [Table 3A].  It                   
     is absurd that the flat-rate mechanic's compensation for                  
     a given day's work should differ depending on what work                   
     was performed on other days of the week.  But, that's the                 
     situation inflicted by the current statute.                               
     On the fourth day, the flat-rate mechanic works three                     
     identical flat-rate jobs of three hours each.  The first                  
     job's flat rate is $72, as you'll see in Table 4.  The                    
     second job's flat rate is also $72.  The third job cannot                 
     be charged $72 because there is an ... hour of overtime                   
     included.  The overtime hour triggers the Department of                   
     Labor's conversion formula from flat-rate to hourly                       
     calculation, hence the third job must be charged two                      
     hours of straight time and one hour at an overtime rate                   
     for a total job cost of $84, whereas the other jobs were                  
     $72.  Under the flat-rate mechanic concept, all three                     
     consumers would have paid the identical price for the                     
     identical job.  However, the statute vitiates the flat-                   
rate concept and requires the flat-rate mechanic's compensation to             
be converted to hourly, overtime rates.                                        
Number 0615                                                                    
     Then on the fifth day in our hypothetical example, we                     
     have an 11-hour repair which is done in 8 hours but no                    
     overtime is due because ... he only worked 8 hours and                    
     did not yet trigger the 40-hour weekly overtime [Table                    
     Finally on the sixth day a job comes in that is identical                 
     the job that came in on the first day.  Again, the ...                    
     overtime statute is triggered.  The job that cost $253 on                 
     the first day cost $356 on the sixth day. [Mr. Pignalberi                 
     noted Table 6 had not copied on the written statement,                    
     but he referred the committee to the bottom of the next                   
     page, where it said "Day 6," noting the bottom table had                  
     the same numbers.]                                                        
     ... The final table is a combination of the six days of                   
     work activity that I've just described.  You will note                    
     that the effective hourly rate changes each day because                   
     it is based on the cumulative hours and pay from previous                 
     days of the week.  Also, the overtime rate changes                        
     because it is a function of the effective hourly rate.                    
     Consequently, it's impossible for an employer and a flat-                 
rate mechanic to know, in advance, the exact amount of compensation            
due at the end of any day or week.  As a result, most of the                   
employers of flat-rate mechanics simply restrict them from working             
overtime to avoid confusion and the attendant liability of                     
violating the law.                                                             
     Current state statute requires conversion of flat-rate                    
     agreements between the employers and their flat-rate                      
     mechanics, conversion to an hourly rate.  This is akin to                 
     trying to convert a cat into a dog.  You can force an                     
     operation and move around the parts but you only end up                   
     with a freak, and the current law is a freak.  It scares                  
     employers.  It deprives flat-rate mechanics of the                        
     opportunity to work.  HB 347 corrects the situation by                    
     separating flat-rate compensation from the statute                        
     governing hourly and overtime pay.                                        
Number 0755                                                                    
MR. PIGNALBERI stated he would be happy to answer any questions and            
noted the presence via teleconference of Ms. Monte Jordan from the             
Department of Labor (DOL) in Fairbanks to assist with any technical            
questions regarding the formula.                                               
Number 0765                                                                    
REPRESENTATIVE COWDERY noted Mr. Pignalberi had worked pretty                  
extensively with this and asked Mr. Pignalberi if he really                    
understood what he had just said.  Representative Cowdery asked if,            
in Mr. Pignalberi's opinion, the average person in the DOL                     
understood it.                                                                 
Number 0782                                                                    
MR. PIGNALBERI responded that there were only a couple of people               
specialized in the DOL who knew how this formula worked through its            
various permutations.  He said, of the six tables mentioned, they              
had probably done 70 or so iterations and many of them differed.               
He said they finally had these verified by the DOL that morning.               
Mr. Pignalberi stated, "So it's ... more complex than even I could             
portray to you, because every day the situation is somewhat                    
different.  ... It's more than any employer or employee would want             
to deal with."                                                                 
Number 0815                                                                    
CHAIRMAN ROKEBERG noted the attendance of Representative Sanders,              
Representative Brice and Representative Kubina.  He commented that             
it would be much easier for the committee to decipher the formula              
if they would have had it the previous Friday.                                 
Number 0831                                                                    
REPRESENTATIVE COWDERY responded that they hadn't gotten the                   
formula down themselves until a matter of minutes ago, noting they             
had worked both Saturday and Sunday.  Representative Cowdery                   
displayed a copy of what he called the flat-rate parts guide (Motor            
parts and time guide), noting it was a 1995 version.  He stated                
this was a standard most shops, small and large, used.                         
Representative Cowdery stated hourly and parts rates were given for            
any job - brakes, motor, transmission, for example - so that                   
estimates could given to customers when they came in.  He said,                
from his experience in this business using this book, that any                 
seasoned mechanic could beat this book.  For a ten-hour job, he                
would say a seasoned mechanic could do it in less time, in the                 
seven to eight-hour range, commenting he hoped some mechanics were             
present who could testify to that fact.  Representative Cowdery                
said the book was available for the committee's perusal, noting he             
had some pages marked.  He commented that this was also the "bible"            
the automobile factories used for jobs done under factory warranty.            
Number 0936                                                                    
REPRESENTATIVE TOM BRICE asked if a consumer was charged for ten               
hours if a job estimated at ten hours by this took only nine hours.            
Number 0945                                                                    
REPRESENTATIVE COWDERY answered in the affirmative.                            
Number 0955                                                                    
MR. PIGNALBERI stated this bill was not about what the consumer is             
charged, it's only about the way to determine compensation for the             
flat-rate mechanic.                                                            
Number 0967                                                                    
REPRESENTATIVE JOE RYAN noted, for the edification of committee, he            
knew from a friend who was an orthopedic surgeon that orthopedic               
surgeons use a similar book to determine charges for operations.               
Number 0990                                                                    
REPRESENTATIVE BILL HUDSON asked Representative Cowdery who                    
published the book Representative Cowdery was referring to, and if             
it was for Alaska.                                                             
Number 0995                                                                    
REPRESENTATIVE COWDERY responded that there were several,                      
indicating it was a national publication.  He said he had some                 
dating back to the 1940s, noting they were published and sold more             
or less like the statutes.  Representative Cowdery commented that              
it is very complex, referring to a passage on an engine for a                  
Camaro or Firebird.  He said it has the parts, the retail prices,              
and a list of times for the different functions, whether it be a               
brake job, steering wheel, engine, transmission, starter; it has               
all of these broken out in the number of hours each job would                  
require.  He said, "And it has nothing to do with the hours that               
the shop time - you know, the shop charges or the hours that they              
pay the mechanic, it's just a kind of a bible."                                
Number 1075                                                                    
CHAIRMAN ROKEBERG noted there were approximately nine people                   
waiting to testify.  Chairman Rokeberg asked Ms. Shirley Armstrong,            
committee aide to the House Labor and Commerce Standing Committee,             
for a copy of the federal statute, stating it was Title 29 of the              
United States Code, the Fair Labor Standards Act (FLSA).  He                   
referred to "section" (10)(A) of 29 U.S.C. 213.  To Mr. Pignalberi,            
Chairman Rokeberg said he was concerned that if they went forward              
with this, HB 347 would exempt the automobile dealers, but not the             
corner auto mechanics' shop, the few gas stations left in the state            
with service bays, things of that nature.                                      
Number 1136                                                                    
MR. PIGNALBERI responded he thought the problem Chairman Rokeberg              
was alluding to was the difference between the federal exemption               
and state law.  Mr. Pignalberi said HB 347, as written, would apply            
to the corner garage repair place but not the gas station, because             
they had to be primarily engaged in the business of servicing auto             
Number 1157                                                                    
CHAIRMAN ROKEBERG pointed out that the federal code said "selling,"            
not "servicing."                                                               
MR. PIGNALBERI replied that was the difference between the federal             
statute and the way they have crafted HB 347, stating HB 347 would             
apply to the small independent repair facility.                                
Number 1173                                                                    
CHAIRMAN ROKEBERG asked how it could apply if it was against the               
federal code.                                                                  
Number 1179                                                                    
MR. PIGNALBERI stated, "In speaking with legal services on this                
subject earlier today, they say if the federal inspector was to do             
an investigation, it would be up them as to whether or not they                
would try to make an employer pay [an] amount that might be due                
under the federal statute vis- -vis the state statute."  However,              
Mr. Pignalberi said the big difference is that HB 347 applies to               
the eight hour per day situation which does not exist in federal               
statute.  He thinks Alaska is unique among the 50 states in that it            
requires employers to pay overtime after an 8-hour day.  Mr.                   
Pignalberi stated the federal law and the rest of the states                   
require overtime pay after the 40-hour week, noting, "So, we don't             
have a rub with the federal statute until after we've passed the               
40-hour per week situation, and then it's ... somewhat hazy to me              
what happens after that."                                                      
Number 1235                                                                    
REPRESENTATIVE RYAN asked, "If I were the owner of N C Machinery [N            
C Machinery Company], could I qualify my people under this bill?"              
indicating he was referring to the Caterpillar, Incorporated,                  
Number 1246                                                                    
MR. PIGNALBERI noted he did not have a copy of the bill in front of            
him, but stated, " If N C -- the Caterpillar dealer qualifies with             
that language in that one sentence of the bill, then you - you                 
certainly want this bill.  I believe it would, yes."                           
REPRESENTATIVE RYAN added, "It says selling or servicing motor                 
vehicles.  It's rather broad -- 'motor vehicles' is rather broad."             
Number 1268                                                                    
MR. PIGNALBERI asked if a "caterpillar" qualified as a motor                   
REPRESENTATIVE RYAN replied, "Propelled by internal combustion                 
engine ...."                                                                   
Number 1278                                                                    
REPRESENTATIVE COWDERY stated he had phoned several small shops in             
Anchorage that morning, "In fact the ones that do my business, it's            
a two-man shop and owner with one mechanic.  I asked 'em about this            
and he said, he told me the way he does business, he pays his - his            
guy an hourly rate, plus a percentage of the flat-rate book because            
everything that comes in ... might or might not be covered, so                 
that's how he does it.  I asked if he was aware that probably what             
he's doing is probably not in tune with the state statutes and he              
didn't know that, but he said half the shops that are his size that            
he knew did a similar -- things that he did or similar."                       
Number 1320                                                                    
CHAIRMAN ROKEBERG noted he wished the committee to take all the                
testimony at that meeting.                                                     
Number 1325                                                                    
REPRESENTATIVE HUDSON pointed out what he thought was a technical              
flaw in the bill; on line 5 of the bill, it designates this as                 
(17), but he believed there was already a (17), community health               
REPRESENTATIVE GENE KUBINA commented that he thought one of them               
had been dropped.                                                              
CHAIRMAN ROKEBERG noted it was a drafting issue.                               
Number 1358                                                                    
REPRESENTATIVE KUBINA stated he thought Representative Cowdery was             
wrong, that a business had to have over four employees for any of              
that section to count for overtime.                                            
Number 1370                                                                    
REPRESENTATIVE COWDERY stated that was the shop owner's comment to             
Number 1376                                                                    
CHAIRMAN ROKEBERG went to Ms. Jordan in Fairbanks.  He asked her to            
clarify two of the technical issues raised:  Representative                    
Kubina's comment about the four-employee standard and the                      
Chairman's question about the potential conflict between state and             
federal law.                                                                   
Number 1394                                                                    
MONTE JORDAN, Supervising Investigator, Wage and Hour Section,                 
Division of Labor Standards and Safety, Department of Labor,                   
testified via teleconference from Fairbanks.  She said there is an             
exemption from all of the overtime statutes for an employer with               
less than four employees.  She stated, "A small business that has              
less than four employees does not have to pay overtime under state             
law, you still have to look at federal law."                                   
Number 1412                                                                    
CHAIRMAN ROKEBERG noted the federal code spoke to automobile                   
dealers.  He gave the situation of a larger mechanics center - for             
example, 20 employees working at an auto maintenance shop - saying             
that would not be covered because of the federal statute speaking              
only to auto dealers and he asked Ms. Jordan if that was correct or            
Number 1437                                                                    
MS. JORDAN noted she was not an expert on FLSA, but it was her                 
understanding that FLSA does exempt auto dealerships, but not gas              
stations and small garages.  She stated, "So what if someone called            
our office, or the employee came in and wanted to file against that            
auto dealership if - if they would be exempt under the feds if we              
had a law that exempted them and they were a small garage employee,            
then we would refer them to the feds because there is no such                  
Number 1473                                                                    
CHAIRMAN ROKEBERG asked if the federal law applied to small shops              
with less than four employees.                                                 
Number 1480                                                                    
MS. JORDAN replied that the federal government does not have an                
exemption based on number of employees, it has an exemption based              
on gross received income of the employer.  She said, "Again,                   
federal law occasionally does cover an area that we don't, because             
ours is both over 8 and over 40."                                              
Number 1497                                                                    
CHAIRMAN ROKEBERG asked if there were further questions of Ms.                 
Jordan.  There being none, he requested she stand by.                          
Number 1524                                                                    
STEVE ALLWINE, Vice President, Alaska Auto Dealers Association                 
(AADA), came forward in Juneau to testify.  He commented, as the               
committee had heard from Mr. Pignalberi, it was a pretty confusing             
issue.  Mr. Allwine said he would try not "beat the same things,"              
and try not to make it quite as complex as it unfortunately seems              
to become.  He commented that, in a nut-shell, current statutes in             
the state of Alaska do not provide an exemption from overtime                  
restrictions for flat-rate mechanics and that, unfortunately,                  
requires the DOL to attempt to regulate what has historically been             
an unregulated area in most other states.  He said the fundamental             
difficulty with this issue is that flat-rate mechanics are not paid            
by the hour.  Mechanics are paid either a flat amount, $10, $20,               
$30 per billable hour, or a percentage of the billable hour,                   
explaining that "billable hour" refers to the charge on a per hour             
basis the merchant bills to the consumer.  Mr. Allwine noted the               
example of 40 percent was given earlier.  He said it came out of               
the parts and times guide previously referred to, and he would                 
provide more history shortly.  He stated that, as the committee                
could see, the DOL had been relegated to what was really an                    
impossible task of trying to convert flat-rate pay to an hourly                
calculation.  He stated customers affected by the current                      
regulation included, but were not limited to, automobile dealers,              
retail consumers, wholesale accounts (repairs completed for another            
garage), and automotive manufacturers.                                         
Number 1614                                                                    
MR. ALLWINE explained, regarding the way flat-rate mechanics are               
paid, that the times for specific repairs are calculated in a way              
to accurately predict how long the work will take to perform and               
the resulting time is then divided into tenths of an hour.  He said            
examples of these calculations range from .2 hours to replace the              
windshield wipers on a Lincoln Continental to 8.3 hours for the                
complete removal and replacement of an engine in a Saturn 4-door               
sedan.  The times used are obtained from several published sources:            
Motor's, Chilton's, Mitchell's (ph), and each manufacturers' own               
time guides provided to automobile dealers.  Mr. Allwine said that             
it is that data in those books which allows an accurate estimation             
of the cost of a particular repair to the consumer.  He noted it               
also worked, and was especially true, in automobile body shops.  He            
stated that a flat-rate mechanic is structured into an eight-hour              
day under the current system.  If the mechanic exceeded the eight              
hours, his compensation was subject to the extremely complex                   
overtime formula as interpreted by the DOL.  Mr. Allwine commented             
that the DOL has no choice, it has to do this through "regulation."            
He referred to the Mr. Pignalberi's explanation, stating the                   
committee could see the calculation was extremely difficult to                 
administer in the areas of calculation, accrual for accountants,               
and payment - "You never know exactly whether you're doing it                  
right."  He said, for these reasons, most Alaskan employers                    
restrict their flat-rate mechanics to an eight-hour workday.  Mr.              
Allwine explained and emphasized this means that if a repair is                
close to completion and the work day is at an end, as an employer              
he is requiring the mechanic to stop work even it would only take              
an additional half hour to complete the repair.  Mr. Allwine noted             
this was especially annoying for a customer in Southeast Alaska                
trying to catch a ferry who had to wait several more days for the              
next ferry because the repair couldn't be complete in time.  He                
said this situation results in frustrated consumers not just                   
frustrated workers.                                                            
Number 1742                                                                    
MR. ALLWINE stressed that HB 347 differed significantly from the               
federal wage and hour exemptions, and that the AADA applauded                  
Representative Cowdery's foresight in this area.  He said HB 347 is            
broad inasmuch as it includes independent repair facilities                    
indicating these facilities are prevalent in Alaska, as well as                
automobile retailers.  Mr. Allwine said HB 347 identifies and                  
separates mechanics employed as hourly mechanics from those paid               
under the flat-rate mechanism.  He stated HB 347 narrowed federal              
law because it states, "Primarily engaged in selling or servicing              
motor vehicles."  He indicated the AADA believes this would                    
eliminate a possible problem in situations where mechanics are                 
working in gas stations and required to perform other duties,                  
because selling and servicing are not the primary functions in                 
those cases.  He said federal wage and hour laws provide numerous              
exemptions, and when Alaska took control of its labor laws,                    
restricting the federal statutes in a blanket manner was the                   
prudent thing to do.  Mr. Allwine stated this was done by simply               
not allowing any exemptions at the outset and, as time has                     
progressed, specific exemptions have been authorized.  He noted he             
mentioned this for a couple of reasons:  1) to demonstrate that                
flat-rate mechanics were not singled out, nor was any class of                 
employee in the initial legislation; and 2) because HB 347 is                  
specific and appropriate, as are other exemptions that have been               
authorized over time.                                                          
Number 1815                                                                    
MR. ALLWINE said beneficiaries of HB 347 include flat-rate                     
mechanics, body and paint personnel, employers, consumers, and the             
DOL, because the department would no longer have to administer such            
a cumbersome "regulation."  The revised statute would allow flat-              
rate mechanics flexibility in the workplace, increased productivity            
and higher income.  Mr. Allwine stated it would eliminate a                    
cumbersome overtime calculation for employers and place Alaska on              
a par with other states.  He said this would serve to attract and              
retain flat-rate mechanics and new personnel to a vocation which is            
suffering major shortages nationwide.                                          
Number 1848                                                                    
REPRESENTATIVE HUDSON noted Mr. Allwine indicated in his testimony             
that the DOL was unable to deal with this because of regulations.              
Representative Hudson asked if Mr. Allwine thought this was the                
department's interpretation of regulations or if could he point                
specifically to the statutes which precluded the DOL from trying to            
find a regulatory solution.                                                    
Number 1865                                                                    
MR. ALLWINE said he believed this is complicated because an                    
exemption is required to eliminate something from "wage and hour."             
He said he believes if there was another way to do it, if they                 
could do this through regulation, the AADA would be happy consider             
all ideas and work toward that.  Mr. Allwine stated he also wanted             
to briefly address Representative Ryan's question about whether N              
C Machinery Company would fall under HB 347.  Mr. Allwine said the             
answer was technically no, because to be a motor vehicle, he                   
believed, the vehicle had to be licensed to be operated on state               
and federal highways indicating he thought that would effectively              
eliminate the equipment N C Machinery Company dealt with.                      
Number 1908                                                                    
CHAIRMAN ROKEBERG asked Mr. Allwine if he had any comments                     
regarding the Chairman's previous question about the federal law               
and its impact in the differential between auto dealers and corner             
Number 1915                                                                    
MR. ALLWINE asked the Chairman to restate the question.                        
Number 1949                                                                    
CHAIRMAN ROKEBERG clarified he was talking about the differential              
between the federal statute of the United States Code [29 U.S.C.               
213, subsection (10)(A)] which specifically cited auto dealers, not            
corner mechanics.                                                              
Number 1961                                                                    
MR. ALLWINE stated he thinks HB 347 was a somewhat more favorable              
take on that because smaller independent shops, including paint and            
body shops, are prevalent in Alaska.  He noted there aren't just               
franchise automobile dealers throughout the state.  Mr. Allwine                
said he thinks that if it is proper, it certainly is appropriate               
from AADA's perspective that the language of HB 347 include those              
independent shops.  He indicated he thinks it's appropriate, in                
other words, to include a shop that primarily services, as well as             
a shop that primarily sells and services automobiles.                          
Number 1988                                                                    
CHAIRMAN ROKEBERG stated he would like to move on to other                     
testimony, commenting that the committee would not be moving HB 347            
at this meeting.                                                               
Number 1994                                                                    
REPRESENTATIVE COWDERY stated Mr. Allwine had previously said he               
would "get into this book a little bit more," and asked him to                 
expand his comments.                                                           
Number 1999                                                                    
MR. ALLWINE replied that he had covered it about halfway through.              
He said, "If you go to another state, you will find a book like                
that.  If you were to take your car in and ask for a repair, it                
will be based on these books, it is very consistent throughout the             
United States."  Mr. Allwine confirmed that the book (the Motors               
parts and times guide) was a national publication.                             
Number 2016                                                                    
CHAIRMAN ROKEBERG said he wouldn't ask some of the other dealers               
on-line but could ask Mr. Allwine, as an AADA member, "If they                 
calculated that a job will take 8 hours based on the book, and it              
only takes the mechanic 6 hours and he gets paid his 40 percent of             
the six hours or however the formula works, what happens to the                
Number 2028                                                                    
MR. ALLWINE stated the mechanic gets paid for his 8 hours, noting              
that was the incentive; if the mechanic produces the job and does              
it properly in 6 hours, he is paid the 40 percent of the 8 hours.              
Number 2036                                                                    
CHAIRMAN ROKEBERG asked who gets the 60 percent and the savings per            
hour between the customer and the dealer.  Chairman Rokeberg asked             
if the dealer made the profit.                                                 
Number 2043                                                                    
MR. ALLWINE responded he was in it for the money.                              
CHAIRMAN ROKEBERG replied that was okay, he believed in profits.               
Chairman Rokeberg noted he had just wanted to go on record without             
putting any of Mr. Allwine's associates on the spot when they were             
Number 2054                                                                    
REPRESENTATIVE RYAN asked if this was predicated upon a journeyman             
MR. ALLWINE answered in the affirmative.                                       
REPRESENTATIVE RYAN asked if a customer still received the                     
originally quoted price if there were a lot of complications and a             
job ran over.                                                                  
MR. ALLWINE responded in the affirmative, adding that the book took            
additional options on the vehicle and complications like rusted                
bolts into consideration.  He noted there were adjustments for                 
those types of things.                                                         
Number 2078                                                                    
REPRESENTATIVE BRICE asked who audited the book to ensure                      
reasonable accuracy.                                                           
MR. ALLWINE indicated he was not sure, probably the Society of                 
Automotive Engineers (SAE).                                                    
Number 2118                                                                    
JAMES D. HINES, auto technician, Mendenhall Auto Center, came                  
forward to testify in support of HB 347.  He stated he has been                
working for approximately 36 years as a flat-rate mechanic.  Mr.               
Hines said he feels that if they don't get this bill and it goes               
the other way with the overtime, he would lose time if he had to               
stop after the eight hours and start again the next day.  He said              
it would cost him more time on the job and make his job a lot                  
harder to do.  He added, "And I don't know, as far the overtime, I             
don't know how you'd ever figure what your pay would be on that."              
Mr. Hines said he's asked people in other states and he said they              
don't have this overtime problem.                                              
Number 2161                                                                    
REPRESENTATIVE KUBINA confirmed that Mr. Hines worked for the                  
dealership but was paid on a per-job basis, receiving health                   
insurance and a retirement plan, and was almost like an independent            
Number 2187                                                                    
CHAIRMAN ROKEBERG asked Mr. Hines if his employer in Juneau allowed            
him a little flexibility, or if he was asked to quit working after             
eight hours.                                                                   
MR. HINES replied that he was currently allowed the flexibility to             
work over the eight hours.                                                     
CHAIRMAN ROKEBERG asked if they had to pay him the overtime.                   
MR. HINES responded, "Well, that's in the makings -- I don't know              
how they figure it out."                                                       
CHAIRMAN ROKEBERG continued, "Why, 'cause it's so complex you're               
not sure what you're getting paid every week?  In other words, you             
actually have to rely on your boss's accountant to figure out what             
you're gonna get paid every week, and you can't really figure out              
if you're getting the right amount of money."                                  
MR. HINES agreed.                                                              
Number 2214                                                                    
REPRESENTATIVE KUBINA asked what happened if Mr. Hines came in one             
day and there was no work.  Did he just not get paid, or did they              
tell him to go home?                                                           
Number 2219                                                                    
MR. HINES replied that he could go home or he could wait and hope              
something came through the door.                                               
REPRESENTATIVE KUBINA asked if Mr. Hines received a standby wage               
while he was waiting.                                                          
MR. HINES answered in the negative.  He said he guessed that was               
part of the job.                                                               
Number 2232                                                                    
REPRESENTATIVE KUBINA asked if that had been the case for pretty               
much of Mr. Hines' whole 36 years as a flat-rate mechanic.                     
MR. HINES indicated that had been the case for most of his 36                  
years, that his pay has been based on commission.                              
Number 2241                                                                    
CHAIRMAN ROKEBERG asked if Mr. Hines thought that he made a pretty             
good living for a hardworking man.                                             
MR. HINES replied he made a good living.                                       
Number 2243                                                                    
REPRESENTATIVE COWDERY confirmed Mr. Hines was familiar with the               
parts and times book.                                                          
MR. HINES stated he had been working out of it for many years.                 
REPRESENTATIVE COWDERY asked Mr. Hines if he felt comfortable                  
saying he could beat the time in the book.                                     
MR. HINES indicated he could match the time, if not beat it.                   
REPRESENTATIVE COWDERY asked Mr. Hines if he generally beat the                
MR. HINES answered in the affirmative.                                         
Number 2259                                                                    
REPRESENTATIVE RYAN commented that Mr. Hines testified he received             
retirement and health benefits, saying that somewhat explained the             
60 percent to the dealer.                                                      
Number 2265                                                                    
CHAIRMAN ROKEBERG stated the committee would go to teleconference              
testimony from Anchorage, asking witnesses to limit their testimony            
to two or three minutes.                                                       
Number 2283                                                                    
SCOTT HANCOCK, auto technician, Saturn of Anchorage, testified via             
teleconference from Anchorage in support of HB 347.  He stated he              
has worked as a technician with Saturn of Anchorage for 14 years.              
Mr. Hancock said the law, as it currently stands, limits their shop            
hours, and changing the law would be a win-win situation for both              
the consumer and the technician.  It would allow them to expand                
their shop hours and would allow him to earn more money.                       
Number 2335                                                                    
JIM SLOAN, auto technician, Eero Volkswagen of Anchorage,                      
Incorporated, testified next via teleconference from Anchorage in              
support of HB 347.  He stated he has been a flat-rate automotive               
technician for 25-plus years.  He currently works for Eero                     
Volkswagen of Anchorage, Incorporated, and has been there almost 21            
years.  Mr. Sloan stated that the flat rate is a good system and               
that they don't need overtime.  He said it would be nice for him to            
be able to finish a job without burdening his employer with                    
overtime; he would be able to get his cars finished at the end of              
the day whether it took him (indisc.) hours or ten hours.                      
Number 2364                                                                    
CHAIRMAN ROKEBERG asked if that concluded Mr. Sloan's testimony,               
and if anyone had asked him to testify that day.                               
Number 2370                                                                    
MR. SLOAN replied that his employer did invite him to come down on             
his own volition.                                                              
CHAIRMAN ROKEBERG asked Mr. Sloan if he worked beyond eight hours              
a day.                                                                         
Number 2378                                                                    
MR. SLOAN replied generally he did not.                                        
CHAIRMAN ROKEBERG asked if his employer had to pay him overtime if             
he worked beyond eight hours a day.                                            
MR. SLOAN answered in the affirmative.                                         
Number 2392                                                                    
STAN PETITO, Service Manager, Cal Worthington Ford of Alaska,                  
Incorporated, testified next via teleconference from Anchorage.  He            
stated he has been a service manager for 20 years.  Mr. Petito said            
it is important to point out that all the technicians he has ever              
talked to are against any (indisc.) of this sort.  He said the                 
technicians feel like they are independent employees because they              
are allowed freedom during the day from constant supervision.  He              
said if they need to make a run or have a cup of coffee, they're               
allowed to because they work by piecework.  Mr. Petito mentioned               
the discussion of what he referred to as the labor time guide.  He             
said the more productive a technician is, the better trained he is,            
the more money he invests in tools, the more efficient he is going             
to be.  He indicated they have some technicians who might take 9               
hours for an 8-hour pay job; they have others who might take 6                 
hours for an 8-hour job.  He said the labor time guide they keep               
referring to is there for the protection of the consumer and the               
technician because it gives a fair, established time for a well-               
trained, well-equipped technician.  Mr. Petito said he thinks the              
accounting nightmare that would be involved in calculating overtime            
pay was pointed out very well in the beginning.  He said (indisc.)             
technicians do not have to work over 8 hours a day, about 80                   
percent of the time there isn't a need for it, but there are those             
times 15 minutes or an hour away from completion of a job when the             
technicians would like to be able to have the freedom to make that             
choice and finish the customer's vehicle.                                      
Number 2459                                                                    
RICK MORRISON, Alaska Auto Dealers Association; Eero Volkswagen of             
Anchorage, Incorporated; Saturn of Anchorage, testified next via               
teleconference from Anchorage.  Mr. Morrison stated, "In listening             
to the testimony today I ..." [TESTIMONY INTERRUPTED BY TAPE                   
TAPE 98-16, SIDE B                                                             
Number 0001                                                                    
MR. MORRISON continued, "... but because of this law, we cannot sit            
and calculate what our expenses are gonna be (indisc.) try to                  
create the bill to come in under that estimate.  Most of our                   
technicians today are a much smarter group, very highly educated.              
We don't refer to them as mechanics anymore, and even though the               
print-out in here says 'mechanic,' these guys are truly and highly             
motivated technicians."  He said many technicians have their own               
tool boxes, which may contain as much as $30,000 to $35,000 worth              
of their own tools.  He stated they send the technicians out for               
continuing education; he personally sends 10 to 15 people out a                
year.  Mr. Morrison stated he is trying to emphasize that these are            
very, very sophisticated technicians compared to the situation in              
the industry 25 to 30 years ago when this law was enacted.  Mr.                
Morrison said he would say the technicians in his stores made, on              
average, about 120 to 140 percent every hour they worked because of            
their ability to do the job faster than the times the books called             
for, noting it was a great incentive.  He indicated it was also an             
incentive to do the job right the first time because if it wasn't              
done right the technicians would have to do the job again on their             
own time, and he indicated this made it a self-governing or self-              
policing system.  Mr. Morrison indicated he thought any journeyman-            
level technician in the industry, if asked, would say he or she                
would much rather work under flat rate system than an hourly and               
overtime system because he or she had the ability to do the job as             
fast as he or she wanted.                                                      
Number 0068                                                                    
MR. MORRISON stated one of the disadvantages of the current law was            
that it limited flexibility.  He related:  A couple of gentlemen in            
their Saturn store came to him with the idea of opening up on                  
Saturdays to provide better customer service.  They would see if               
everybody would be willing to work one extra hour a day and "every             
other week we'd take one day off."  Mr. Morrison said it sounded               
like a great idea but he couldn't do it under the current law, he              
said, "Because the customers are not willing to pay the extra                  
amount of money that it costs them their flat-rate hour, which,                
again, they're making 120 to 140 percent more, and pay overtime on             
top of that, so I have to look at 'em (indisc.) so I can't allow               
you to do that.  So there isn't flexibility to do it."  Mr.                    
Morrison said he started in the automotive business 25 years ago as            
a technician.  He noted he had been an ambitious young man, and                
commented that he and his family had benefited because he was given            
the privilege of being able to put in as much time as he wanted                
working off of a flat-rate system.  He stated, "Under current                  
Alaska law, you can't do that because it's too restrictive.  ... In            
conclusion, I'd tell you that it's a very minor exception.  It                 
provides a lot of additional incentive for the workforce.  If they             
don't want to work more than that, I don't believe that they would             
be forced to work more than that.  In our particular ... stores, we            
really let the technicians govern that.  These guys are a smart,               
intelligent group and they'll work with you, and their goal is to              
make the consumer happy because that just brings in more business              
for them.  And I haven't found anybody within our organization that            
would oppose (indisc.) if they had the flexibility on the other                
Number 0161                                                                    
DON ETHERIDGE, Alaska State Chapter, AFL-CIO; District Council of              
Laborers, testified next in Juneau.  He stated he worked for the               
District Council of Laborers and was speaking on behalf of the AFL-            
CIO.  He said normally they oppose any overtime exemption bill and             
HB 347 is no exception, but Mr. Etheridge said they are working                
with the dealers and the DOL to find a solution agreeable to all               
parties without "messing up" state statute.  He said they hope they            
can get that done shortly.  He mentioned one of his bosses, Mano               
Frey, had discussed this with an AADA representative that morning,             
and he said  Mr. Frey is also waiting to get in touch with Mr.                 
Flanangan (Deputy Commissioner) from the DOL tomorrow to see if                
there is a solution which does not involve changing the statute.               
Mr. Etheridge stated, "We get concerned every time we change or add            
an exemption to overtime laws, or to the wage and hour of any type,            
'cause it's just another chink in the armor the way we look at it,             
and we're getting so many chinks that pretty soon the armor's gonna            
fall off."                                                                     
Number 0210                                                                    
CHAIRMAN ROKEBERG commented he didn't think they had lost any                  
chinks in the past three years while he's been here.                           
Number 0216                                                                    
MR. ETHERIDGE replied that was because they have been fighting                 
Number 0225                                                                    
DWIGHT PERKINS, Special Assistant, Office of the Commissioner,                 
Department of Labor, came forward to testify.  Mr. Perkins stated              
there had been a lot of discussion about the flat-rate mechanic,               
noting he thinks there are many of misconceptions about the law and            
about what is currently being done in the industry.  He said the               
DOL is philosophically opposed to this type of legislation, noting             
the concerns Mr. Etheridge addressed.  He stated the DOL's concern             
is that it would be a weakening of Alaska's wage and hour laws.                
Mr. Perkins said he agreed with Chairman Rokeberg's comments about             
few "chinks in the armor" in the last three years.  However, Mr.               
Perkins stated, the DOL is "on watch" to make sure the working men             
and women of Alaska receive their fair pay for their fair days'                
work.  He referred to Mr. Pignalberi's example and said he was glad            
there wasn't a real Bob out there because Bob would probably be                
filing a workers' compensation claim for all the stress he                     
experienced figuring out his pay.  Mr. Perkins said he appreciated             
Mr. Pignalberi's and Representative Cowdery's efforts, noting they             
have had an open dialogue.  He said it is the DOL's understanding              
that the AFL-CIO and the AADA are working together, and, if it was             
the wish of the committee, he stated, "The Department of Labor                 
would help facilitate to come back to the committee with some                  
language that would be livable to all parties."                                
Number 0311                                                                    
REPRESENTATIVE HUDSON asked Mr. Perkins if he was optimistic the               
DOL could find something within the regulatory scheme to resolve               
this issue.                                                                    
Number 0317                                                                    
MR. PERKINS said he was optimistic the department might be able to.            
He noted some ideas have been expressed, and stated the department             
would look into all avenues, hopefully coming to a resolution.                 
Number 0332                                                                    
REPRESENTATIVE RYAN thanked Mr. Perkins for being open enough to               
try to solve this problem, noting it makes a big problem go away.              
Number 0341                                                                    
REPRESENTATIVE COWDERY also thanked Mr. Perkins.  Representative               
Cowdery mentioned that they had discussed this for a long time, and            
he was certain they could come up with a solution he thinks would              
be acceptable to everyone.  Representative Cowdery asked Mr.                   
Perkins, "Do you know how many other states that have something                
like this that we're trying to get going here ... the eight-hour               
Number 0359                                                                    
MR. PERKINS replied he didn't know offhand.  He said, "As been                 
stated, there is the Federal Labor Standards Act, FLSA, that has               
been referred to that does mention it."  Mr. Perkins cautioned,                
"There is the potential overtime liability for the shops out there             
that are not the automobile, and it - it does specifically state               
that in FLSA."  He noted the department would look at this,                    
mentioning that Mr. Pignalberi had touched on it and Monte Jordan              
["Monte Brice" misstated on tape] with DOL in Fairbanks had                    
discussed it.  Mr. Perkins stated it was something the department              
needed to look into, but said they would be happy to report their              
findings, and any accomplishments or resolutions they might come               
to, if it was the wish of the committee.                                       
Number 0395                                                                    
CHAIRMAN ROKEBERG stated Representative Cowdery's office has                   
requested legislative research which indicates at least seven                  
states have this type of legislation, noting the Chairman thinks               
the number is greater.  He said it was his wish that they come back            
to this committee with a solution.  He would commend all parties to            
this, including the automobile dealers and organized labor, making             
sure DOL fully cooperates with those groups to find a resolution to            
this issue in regulation to avoid amendment of the statute.  He                
stated, "Because if we can't, then we will amend the statute.                  
Number 0425                                                                    
MR. PERKINS stated that Commissioner Cashen would be happy to try              
to make the wishes of the committee come true.                                 
Number 0430                                                                    
CHAIRMAN ROKEBERG closed the public hearing for that meeting on HB
347, indicating HB 347 would be held over.                                     

Document Name Date/Time Subjects