Legislature(2001 - 2002)

03/25/2002 03:20 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 504-WAGES FOR WORKERS IN FISHERIES                                                                                         
TAPE 02-43, SIDE B                                                                                                              
CHAIR MURKOWSKI announced  that the next order  of business would                                                               
be HOUSE  BILL NO. 504, "An  Act relating to the  wages of people                                                               
working in the fisheries business."                                                                                             
REPRESENTATIVE  KOTT,  Chair,  House  Rules  Standing  Committee,                                                               
Alaska State  Legislature, testified  as the  sponsor of  HB 504.                                                               
He  informed  the committee  that  the  packet should  include  a                                                               
committee substitute (CS) for the committee's consideration.                                                                    
Number 2272                                                                                                                     
REPRESENTATIVE MEYER moved to  adopt Version 22-LS1595\L, Craver,                                                               
3/25/02,  as the  working document.   There  being no  objection,                                                               
Version L was before the committee.                                                                                             
REPRESENTATIVE KOTT  recalled his remarks at  a meeting regarding                                                               
an  increase in  minimum wages  for  all Alaskans.   He  recalled                                                               
specifying  that increasing  the minimum  wages for  all Alaskans                                                               
would harm the fishing industry,  primarily the processors.  This                                                               
legislation attempts to provide  processors the ability to reduce                                                               
the minimum wage  equal to a fair value associated  with room and                                                               
board.   Representative Kott directed attention  to AS 23.10.055,                                                               
which  houses a  number  of exemptions  that  don't include  [the                                                               
fishing  industry],  which  he  estimated  to  be  an  oversight.                                                               
Representative  Kott  emphasized  that this  legislation  doesn't                                                               
seek  complete exemption  from the  [Alaska Wage  and Hour  Act],                                                               
rather it  attempts to carve  out a  small niche for  the seafood                                                               
processing industry.  Representative  Kott informed the committee                                                               
that  when the  original statute  was passed  the department  was                                                               
allowed to adjust  the minimum wage, although it  was never done.                                                               
In the  current state of  affairs for the fishing  industry, this                                                               
matter needs to be addressed.                                                                                                   
CHAIR  MURKOWSKI related  her understanding  that although  other                                                               
industries  provide  room  and board,  this  legislation  doesn't                                                               
intend  to  expand  this  [minimum   wage  adjustment]  to  other                                                               
REPRESENTATIVE  KOTT agreed  that there  is no  intent to  expand                                                               
this  beyond the  fishing industry.   He  pointed out  that other                                                               
industries  that  provide room  and  board,  such as  mining  and                                                               
logging, often  pay well  above the  minimum wage.   Furthermore,                                                               
there is a provision in  regulation that allows the [employer] to                                                               
approach the department in order to  adjust the wage for the food                                                               
and  lodging, although  that wage  can't fall  below the  minimum                                                               
Number 2056                                                                                                                     
LINDA  SYLVESTER,  Staff  to Representative  Kott,  Alaska  State                                                               
Legislature, testified on behalf of  the sponsor, the House Rules                                                               
Standing Committee.  Ms. Sylvester  explained that Version L adds                                                               
a  new section  to the  Alaska Wage  and Hour  Act.   However, it                                                               
doesn't  tamper with  AS 23.10.085.   Ms.  Sylvester pointed  out                                                               
that when  the Fair Labor  Standards Act was enacted  it included                                                               
an exemption for fishery processor  workers.  However, the Alaska                                                               
Hour  and Wage  Act  in 1959  didn't  include the  aforementioned                                                               
exemption.   There doesn't seem  to be any indication  that there                                                               
was an intention to exempt the rural areas.                                                                                     
MS. SYLVESTER directed attention  to AS 23.10.085(c), which reads                                                               
as follows:   "(c)  The regulations may  permit deductions  by an                                                               
employer from  the minimum wage  applicable under AS  23.10.050 -                                                               
23.10.150 to employees for the  reasonable cost, as determined by                                                               
the  director on  an  occupation basis,  of  furnishing board  or                                                               
lodging  if board  or  lodging is  customarily  furnished by  the                                                               
employer  and  used  by  the  employee."    This  language  comes                                                               
directly  from  the  federal  Fair  Labor  Standards  Act.    The                                                               
enabling regulations, 8 AAC 15.160,  which says "(a) AS 23.10.085                                                               
(c)  does not  limit the  right of  an employer  and employee  to                                                               
enter  into a  written  agreement to  provide  for deductions  of                                                               
monetary  obligations  of  an  employee."    Furthermore,  8  AAC                                                               
15.160(a)  specifies that  [an employer]  can't negotiate  a wage                                                               
that falls  below the  minimum wage.   Moreover, 8  AAC 15.160(d)                                                               
specifies the following:                                                                                                        
     (d)   Nothing  in   (a)  of   this  section   prohibits                                                                    
     deductions   from   earnings,   based  on   a   written                                                                    
     agreement, to reimburse an  employer for the reasonable                                                                    
     cost of furnishing board and lodging, if                                                                                   
          (1)   alternative   public   board   and   lodging                                                                    
     facilities  are  accessible  to the  worksite  and  the                                                                    
     employee has declined to use such facilities;                                                                              
          (2) the board and lodging facilities of the                                                                           
     employer are customarily furnished  by the employer and                                                                    
     used by the employees; and                                                                                                 
          (3) the cost to the employee for the use of the                                                                       
     employer's board and  lodging facilities, is reasonable                                                                    
     and without profit to the employer.                                                                                        
MS.  SYLVESTER continued  by pointing  out that  8 AAC  15.160(f)                                                               
specifies  that   the  director   will  make   the  determination                                                               
regarding  the cost  of  board  and lodging  based  on 29  C.F.R.                                                               
531.3-531.5 and  531.29-531.35, which provide the  definitions of                                                               
all the  terms in  the [related] statutes  and regulations.   Ms.                                                               
Sylvester  informed   the  committee   that  the   department  is                                                               
unwilling to remove  8 AAC 15.160(g)(1) because  without it there                                                               
is no indication  that the employee has  voluntarily accepted the                                                               
room and board  as an adjustment to their wage.   She then turned                                                               
attention to Title 29, Chapter  8, Sec. 203(m) [Section 3(m)] and                                                               
pointed out that it speaks very  generally with regard to how the                                                               
fair  value  [for  the  room  and  board]  is  determined.    She                                                               
interpreted the  intent of the  Fair Labor and Standards  Act and                                                               
the  Alaska  Hour and  Wage  Act  as  to  allow an  employer  who                                                               
provides room and lodging to consider  a fair value for that room                                                               
and board  [and factor it in]  the wage paid.   However, with the                                                               
pending increase in the minimum  wage, the seafood processors are                                                               
unable to absorb  the costs of room and board.   This legislation                                                               
attempts to  correct the  inability of  some rural  processors to                                                               
factor in the costs of room and board.                                                                                          
REPRESENTATIVE   KOTT   clarified   that  this   legislation   is                                                               
independent  of  the  legislation increasing  the  minimum  wage.                                                               
Regardless of the  outcome of the minimum  wage, the [processors]                                                               
are in a depressed situation.                                                                                                   
MS. SYLVESTER  noted that  during the work  on the  minimum wage,                                                               
she received  many phone calls  requesting exemptions.   Often it                                                               
seemed that there was nothing  to offer.  However, this situation                                                               
with the  [processing industry] is  unique because  this industry                                                               
has been  part of Alaska's  fabric since  before the turn  of the                                                               
Twentieth  Century,  not  to  mention   that  this  industry  was                                                               
factored  in  with  the  federal   regulations.    Recently,  the                                                               
industry  was  precluded  and in  the  current  environment,  the                                                               
industry  needs the  statutes to  return to  the original  intent                                                               
that  allowed  these remote  processors  to  operate under  their                                                               
unique situations.   In closing,  Ms. Sylvester pointed  out that                                                               
employees  of  the  processing industry  are  akin  to  migratory                                                               
workers, both of which don't  require much education or training.                                                               
These positions  can be  filled with  individuals off  the street                                                               
while offering practical [employment].                                                                                          
CHAIR  MURKOWSKI  noted  the  hour  and  announced  that  HB  443                                                               
wouldn't be taken up today.                                                                                                     
Number 1490                                                                                                                     
STEPHANIE  MADSEN,  Vice  President, Pacific  Seafood  Processors                                                               
Association,  informed the  committee  that  the Pacific  Seafood                                                               
Processors Association  has been in  existence since 1914.   This                                                               
association represents  shore-side throughout  the state  as well                                                               
as three  mother ship operations in  the Bering Sea.   Ms. Madsen                                                               
stated the association's support  for this legislation, which she                                                               
characterized as  critical for  the seafood  processing industry.                                                               
Ms.  Madsen  pointed  out  that   the  European  union  has  very                                                               
stringent  import  requirements,   and  those  requirements  have                                                               
increased as  has their  concern for food  safety.   The European                                                               
union is  one of the  largest markets for  canned salmon.   As of                                                               
December  1, 2003,  [the processors]  will no  longer be  able to                                                               
fill cans that they currently own.   From that point in time, the                                                               
can  coating will  have to  be changed.   Furthermore,  since the                                                               
September  11,  2002,  tragedy,   food  has  been  of  particular                                                               
interest  with  regard  to  ensuring   that  it's  tamper  proof.                                                               
Therefore, the  Food and Drug  Administration (FDA)  has provided                                                               
lengthy  guidance documents  with regard  to educating  employees                                                               
and  ensuring that  products are  tamper proof.   Along  with the                                                               
aforementioned,  the industry  is  trying to  adapt  to a  global                                                               
market, which  means that [Alaska] needs  to be cost-competitive.                                                               
Every increment  that is added to  the cost is an  increment that                                                               
prevents the  industry from being a  cost-competitive producer in                                                               
the  global  market  place.     Ms.  Madsen  stressed  that  this                                                               
[inability to  reduce wages  based on the  room and  board that's                                                               
provided] does place the industry  over the edge.  The cumulative                                                               
effect is disastrous  for the industry.   This legislation merely                                                               
offers an expansion  of what is already authorized.   She pointed                                                               
out  that  there  are  some  seafood  processors  that  lived  in                                                               
communities with facilities that are  accessible to the work site                                                               
and have traditionally  charged employees for room  and board, as                                                               
determined  by the  department.   Those processors  typically pay                                                               
higher than  the minimum wage and  thus were able to  deduct that                                                               
room  and  board from  the  wage.    However, the  situation  has                                                               
drastically  changed and  the industry  is faced  with trying  to                                                               
internalize  increased  costs.   She  expressed  hope that  there                                                               
would  be  consideration  for those  remote  operators  who  have                                                               
historically provided  room and  board by allowing  the deduction                                                               
for the room and board even  if it falls below the minimum hourly                                                               
rate and the  overtime level.  Ms. Madsen  highlighted that there                                                               
are two tests:   the minimum wage hourly rate  and overtime.  She                                                               
mentioned the  costs associated with transportation,  and pointed                                                               
out  that  transportation  costs  can be  deducted  if  the  wage                                                               
doesn't  fall below  the minimum  wage requirement.   Ms.  Madsen                                                               
noted  that the  committee packet  should include  a letter  from                                                               
Trident Seafoods.  In closing,  Ms. Madsen informed the committee                                                               
that [seafood] is the state's  number one export and [the seafood                                                               
processing  industry]  is the  largest  private  employer in  the                                                               
state and the second largest taxpayer in the state.                                                                             
Number 1232                                                                                                                     
REPRESENTATIVE  HAYES inquired  as  to who  would determine  what                                                               
would be considered the reasonable cost or fair market value.                                                                   
MS.  MADSEN deferred  to the  commissioner of  the Department  of                                                               
Labor  &  Workforce  Development.     She  pointed  out  that  AS                                                               
23.10.085  directs the  division  director to  have oversight  on                                                               
[determining  the reasonable  cost or  fair market  value].   She                                                               
related  her understanding  that  the  current practices  involve                                                               
either  producing a  detailed analysis  of  the company's  costs,                                                               
which  would be  reviewed  by the  department,  or utilizing  the                                                               
standard  federal  allowance of  $10  a  day.   Customarily,  the                                                               
seafood processors have chosen a  reasonable standard approved by                                                               
the department, and that standard ranges from $12-$15 a day.                                                                    
MS. MADSEN,  in response to  Representative Meyer,  answered that                                                               
traditionally  the  employer  provides   room  and  board.    She                                                               
mentioned that services  such as laundry are also  offered by the                                                               
processor.  She explained that  if a seafood processor has public                                                               
facilities  accessible  to  the   work  site  and  those  seafood                                                               
processors make a  deduction on their employee's  room and board,                                                               
then those processors have the  option to live in company housing                                                               
or find  alternative housing.   The difficulty  is in  the places                                                               
where no public  facilities are accessible.   In further response                                                               
to Representative Meyer, Ms. Madsen  agreed that legislation such                                                               
as  this is  important  in  order to  be  competitive in  today's                                                               
seafood market.   She  stressed that the  seafood industry  is in                                                               
competition with seafood  from around the world as  well as every                                                               
other protein source.                                                                                                           
Number 0938                                                                                                                     
REPRESENTATIVE  CRAWFORD surmised  that the  seafood industry  is                                                               
also in competition with other  industries for workers.  He asked                                                               
if the industry  felt that it [could compete] for  workers if say                                                               
$15 a day was withdrawn for room  and board.  He also inquired as                                                               
to whether workers  have to pay for their room  and board on days                                                               
when there is no work.                                                                                                          
MS. MADSEN highlighted that the market  drives what is paid.  She                                                               
noted  that Alaska  competes with  Washington  and California  as                                                               
well as  with other processors.   Therefore, Ms.  Madsen informed                                                               
the  committee  that  [seafood   processors]  are  nervous  about                                                               
charging employees  for something that  has been received  in the                                                               
past.   She noted that  those employees  at the minimum  wage are                                                               
entry  level  employees and  thus  can  become employed  with  no                                                               
education or  work experience.   She  reiterated that  the market                                                               
would drive the wage and what can reasonably be deducted.                                                                       
REPRESENTATIVE CRAWFORD  asked if  it would be  better to  have a                                                               
level  playing  field  rather  than  having  one  [company  in  a                                                               
particular area] deduct more than another.                                                                                      
MS. MADSEN agreed  that it would be nice to  have a level playing                                                               
field,  although it  probably isn't  practical  because of  price                                                               
CHAIR MURKOWSKI restated  Representative Crawford's question with                                                               
regard to whether an employee would  be charged room and board on                                                               
days in which the employee has no work.                                                                                         
MS.  MADSEN  related her  belief  that  this situation  currently                                                               
exists  and probably  varies from  plant  to plant.   Ms.  Madsen                                                               
informed  the committee  that seafood  processors  often use  the                                                               
room  and  board  deduction  as an  incentive  for  employees  to                                                               
complete  their contract.   When  such an  incentive is  offered,                                                               
upon  completion  of a  contract  an  employee's room  and  board                                                               
deduction is  reimbursed.  This  type of information would  be in                                                               
the agreement signed by the employee prior to going to work.                                                                    
CHAIR  MURKOWSKI  mentioned horror  stories  she  has heard  with                                                               
regard to employees  who don't speak English well  and because of                                                               
room,  board,  and  transportation   charges  end  up  owing  the                                                               
MS. MADSEN  clarified that  such situations  probably occur  on a                                                               
catcher processor because those  employees are paid by crew-share                                                               
and thus  an employee could  end up owing  the boat.   Ms. Madsen                                                               
mentioned that it's  in the employer's best interest  to keep the                                                               
employee working and thus [plants]  often have employees painting                                                               
or doing  various other  "work" when no  fish are  coming through                                                               
the plant.                                                                                                                      
Number 0552                                                                                                                     
ED  FLANAGAN,  Commissioner,  Department  of  Labor  &  Workforce                                                               
Development   (DLWD),   announced  the   department's   strenuous                                                               
opposition to HB  504.  Commissioner Flanagan  submitted that the                                                               
language  [in  statute  and regulation]  was  written  such  that                                                               
seafood processing employees were covered  by the Alaska Wage and                                                               
Hour Act,  including overtime and  minimum wage.   The exclusions                                                               
were for  the piece-work or crew-share  exemptions.  Commissioner                                                               
Flanagan said  that he  found the discussion  with regard  to the                                                               
definitions found in the Federal  Labor Standards Act irrelevant.                                                               
The  statute  allows  [the   department],  absent  regulation  or                                                               
statute, to  utilize definitions and determinations  found in the                                                               
Federal Labor Standards Act.  To  say that the state can't differ                                                               
from the Federal Labor Standards  Act is incorrect.  Commissioner                                                               
Flanagan turned  to the 1959  legislation that  clearly specifies                                                               
that the department  "may" develop regulations to  allow for some                                                               
deductions.   Historically, the department practice  has been not                                                               
to  allow  the  [room  and   board]  deduction  for  remote  site                                                               
employers where  the housing is  provided for the  convenience of                                                               
the employer.  The regulation  basically codified the practice in                                                               
COMMISSIONER FLANAGAN said:                                                                                                     
     I find it a little chilling  to talk about the place of                                                                    
     certain  people or  workers and  what they're  here for                                                                    
     ...  -- basically  to be  guest  workers or  something.                                                                    
     I'll push the  envelope as far as anybody  on trying to                                                                    
     use  every legal  means to  give preference  to Alaskan                                                                    
     workers.    But  once  workers are  in  our  state  and                                                                    
     working,  we  don't  distinguish between  them  on  the                                                                    
     protections  they're  entitled   to  under  state  law,                                                                    
     including minimum wage.                                                                                                    
COMMISSIONER FLANAGAN refuted the  notion provided in the sponsor                                                               
statement with  regard to college students  working in canneries.                                                               
Commissioner Flanagan highlighted the work  that has been done to                                                               
encourage  Alaskan  hire  in  this industry.    He  informed  the                                                               
committee  that Alaskan  employment  in this  industry has  risen                                                               
from 24 percent of workers in 1995  to 30 percent [in 2002].  The                                                               
wages  [paid  to Alaskans]  have  risen  from  36 percent  to  45                                                               
percent.    Commissioner  Flanagan   expressed  empathy  for  the                                                               
industry and  the challenges  it faces.   However, there  will be                                                               
canneries  that won't  operate this  year and  that doesn't  have                                                               
anything  to do  with the  minimum wage.   Commissioner  Flanagan                                                               
pointed out  that those  workers receiving  close to  the minimum                                                               
wage  don't  benefit  when  the prices  are  good,  although  the                                                               
fisherman,  the   processor,  and   the  local   community  does.                                                               
Commissioner Flanagan  related that  these workers are  making 25                                                               
percent less  in real dollars than  they were 15 years  ago.  "To                                                               
... have  the brunt of the  hardship that the industry  is facing                                                               
be borne  by the low-wage  workers, I think,  is unconscionable,"                                                               
he said.                                                                                                                        
COMMISSIONER  FLANAGAN related  his belief  that the  lack of  an                                                               
effective  date  was  inadvertent  because if  this  passes  next                                                               
month, it would take effect four  to six months before there is a                                                               
minimum wage increase,  if there is one.   Therefore, an employer                                                               
could  utilize   this  [legislation   before  the   minimum  wage                                                               
increase].    Commissioner  Flanagan   charged  that  [were  this                                                               
exemption granted] other  industries would line up  to receive an                                                               
exemption  from the  onerous minimum  wage.   With regard  to the                                                               
amenities  of  laundry,  television, and  overtime,  Commissioner                                                               
Flanagan  stressed that  these  workers are  working  80 hours  a                                                               
week.  Therefore,  these workers receiving minimum  wage may have                                                               
a little  time to eat, sleep,  watch a little television,  and do                                                               
laundry -- all for the sum of $715  a week with the increase.  He                                                               
discussed  the difference  in the  camps  from subsistence  level                                                               
housing to the year round facilities.                                                                                           
TAPE 02-44, SIDE A                                                                                                              
COMMISSIONER  FLANAGAN   discussed  the   "recruitment  crunches"                                                               
during which  the camps  offer to pay  transportation and  as the                                                               
recruitment  becomes more  difficult payment  for things  such as                                                               
room and  board are  offered as  incentives.   He noted  that the                                                               
processors [near cities]  usually pay higher wages  than those in                                                               
the  remote  sites  paying  near  the minimum  wage.    To  start                                                               
excluding  people before  the  minimum wage  is  even raised,  is                                                               
[inappropriate], he related.                                                                                                    
Number 0179                                                                                                                     
REPRESENTATIVE KOTT  asked if Commissioner Flanagan  was familiar                                                               
with the "Davis  brothers case" [Davis Brothers,  Inc., a Georgia                                                             
Corp Plaintiff/Appellant  v. Raymond Donovan, Secty  of Labor, et                                                             
al.], a federal case in which  the courts held it reasonable that                                                             
employers could deduct board [from an employee's wage].                                                                         
COMMISSIONER  FLANAGAN answered  that  he believes  that such  is                                                               
allowed under  federal law, although  he said he  wasn't familiar                                                               
with the case.                                                                                                                  
REPRESENTATIVE  KOTT  said  that  this legislation,  to  a  large                                                               
extent,  mirrors what  is in  federal law.   Representative  Kott                                                               
turned to  the statute  passed in 1959  in which  the legislature                                                               
specified  that  the regulations  to  be  promulgated may  permit                                                               
deductions.  He expressed confusion with  regard to why [in 8 AAC                                                               
15.160] (d)(1) was  included when it was  specifically [left out]                                                               
of the statute.                                                                                                                 
COMMISSIONER   FLANAGAN  related   his  understanding   that  the                                                               
department,  through  26  years,  had chosen  not  to  promulgate                                                               
regulations.  Rather,  the department had a policy  that it would                                                               
recognize deductions, but  not in remote sites.  Clearly   [8 AAC                                                               
15.160]  (d)(1)  differentiates between  a  remote  site and  one                                                               
where alternative  housing is  available.   Commissioner Flanagan                                                               
indicated  that  this  may  have  been a  situation  in  which  a                                                               
regulation  was based  on policy,  and  therefore the  regulation                                                               
codified  the policy.   The  statute is  permissive in  regard to                                                               
which regulations  the department could promulgate.   "We're just                                                               
being consistent with  interpretation," he said.   With regard to                                                               
differences  between  the  federal and  state  law,  Commissioner                                                               
Flanagan said that  Alaska's level of remote  employment makes it                                                               
entirely appropriate  for the state  to have  different standards                                                               
than the federal government.                                                                                                    
REPRESENTATIVE  KOTT  agreed  that  the  statute  is  permissive.                                                               
However, he  said he believes  that the legislature's  intent was                                                               
moving in the  opposite direction.  Representative  Kott asked if                                                               
the department has the ability  to enter the non-remote sites and                                                               
make adjustments.                                                                                                               
COMMISSIONER  FLANAGAN deferred  to Richard  Mastriano, Director,                                                               
Division  of  Labor Standards  &  Safety,  DLWD, with  regard  to                                                               
enforcement.   However, he  noted that  depending upon  the wages                                                               
paid, the fees  may be nominal enough that minimum  wage isn't an                                                               
CHAIR MURKOWSKI announced her intention  to hold HB 504 and bring                                                               
it back before the committee on Wednesday, March 27, 2002.                                                                      

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