Legislature(2001 - 2002)
03/25/2002 03:20 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 industries. 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 wage. 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 differences. 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 company. 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 1985. 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 issue. CHAIR MURKOWSKI announced her intention to hold HB 504 and bring it back before the committee on Wednesday, March 27, 2002.