Legislature(2005 - 2006)CAPITOL 17

04/01/2005 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
Moved Out of Committee
Moved CSHB 216(L&C) Out of Committee
Bill Postponed
Bills Previously Heard/Scheduled
Heard & Held
HB 180-WORKERS' COMPENSATION                                                                                                  
CHAIR ANDERSON announced  that the final order  of business would                                                               
be  HB  180.   He  stated  that  this  bill  was created  by  the                                                               
Governor's people  and it  has been heard  and testified  on many                                                               
people,  from industry,  insurance, medical  groups, individuals,                                                               
and workers' compensation  groups.  He revealed  that people have                                                               
ranged  in their  responses to  the bill  from various  extremes,                                                               
which included suggestions  to 'kill the bill',  'hold the bill',                                                               
and 'move  it' and make  it a work in  progress.  He  then stated                                                               
that  they needed  to begin  going  through the  bill section  by                                                               
4:18:09 PM                                                                                                                    
CHAIR ANDERSON  obviated the fact  that they had  already allowed                                                               
several days  of public testimony and  if they were going  to get                                                               
through  the bill,  they would  have to  start going  through the                                                               
bill section by section.  He  acknowledged the fact that there is                                                               
an ad hoc  committee, but this group has not  brought anything to                                                               
the table  at this  point.   Mentioning that  he did  not believe                                                               
that the  Governor had created  a perfect  bill, he then  said if                                                               
the committee  waited until this  ad hoc group  brought something                                                               
to  the table  after speaking  to the  Governor, thus,  deferring                                                               
committee  opinion  until such  time,  the  committee, he  feels,                                                               
would not be doing their job.                                                                                                   
CHAIR ANDERSON then announced that  he first wanted to go through                                                               
the  ad hoc  bill, but  had  not had  it formally  drafted.   The                                                               
substance of it is known, but  at this point he indicated that he                                                               
would like to guide the  committee through the Governors bill and                                                               
talk about each  section.  He hoped that the  easiest way to deal                                                               
with this  problem would  be to  go through  the bill  section by                                                               
section, and make  it a point to listen to  each committee member                                                               
and  their  comments, as  they  apply  their own  background  and                                                               
4:19:36 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  stated  that the  committee  had  already                                                               
heard the commissioner of insurance  talk about the previous bill                                                               
and how  she had been working  with stakeholders and how,  at the                                                               
end,  there was  a  really good  bill.   She  indicated that  she                                                               
understood that  the Governor was  working with  the stakeholders                                                               
and thought  that the committee should  give it a couple  of days                                                               
and see if they  have crafted a good bill and  see what they have                                                               
come up with.                                                                                                                   
4:20:11 PM                                                                                                                    
CHAIR ANDERSON  explained that this  was an interesting  idea but                                                               
that there was two months  of conversation that had already taken                                                               
place between the  two parties and that it needed  to move faster                                                               
than this.                                                                                                                      
4:20:18 PM                                                                                                                    
REPRESENTATIVE ROKEBERG  indicated that  in his meeting  with the                                                               
leadership group that meets with  the Governor, it was made clear                                                               
to him that progress was  being made with the discussions, though                                                               
he could not say if any  agreement was forthcoming.  He then said                                                               
that  there were  several  points  that needed  to  be made  here                                                               
concerning the discussions.  First,  there is no expectation that                                                               
complete  agreement will  be made.   There  will be,  on the  one                                                               
hand, sections that may be agreed on conceptually.                                                                              
REPRESENTATIVE ROKEBERG then stated  that second, the people that                                                               
make up  the ad hoc  committee will  not be available  soon since                                                               
they will  be moving on to  their various endeavors.   He pointed                                                               
out that  waiting for these  individuals to finish their  work is                                                               
unrealistic given the time that it takes and has taken.                                                                         
REPRESENTATIVE ROKEBERG  followed this by stating  that third, it                                                               
is the duty  and obligation of the committee  and the legislature                                                               
need to  write the bill.   He said that  they should not  have to                                                               
wait for  the ad hoc committee  to reconvene to make  a decision.                                                               
The committee has a bill before  it and if people have objections                                                               
to sections of the bill they  need to come forward and object and                                                               
put this on public record.   They need to be recognized for their                                                               
views and the committee needs to move forward.                                                                                  
4:21:58 PM                                                                                                                    
REPRESENTATIVE LYNN said  that he wanted to  make the observation                                                               
that the chairman  had said that people who are  in the committee                                                               
have their associations  with industry, but he  wanted to clarify                                                               
this   by  suggesting   that  the   only  association   that  the                                                               
Representative should have is with the constituents.                                                                            
4:22:25 PM                                                                                                                    
CHAIR  ANDERSON  clarified  that  this comment  referred  to  our                                                               
individual  philosophies.   The chair  then asked  Representative                                                               
Rokeberg what his  opinion was concerning this  type of sectional                                                               
4:23:01 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG answered  that this  was acceptable  and                                                               
that  the  Department  of Labor  and  Workforce  Development  has                                                               
provided a sectional.   He then asked that another  copy be given                                                               
to him, since  he could not find the analysis  in the huge amount                                                               
of paperwork that has accumulated since the bill was introduced.                                                                
4:23:18 PM                                                                                                                    
CHAIR ANDERSON then said that  the committee aide would make sure                                                               
that he  got another  copy this  meeting, specifically  the three                                                               
page document  that provided and  overview of the  original bill.                                                               
He then addressed  the committee and said that he  wanted to make                                                               
sure  that the  committee  understood that  it  was important  to                                                               
voice their concerns,  even if they do not like  any section.  He                                                               
emphatically stated that  it was important to  get their opinions                                                               
on the record, rather than waiting.                                                                                             
REPRESENTATIVE  ROKEBERG said  that  the problems  are that  fact                                                               
that given the  amount of testimony given already  on the record,                                                               
and the  opinions of  people that  clearly show  that we  need to                                                               
create a bill [that is acceptable to all parties].                                                                              
4:24:15 PM                                                                                                                    
REPRESENTATIVE CRAWFORD  mentioned that  he did have  a sectional                                                               
analysis of HB  180 and he wanted to make  sure that everyone was                                                               
on the same page.                                                                                                               
CHAIR ANDERSON  asked that a brief  at ease be taken  so that the                                                               
committee could put  their packets together in  a more convenient                                                               
[At ease between 4:24:42 PM and 4:27:11 PM.]                                                                                
4:27:1 3 PM                                                                                                                   
CHAIR ANDERSON  announced that the  version of the  analysis that                                                               
needed to be used was the  document that was entitled "Summary of                                                               
HB  180  Prepared  for  House   Labor  and  Commerce  Committee",                                                               
prepared by  the Department of  Labor and  Workforce Development,                                                               
and dated March 14, 2005.                                                                                                       
4:27:35 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG asked  that  he receive  a flow  chart                                                               
from the  Department and asked that  this be used as  well in the                                                               
4:29:00 PM                                                                                                                    
REPRESENTATIVE LEDOUX said that she  wanted to make sure that the                                                               
committee were dealing with bill numbered 24-GH1112\A.                                                                          
CHAIR ANDERSON  again stipulated that  he wanted to  committee to                                                               
seriously go through  the bill section by section  and give their                                                               
feedback  judiciously and  without hesitancy.  He indicated  that                                                               
they were  not going to rush  through this and that  he wanted to                                                               
hear people's  points of  views and  hear the  adamant objections                                                               
that the committee members have given to the bill thus far.                                                                     
4:29:44 PM                                                                                                                    
PAUL  LISANKIE,  Director,  Division  of  Workers'  Compensation,                                                               
Department of Labor & Workforce  Development, pointed out for the                                                               
committee that  there are 6 pages  of text that are  summaries of                                                               
the  changes created  by  the Department.    [These changes  fall                                                               
under 6 categories that address  concerns held by several parties                                                               
to the  bill.  These 6  pages are interspersed between  the pages                                                               
holding the Bill Sections in question.]                                                                                         
[Brief at-ease from 4:30:37 to 4:31:01]                                                                                         
4:31:01 PM                                                                                                                    
MR.  LISANKIE stated  again that  there  are 6  pages of  summary                                                               
pages in total.  Each page is,  in and of itself, a chapter [This                                                               
Chapter  addresses a  theme important  to the  discussion of  the                                                               
bill.   This  chapter heading  is  followed by  the bill  section                                                               
pages that are  relevant to the particular chapter  subject.]  He                                                               
gave an  example using page one,  and he said that  first section                                                               
being discussed  under that  chapter heading  was Section  21 and                                                               
that  particular  page of  the  bill  is  the  next page  in  the                                                               
sectional  analysis.     He  then  apologized   for  the  package                                                               
disorganization and said  that he was trying  to create something                                                               
that made sectional analysis easier.                                                                                            
4:32:20 PM                                                                                                                    
CHAIR ANDERSON  said that  he could  see how  this was  being put                                                               
together  and said  that  it would  make the  task  at hand  much                                                               
4:32:39 PM                                                                                                                    
MR. LISANKIE  introduced the Sectional  Analysis by  stating that                                                               
the  first chapter  dealt with  protecting workers'  benefits and                                                               
jobs and  that he  would begin  by looking at  Section 21.   This                                                               
section of the  bill is important change which  would empower the                                                               
division  director that  confirmed  that the  employer failed  to                                                               
have the  legally required workers' compensation  insurance.  The                                                               
is a  way to  do this now  but it  takes a longer  time.   In the                                                               
interim, a person  can be injured while  this investigation takes                                                               
place.  He  then said that step one of  this process requires the                                                               
employer to  prove they have  insurance.  There will  an informal                                                               
inquiry and  the employer is given  one more chance to  show that                                                               
they have insurance.   One way, he said, this  could happen would                                                               
be to have  their insurance broker call the board  and show proof                                                               
that insurance  policies were written  and are current.   He then                                                               
said that they are not interested  in shutting a business down if                                                               
they simply  have a paperwork  problem.   The whole intent  is to                                                               
give them an opportunity to show that they have the insurance.                                                                  
4:35:30 PM                                                                                                                    
CHAIR  ANDERSON  reiterated  that  the  previous  discussion  was                                                               
regarding Section 21 of HB 180, found on page 16.                                                                               
4:35:43 PM                                                                                                                    
REPRESENTATIVE  CRAWFORD  said that  this  was  one of  our  (his                                                               
party) concerns.   He  explained that many  times a  company will                                                               
have workers'  compensation insurance but  it will only be  for a                                                               
general labor,  rather than pipe  fitting or iron  workers, since                                                               
they are  higher rates.   This  is a problem,  since this  is not                                                               
proper  insurance.   However, what  we believe  is fraud,  can be                                                               
seen also  as a  company taking insurance  for what  they require                                                               
[and  not what  the  company might  need].   One  of our  biggest                                                               
concerns was whether you could just shut these individuals down.                                                                
4:36:57 PM                                                                                                                    
MR. LISANKIE believed that the  fraud of willingly misclassifying                                                               
your workforce would require a more in-depth inquiry.                                                                           
MR.  LISANKIE then  restated the  view by  saying that  this bill                                                               
refers to a  basic investigation [of whether someone  has or does                                                               
not have  insurance] and that  the willful act  of misclassifying                                                               
your workforce is  beyond the scope of  this [proposed] immediate                                                               
4:37:42 PM                                                                                                                    
CHAIR ANDERSON then asked for an example.                                                                                       
4:37:46 PM                                                                                                                    
MR. LISANKIE  stated that if one  of his investigators got  a tip                                                               
and went to  investigate a possible situation  where someone flat                                                               
out does  not have insurance,  they do a  inquiry and if  they do                                                               
not have  insurance and cannot  provide proof that they  do, then                                                               
they are shut down immediately.                                                                                                 
4:38:20 PM                                                                                                                    
CHAIR ANDERSON  furthers this example  by stating that a  mom and                                                               
pop  burger  joint  is  investigated  and  shown  to  be  without                                                               
insurance, they  are shut down.   He then asked  for confirmation                                                               
of his understanding.                                                                                                           
4:38:30 PM                                                                                                                    
MR.  LISANKIE  replied  that  this  was  correct.    However,  in                                                               
referring  to Representative  Crawford's question,  he said  that                                                               
there was  no doubt  that a construction  company trying  to save                                                               
money on  your insurance bill  by willfully  misclassifying their                                                               
workforce  was not  legal and  would be  dealt with  by governing                                                               
statutes not covered in section 21.                                                                                             
4:38:59 PM                                                                                                                    
REPRESENTATIVE CRAWFORD  continued his  question by  stating that                                                               
his membership with  the construction industry, the  AGC, and the                                                               
workers involved in construction, has  given him some concern and                                                               
that he was worried about  under insured workplaces and employers                                                               
within his industry misclassifying their workforce.                                                                             
REPRESENTATIVE  ROKEBERG asked  why this  was not  in the  ad hoc                                                               
bill if he was concerned about this issue.                                                                                      
REPRESENTATIVE CRAWFORD stated  that there is an ad  hoc bill, it                                                               
was turned into the governor, but it has not been put forward.                                                                  
CHAIR ANDERSON explained  that Representative Rokeberg recognizes                                                               
that Representative Crawford  supports the ad hoc bill  but he is                                                               
not asking  where the  bill is but  instead, was  wondering where                                                               
Representative Crawford's concern is verbalized in the bill.                                                                    
4:39:55 PM                                                                                                                    
REPRESENTATIVE CRAWFORD  firmly stated that he  believed that the                                                               
committee was  talking about  the House  Bill [and  the sectional                                                               
analysis]   not  the   ad  hoc   bill.     He  then   stated  for                                                               
Representative Rokeberg,  that his concern about  House Bill 180,                                                               
was  that  the   issue  of  the  classification   of  workers  be                                                               
4:40:27 PM                                                                                                                    
CHAIR ANDERSON then  said that the real issue  behind his concern                                                               
and Representative Rokeberg's concern  was that he had introduced                                                               
himself as  "we" instead of  using a  singular "I or  myself" and                                                               
this  prompted a  concern about  appropriate language.   He  then                                                               
stated   that  in   the   beginning  he   had   asked  that   the                                                               
Representatives not  hide behind affiliation but  represent their                                                               
own  views  and  concerns.    Furthermore,  the  people  in  this                                                               
committee  are  all  different individuals  and  have  their  own                                                               
4:40:37 PM                                                                                                                    
REPRESENTATIVE  CRAWFORD  finally   stated  that  his  individual                                                               
concern  is that  this  bill  is deficient  because  it does  not                                                               
address this problem.                                                                                                           
4:41:08 PM                                                                                                                    
REPRESENTATIVE  KOTT  interjects that  Representative  Crawford's                                                               
comments were certainly valid, and  that further, when a workers'                                                               
compensation claim  has been filed  and that individual  has been                                                               
misclassified,  the  question is  whether  the  benefits of  that                                                               
individual would be disturbed.                                                                                                  
4:41:35 PM                                                                                                                    
MR. LISANKIE  stated that  there would  be detrimental  effect on                                                               
premiums and  that they would get  their full benefits.   He then                                                               
stated that they  are not basing their benefits  on premiums that                                                               
were set up legally or illegally, or somewhere in between.                                                                      
4:42:14 PM                                                                                                                    
REPRESENTATIVE CRAWFORD asked what  happens today when someone is                                                               
not paying the correct premium.   He suggested that what he would                                                               
like to  make sure  that each  of the  people that  are employing                                                               
people in an  industry pay the proper premium upfront.   That way                                                               
everyone in that industry pays a  lower rate.  This cannot happen                                                               
now, since while the honest  employers are paying the higher rate                                                               
(approximately  88  dollars  to  every  hundred  paid  out),  the                                                               
dishonest  employers are  paying the  low rate  (approximately 24                                                               
dollars to every hundred dollars) by misclassifying his workers.                                                                
4:43:32 PM                                                                                                                    
CHAIR  ANDERSON stated  that he  thoroughly understood  where the                                                               
Representative  was   coming  from  and  then,   talking  to  Mr.                                                               
Lisankie, said  that he understood the  Representative's concern,                                                               
but that Section 21 was addressing something different.                                                                         
4:43:53 PM                                                                                                                    
MR.  LISANKIE  stated  that  no,   he  did  want  to  assure  the                                                               
Representative that Section 21 addressed  his concern, because it                                                               
simply wasn't about that concern.                                                                                               
4:44:15 PM                                                                                                                    
MR. LISANKIE  indicated that  what really haunts  me is  a person                                                               
like Mr. Flock  who gets hurt and because of  the system, and his                                                               
particular situation,  there is no available  insurance and there                                                               
is no one that can help him.                                                                                                    
4:44:21 PM                                                                                                                    
CHAIR ANDERSON  said that that  his unfortunate situation  is due                                                               
to  the exact  situation  we  are dealing  with  right  now.   He                                                               
suggested  that   if  someone  had  checked   his  [Mr.  Flock's]                                                               
employer's  lack  of insurance  and  the  computer records,  this                                                               
could  have been  stopped  before he  found  himself without  any                                                               
4:44:35 PM                                                                                                                    
MR. LISANKIE responded hesitantly that  it might be the case, but                                                               
that this kind of thing does not get reported all the time.                                                                     
4:44:42 PM                                                                                                                    
REPRESENTATIVE  CRAWFORD pointed  out that  his concern  was that                                                               
the  act of  misclassification in  insurance be  an infringement,                                                               
and that it be covered, so that they get shut down immediately.                                                                 
4:45:03 PM                                                                                                                    
CHAIR ANDERSON asked if there were  language that could be put in                                                               
that would cover this.                                                                                                          
4:45:12 PM                                                                                                                    
MR. LISANKIE stated  that he would rather prefer to  defer to Ms.                                                               
Hall, who is at the meeting.                                                                                                    
4:45:55 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG stated  that he  agreed with  the Chair,                                                               
that this is another topic.                                                                                                     
REPRESENTATIVE CRAWFORD said that he  believed that this issue is                                                               
best addressed in this section of the bill.                                                                                     
REPRESENTATIVE ROKEBERG  answered that what he  believed that the                                                               
committee should look at this as  if there is anything wrong with                                                               
the existing  language.  If we  to make any progress  at all then                                                               
the committee say that [Section 21]  is good but that it does not                                                               
go  far enough.   He  then  said that  they should  then work  on                                                               
identifying an amendment that is satisfying.                                                                                    
REPRESENTATIVE  CRAWFORD said  that  he could  not  have said  it                                                               
better himself.                                                                                                                 
REPRESENTATIVE LYNN said  that he thought that this  was what was                                                               
being sought after before.                                                                                                      
REPRESENTATIVE  GUTTENBERG then  stated  that  the real  question                                                               
that  should  be  asked  is  if this  issue  is  being  addressed                                                               
anywhere in the bill.                                                                                                           
4:46:35 PM                                                                                                                    
MR.  LISANKIE made  it  clear  that it  is  currently illegal  to                                                               
misclassify employees;  this is  in Section  250 of  the Statute.                                                               
The question  is how to  enforce this.   Section 21  was designed                                                               
with total  non-compliance in mind  and shutting down  people who                                                               
simply do not  have the insurance.  The issue  of how workers are                                                               
classified is  a more  complicated one and  one not  easily dealt                                                               
with using the proposed rule changes in Section 21.                                                                             
4:48:05 PM                                                                                                                    
CHAIR ANDERSON  said that  he cannot be  more succinct  in saying                                                               
that Section 21 does not cover this type of infringement.                                                                       
4:48:16 PM                                                                                                                    
REPRESENTATIVE CRAWFORD  indicated that  he did indeed  answer it                                                               
perfectly.   However, the  way this is  written it  doesn't cover                                                               
and I  want to make  sure it is  covered.   He then said  that he                                                               
wants  the   same  ability   to  shut   someone  down   that  has                                                               
misclassified his  employees.   It may  be more  complicated, but                                                               
this power needs to be in his arsenal.                                                                                          
4:49:16 PM                                                                                                                    
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce, Community  and Economic Development, stated  that under                                                               
current  law  it  is considered  premium  fraud  under  insurance                                                               
regulations   and  illegal   under   the  workers'   compensation                                                               
regulations.  The  investigators who look into fraud  do not have                                                               
this  type of  power [to  shut businesses  down].   She indicated                                                               
that  her group  has more  investigators  in the  field than  Mr.                                                               
Lisankie and the Division of  Workers' Compensation.  She pointed                                                               
out that  they can pursue  criminal charges against  someone that                                                               
willfully misclassifies  their workers, but currently,  her group                                                               
cannot  shut their  businesses down.  She  added that  this is  a                                                               
penalty phase that  could be added if the  committee decided that                                                               
it was appropriate.                                                                                                             
4:50:19 PM                                                                                                                    
REPRESENTATIVE CRAWFORD  exhibited an example  of a man  they had                                                               
tried  to  shut   down  this  year,  or  at   least  charged  the                                                               
appropriate rates for  his work crew, who had a  man actually die                                                               
on the  job.  It was  not brought out until  later that according                                                               
to  his  job  classification,  he was  classified  as  a  general                                                               
laborer when he  was actually working as an ironworker.   This is                                                               
why, he  said, I want  to be able to  shut these people  down and                                                               
provide a healthier and safer place to work.                                                                                    
4:51:25 PM                                                                                                                    
CHAIR  ANDERSON announced  that though  he agreed  wholeheartedly                                                               
about this  issue, the debate is  taking time away from  the long                                                               
analysis,  and he  hoped  that people  were  not being  purposely                                                               
dilatory.   He then indicated that  he would be looking  into the                                                               
issue and try  to figure out a  way to get it  into an amendment.                                                               
However, he  said, Mr.  Lisankie has said  many times,  that this                                                               
particular section does not apply to  the issue being debate.  He                                                               
ended by  stating that the  committee had  spent 15 minutes  on a                                                               
fairly simple section and that the committee needed to move on.                                                                 
REPRESENTATIVE GUTTENBERG pointed  out that he and  others to the                                                               
left  of the  chair  have been  patiently waiting  to  talk.   He                                                               
explained  that  when  saying  "we"  he  himself  meant  that  it                                                               
referred to  "us" and  our responsibility to  the people  and the                                                               
contractors here  in this state to  make sure that some  "mom and                                                               
pop burger  joint" from Phoenix  Arizona doesn't bid on  a bridge                                                               
job, get  the job, and then  get insurance rates that  cover only                                                               
burger workers,  all the  while "pops  ironworkers" fails  to get                                                               
the  job  and  would  have  had to  have  paid  the  nominal  fee                                                               
associated with insuring ironworkers.                                                                                           
REPRESENTATIVE  GUTTENBERG  then  said  that  a  group  that  has                                                               
committed misclassification on their  insurance premiums is still                                                               
eligible for  compensation.  He  then asked what would  happen to                                                               
the worker who files for a  claim and the state replies that they                                                               
are not an  ironworker but work as a burger  worker instead.  For                                                               
the person  that is  injured, the process  must be  seamless [and                                                               
have  their  interests in  mind,  not  just penalization  of  the                                                               
employer through the employee].                                                                                                 
4:53:19 PM                                                                                                                    
MS.  HALL   pointed  out  that   the  insurance  policy   is  not                                                               
classification   specific.     Workers'  compensation   insurance                                                               
stipulates that it  will cover benefits that are  required by the                                                               
statutes.  If  the employee is injured, he  will receive benefits                                                               
regardless if the  employer has misclassified himself.   She then                                                               
said [she  indicates that she is  editorializing] that situations                                                               
like what  the Representatives are  talking about do occur.   She                                                               
indicated that many  people have talked to her about  it.  Giving                                                               
an example of a truck driver  classified as an office worker, she                                                               
said that  he still  is eligible  for benefits.   The  board will                                                               
retroactively charge  the employer directly for  the infringement                                                               
and the employee's benefit coverage is not impacted.                                                                            
4:54:51 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG asked  if there  was anything  in here                                                               
that would  say that  an insurer  has to  notify the  Division if                                                               
there is  significant change [in  a policy holders account].   He                                                               
further explained  that what he  is worried about is  a situation                                                               
where  an employer  is  approached by  the  Division about  their                                                               
workers' compensation  insurance and after they  show proof, they                                                               
then cancel the insurance.                                                                                                      
4:55:57 PM                                                                                                                    
MR. LISANKIE answered  that the insurance company  is required to                                                               
give  cancellation notice  of businesses  to the  Division.   The                                                               
cancellation  does not  go into  affect until  after a  number of                                                               
days has past.                                                                                                                  
4:56:19 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  indicated  that from  her  experience  in                                                               
insurance law, if  one gets an insurance  policy fraudulently the                                                               
insurance company  can generally void  coverage.  She  then asked                                                               
if  there  was something  like  this  that pertains  to  workers'                                                               
4:56:46 PM                                                                                                                    
MS. HALL answered  that she did not know if  this is unequivocal.                                                               
Normally, to  cancel a  policy for insurance  fraud, you  have to                                                               
give notice.   She then  said that she knew  of only one  type of                                                               
insurance policy that can retroactively  cancelled and that would                                                               
be marine coverage where there  is a requirement for survey which                                                               
is not completed  or is falsified and that  being fraudulent, the                                                               
insurance companies  can retroactively cancel  policies. However,                                                               
there still needs to be notification.                                                                                           
4:57:44 PM                                                                                                                    
REPRESENTATIVE LEDOUX  concurred that  in the  maritime industry,                                                               
which she has  dealt with before as a lawyer,  she knew that even                                                               
a  negligent  misrepresentation  will   vitiate  coverage.    She                                                               
indicated  that this  is the  difference with  maritime law.   On                                                               
land,  she said,  a willful  case of  misrepresentation can  even                                                               
result in  retroactive cancellation.   She then asked  what would                                                               
happen if  someone were  going out of  business and  couldn't pay                                                               
their premium.                                                                                                                  
4:58:33 PM                                                                                                                    
MS. HALL answered  that she has never seen this  before and would                                                               
do  more research.   She  said that  it [going  out of  business]                                                               
doesn't negate the  employer's liability to have  insurance.  She                                                               
then said that  the insurance company provides  coverage for this                                                               
event and the employer still has  the requirement.  She then said                                                               
that she would do more research on this topic.                                                                                  
4:59:11 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG  commented  that  this  situation  had                                                               
occurred  to someone  that had  contacted him  in his  office and                                                               
that this person, through negligence  on his part, [he got caught                                                               
in something] lost his insurance.                                                                                               
MS.  HALL then  asked if  this was  workers' compensation,  since                                                               
maritime policy is different from  land policy, as Representative                                                               
Ledoux pointed out.                                                                                                             
REPRESENTATIVE  GUTTENBERG   then  said  that  there   was  fraud                                                               
involved and a worker was just caught in the middle.                                                                            
4:59:43 PM                                                                                                                    
CHAIR  ANDERSON said  that he  believed that  he had  been pretty                                                               
liberal  about  giving time  and  analysis  to these  discussions                                                               
concerning misrepresentation  and misclassification  of employees                                                               
and  that this  topic of  Representative Crawford's  is something                                                               
that needs to  be looked at.   It has been indicated  by both Ms.                                                               
Hall and Mr. Lisankie that this  section is not something that is                                                               
germane  to this  discussion topic.    He stated  firmly that  he                                                               
wanted to  revisit this  issue and  see if they  could fit  it in                                                               
some other place.                                                                                                               
5:00:09 PM                                                                                                                    
REPRESENTATIVE   CRAWFORD  firmly   stated  that   he  was   very                                                               
frustrated at the  Chair for not characterizing  the bill fairly.                                                               
He  said that  the  Chair continued  stating  that "this  doesn't                                                               
apply", and this  is not the case,  he said.  This  bill does not                                                               
address the issue which in his mind is applicable to the bill.                                                                  
CHAIR ANDERSON then interjected  and asked the Representative how                                                               
many more  times he wanted it  be said that "it  does not address                                                               
what [he is] talking about".                                                                                                    
REPRESENTATIVE  CRAWFORD insisted  that this  Section 21  was the                                                               
section in  which it  should apply.   This section  is deficient.                                                               
He  indicated  that  there  is  no ambiguity  here  and  that  he                                                               
believed that  he and the  rest of group present  were discussing                                                               
something that was germane to discussion.                                                                                       
CHAIR  ANDERSON   asked  that   the  Representative   supply  the                                                               
committee with  language immediately that would  be sufficient in                                                               
his eyes to amend the deficiency.                                                                                               
5:01:32 PM                                                                                                                    
REPRESENTATIVE   LYNN  indicated   that   he   had  talked   with                                                               
Representative  Crawford  on  the  issue  and  had  a  conceptual                                                               
amendment that he wanted to read to the committee:                                                                              
          If an employer is determined to roughly misclassify an                                                                
          employee, the director may issue an immediate stop                                                                    
          order to the employer.                                                                                                
CHAIR ANDERSON announced that he  would work with Mr. Lisankie on                                                               
this paragraph.                                                                                                                 
CHAIR  ANDERSON then  stated that  it seemed  that Representative                                                               
Lynn  understood where  Representative Crawford  was coming  from                                                               
and that this would be used to craft an amendment.                                                                              
5:02:26 PM                                                                                                                    
REPRESENTATIVE  CRAWFORD then  adds that  it should  also include                                                               
something  that  empowers the  board  to  fine the  employers  of                                                               
uninsured or  misclassified employers  up to  a 1000  dollars day                                                               
per employee.                                                                                                                   
REPRESENTATIVE CRAWFORD  then stated that  for the record,  he is                                                               
not intending  on holding up  the process here or  the committee,                                                               
but as  he insisted earlier,  this is a  crucial part of  what he                                                               
was trying  to convey today.   This issue is the  same issue that                                                               
has been on my mind and there has been no deviation from it.                                                                    
5:03:11 PM                                                                                                                    
REPRESENTATIVE LYNN withdraw the  amendment, although he feels it                                                               
was not  properly introduced into  the committee discussion.   He                                                               
then said that he could offer it later at another hearing.                                                                      
CHAIR   ANDERSON  announced   that   this  suggested   conceptual                                                               
amendment sounded good  and asked Representative Lynn  to work on                                                               
this  following the  meeting and  work on  the verbiage  and then                                                               
craft the amendment.                                                                                                            
REPRESENTATIVE LYNN said he would look at it this weekend.                                                                      
REPRESENTATIVE CRAWFORD  asked the Chair  to allow him  a drafter                                                               
[from legal services] to make sure it's done correctly.                                                                         
CHAIR ANDERSON chided  the Representative and said  that this was                                                               
something that needed  to have been done weeks  earlier, when the                                                               
bill was  first heard and  during the subsequent weeks  of public                                                               
REPRESENTATIVE CRAWFORD  indicated that  he had not  received the                                                               
documents that they were reviewing until today.                                                                                 
CHAIR  ANDERSON  said  that  all the  members  of  the  committee                                                               
received the bill  packet six weeks prior to  this discussion and                                                               
if there  was anything that  you found  needed to be  added, this                                                               
needed to  be done  earlier, and  not now  when the  committee is                                                               
summing up  the bill and  you are not willing  to give it  to the                                                               
committee now,  but instead are asking  to give it later.   This,                                                               
he said, may be delaying the bill.                                                                                              
5:04:31 PM                                                                                                                    
REPRESENTATIVE  LYNN  explained  to  the  chair  that  the  whole                                                               
purpose  behind having  a committee  is  to have  all the  people                                                               
focus  their ideas  where  we  hear various  points  of view  and                                                               
5:05:11 PM                                                                                                                    
CHAIR  ANDERSON  stated for  clarification  that  there has  been                                                               
three public  testimonies.  This is  no longer opinion time.   We                                                               
now  have   the  Division   Director  here   giving  step-by-step                                                               
summation of the bill being moved  out. He then adds that this is                                                               
probably something that your staff should have done weeks ago.                                                                  
5:05:25 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG  said  that  frankly,  if  someone  were                                                               
wanting to deal  with this, and they had burning  issues with the                                                               
proposed bill, they should have added it  to the ad hoc bill.  He                                                               
then announced  that as far  as he  knew, this subject  was never                                                               
even brought up  to the legislature by the ad  hoc committee.  He                                                               
said that  he really wanted  to understand it  and if there  is a                                                               
real  desire to  be cooperative  and move  legislation then  this                                                               
issue should have been dealt with then.                                                                                         
5:06:09 PM                                                                                                                    
REPRESENTATIVE  CRAWFORD indicated  that  he brought  this up  in                                                               
last years deliberations.  He then  said that he wanted to ask if                                                               
the  language used  in  the presented  bill  being discussed  now                                                               
would give him  the power [allow him to shut  down businesses and                                                               
employers who  do not  abide by  the insurance  rules].   If not,                                                               
then he  said he was  ready to do  an amendment, however,  he was                                                               
not  ready  to  do it  right  then  since  he  would to  do  this                                                               
correctly.   He  then said  to the  chair that  since it  was his                                                               
committee he could forge ahead if that was his desire.                                                                          
REPRESENTATIVE  CRAWFORD ended  by stating  that the  chair asked                                                               
for the committee's concerns and this was his concern.                                                                          
5:07:04 PM                                                                                                                    
CHAIR ANDERSON said  he did appreciate his concern  and it sounds                                                               
like the  whole committee  supports what  Representative Crawford                                                               
is saying.  From a standpoint  of time though, he wished that his                                                               
ideas could  be put forth into  an amendment that could  be given                                                               
to the  committee today, rather than  wait for a bill  drafter to                                                               
come back in three days.                                                                                                        
5:07:25 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG asked  that  the  committee please  move                                                               
along since  it was  obvious to  him that there  was no  way they                                                               
were going to be able to get through the entire summary.                                                                        
5:07:40 PM                                                                                                                    
CHAIR ANDERSON said that he agreed.   He then asked to move on to                                                               
the second part  of Section 21 that deals with  the 1000 dollar a                                                               
day fine.                                                                                                                       
5:08:01 PM                                                                                                                    
MR. LISANKIE said  that this is an adjunct tool  for us to detect                                                               
when an employer  drops and begins insurance only  when they have                                                               
been detected.  This fine  gets their attention when this occurs.                                                               
Right  now, all  the Division  can do  is issue  an order  to the                                                               
Board of  insurance to  submit a  stop order  to make  them cease                                                               
operating.   The  time  it  takes to  get  a  hearing allows  the                                                               
employer  to  obtain  ["temporary"] insurance  which  effectively                                                               
makes the stop order obsolete.   The bill now allows the Board to                                                               
say that though  they have insurance at the time  of the hearing,                                                               
they did  not have it  for a period  of time before  the hearing.                                                               
The  Board and  Division can  now announce  to the  employer that                                                               
they are facing a fine of up to $1000 a day.                                                                                    
CHAIR ANDERSON asked if this  was acceptable to the committee and                                                               
if anyone had any concerns about the section.                                                                                   
5:09:01 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG  said that  he  would  like to  know  if                                                               
members of the  committee or members of organized  labor have any                                                               
problems with the  way Section 21 is written.   He then said that                                                               
he really  appreciated what Representative Crawford  has said and                                                               
understand what he is trying to do,  which is add more to cover a                                                               
perceived  deficiency.     However,  to  make   progress,  is  to                                                               
understand why  one would have a  problem with the language.   He                                                               
then  indicated that  he understood  why Representative  Crawford                                                               
felt the  way he did  about adding to  the section.   However, he                                                               
stipulated that consensus  would never be made  until progress is                                                               
made in understanding if this change is agreeable with everyone.                                                                
5:09:57 PM                                                                                                                    
CHAIR ANDERSON asked if anyone has  a problem with Section 21 and                                                               
if they did to speak now  and immediately tell him where and what                                                               
needed to  be changed.  He  then iterated that they  had spent 45                                                               
minutes on one section.                                                                                                         
5:10:04 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG expressed  major concern  the way  the                                                               
meeting and questioning have been  dealt with and said that "[he]                                                               
likes  to  ask  questions"  and  that "this  was  where  we  were                                                               
supposed to be asking questions".                                                                                               
CHAIR ANDERSON said  that was correct, insofar as  we are talking                                                               
about Section 21.                                                                                                               
REPRESENTATIVE GUTTENBERG  then asked how this  proposal compares                                                               
to the current statute.                                                                                                         
5:10:4 8 PM                                                                                                                   
MR.  LISANKIE  stated that  there  is  no  penalty phase  in  the                                                               
current statute for  not having insurance.  The only  fine is one                                                               
that  is  criminal and  this  is  a  lot  more difficult  to  get                                                               
5:11:31 PM                                                                                                                    
REPRESENTATIVE CRAWFORD stated again  for the record that Section                                                               
21 is  wrong because it  doesn't address misclassification.   She                                                               
then said  that this  is tantamount to  not having  insurance and                                                               
it's cheating the honest employers.                                                                                             
5:12:00 PM                                                                                                                    
REPRESENTATIVE ROKEBERG asked Mr. Lisankie  if he had read the ad                                                               
hoc  committee bill  and  did  they speak  about  the issue  that                                                               
Representative Crawford is speaking about concerning Section 21.                                                                
MR. LISANKIE  indicated that  thought he had  read the  bill, and                                                               
upon reflection, he could say that  it was very close but not the                                                               
exact same wording.                                                                                                             
5:13:12 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  stated   that  it  if  this   is  a  good                                                               
suggestion  then  it  doesn't  matter   if  its  in  the  ad  hoc                                                               
suggestions or not.                                                                                                             
5:13:40 PM                                                                                                                    
MR.  LISANKIE stated  that  Section  22 is  a  corollary that  is                                                               
designed  to  receive those  fines  that  we  have the  power  to                                                               
enforce against employers that were underinsured or uninsured.                                                                  
MR. LISANKIE then stated that  these funds would be redirected to                                                               
newly created  "benefits guarantee fund" that  would be permitted                                                               
to use the fines  that were paid into the fund  to pay the actual                                                               
claims  that came  from injured  employees  whose employers  were                                                               
uninsured or failed  to pay.  He  then said that in  no way would                                                               
there be  a free ride.   If pressing them is  next to impossible,                                                               
like was  the case with  Mr. Flock, then there  must be a  way to                                                               
get payment.   The fund  will circumvent  the lack of  payment by                                                               
the employer  and get  the employee the  help with  injuries that                                                               
they need.   The fund would then continue to  take money from the                                                               
employer to replenish the fund                                                                                                  
5:15:38 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG said that outside  of HB 180 would this                                                               
fund  be outside  the  "budget  sweep" [as  provided  for in  the                                                               
Alaska State  Constitution, Article IX]  at the end of  the year,                                                               
or  would this  be like  the Constitutional  Budget Reserve  Fund                                                               
(CBRF) sweep where they bring in all funds that are out there.                                                                  
MR. LISANKIE stated that it does not lapse.                                                                                     
5:16:20 PM                                                                                                                    
REPRESENTATIVE LEDOUX stated  that this is not  guaranteed to the                                                               
worker  who is  working for  an employer  who is  working for  an                                                               
uninsured  employer, but  instead it  is only  there if  there is                                                               
enough money in the fund to do this.                                                                                            
MR. LISANKIE stated that statement is correct.                                                                                  
REPRESENTATIVE  LEDOUX  followed  this  up  by  asking  how  much                                                               
Section 22  of HB 180  would have  enabled your group  to collect                                                               
for the fund.                                                                                                                   
MR. LISANKIE stated  that they did take  a look at it  to see how                                                               
many  uninsured  employers  were  detected and  how  many  people                                                               
worked for them and  then if you do the math,  you can figure out                                                               
what the  amount would  be.  He  then said he  would have  to get                                                               
back to  the committee on  the number-  though he could  say that                                                               
the  year  before, they  caught  2200  businesses without  proper                                                               
insurance.   The fine amount  of $1000 is  meant to be  a sliding                                                               
5:18:49 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked if  there would be  enough collected                                                               
through fines to accomplish the intended goal.                                                                                  
MR.  LISANKIE  stated that  the  division  is not  interested  in                                                               
having a huge guaranteed fund.  The  goal, he said, is to have no                                                               
uninsured employers.                                                                                                            
5:19:46 PM                                                                                                                    
REPRESENTATIVE ROKEBERG said that  he does have some reservations                                                               
about the  establishment of this  fund.  He expounded  by stating                                                               
that the  mere existence of the  fund is wrong in  that it leaves                                                               
it open  for demand that will  result in it reaching  for another                                                               
source to  fund it  in future  legislations.   He gives  one such                                                               
example with the Freemont Case.                                                                                                 
5:21:11 PM                                                                                                                    
REPRESENTATIVE  CRAWFORD  said that  one  of  the practices  that                                                               
happen with  small contractors is  that they hire extra  help and                                                               
these people  are told to  get their own business  licenses which                                                               
requires  them to  pay  their own  insurance,  which they  don't.                                                               
When they  get hurt, they turn  to the company which  denies them                                                               
since they are a "supposed" independent contractor.                                                                             
5:22:21 PM                                                                                                                    
MR. LISANKIE  the supposed independent  contractor who  gets hurt                                                               
and  is found  to  be an  actual employee  would  have rights  to                                                               
recover benefits  and help from  the employer who gave  them this                                                               
poor advice.   If the company  did not have insurance  they would                                                               
be  an  injured  worker  who didn't  have  recourse  against  the                                                               
5:23:22 PM                                                                                                                    
REPRESENTATIVE CRAWFORD  gave an example of  Century Construction                                                               
and their workers.  He said  that this situation happened to them                                                               
and the  company reacted by going  out of the state  and declared                                                               
themselves insolvent.   The workers were left  with no insurance.                                                               
The other  example was if the  workers were determined not  to be                                                               
employees but they were still hurt.                                                                                             
5:24:01 PM                                                                                                                    
MR. LISANKIE  said that  if the  company said  that they  were an                                                               
employee they  would to workers'  compensation, but if  they were                                                               
determined  to be  a independent  contractor they  would have  to                                                               
provide their own insurance or they have no recourse.                                                                           
5:24:48 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG indicated  that  he had  a real  problem                                                               
with the section, especially page 18,  line 4, where it says that                                                               
legal expenses  are going to  be paid as well.   He said  that he                                                               
had a  problem here where the  fund is being used  to pay lawyers                                                               
in  addition to  paying  medical expenses  and retraining  costs,                                                               
since there is so little money in the fund.                                                                                     
MR.  LISANKIE   expressed  confirmation   on  the  part   of  the                                                               
Representative  and said  that  the drafting  was  done with  the                                                               
intention of administrating to a  claim and not for outside legal                                                               
5:26:16 PM                                                                                                                    
REPRESENTATIVE LEDOUX asked what would  happen if these were only                                                               
legal expenses  with respect  to the funds  legal expenses.   She                                                               
pointed out that in subparagraph (F),  there is a person hired to                                                               
adjust claims  against the fund.   She then said that  if a claim                                                               
is contriverted,  then if there is  a lawyer hired at  the end of                                                               
the day, the insured pays those  fees for that attorney.  If this                                                               
were  changed  to a  situation  where  the  fund didn't  pay  the                                                               
attorney  fees,  she asked  what  would  happen to  that  injured                                                               
persons right to hire an attorney for their claim.                                                                              
5:27:35 PM                                                                                                                    
MR. LISANKIE said that he understood  her point but there is only                                                               
so much good  you can do here  when you have a  limited amount of                                                               
money.  He then indicated that  he didn't believe it was intended                                                               
by the drafters  that it was there was an  expectation to pay the                                                               
benefits that they would ordinarily not receive.                                                                                
REPRESENTATIVE LEDOUX  said that she  sees that the  problems are                                                               
that  some  claims are  contriverted  correctly  and others  not.                                                               
There would be  no recourse for these people, if  you don't allow                                                               
any attorney fees.                                                                                                              
MR. LISANKIE then said that  the expectation on anyone sitting as                                                               
a purser  to the fund  paying out  anything other than  what they                                                               
thought was  a legitimate amount.  If that person  disagreed with                                                               
this  decision, they  would  not  be given  funds  to fight  this                                                               
decision with money from the same fund.                                                                                         
REPRESENTATIVE LEDOUX  indicated that that the  problem with this                                                               
is  that  workers' compensation  law  makes  it  a crime  for  an                                                               
attorney to  take funds from a  private claim.  They  have to get                                                               
their money from a fund.                                                                                                        
MR. LISANKIE said  that it is illegal to take  money to represent                                                               
someone  without  prior approval  from  the  board, so  it's  not                                                               
illegal to pay if the board says its okay.                                                                                      
5:30:37 PM                                                                                                                    
REPRESENTATIVE  KOTT,  referring  to  page 18,  which  refers  to                                                               
monies being  deposited into  the Guaranteed  Fund, and  asked if                                                               
the amount is insufficient to  cover the claims drawn against the                                                               
Guaranteed Fund, would there be  a chance that the Division might                                                               
come to the legislature at a later  date to ask for more funds to                                                               
assist in paying those unpaid claims.                                                                                           
MR. LISANKIE  said that this  is not  what he envisioned  when he                                                               
was assisting in the writing of this draft.                                                                                     
REPRESENTATIVE KOTT  then asked  what other  appropriations might                                                               
there be.                                                                                                                       
MR. LISANKIE  indicated that he  did not  know.  He  then pointed                                                               
out that sub-section  E does point out that if  the fund runs out                                                               
of  sufficient  funds   to  cover  claims,  the   fund  shall  be                                                               
replenished before the claims are settled.                                                                                      
REPRESENTATIVE KOTT  then said that  by going to  the legislature                                                               
to  do  this, the  monies  would  be  appropriated and  the  fund                                                               
replenished.  However, he indicated,  this is precisely what I am                                                               
getting at, which  is if a future legislature would  be asked for                                                               
money to  replenish the fund.   More specifically, what  types of                                                               
funds would  be appropriated  to the Guaranteed  Fund and  if the                                                               
Legislature is, from  time to time, to be asked  to give money to                                                               
this fund, then  this particular nuance needs to  be written into                                                               
the bill.                                                                                                                       
5:33:26 PM                                                                                                                    
REPRESENTATIVE ROKEBERG stated that  in regards to Representative                                                               
Ledoux's  point, if  subsection (c)  and (d)  are the  qualifying                                                               
sections that  define how anyone  makes a  claim on the  fund, he                                                               
stated that  the fund itself  can assert the same  defense itself                                                               
as an  insured employer.   He  then asked  how the  claimant have                                                               
access  to the  same  legal counsel  if  this is  the  case.   He                                                               
indicated that the fund did not look  like it was going to have a                                                               
lot of  money.   He then  pointed out for  the committee  that if                                                               
these are the  elements that qualify/not qualify  someone for the                                                               
fund,  and you  then  assert  some of  these  issues against  the                                                               
claimant, he then asked how it  is possible to have legal counsel                                                               
given to the claimant as well.                                                                                                  
[HB 180 was held over.]                                                                                                         

Document Name Date/Time Subjects