Legislature(2023 - 2024)BARNES 124
02/02/2024 03:15 PM House LABOR & COMMERCE
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Audio | Topic |
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Start | |
HB147 | |
HB186 | |
HB192 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
*+ | HB 251 | TELECONFERENCED | |
*+ | HB 237 | TELECONFERENCED | |
+ | TELECONFERENCED | ||
*+ | HB 147 | TELECONFERENCED | |
+= | HB 192 | TELECONFERENCED | |
+ | SB 37 | TELECONFERENCED | |
+= | HB 186 | TELECONFERENCED | |
HB 186-VOLUNTEER LABOR COMPLIANCE OFFICER PRGM 3:49:37 PM CHAIR SUMNER announced that the next order of business would be HOUSE BILL NO. 186, "An Act relating to volunteer labor compliance officers; and providing for an effective date." 3:49:56 PM ALICIA MALTBY, President, Alaska Building Contractors Alaska, read her written testimony in opposition to HB 186 [included in committee packet], which read as follows [original punctuation provided]: Associated Builders and Contractors of Alaska ("ABC"} is the voice of the Alaska construction industry, advocating the ideals of free enterprise, developing training for the workforce, and providing contractors the resources required to compete in the ever-changing environment. ABC opposes House Bill 186 "An Act relating to volunteer labor compliance officers". ABC supports enforcement of Alaska's labor laws but while we may have a common goal to ensure compliance the solution contained in House Bill 186 is the wrong approach and would set a dangerous precedent for enforcement of Alaska laws and regulations. Enforcement of Alaska labor laws and regulations often requires site visits to private property, private businesses and place the investigator on construction sites. These types of activities should be the responsibility of trained public employees, who should not have any conflicts of interest, while operating under Alaska ethics laws where the State can be held responsible for their actions. While HB 186 deals with construction the underlying premise would support expansion to other agencies where complaints arise of inadequate enforcement allowing citizen investigators in a myriad of sectors such as the Alaska Public Offices Commission or food safety inspectors of restaurants. Simply put, the bill seems to indict the Department of Labor and the current Administration as failing to do their job in enforcing state labor laws and regulations. The solution proposed would have privately paid "investigators" stepping in to do the Department's work. We believe a better path would be to better identify and define problems, if any, and work with the Department to ensure they have the tools necessary to do their job. With regard to this bill, when looking at the information from the Department of Labor there does not seem to be a significant issue that justifies such a radical approach to change current enforcement programs, but ABC is willing to engage and collaborate with stakeholders to further understand any potential issues. With regard to specific concerns, we offer the following preliminary thoughts: - While the bill prohibits investigators from having a conflict of interest there is no definition of what a conflict is. This should be defined in great detail and not left for regulations. Would a union employee investigating a nonunion contractor have an inherent conflict of interest? Alaskans should know before passing the bill what is intended within the context of "conflict of interest." Additionally, there should be some public disclosure of the " investigator's" personal interests such as who they have worked for, if they own a business in construction, and who is paying them to be an "investigator." - The bill inadequately addresses liability. Who will be liable for any accidents or injuries that are a result of the "investigators" on site activities? Will it be the investigator personally or the entity paying the "investigator"? How much liability coverage will they be required to cover? - The bill is insufficient in how it deals with conflicts of interest. By simply removing the person from having authority to continue investigating, this leaves little to no deterrence for malfeasance or holds anyone accountable for any actions of the "volunteers." At a minimum, investigating a private business with a conflict of interest should be a crime. Who will manage the complaints over conflicts of interest? If the underlying concern is the Department does not have the resources to investigate labor violations, how would they have the resources to investigate conflicts of interest or other complaints? What type of due process procedure is envisioned to deal with complaints? One suggestion would be to add "volunteer" citizen hearing officers/investigators to the bill to investigate the investigators? - We do not understand the prohibition on an employee of the State taking leave and "volunteering" to be an investigator. What is the rationale for excluding state employees? Enforcement of State of Alaska laws and regulations is the sole responsibility of the State. When the full power and authority of the State of Alaska is behind individuals performing said enforcement, those individuals should have the same consequences for improprieties than any other State of Alaska employee has. In short ABC of Alaska feels strongly that any labor compliance should be performed by the State of Alaska, and volunteers would not be appropriate or suitable to perform these duties. ABC is willing to collaborate with you and the legislature to better define any problems with enforcement and if any exist ensure the Department of Labor has the tools to solve those problems but cannot support the radical idea to delegate such an important responsibility to "volunteers." We do appreciate your interest in seeing Alaska's labor laws and regulations enforced and Alaska businesses and workers being protected. We look forward to further engagement and collaborating with you on this matter. 3:56:15 PM TANYA KEITH, Director, Division of Labor Standards and Safety, Department of Labor and Workforce Development (DLWD), said she is present to take questions. 3:56:35 PM REPRESENTATIVE FIELDS offered his understanding that there has been declining staffing in Departments of Labor across the country. He asked Ms. Keith how she would characterize DLWD'S approach to standards and safety. MS. KEITH answered that the department uses a strategic approach, with 10 to 12 investigators across the state; it covers 21,000 businesses in the state, as well as the 2,400 public projects that have been started since 2021. REPRESENTATIVE FIELDS asked how the department looks at staffing, whether it's per man hour, per a certain number of dollars in the industry. He asked whether industries with higher union density have more complaints. MS. KEITH responded that investigations are prioritized through complaints received; the department's authority of enforcement is tied to an assignment received from an employee. She said that union representation doesn't necessarily correlate into more complaints. She explained that job sites with unions typically have a person who advocates for the employees, and in some cases, takes care of issues before they come to the office. She said the division receive many complaints from low-wage workers because they have no other avenue of recourse. 4:00:09 PM REPRESENTATIVE PRAX asked whether the state has people that just monitor complaints. MS. KEITH answered yes, most agencies that have contracts do have project managers who oversee projects. REPRESENTATIVE PRAX inquired about grant agencies and whether, if they are operating under a grant or contract with the state, the state would audit those companies as it relates to wage and hour and job safety. MS. KEITH explained that only public construction is audited regularly. She shared that some industries, like assisted living, are subject to licensing requirements; many reports of violations in that industry come from other state agencies that monitor the industry. 4:02:29 PM REPRESENTATIVE SADDLER asked where else the department looks for volunteers to enforce labor standards and safety and whether there are regulations allowing people to report an unsafe or illegal labor practice they witnessed. MS. KEITH stated that the department does not have volunteers who enforce labor laws. She said it takes tips or calls from anybody on a job site that sees an issue. In response to a follow-up question regarding what is typically reported in tips and how many, she said the department gets calls everyday. She explained that if someone is having issues with their employer, it usually isn't limited to just their pay. If the complaint deals with another department, the complaint is referred to the other department. She listed the sorts of tips they get, including no final paycheck, unsafe work practices, and harassment. REPRESENTATIVE SADDLER pointed out that testifiers said they don't see a need for this legislation. He asked if the proposed volunteer program would be helpful in improving compliance with labor practice laws. MS. KEITH stated that she has no opinion. 4:05:11 PM CHAIR SUMNER asked how the department would process a labor law violation report from a third-party non-employee. MS. KEITH explained that, based on how egregious the violation was, there are several steps the department could take. She said those steps include calling the employer, sending a letter notifying them about the issue, informing them on what the laws are, and going to site visits, which could lead to an investigation. CHAIR SUMNER asked whether it is department policy to only respond to employee complaints. MS. KEITH answered no, it is not policy to only respond to employee complaints. She commented that third party information is taken and considered, but investigations cannot begin from a third-party report because enforcement comes from investigating complaints. To take court action, there needs to be an assignment from the employee. 4:07:31 PM REPRESENTATIVE FIELDS asked about wage theft, as well as which groups of employees are less aware of their labor rights. MS. KEITH answered that Alaska law does not define wage theft, but many employees don't receive a final paycheck, for example. She explained issues that DLWD finds, like an employer not aware of overtime laws, or another that didn't pay based on the wage rate they promised to the employee. She said many reports are from immigrants who are not aware of their rights. 4:10:37 PM REPRESENTATIVE PRAX offered his understanding that employers, union shops, and merit shops, as examples, would be quick in addressing a contractual problem. He said the previous testimony made it sound like the state was getting involved in the contractual relationship between employer and employee. He asked whether the state should be involved in contractual violations, as opposed to state labor law. MS. KEITH responded that the department does not get involved in labor issues or contracts. She explained that, when a public construction site is investigated, DLWD verifies that all employees and contractors are getting paid the prevailing wage for the classification of work they are doing; on a private construction site, the department enforces wage and hour laws, which requires that employes are paid minimum wage and overtime for all of the hours they are working. 4:13:04 PM CHAIR SUMNER asked how labor laws are enforced with out-of-state employees. MS. KEITH answered that it is the same with Alaska employers. Upon notification of an awarded contract, the department ensures receipt of notice of work from the contractors, determines whether they have current licensure, and provides education the employee might need. CHAIR SUMNER sought clarification as to whether it is the position of DLWD that Alaska labor laws do not apply to out-of- state contractors. MS. KEITH answered no, all employees working in the state of Alaska are subject to labor laws. She stated that the location of the employer makes no difference, as the department routinely does investigations into businesses that are out of state. 4:14:30 PM REPRESENTATIVE SADDLER questioned the need to deputize labor compliance officers. MS. KEITH commented that the department is not receiving a significant number of complaints about public projects. She explained that staff within the wage and hour division audits certified payroll and catches issues. In response to a follow- up question regarding private construction projects, she said the department is not receiving a significant number of complaints in that area either. She pointed out that in 2023, one public construction complaint and 11 private construction complaints were filed. 4:16:36 PM The committee took an at-ease from 4:16 p.m. to 4:22 p.m. 4:21:52 PM BRONSON FRYE, President, Alaska Local 1959, stated that he is testifying in support of HB 186. He explained the bidding process as the summation of four categories: the materials, the overhead, the profit, and the labor. Material costs are the same for everyone, as is overhead and profit, but labor is variable. He said the construction industry is faced with an issue where whoever can reduce labor costs, whether through honest or dishonest means, is often rewarded by getting the job. He stressed that wage theft is real in Alaska, and that the easiest employee to fall victim to wage theft are those who are already victims of human trafficking. Another example is when an employer requires that each employee get a business license and self-perform the work as an independent contractor; this makes it so the employer is no longer required to provide worker's compensation, which in the construction industry is typically about 30 percent of labor costs. He pointed out a combination of employee misclassification, wage theft, no overtime, and victimizing those being human trafficked; contractors are incentivized to adopt dishonest business models and are awarded for doing such. He commented that he is mystified as to why the Associated Builders and Contractors are not in full support of the bill, since their mission is to help qualified and responsible low bidders with an emphasis on honesty and fairness. He stated that the reality is that the responsible, honest contractors are the ones being cheated out of the opportunities to do the jobs. He offered that a contractor would be happy to support something that prevented dishonest employers from gaming the system. He detailed that an employee who is being trafficked is disincentivized from self- reporting to the department due to the fear of retaliation. He said honest contractors are being cheated, and dishonest contractors are incentivized to adopt unscrupulous business models. He stated that it is reasonable that the state takes the position that there would be utility in a voluntary compliance officer program, like the one proposed in the bill. He stressed that there will be $4 billion to $6 billion of construction work coming to Alaska over the next decade, and that the state should not be a place that rewards cheating, dishonest, and unscrupulous contractors that victimize employees. 4:28:23 PM REPRESENTATIVE PRAX noted that there are contractors that work on small and big projects. He asked whether the practices Mr. Frye referred to are prevalent in small, medium, or large-scale projects. MR. FRYE answered, "All of them." He shared that he has recently been on small, medium, and large projects and has seen it. REPRESENTATIVE PRAX offered his understanding that, in using the term "prevailing wage," a condition of the contract would be that the employer would pay whatever the prevailing wage might be. He asked if Mr. Frye is talking about projects that are under written contract that pay a prevailing wage until it's found out that they are not. MR. FRYE explained that when an employee becomes a self- contractor, the main business does not have them listed for a prevailing wage. He detailed a hypothetical: while there may be five drywall painters on a site, certified payroll only shows one person. He stressed that dishonest employers are gaming the system. REPRESENTATIVE PRAX asked Mr. Frye if he had personally witnessed what he is alleging. MR. FRYE answered, "Yes, all over the state." REPRESENTATIVE PRAX suggested that this issue would be something that the union handles. He asked if Mr. Frye works with the union. MR. FRYE confirmed that he works for the union, and that the projects he referred to were open bid with both union and non- union workers on them. REPRESENTATIVE PRAX offered that if a person is working on a union contract, it would seem to be the job of the union to represent their members. He asked why the union is not representing their members. MR. FRYE answered that he is a union organizer, and that his job is to talk to workers. He stressed that he is testifying on authority and with certainty regarding what is going on. 4:33:56 PM REPRESENTATIVE CARRICK said the bill as written would allow a current construction worker to be a voluntary compliance officer. She asked about people that work for a company's competitor on a project. MR. FRYE responded that owners of construction companies are mindful of their budget, and so he cannot imagine a company investing in going around and abusing the proposed compliance officer. He stated that he does not believe that would be an issue. REPRESENTATIVE CARRICK pointed out that the bill also requires construction experience in order to be a volunteer compliance officer. She asked if there is a pool of former construction people, not currently employed, who can volunteer for the position. MR. FRYE answered that there are many industry groups that want to see honest employers do good. He said it is fair to expect a pool of people that'll step up. 4:36:16 PM REPRESENTATIVE PRAX said Mr. Frye must be getting his info from non-union job sites. He asked how he gets on these job sites. MR. FRYE stated that he's not a union contractor, he's a union organizer. He said it is easy to find construction workers and talk to them about such information. 4:37:19 PM REPRESENTATIVE SADDLER pointed out that DLWD says there is not a problem, and that total wage claims have reduced from 250 to 50 since 2018. MR. FRYE answered that there is a lot of ground to cover with only just 12 investigators. He highlighted that most wage theft victims are disincentivized from self-reporting for fear of retaliation. REPRESENTATIVE SADDLER asked about employees being independent contractors, and asked if this bill would solve that. MR. FRYE responded yes, and that it would be done by asking if each individual employee is covered by a worker's compensation policy. He said most of the time, workers are not covered; once an employer classifies the worker as an independent contractor, the employer is no longer responsible for worker's compensation premiums. 4:39:51 PM MATT CAPECE, Representative of the General President, United Brotherhood, Carpenters and Joiners of America, read his written testimony on HB 186 [included in committee packet], which read as follows [original punctuation provided]: Dear Representative Sumner, I am writing on behalf of the United Brotherhood of Carpenters and Joiners of America ("UBC") to give our support for House Bill 186, An Act Relating to Volunteer Labor Compliance Officers. The focus of my work for the UBC is on the growing problem of illegal employment practices in the construction industry. My work on the topic began in 1989 when I was associate general counsel for my local carpenters' union in Connecticut. Since then I was hired by the UBC, which has put me in the position of witnessing the spread of illicit and immoral employment practices throughout the country that harm workers, responsible construction businesses and taxpayers. The illicit and immoral employment practices in our industry sadly do not stop at tax fraud, wage theft and workers' compensation premium fraud. They also include labor trafficking, child labor, mail fraud, wire fraud, immigration-law violations, money laundering and racketeering. In one outrageous case in Minnesota, a subcontract labor provider, Ricardo Batres, was sent to jail for labor trafficking and employer workers' compensation premium fraud. He kept his construction workers packed in living quarters without hot running water. Whenever his workers complained about their housing and unsafe working conditions, he threatened to call immigration authorities to keep them quiet. Those unsafe working conditions resulted in one of his workers suffering a broken back. Batres' response was to insist that he be brought to a massage therapist. Conditions in our industry have become so alarming that the U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") has issued a notice to banks, money service businesses and other financial institutions requiring them to report the suspicious transactions of their construction account holders. In its notice, FinCEN wrote: The Financial Crimes Enforcement Network (FinCEN) is issuing this Notice to call financial institutions' attention to what law enforcement has identified as a concerning increase in state and federal payroll tax evasion and workers' compensation insurance fraud in the U.S. residential and commercial real estate construction industries. Every year across the United States, state and federal tax authorities lose hundreds of millions of dollars to these schemes, which are perpetrated by illicit actors primarily through banks and check cashers. As described in this Notice, many payroll tax evasion and workers' compensation fraud schemes involve networks of individuals and the use of shell companies and fraudulent documents. These schemes further affect the local and national construction job markets, and put legitimate construction contractors and their employees at a competitive disadvantage. By now you may have been made aware of the data on illegal practices in our industry nationally and in Alaska, so please bear with me as I summarize here. Nationally, up to 2.1 million construction workers, or 19 percent, are either misclassified as independent contractors or paid off the books.5 Those are conservative estimates. State and federal tax losses amount to $10 billion. Construction workers suffer $1.9 billion of wage theft, and workers' compensation insurers lose $5 billion a year to employer premium fraud. To add insult to injury, working families suffer a $5.1 billion tax increase, because crooked contractors foist the employment taxes they should be paying onto the backs of their workers. Nationally, this race to the bottom has led to 39 percent of construction worker families relying on some form of public assistance to make ends meet, costing state and federal taxpayers $28 billion a year.6 It is no wonder that under these conditions the industry is having difficulty attracting and retaining a skilled workforce. In Alaska, up to 19.2 percent of the construction workforce is either misclassified as independent contractors or paid off the books.7 The workers suffer $4.7 million in wage theft a year and the state is losing $5.8 million a year in unpaid unemployment insurance contributions, and the offloading of employment-tax obligations result in Alaska construction workers having their taxes increased by $12.9 million. Unpaid workers compensation premiums are $12.4 million. You can bet that workers' compensation insurers are passing along those fraud losses to honest construction employers who then see their premiums go up, making them less competitive against the cheaters. How did things get this bad? There are a combination of factors, chief among them include a marketplace favoring the lower bids of the crooks, workers' compensation insurer practices that enable fraud, failed immigration laws, the industry's adoption of a labor provider (whom we call "labor brokers") fraud model that protects upper-tier contractors from liability, the absence of accountability for upper- tier contractors that use law-breaking labor brokers, the underfunding of law enforcement, the industry giving up on self policing, and the lack of knowledge and understanding of the construction industry and the severity of the problem. This now brings us to our support of House Bill 186. The bill wisely improves the state's enforcement capabilities at little cost. The fiscal notes on the legislation put the yearly cost at $464.6 thousand a year. This is far less, for instance, than the $5.8 lost to the state unemployment trust fund and the $4.7 million in wage theft. The volunteer compliance officers will be trained by the Department of Labor and Workforce Development ("DLWD"). The legislation includes safeguards that ensure the impartiality and professional conduct of the volunteers. The volunteers will not be issuing citations-they will serve as a vanguard, reporting suspected violations of state labor law to DLWD who can conduct further investigations that can lead to citations. The volunteers amount to a much-needed force multiplier for DLWD, thus improving law enforcement capabilities for the construction industry, especially when DLWD uses volunteers with industry expertise. This checks many of the boxes needed to improve compliance with state employment, tax, and anti-labor trafficking laws. The UBC and it [sic] affiliates simply seek a level playing field for all law-abiding construction employers and a ticket to the middle class for the men and woman who do the hard work. HB 186 assists in getting there. For these reasons we support the legislation and urge its adoption. 4:48:29 PM REPRESENTATIVE PRAX noted that there may be competing companies that seek to suppress competition. He asked how conflict of interest is defined in other states. MR. CAPECE answered that, in the construction industry, the marketplace is favoring employers who cheat; there's a suppression of business for law-abiding employers. He said that law-abiding employers need protection from cheating competitors. He said he cannot answer the conflict-of-interest question, but pointed out that the bill provides for people to be trained by DLWD on how to act professionally, and how to not benefit any one person or entity. He said the volunteers would be "eyes and ears," as they are not issuing citations; whatever they see, they will report to DWLD, who will handle the investigation and issue citations. 4:51:10 PM REPRESENTATIVE FIELDS said there are many worker advocacy groups. He asked where immigrant advocacy groups are. MR. CAPECE commented that in every state there are going to be low-wage employee advocacy/protection groups. He shared an anecdote about such a group in Minnesota. 4:52:50 PM CHAIR SUMNER announced that HB 186 was held over.
Document Name | Date/Time | Subjects |
---|---|---|
HB192 Letter of Support - Uber Eats.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |
AK HB 192 - letter of support FINAL.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |
DOLWD HB 186 Response.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 186 |
HB 147 I am oppossed to the non-payment for the license..docx |
HL&C 2/2/2024 3:15:00 PM |
HB 147 |
HB192 Support Letter HLC 2-13-24.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |
HB192 Amendments Updated.pdf |
HL&C 2/2/2024 3:15:00 PM |
HB 192 |