Legislature(1995 - 1996)
02/08/1996 08:00 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 457 - FINES: UNLICENSED PRACTICE OF OCCUPATION The next order of business to come before the House State Affairs Committee was HB 457. CHAIR JAMES called on Walter Wilcox to read the sponsor statement for HB 457 into the record. Number 1680 WALT WILCOX, Committee Aide, House State Affairs Committee read the following statement into the record. "This legislation was requested by LB&A as part of the sunset audits on various boards. "Current law allows enforcement of practicing certain occupations without a license only through the courts. This Bill allows the Department to impose a civil penalty if a person practices or offers to practice an occupation in this State that is regulated under Title Sec.08.01. "The civil penalty may not exceed $5,000.00 for each offense. The Bill also provides for enforcement mechanisms." MR. WILCOX invited Catherine Reardon, Department of Commerce and Economic Development, to explain the department's position. Number 1731 CATHERINE REARDON, Director, Central Office, Division of Occupational Licensing, Department of Commerce and Economic Development, thanked Representative James for introducing the bill, and further stated the department supported HB 457. The bill, she said, would give the division another tool to bring individuals into compliance with the occupational licensing laws. She stated it would be helpful for occupations such as opticians, and commented it was the optician sunset audit that suggested such a bill. She said the department would first try to bring the individuals into voluntary compliance through a letter noting the potential financial fine. The bill she said gave the division up- to $5,000, but, she asserted, the division would not be fining individuals $5,000 for relatively minor violations. She reiterated that was an "up-to" figure. She referred the committee members to page 1, line 11, "The department shall set the amount of the penalty after taking into account appropriate factors, including the seriousness of the violation, the economic benefit resulting from the violation, the history of violations..." The bill she said directed the division to act reasonably depending on the action. However, if someone continued to practice without a license then the department could ratchet-up the fines. She further said the department operated under the Administrative Procedures Act (APA) which required a hearing before a fine was issued. She said the bill did not allow capricious fines. Ms. Reardon said it was frustrating for small business owners to see the competition not pay for a license. She alleged HB 457 would alleviate the court system with citations of unlicensed activity. Number 1870 REPRESENTATIVE GREEN mentioned a conversation between himself and Ms. Reardon regarding another bill where the cost was born by the litigants. He said that bill would net zero but a positive fiscal note would need to be shown. He questioned why HB 457 indicated a zero fiscal note. Number 1898 MS. REARDON said she recalled the conversation. She said if money needed to be collected, for example it would need to be reflected in the fiscal note. However, HB 457 did not require additional money. She said she would use her licensing examiners and Attorneys General for the hearings. She stated the department might see a revenue, but she did not include the estimate in the fiscal note because she simply was not sure how much would be generated. Ms. Reardon did not want to guarantee a certain amount in fines in the event she did not reach it. She reiterated she did not have any new expenditures. She referred to the other bill Representative Green mentioned and stated per diem and travel was needed in addition. She said she was not trying to be inconsistent. REPRESENTATIVE GREEN cited she would issue fines. MS. REARDON replied she would send a letter indicating a fine, but she would not pay anyone new to do that task. REPRESENTATIVE GREEN said he did not see the difference. Number 1994 CHAIR JAMES said she understood Ms. Reardon. A fiscal note indicated money that was not authorized. Ms. Reardon said she was not going to spend any money that was not already authorized and use the existing parameters. For example, the bill might require more stamps, but Ms. Reardon already had a budget for stamps and the bill would not increase her budget for stamps. Number 2025 REPRESENTATIVE GREEN said he agreed if it was true. He alleged it was not the same because the fiscal note suggested she would not spend anything and he asserted there were more steps required that would cost money. Number 2035 MS. REARDON replied, yes, the activities would require staff time, but she was going to cutoff other activities to provide the required time. She cited her staff would cutback time expended trying to prove criminal intent and instead prepare for the hearing. She said she would talk to Representative Green regarding the other fiscal note. Number 2065 CHAIR JAMES said a positive fiscal note sometimes showed money saved and closed the gap. She also said sometimes a positive fiscal note was issued to off-set an expense in which case the legislature was authorizing the money to be spent. In this case, there might be some revenue generated of which would go to the general fund. REPRESENTATIVE GREEN asserted it should be shown as a fiscal note. CHAIR JAMES said Ms. Reardon did not have a clue how much revenue would be generated in fines. REPRESENTATIVE GREEN asked if she had a clue regarding the other issue also. He said he did not want to belabor it here. CHAIR JAMES replied she was happy with the attached fiscal note, and the other bill needed to be discussed outside of the meeting. REPRESENTATIVE GREEN agreed it should be discussed elsewhere, but asserted there was a direct correlation. Number 2115 REPRESENTATIVE OGAN wondered if boards had quasi-judicial power to impose fines for practicing without a license. MS. REARDON replied boards had the authority to fine incompetent activity which was already licensed activity. However, the Board of Registration for Architects, Engineers and Land Surveyors had the authority to fine up-to $5,000 for unlicensed activity. Number 2147 REPRESENTATIVE OGAN said this was a policy shift giving the Department of Commerce and Economic Development more quasi-judicial powers through the ability to judge, for example. Number 2168 MS. REARDON responded it was not a new function for the department. She said in the division there were 20 licensing boards and 14 programs that ran without boards. Therefore, the department had the final authority to sign-off on recommendations. It was not a new procedure but rather a new range of offenses that could trigger the procedure. Number 2208 CHAIR JAMES said the public complained about unlicensed activity and did not feel they had an avenue to fix the problem. She cited business licenses were a problem. There was a requirement to obtain a business license and many people operate without one. This bill, however, did not include business licenses - only occupational licenses. Number 2252 MS. REARDON said the intent of the bill was to only include occupational licenses, but there was the possibility of reading the bill to include business licenses as well. Number 2266 MR. WILCOX asked Ms. Reardon to read the list of the current occupations impacted by HB 457. Number 2280 MS. REARDON said HB 457 referred to AS 08.01 as the centralized licensing statute. It included all the programs the division administered and no others. It did not include drivers licensing, for example. There were 34 program areas. MR. WILCOX asked her to list the program areas to clarify the business licensing issue. CHAIR JAMES said it was a good thing to put on the record. Number 2315 MS. REARDON read into the record AS 08.01.010 which listed the following occupations the statute applied to. Board of Public Accountancy; State Board of Registration for Architects, Engineers and Land Surveyors; Athletic Commission - boxers and wrestlers; Board of Barbers and Hairdressers; Big Game Commercial Services Board - now a division function; Board of Certified Real Estate Appraisers; Board of Chiropractic Examiners; Board of Clinical Social Work Examiners; Board of Dental Examiners; Board of Dispensing Opticians; Board of Marine Pilots; Board of Marital and Family Therapy; State Medical Board; Board of Nursing; Board of Examiners in Optometry; Board of Pharmacy; State Physical Therapy and Occupational Therapy Board; Board of Psychologist and Psychological Associate Examiners; Real Estate Commission; Board of Veterinary Examiners; regulation of acupuncturists under AS 08.06; regulation of audiologists under AS 08.11; regulation of business licenses under AS 43.70; regulation of collection agencies under AS 08.24; regulation of concert promoters under AS 08.92; regulation of construction contractors under AS 08.18; regulation of electrical mechanical administrators under AS 08.40; regulation of professional geologists under AS 08.02.011; regulation of hearing aid dealers under AS 08.55; regulation of morticians under AS 08.42; regulation of the practice of naturopathy under AS 08.45; and regulation of nursing home administrators under AS 08.70. She stated the mention of the regulation of business licenses under AS 08.01 was for administrative reasons such as the collection of fees. She asked the committee members if the bill should apply to business licensing also. Number 2433 CHAIR JAMES replied as sponsor of HB 457 it was not the intent to include business licensing. She said it was drafted after the request of the Legislative Budget and Audit Committee's recommendations. She further said an occupational license was the business license. Number 2464 MS. REARDON responded every business was required to have a business license and some also were required to have an occupation license. She cited for an example, a doctor had to have a medical occupation license and a business license if running a private business. Number 2476 CHAIR JAMES said she was interested in a separate bill to address the business license enforcement. She stated it was important to meet the needs of the state to enforce everyone to obtain a business license. She also said it was not her intention to include that in HB 457 and it needed to be addressed in a separate bill because it had an entirely different constituency. She also said the House Judiciary Committee, the next committee of referral, would look at the bill to determine if additional language was needed to address the business licensing issue. CHAIR JAMES called on the next witness via teleconference in Anchorage, Mark Johnson. Number 0053 MARK JOHNSON, President, Center for Employment Education, said he supported HB 457. He suggested expanding the bill to cover other areas as well. He cited in 1994 his company established the first truck driving training school in Alaska. His company was certified nationally and in August of 1995 the doors opened under the applicable exemptions in the laws. He said it took several months to meet the requirements for the post secondary education and the division of motor vehicle divisions. After one year, he said, the center operated at a considerable loss. He cited the center spent $470,000 to certify the program and make it operational. He stated he understood it was not uncommon for business to lose money in the first years. He further said upon review the center started looking at the competition when it was discovered many of the other businesses were not licensed properly under the laws. A formal complaint was issued to the director of public safety and to the Alaska Commission on Postsecondary Education (ACPE). The response was the training was insignificant therefore it did not fall under the rules of the postsecondary education commission. He said the problem was two-fold as the other companies were training drivers and renting trucks for the CDL test, while the statutes required the renter was licensed to operate the equipment. Number 0286 CHAIR JAMES wondered if the students that attended the Center for Employment Education received Alaska state student loans. MR. JOHNSON replied, yes. CHAIR JAMES asked if the other schools had students attending that received the Alaska state student loan. MR. JOHNSON replied, no, because they did not have authorized approved programs. He cited the responses from his enquiry. A response from Fairbanks said during the check-in procedure a routine check was done to determine if the person renting the equipment was licensed. At times the check-in required an equipment familiarization process but alleged it was not a training course. He also cited a letter from Soldotna which stated the company rented vehicles for individuals to take their CDL test. The letter also asked him to mind his own business so he could do his job. Mr. Johnson further said the center was most concerned about an individual in Anchorage that registered over 700 tests for the CDL at the Department of Motor Vehicles (DMV). He alleged the individual charged $250 per rental which equated to a great deal of money for an unlicensed activity. CHAIR JAMES asked Mr. Johnson to wrap-up his testimony. She further said his concerns were valid and needed to be addressed, however, they did not fit into HB 457. MR. JOHNSON said, in conclusion, there was a serious problem with respect to drivers training in Alaska. The current regulations were not working. Number 0495 CHAIR JAMES said she appreciated his concerns. She said HB 457 went next to the House Judiciary Committee. She reiterated the bill did not cover the issues he shared with the committee members, and suggested special legislation as it affected public safety. Number 0530 MR. WILCOX suggested in section (b) to add a line to explain the section did not apply to business licensing. Number 0542 CHAIR JAMES suggested a conceptual amendment. Number 0549 REPRESENTATIVE IVAN moved to adopt a conceptual amendment. Number 0557 REPRESENTATIVE OGAN said he did not understand the amendment and asked for clarification. Number 0560 CHAIR JAMES replied, the list of regulations and boards Ms. Reardon read earlier could be misconstrued to include the general business license that was bought for $50. The bill was not intended to cover that provision. Therefore, to make it perfectly clear a line should be drafted and included in HB 457. Number 0591 REPRESENTATIVE OGAN wondered if it was referenced to in the statute. CHAIR JAMES replied, "no," and asked Ms. Reardon to respond. Number 0598 MS. REARDON said HB 457 put the provision in Title 8 which included the list of boards and regulations she read earlier. She said a sentence to clarify this issue to eliminate the possibility a business license would be included because statutes were referred to each other in the bill. REPRESENTATIVE OGAN said he understood. CHAIR JAMES said hearing no objection to the motion to accept the conceptual amendment, it was so moved. Number 0640 REPRESENTATIVE OGAN enquired about the $5,000 offense penalty. Number 0645 MS. REARDON replied it was from the Board of Registration for Architects, Engineers and Land Surveyors, the board that already had the authority to fine unlicensed activity. She said it was also based on the recommendation of the Legislative Budget and Audit Committee's suggestion for all the boards and regulations to have the same authority. Number 0663 CHAIR JAMES replied some of the issues were health related. Therefore, a deterrent was needed as the issues were large enough. She further commented a procedure outline was needed to establish the amount of the fine. Number 0683 MS. REARDON responded it was a good idea. She further said the hearing officer usually determined the amount of the fine after listening to the evidence. She alleged the upper amount was seldom delivered, and maybe regulations would clarify the issue. Number 0703 CHAIR JAMES said regulations would clarify, and furthermore, regulations went through a public process to include the input of the public. She further said she was not sure if regulation enforcement should be included in the bill and wondered if it was presumed. Number 0731 REPRESENTATIVE OGAN said when he served on the Big Game Commercial Services he cited there was a $5,000 criminal offense penalty. He said $5,000 was too high for a civil penalty under this scenario. He also said he questioned the due process of an administrative hearing. He cited a driving ticket example, whereby a ticket was issued and went to court following due process. He again stated $5,000 was a severe fine. REPRESENTATIVE OGAN moved that on page 1, line 10, change the amount of "$5,000" to "$500." REPRESENTATIVE WILLIS asked if the fines would be greater under the existing laws based on Representative Ogan's motion. Number 0800 MS. REARDON responded in court an upper limit of $5,000 was issued under a misdemeanor generally. She further stated some of the licenses cost $700 every two years. Therefore, she was concerned about individuals profiting by failing to obtain a license. She suggested a higher offense might serve as a deterrent. Number 0839 REPRESENTATIVE OGAN said if the limit of $5,000 was for a criminal penalty in court, it should not be the same for a civil penalty. He agreed the limit should be expensive and was willing to negotiate on the amount. Number 0874 REPRESENTATIVE GREEN said the committee members were hung-up on an automatic $5,000 fine rather than an "up-to" $5,000 fine. He further said the circumstances would predicate the amount of the fine. Representative Green said there was a presumption of incompetence if a person failed to obtain a license and there should be a worthwhile potential penalty. Number 0942 CHAIR JAMES called on the next witness via telephone, Randy Welker. Number 0950 CHAIR JAMES explained to Mr. Welker the amendment made to HB 457 to not include business licenses. She asked Mr. Welker his opinion regarding the change of the penalty from $5,000 to $500. REPRESENTATIVE IVAN said he was comfortable with the maximum $5,000 limit. He cited there were provisions in the bill to let the department set the fines accordingly. Number 1007 RANDY WELKER, Legislative Auditor, Legislative Audit Division, Legislative Agencies and Offices, said the nature of the potential violations were important to consider. He cited a physician running a medical office without the proper license needed to be stopped immediately using a $5,000 penalty. He alleged it was a tool used to stop the behavior immediately instead of pursuing a criminal procedure which took time. Number 1085 CHAIR JAMES reiterated her suggestion of establishing a regulation to schedule the fees. Number 1107 MR. WELKER said it was reasonable to expect the department would adopt regulations to guide the boards and the hearing officers. Number 1122 CHAIR JAMES said the regulations would be more representative of the applicability of each case because it would include the general public. Number 1136 MR. WELKER replied he agreed with Chair James as long as the legislation language was flexible regarding the up-to limit. Number 1145 REPRESENTATIVE OGAN said he was concerned about the agency acting like a judge. He said the legislation was allowing the agency to act in the same manner as if it were a criminal offense. Representative Ogan said a $5,000 limit was appropriate for a criminal offense, and reiterated his philosophical difference regarding the due process and the lack of the separation of powers. He asked Mr. Welker, if an administrative solution was not possible, was the next step a criminal trial. Number 1212 MR. WELKER replied that was a possibility, and the concern was the issue of time and deterrence until a criminal proceeding took place. Number 1241 CHAIR JAMES referred Representative Ogan to page 2, line 8, "A person aggrieved by the imposing of a civil penalty under this section may file an appeal with the superior court for judicial review of the penalty under AS 44.62.560." She further commented the Administrative Procedures Act (APA) outlined the exact appeal process which included due process. She said there was the opportunity for a hearing to present a case along with an appeal. Number 1295 REPRESENTATIVE OGAN said it took time because of the due process involved. He said it should be a stop gap to a court proceeding. He amended his previous amendment from "$500" to "$2,500." He said it was half-way between nothing and the maximum for a criminal violation. Number 1350 CHAIR JAMES asked if there were any objections to Representative Ogan's amendment. Number 1360 REPRESENTATIVE GREEN replied he was concerned about adding a variety of "up-to" limits. He said one "up-to" was enough and let the department decide the offense. He suggested the limit stay at $5,000. Number 1402 CHAIR JAMES responded she did not want to arbitrarily change the amount otherwise the committee members should look at each board and regulation and decide what amount was appropriate. She suggested leaving it at $5,000 - the suggestion of the auditor. Number 1438 REPRESENTATIVE OGAN replied the auditor did not set the policy in this state, the legislature did. Number 1481 CHAIR JAMES reiterated the motion to change page 1, line 10 from "$5,000" to "$2,500." There was an objection, so a roll call vote was taken. Representatives James, Green, Ivan and Willis voted against the amendment. Representative Ogan voted in favor of the amendment. So, the amendment failed. CHAIR JAMES commented again regarding the parameters of the penalties imposed, and wondered if it should be included in the bill. Number 1510 REPRESENTATIVE GREEN said it was not necessary, but if it added clarity it was worthwhile. Number 1525 CHAIR JAMES suggested a committee substitute to be discussed at the next committee meeting.
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