Legislature(1995 - 1996)

03/07/1995 08:03 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HSTA - 03/07/95                                                               
 HB 218 - PROMPT PAYMENT OF TRUCKING SUBCONTRACTORS                        
                                                                               
 CHAIR JEANNETTE JAMES, who introduced HB 218 at the request of                
 the Alaska Independent Truckers, read her sponsor statement:                  
                                                                               
 "This bill was filed upon request for the Alaska Independent                  
 Truckers, to provide for their prompt payment.  However, HB 218               
 could fill a niche and open a door for an entire category of                  
 service providers in Alaska.                                                  
                                                                               
 "We claim we want to create jobs.  Here is a way to do it.                    
                                                                               
 "There is a group of skilled workers and professionals in our                 
 state who fall between the cracks.  They are not small                        
 businesses.  They are not employees.  They are each individual                
 operators who provide their own tools, equipment, and expertise               
 for hire.  They offer small businesses all the advantages of a                
 single temporary employee, available only when needed, without                
 the red tape and expense of hiring and firing employees, renting              
 or buying equipment, and training operators.                                  
                                                                               
 "Since these workers are just single independent operators, they              
 do not have a resource of working capitAl and they need to be                 
 paid on a regular and prompt basis.                                           
                                                                               
 "Often these single independent operators do eventually raise                 
 enough capital to create their own small businesses.  They can be             
 the forerunners for a more healthy business environment in Alaska             
 if we clear their way.  HB 218 could be the start."                           
                                                                               
 Number 030                                                                    
                                                                               
 CHAIR JAMES added that, although this is a truckers bill, she has             
 talked to a number of other independent providers of services who             
 would like to see this bill passed so they can be paid promptly,              
 since "this is their pay check."  The blank CS for HB 218, work               
 draft 9-LS0352/G, was the working draft for the committee                     
 meeting.                                                                      
                                                                               
 Number 067                                                                    
                                                                               
 BOB EAKMAN, General Manager and Lobbyist for the Alaska                       
 Independent Truckers Association of Anchorage, gave a history of              
 the independent owner-operators, stating they fell through the                
 cracks when laws were passed in 1986 requiring the prime                      
 contractor and the subcontractor to be paid within seven days,                
 but failing to address or protect the independent owner-operator.             
 This means the independent trucker's credit is always in jeopardy             
 because he often is not paid in time to meet his own bills and                
 payments.  It also means that sometimes safety considerations get             
 dropped if truckers cannot afford to keep their trucks in                     
 compliance with safety requirements.                                          
                                                                               
 Number 161                                                                    
                                                                               
 REPRESENTATIVE JOE GREEN referred to lines 7 and 8 of page 2 of               
 the blank CS working draft and asked if a trucker could possibly              
 end up submitting three or four bills in a given month.                       
                                                                               
 Number 180                                                                    
                                                                               
 MR. EAKMAN said this was possible, but they agree to not bill                 
 more than twice a month on a given job.  If a trucker has more                
 than one job, it is up to him to keep it straight.                            
                                                                               
 Number 197                                                                    
                                                                               
 REPRESENTATIVE GREEN referred to lines 13 through 15, page 2 of               
 the working draft, asking whether the 1/2 percent per month                   
 interest on the unpaid balance applies only to the actual days                
 which the payment is late.                                                    
                                                                               
 Number 226                                                                    
                                                                               
 MR. EAKMAN answered normal practice must be followed, charging                
 1/2 percent per month or 18 percent per annum, not                            
 fractionalizing it for partial months.                                        
                                                                               
 Number 245                                                                    
                                                                               
 TERRY BANNISTER, Attorney, Legislative Legal Council, Legislative             
 Affairs Agency and drafter of HB 218, agreed to answer questions.             
                                                                               
 REPRESENTATIVE BRIAN PORTER asked Ms. Bannister which statute                 
 provides the mechanism for contractors and subcontractors to be               
 paid.                                                                         
                                                                               
 MS. BANNISTER replied it is AS 36.90.200 through 290, which                   
 details contractual and payment requirements for public                       
 construction contracts.                                                       
                                                                               
 REPRESENTATIVE PORTER asked if it required a contract.                        
                                                                               
 MS. BANNISTER replied she thought a written contract was                      
 required.  She added the provisions are different; it goes into               
 more detail than HB 218.                                                      
                                                                               
 Number 297                                                                    
                                                                               
 REPRESENTATIVE PORTER observed an agreement is difficult to                   
 enforce without a written contract.                                           
                                                                               
 Number 305                                                                    
                                                                               
 CHAIR JAMES noted one reason people would become independent                  
 owner-operators is because they have not been able to get a job               
 elsewhere, and this would allow them to sell their skills for                 
 short jobs and get a paycheck which wouldn't be available to them             
 as employees.  She added if these people could be identified,                 
 there would probably be a different category of business license              
 for them.                                                                     
                                                                               
 Number 347                                                                    
                                                                               
 REPRESENTATIVE GREEN inquired whether a small general contractor              
 could use a chit with blanks to fill in.                                      
                                                                               
 MR. EAKMAN said it could be done, using a "boiler-plate                       
 contract."  The problem occurs when a contractor calls with an                
 immediate need for the trucker's service and there is no                      
 discussion of wages; this constitutes a verbal contract, which is             
 defensible in Alaska, yet almost impossible to enforce.                       
                                                                               
 Number 383                                                                    
                                                                               
 CHAIR JAMES mentioned the requirement to fill out a W-9 form,                 
 adding the general contractor should require the contract and                 
 other information to be filled out at the same time.                          
                                                                               
 Number 398                                                                    
                                                                               
 MR. EAKMAN said what happens is truckers end up on a certified                
 payroll, and they should not.                                                 
                                                                               
 Number 409                                                                    
                                                                               
 REPRESENTATIVE SCOTT OGAN said he is an independent contractor                
 himself and has been one for 20 years.  He does not want the                  
 state making statutes which would require the contractors with                
 whom he does business to pay him in 14 days; he believes he has               
 enough business finesse of his own to be sure he has contracts                
 and doesn't want the state involved.  It would set a dangerous                
 precedent and start other business people asking for the same                 
 protection.  There is a certain amount of risk in owning a                    
 business, along with the rewards.  He added he will not be able               
 to support the bill.                                                          
                                                                               
 Number 442                                                                    
                                                                               
 REPRESENTATIVE CAREN ROBINSON asked if they were talking about                
 public or state contracts.                                                    
                                                                               
 MS. BANNISTER said they were dealing with contracts in general.               
                                                                               
 CHAIR JAMES added that HB 218 as currently drafted does not just              
 relate to public contracts.                                                   
                                                                               
 Number 455                                                                    
                                                                               
 JACK WIEGELE, Vice President, Alaska Independent Truckers                     
 Association, testified via teleconference in favor of HB 218.  He             
 stated he has been an owner-operator since 1979, hauling gravel,              
 and he helped draft HB 218.  He said it is simple: they need to               
 be paid in a timely manner.  The 30, 60, 90, and 120 day payments             
 are not adequate.  The whole community should be behind this                  
 bill.                                                                         
                                                                               
 Number 491                                                                    
                                                                               
 CHARLES HIGHT, Master at Arms, Alaska Independent Truckers                    
 Association of Anchorage, testified via teleconference.  He said              
 he had been in business since coming to Alaska, and this bill                 
 will help truckers support their families by being paid promptly.             
 He added that truckers who ask for payment are afraid they will               
 be black-balled and not called for the next job, and they can't               
 stay in business being paid in this manner.                                   
                                                                               
 Number 516                                                                    
                                                                               
 RANDY CARR, Chief, Wage and Hour Administration, Alaska                       
 Department of Labor, testified via teleconference.  He said he                
 had no statement to make but was available to answer questions.               
                                                                               
 Number 527                                                                    
                                                                               
 MONTY MONTGOMERY, Assistant, Executive Director, Associated                   
 General Contractors of Alaska, testified via teleconference in                
 opposition to HB 218, stating a prompt pay act is already in                  
 effect requiring a contractor to pay within seven days after he               
 is paid.  It is poor business practice to respond to a request to             
 work without discussing a commitment of money or time.  He added              
 there is no reason a contract can't be sent by FAX machine and                
 signed in advance.                                                            
                                                                               
 Number 553                                                                    
                                                                               
 CHAIR JAMES asked what are the options if a contractor does not               
 hire an independent owner-operator, stating it appears the only               
 choice is to rent a truck, which requires payment in advance, and             
 to hire a driver by payroll, who also gets paid regardless of                 
 whether the contractor gets paid.  She asked if this was correct.             
                                                                               
 MR. MONTGOMERY replied this was correct.                                      
                                                                               
 Number 565                                                                    
                                                                               
 STEVE TROSPER, Business Representative, Teamsters Local 959,                  
 testified via teleconference.  He stated Local 959 supports the               
 bill and also supports the independent truckers who generally are             
 not union members.  He raised the issue of safety and noted that              
 when money isn't coming in, safety isn't given enough attention.              
 He added union owner-operators are routinely paid twice a month               
 on their truck expenses and twice a month on the payroll and the              
 independent operators should be given the same consideration.                 
                                                                               
 Number 582                                                                    
                                                                               
 JAY EVANS, Owner-Operator, Alaska Independent Truckers                        
 Association, testified via teleconference in support of HB 218,               
 saying that independent truckers fall between the cracks under                
 current law and they are just asking for a fair shake.  The                   
 general public expects the truckers to give them a fair shake, be             
 courteous on the road and have their equipment in safe operating              
 condition.  The truckers are more likely to be able to do that if             
 they have received their money in a timely manner.                            
                                                                               
 Number 598                                                                    
                                                                               
 BILL EVANS, Owner-Operator, Alaska Independent Truckers                       
 Association of Anchorage, and with Eagle Equipment, testified via             
 teleconference in support of HB 218, stating he can't pay his                 
 bills if he is operating with a credit situation, nor can he                  
 operate safely if he can't get his money.  He added this is a                 
 real problem for many truckers besides himself.  He said he is                
 100 percent in favor of HB 218.                                               
                                                                               
 Number 618                                                                    
                                                                               
 ROXANNA HORSCHEL, Vice-Chair of the Legislative Committee of the              
 Associated General Contractors (AGC), and owner of Acme Fence                 
 Company in Anchorage, testified via teleconference in opposition              
 to HB 218, though she is absolutely in favor of everyone getting              
 paid in a proper amount of time.  She stated she has problems                 
 understanding how the state can regulate payment; would the state             
 have inspectors to insure contractors issue a pay check 14 days               
 after receiving an invoice?  She said a legal document of some                
 sort needs to be used.  She added independent truckers get paid               
 much more than an employee, to cover wages for possibly 30 or 60              
 days, money to pay their truck payments and insurance, as well as             
 money to support their families.  As an independent business                  
 person, she knows her capital is eaten up not just for 30 or 60               
 days but for the entire first year of being in business.  She                 
 would like to see a formal contract utilized rather than a                    
 statute passed to clean up the situation.                                     
                                                                               
 Number 649                                                                    
                                                                               
 MS. HORSCHEL added that she was the one who put through the                   
 prompt payment bill, and she is very sensitive to people who                  
 don't get paid on time.  In state contracts, the state makes sure             
 the language is appropriate in the contract before a                          
 subcontractor is approved.                                                    
                                                                               
 Number 669                                                                    
                                                                               
 CHAIR JAMES asked, if a subcontractor who is not approved under a             
 state contract is not allowed to be hired, how can the                        
 independent truckers be hired without approval.                               
                                                                               
 MS. HORSCHEL replied that was her point, because she did not know             
 how the state could approve or regulate an independent trucker                
 without a contract.                                                           
                                                                               
 CHAIR JAMES said she did not ask the question to determine how                
 the state would regulate the contract, but as to whether the                  
 independent truckers were approved to be on the job in the first              
 place.                                                                        
                                                                               
 MS. HORSCHEL replied this is done through brokers, who have a                 
 contract with the prime contractor and in turn call out the                   
 truckers.  So the truckers are almost like employees because they             
 are told where to be and when to be there, though they do have to             
 have their own insurance and maintain their own trucks.  She                  
 added again that a formal contract, stating what and when they                
 will be paid, is needed between the truckers and their brokers or             
 their prime contractors.                                                      
                                                                               
 Number 702                                                                    
                                                                               
 CHAIR JAMES said it appears to her, if the independent truckers               
 were identified by statute, the only leverage they would have                 
 would be to write a letter to the contractor or to the state if               
 the 14 days came and went without their getting paid.  This would             
 then be self-enforcing because the contractor would not want                  
 these letters sent to the state.                                              
                                                                               
 TAPE 95-23, SIDE B                                                            
 Number 000                                                                    
                                                                               
 MS. HORSCHEL agreed this could encourage prompt payment, but she              
 stated that option exists currently.  She referred to a situation             
 where such letters were written and it still took a long time for             
 the trucker to get the money owed him.  She reiterated that                   
 without a contract any agreement would be almost impossible to                
 enforce.  If a trucker wants to be independent and get more than              
 the hourly wage required in the Davis Bacon Act she thinks that               
 is wonderful, but a formal agreement is needed to allow them an               
 avenue with the state to insure payment.                                      
                                                                               
 Number 089                                                                    
                                                                               
 CHAIR JAMES asked Ms. Horschel if the brokers would qualify as                
 subcontractors on a state job.                                                
                                                                               
 MS. HORSCHEL said yes, they do fall under that category.  The                 
 truckers who now "fall between the cracks" can go to work for a               
 broker who can collect under the prompt payment bill, but the                 
 truckers themselves cannot collect under the prompt payment bill.             
                                                                               
 Number 113                                                                    
                                                                               
 CHUCK DAVIS, Owner-Operator, Alaska Independent Truckers                      
 Association of Anchorage, and Owner of Davis Transport Ltd.,                  
 testified via teleconference, stating there is a lack of                      
 understanding about how the owner-operators do business with the              
 contractors and subcontractors in Alaska.  Truckers do not have               
 FAX machines in their trucks.  They are called on cellular phones             
 in their trucks and respond sometimes four or five times in one               
 day without an opportunity to negotiate pay rates or pricing.                 
 Their business is sporadic and volatile, and prime contractors                
 take advantage of this by stringing them out for three or four                
 weeks without paying them.  Even if they do reach an                          
 understanding for a pay rate, it sometimes changes during the                 
 course of a job.                                                              
                                                                               
 Number 174                                                                    
                                                                               
 CHAIR JAMES asked Mr. Davis if he hired out to a broker.                      
                                                                               
 MR. DAVIS replied he did, even though he tried to avoid it                    
 because of the difficulties of collecting payment.                            
                                                                               
 CHAIR JAMES asked Mr. Davis to explain what a broker is.  Does he             
 have his own trucks too?  Is he paid by a percent of what the                 
 trucker makes?                                                                
                                                                               
 MR. DAVIS replied it is very complex.  The idea is for a general              
 contractor to be able to make one phone call and get up to 50 or              
 60 trucks.  Brokers exist mainly to assure fulfillment of                     
 minority quotas on state jobs; a broker can exploit a minority                
 partner to fill the quota.                                                    
                                                                               
 CHAIR JAMES asked if a special license is required to be a truck              
 broker.                                                                       
                                                                               
 MR. DAVIS said he was not aware of one.                                       
                                                                               
 Number 210                                                                    
                                                                               
 MICHAEL SWALLING, President of Swalling Construction, testified               
 via teleconference in opposition to HB 218.  He is a private                  
 subcontractor and has been in Alaska 30 years.  He stated the                 
 prompt payment bill eliminated a lot of problems with payment of              
 subcontractors.  He can see where independent truckers fall into              
 a crack in the application of that law, but the bill could                    
 require him as a subcontractor to pay the trucker before he                   
 himself gets paid by the prime contractor.  Though the                        
 independent truckers have raised some valid issues, he does not               
 believe HB 218 is the mechanism to solve the problems.  It is                 
 clearly special interest legislation which creates more problems              
 than it solves.                                                               
                                                                               
 Number 225                                                                    
                                                                               
 CHAIR JAMES commented again that if subcontractors were not                   
 hiring independent truckers, their only other option would be to              
 rent trucks, paying cash in advance, and put the driver on                    
 payroll which requires prompt payment.  She said she is not                   
 planning to move the bill out today, adding she has had                       
 conversations with the Associated General Contractors who are                 
 willing to help draft a bill which is more palatable to                       
 everybody.                                                                    
                                                                               
 Number 244                                                                    
                                                                               
 REPRESENTATIVE PORTER said he could not support the bill in its               
 present form.  He has problems with the idea of a different                   
 standard for prompt payment for truckers versus contractors.  If              
 a trucker wants to be in an independent business, then he or she              
 should expect the standard business practice of a "net 30."  He               
 said he recognizes the safety issue but would like to solve that              
 situation within existing legislation pertaining to                           
 subcontractors.  He added that going beyond that amounts to                   
 negotiating a labor contract or a business agreement through                  
 statute, and he does not like to do that.                                     
                                                                               
 Number 269                                                                    
                                                                               
 CHAIR JAMES clarified that the prompt pay provision requires                  
 payment seven days after the contractor gets paid, so it is not               
 "net 30."                                                                     
                                                                               
 Number 276                                                                    
                                                                               
 REPRESENTATIVE OGAN said he knows of no contractor who gets paid              
 earlier than 30 days.                                                         
                                                                               
 MR. EAKMAN said it is his understanding that in the trucking                  
 industry most prime contractors require payment every two weeks,              
 and the state generally prefers to pay every two weeks.                       
                                                                               
 REPRESENTATIVE ED WILLIS inquired if this legislation plows new               
 ground, or are there statutes in other states to cover this.                  
                                                                               
 MR. EAKMAN replied that some states have a Public Utilities                   
 Commission to handle this; other states are not regulated at all.             
                                                                               
 MR. DAVIS suggested that owner-operators need to be recognized as             
 an entity; they could get a truck check once a month and a                    
 regular payroll check as an employee, like the Teamsters do.  If              
 they can't be listed as employees, maybe they could be listed as              
 subcontractors.                                                               
                                                                               
 Number 349                                                                    
                                                                               
 CHAIR JAMES repeated that she will be working with the AGC and                
 will carry HB 218 over to next Tuesday's meeting.  She added for              
 the record, a summary of a telephone call the day before from Ms.             
 Marie Wilson, 591 West 67th Avenue, Anchorage, objecting to HB
 218 because of the difficulty in enforcing it.                                
                                                                               
 Number 365                                                                    
                                                                               
 CHUCK DAVIS added that people don't realize owner-operators                   
 operate on a very marginal percent of profit, 2 percent to be                 
 exact, and it is very hard to have any working capital between                
 long payment periods.  It is difficult to get contracts in                    
 writing because each job is different; some are by the ton, some              
 are hourly, some are by the load.  Some operators who complain                
 about this are asked to leave.                                                
                                                                               
 CHAIR JAMES said after 35 years in accounting she understands all             
 the problems experienced by owner-operators.  She said they fall              
 through a crack, though they fill a niche and provide a valuable              
 service not available any other way.  She added she does not have             
 an answer but is willing to work with everyone involved to find a             
 solution which addresses safety while allowing people with "the               
 American Dream" to get started with a small initial investment.               
 She recognized they must be careful not to change any existing                
 labor laws.  She held the bill over until next Tuesday.                       
                                                                               

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