Legislature(1995 - 1996)

04/13/1995 08:05 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HB 218 - PROMPT PAYMENT OF TRUCKING SUBCONTRACTORS                           
 Number 097                                                                   
 CHAIR JAMES announced the next item on the agenda was HB 218.  She            
 stated she had drafted a new sponsor statement, which she felt                
 would clarify some of the previous concerns.  She said this bill              
 was filed at the request of the Alaska Independent Truckers                   
 Association to provide for their prompt payment.  Recent events               
 have demonstrated the inability of truckers to receive prompt                 
 payment.  She argued this was not only an economic issue, but a               
 safety issue as well.  To solve this, she recommended that the                
 truckers would need to organize their own contract and billing                
 system, which they are currently doing.  She stated that                      
 subcontractors are covered under statutes for prompt pay and                  
 employees are covered by labor laws.  She pointed out this statute            
 support does not include the owner-operators of trucks.  She                  
 thought the independent owner-operators of trucks must be able to             
 depend on prompt payment in order to maintain their trucks to                 
 guarantee safe operation of them on our roads.  She pointed out               
 this bill was specific to the owner-operator of trucks and did not            
 include any other segment of small business.  She said the truckers           
 were instituting a system of semi-monthly billings and this bill              
 would allow for those bills to be paid within 14 days.  She stated            
 there were people to testify on teleconference and she would like             
 to hear their testimony before any other discussion of this bill by           
 the committee.                                                                
 Number 142                                                                    
 BOB EAKMAN, General Manager, Alaska Independent Truckers                      
 Association, expressed his support of HB 218.  He mentioned they              
 did have problems getting paid, occasionally being delayed as long            
 as six months.  He said this type of situation cannot continue and            
 agreed that semi-monthly billing would be a partial solution.  He             
 pointed out the owner-operators are unique in that they are                   
 sometimes hired for a job as they are driving for another, and so             
 cannot always get a signed contract.  He thought this was something           
 the industry would have to strive for.  He stated they asked for              
 the twice monthly billing law in order to keep their trucks                   
 maintained and in compliance.  He pointed out that the long haul              
 truckers already are required to be paid on a twice monthly basis,            
 regardless of whether or not those companies hiring them got paid             
 or not.  In closing, he argued that everyone in the state was                 
 affected by the lack of owner-operators getting paid promptly.  He            
 argued when there was a delay in payment, the first thing to be               
 compromised was the maintenance of their trucks.                              
 BILL EVANS, Owner, Eagle Equipment, reiterated that prompt payment            
 for independent owner-operators was an issue of public safety.  He            
 stated there were three incidents he was aware of where the lack of           
 prompt payment led to poor maintenance of trucks, which caused the            
 deaths of individuals involved in accidents.  Thus, he thought it             
 was going to be a question of who would die next.  He stated he had           
 equipment that he would not allow on the highway, because he did              
 not have the money to keep them maintained.  He commented he had              
 just recently received payment for work he had completed the                  
 previous July, after several phone calls and duplication of the               
 paperwork.  He said he was a small business and needed the                    
 guarantee of prompt payment, so that he could pay his bills and               
 keep his trucks properly maintained.  He reiterated his main                  
 concern was public safety.                                                    
 Number 288                                                                    
 REPRESENTATIVE OGAN verified that Mr. Evans had trucks he could not           
 afford to repair and operate, because he had not received payment             
 for work completed.                                                           
 MR. EVANS agreed.                                                             
 REPRESENTATIVE OGAN asked if independent truckers had the right to            
 attach liens on jobs, when not receiving payment.                             
 MR. EVANS stated this was the case in some instances, if the                  
 owner-operator could find the contractor and get all of the                   
 paperwork completed.  He gave an example of a personal                        
 circumstance, where he had tried to collect payment and could not             
 locate the contractor and had to duplicate paperwork and phone                
 calls without success.                                                        
 REPRESENTATIVE OGAN asked whether the contractors were required to            
 be bonded.                                                                    
 MR. EVANS agreed, but reiterated it was difficult to make contact             
 with them.                                                                    
 CHAIR JAMES explained that the problem was with the brokers.  She             
 stated the contractors may pay the broker, who may or may not pay             
 the owner-operators.  She explained the reason that the                       
 owner-operator is not covered by law is that they are not                     
 considered subcontractors.  She further pointed out that the broker           
 may or may not be bonded, and so this may not be an option of                 
 recourse for the owner-operators.  She added that those brokers               
 that are responsible, usually put their truck drivers on payroll.             
 She stated her investigation documented that the real problem was             
 usually with the brokers, but argued that outlawing brokers would             
 really hinder entrepreneurial enterprises that create jobs.  She              
 thought that a requirement of prompt payment following semi-monthly           
 billing would at least eliminate those brokers that were not                  
 MR. EVANS agreed and stated he would be glad to be placed on the              
 payroll of a company as an employee.                                          
 Number 344                                                                    
 MR. EAKMAN stated the owner-operators would agree to be placed on             
 payroll if there was no other alternative.  He said they were                 
 independent businessman, who had to carry insurance and get a                 
 business license.  Thus, he argued that most of the owner-operators           
 would agree to go on payroll as an employee, but would prefer to              
 remain as independent businessmen.                                            
 REPRESENTATIVE OGAN asked if the brokers had any type of                      
 performance bonds or surety bonds required when they bid on jobs.             
 He stated he assumed they were bidding as a subcontractor.                    
 MR. EAKMAN answered there was no bonding requirements for the                 
 brokers themselves.                                                           
 REPRESENTATIVE OGAN thought it would be more reasonable to require            
 bonding for the brokers as subcontractors.  He thought                        
 owner-operators would then have something they could attach with              
 liens.  He stated that should the brokers lose their surety bond,             
 because of lack of payment of their bills, they would then not be             
 able to stay in business, as no one would insure them.                        
 Number 381                                                                    
 CHAIR JAMES stated she was not sure that this would apply in this             
 situation.  She mentioned that the brokers qualify as                         
 subcontractors and receive their payment within seven days after              
 payment to the prime contractor.  She added that everyone is                  
 covered except the owner-operators under the current law.  She                
 stated that under current law, the only way the truckers would be             
 covered would be if they were listed as payroll, which is not                 
 applicable as they provide not only their labor, but their trucks             
 and equipment also.                                                           
 Number 399                                                                    
 REPRESENTATIVE PORTER stated the only difference he saw between the           
 provision for paying the subcontractor and this bill, was that the            
 subcontractor received payment 7 days after the prime contractor              
 gets paid, where this bill requires payment to the owner-operator             
 14 days after billing.  It does not take into account whether the             
 subcontractor got paid or not.  He did not think this necessarily             
 created a fair situation.                                                     
 CHAIR JAMES suggested this was the same situation as payroll.  She            
 said subcontractors are required to meet payroll, whether or not              
 they receive their payment.  She stated that the responsible                  
 brokers are already paying their owner-operators on a semi-monthly            
 Number 417                                                                    
 REPRESENTATIVE PORTER stated he did not disagree with her                     
 statements, but argued there was a difference in that this bill               
 covers a relationship between two entrepreneurs and the other                 
 situation is a businessman/employee relationship.  He pointed out             
 this bill was requiring one entrepreneur to be paid by another who            
 may or may not have been paid.                                                
 CHAIR JAMES agreed, arguing that if a broker does not have                    
 sufficient funds to pay an owner-operator, who would otherwise be             
 on payroll, they will not be in business.                                     
 REPRESENTATIVE PORTER thought this was maybe the case with the                
 broker, because the contractor did not pay them.                              
 Number 423                                                                    
 REPRESENTATIVE GREEN said he could understand the concerns of                 
 Representative Porter, but thought Chair James was trying to                  
 establish a mini-call.  He explained that a contractor receives               
 segments of their pay as they progress through the contract.  He              
 added that the owner-operators do not have this ability, citing               
 stories of truckers having their jobs change en route.  He                    
 understood that the problem was that owner-operators were not in              
 the position to contract and make calls.                                      
 CHAIR JAMES stated she had studied this issue thoroughly and could            
 even cite names of individuals involved.  She thought this was a              
 situation that needed some type of control, and that this bill was            
 the best way to implement it.  She said the owner-operators were              
 already implementing a system of semi-monthly billing and whenever            
 possible, would try to get the terms of their contracts written               
 down.  She pointed out that these people are unique in that they              
 are independent contractors, that fit the mold of payroll                     
 employees.  She thought this bill would give the owner-operators an           
 opportunity to write the prime contractor and state they are not              
 getting paid.  This would allow the prime contractor to require the           
 subcontractor to pay these people when receiving future payments.             
 Number 477                                                                    
 REPRESENTATIVE OGAN disagreed that owner-operators fit the mold of            
 payroll employees.  He argued they were running a business, getting           
 the tax benefits, and were writing off the depreciation of their              
 equipment.  He further stated they were working their own hours.              
 Thus, he felt they were not really payroll-type employees.  He said           
 that with the benefits of owning a business, come some risk.  He              
 stated he did not have a problem with affording owner-operators               
 some protection for prompt pay, but not on a semi-monthly basis. He           
 argued they needed to follow the same type of system as the rest of           
 the construction industry, which was that they would get paid seven           
 days after the subcontractor got paid.                                        
 Number 493                                                                    
 REPRESENTATIVE ROBINSON said she supported this bill, but was                 
 curious as to why the sponsor chose a schedule of 14 days, rather             
 than another period of time such as 30 days.                                  
 Number 498                                                                    
 CHAIR JAMES replied that she thought this period of time was                  
 generous, in that it was routine in the industry to pay on a                  
 semi-monthly basis.  She said that long-haul truckers get paid on             
 a semi-monthly basis.                                                         
 MR. EVANS agreed this was a standard schedule for the industry,               
 giving an example of a job he had hauling snow for the state of               
 Alaska.  He said that he was paid every two weeks from the state on           
 this job.                                                                     
 KAREN CHASSE, Qwik Sand Trucking, said she wanted to address                  
 Representative Ogans comments about filing a lien against the                 
 subcontractors bond.  She said the law currently requires them to             
 file a lien within 90 days of completing work on the job.  The                
 normal pay situation was to wait more than 90 days for payment.               
 Thus, they were too late to be able to file a lien when they                  
 realized they were not going to get paid.  She commented her                  
 husband had been involved with the trucking industry for over 20              
 years and was the owner of Qwik Sand Trucking.  They considered               
 themselves a small business and filed all of the required                     
 paperwork, carried insurance, and billed monthly.  She argued they            
 were only asking to be paid in a prompt manner and failed to                  
 understand how anyone can be opposed.  She thought the contractors            
 had been taking advantage of the owner-operators for years to the             
 point that most of the truckers were afraid to even ask for their             
 money for fear of being black-balled.  She stated the brokers                 
 were afraid to ask for their money for the same reason.  She argued           
 the whole system worked on fear and intimidation.  She said there             
 were many owner-operators who wished to testify, but were too                 
 scared.  She thought the only way this situation could be stopped             
 was by passage of this bill.  She offered to answer any questions             
 from the committee.                                                           
 Number 564                                                                    
 REPRESENTATIVE PORTER asked what the difficulty would be if this              
 bill were amended to read that the owner-operator would be paid x             
 number of days after the broker or subcontractor got paid.  He                
 thought this would be more in line with the laws for payment to               
 MS. CHASSE said the problem was that the prime contractors were not           
 paying the subcontractors in a timely manner.  She stated the                 
 subcontractors/brokers were not asking for their money, as they               
 were just as intimidated as the owner-operators.                              
 REPRESENTATIVE PORTER said he did not doubt the validity of this,             
 but asked what she suggested to do in a situation where the broker            
 was not paid by the prime contractor, but under this bill would be            
 required to pay the owner-operators regardless.                               
 MS. CHASSE thought this bill would force the broker to demand their           
 money from the prime contractor.                                              
 Number 597                                                                    
 REPRESENTATIVE OGAN commented that some of the statements he heard            
 made him shake his head.  He said he had been in business himself             
 for 20 years and never felt intimidated to ask for his money.  He             
 stated he wanted to help, but was uncomfortable with the provision            
 requiring payment within 14 days.  He would rather see an approach            
 along the line of payment for subcontractors, requiring payment a             
 certain amount of time after the contractor gets paid.  He thought            
 that with the way the bill was written, it was placing an undue               
 burden on the subcontractors/brokers.  He said the demands were               
 just too great to have a payroll situation for an independent                 
 businessman.  He stated that everyone else was on a 30-day cycle              
 for payment.                                                                  
 CHAIR JAMES reiterated that twice a month was standard for the                
 trucking industry.                                                            
 Number 629                                                                    
 REPRESENTATIVE ROBINSON noted this bill was additionally referred             
 to the Transportation and Judiciary Committees.  She thought the              
 Transportation Committee might be more appropriate to deal with the           
 concerns raised.  Thus, she moved to adopt the proposed committee             
 substitute, Version G, dated 3/6/95, as the working document for              
 the committee.                                                                
 CHAIR JAMES asked if there were any objections.  Hearing none, the            
 committee substitute was adopted.                                             
 Number 649                                                                    
 REPRESENTATIVE ROBINSON moved to pass CSHB 218(STA), Version G,               
 dated 3/6/95, out of committee with individual recommendations and            
 with the suggestion that the sponsor work with those members who              
 had concerns, to see that they were addressed before the bill is              
 heard in the next committee.                                                  
 CHAIR JAMES agreed that the Transportation Committee was the                  
 appropriate place for these concerns to be heard.  She asked if               
 there were any objections.                                                    
 Number 657                                                                    
 REPRESENTATIVE OGAN objected for purposes of discussion.  He said             
 he would like to see this bill amended to fit standard contracting            
 practices, where the owner-operators would be paid in x amount of             
 days after the subcontractor/broker.  He also suggested they look             
 at some bonding requirements for the brokers.  He also recommended            
 that the owner-operators get together with their association and              
 draft contracts, and then not go to work before contracts are                 
 written and signed.  He stated it seemed as if this was a situation           
 of Big Brother helping out people who do not do their paperwork               
 and then get in trouble.  He stated that having mentioned his                 
 concerns, he would remove his objection.                                      
 CHAIR JAMES asked if there were any other objections.  Hearing                
 none, CSHB 218, Version G, dated 3/6/95, passed out of committee.             

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