Legislature(1999 - 2000)
02/22/2000 09:02 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 193(L&C)
"An Act relating to the payment of wages and claims
for the payment of wages."
KRISTOPHER KNAUSS, Legislative Assistant, Senator Pearce,
testified that SB 193 was brought to the attention of
Senator Pearce by a constituent named Margaret Bowman. He
noted that Ms. Bowman obtained employment with the Alaska
Business and Industry Newspaper, a publishing company out
of Anchorage. He continued that she was hired in the fall
of 1998 under a contractual agreement. He added that
during a year and one half time period, arrears of her
wages reached in excess of $10,000. He added, that at this
time, the employment relationship ceased. He then noted
that the bill before the Committee increases the amount
allowed in small claims court from $7500 to $20,000. He
offered that by increasing this cap, legal representation
would be available to the aggrieved and added that this
bill had a zero fiscal note.
Co-Chair Parnell asked about the original bill and the
elimination of Section 3, dealing with the elimination of
the court's discretion regarding penalties for late payment
of wages. He asked Mr. Knauss to address this concern and
asked for an explanation of what this current version
undertakes.
Mr. Knauss responded that the original version of this bill
stated that an employer could be liable to pay back wages
for a 90-day period. He continued that this was changed to
a straight time, eight hour work day so that the employer
would not be penalized for this entire 90-day period, if in
fact the payment was three days late.
Co-Chair Parnell asked if this clause changed existing law.
Mr. Knauss [inaudible.]
CHRISTINE MCGARVIN testified via teleconference from
Fairbanks. She stated that she was a Human Resource
Manager for a mid-size, non-profit organization. She noted
that her biggest concern regarding this legislation was the
language dealing with penalties and felt as though allowing
for penalties would be an unfair burden to employers. She
felt as though most employers, especially non-profit
organizations are anxious to comply with state and federal
regulations, but noted that these laws are very confusing.
She added that when the Department of Labor interprets
certain aspects of these, the interpretations could be
opposite to what the law generally states. She added that
there are many complex elements to consider, especially the
salary basis test, which is problematic when trying to
determine the criteria for whether an employee should be
exempt, salaried or an hourly employee. She then pointed
out how this bill's language relates to this concern.
JAY SEYMOUR testified via teleconference from Anchorage.
He stated that he was an employment law attorney with
Perkins Coie. He noted that the Alaskan wage and hour laws
are the most frustrating and aggravating for most employers
since they are so confusing. He added that if an employer
makes the wrong guess regarding an employee, the penalties
could be harsh. He stated his support for the increase in
the Department of Labor's jurisdiction as outlined in this
present legislation, but he took exception with "waiting
time penalties" on top of liquidated damages in any minimum
wage or overtime claim. He added that there should be a
deterrent to when an employer refuses to pay wages though.
He explained why he takes offense to waiting time
penalties, with a scenario of an employer required to make
a $100,000 payment in penalties as a result of a good faith
disagreement.
Co-Chair Parnell asked Mr. Seymour that if the Committee
took out Section 3 of this bill, leaving the present
jurisdictional increases, whether or not this change would
be acceptable.
Mr. Seymour responded that Section 3 changes the "waiting
time" penalties from discretionary to mandatory, by either
a judge or the Department of Labor. He continued that this
penalty could be accomplished by awarding "waiting time" on
top of liquidated damages. He felt as though a prevailing
party ought to get one or the other, but not both, deleting
Section 3 does not accomplish this.
Co-Chair Torgerson asked how many cases per year did the
present draft legislation affect.
RANDY CARR, Chief of Labor Standards & Safety, Department
of Labor & Workforce Development testified via
teleconference from Anchorage. He estimated this amount at
100 to 120 new cases yearly on top of a 1100 case load
generally, with a settlement rate in excess of 90 percent,
along with 10 to 15 percent of these that go to trial.
Senator Phillips asked how this caseload compared to other
states.
Mr. Carr responded that he did not think this statistic was
available. He felt as though Alaska was at an average
compared to other states.
Co-Chair Torgerson asked that the department address the
penalty schedule of this legislation. He wondered why
penalties should be included when they do not currently
exist.
Mr. Carr responded that the current statute does provide a
"waiting time" penalty and noted that the present bill
seeks to make these penalties mandatory rather than
discretionary.
Tape: SFC - 00 #34, Side B, 9:52 AM
Mr. Carr continued to outline these penalties historically
and outlined how the department is able to assess penalties
within settlement discussions. He stated that penalties
are necessary in order to discourage employers from
violating the law at will.
Co-Chair Torgerson responded that he agreed with this
assessment, but wondered when a trigger is instituted to
take a case to court. He noted a $7500 amount not
inclusive of penalties with a proposed increase of $20,000
exclusive of penalties. He interpreted this to mean that a
different trigger exists if the penalty is much higher and
included in the $7500 claim.
Mr. Carr responded that the intent of the bill was to raise
the statute of limitations addressing the size of the case
(in monetary terms) the department can hear, but it was not
to tie the assessment of penalties to this dollar value in
a particular case. He noted that presently, any case that
the state takes to court, it may seek an award of "waiting
time" penalties regardless of the size of the case, as long
as it is within the jurisdictional limit of $7500. He
continued that this would not change with the increase of
this cap
Co-Chair Torgerson stated that he understood this, but that
the court can award whatever it feels like. He went on to
explain his interpretation of what triggers the amount of
money included in the $7500 or the $20,000 cap. He
clarified that the $7500 amount is exclusive of costs,
interest and attorney's fees only and this legislation
would amend this present situation to a $20,000 cap
exclusive of cost, interest, penalties and attorney's fees.
He referred to line 10, the language, which states, "in an
amount not to exceed $20,000, exclusive of costs, interest,
penalties, and attorney fees." He stressed that this
allows for an exclusion, which did not presently exist in
law and that this could force the outside amount for
penalties to become inflated.
Mr. Knauss responded to a subsequent discussion between Co-
Chair Torgerson and Senator Donley regarding the scope of
small claims court generally and the amount of penalties
assessed for these types of claims. He noted that on line
26, page two, the word "shall" was changed to "maybe," in
the following: "In an action brought by the department
under this section, an employer found liable for failing to
pay wages within three working days of termination shall be
required to pay the penalty set out in (d) of this
section."
Senator Donley stated that this change seemed reasonable
but suggested that mandatory penalties be assessed when the
department is the litigant. He was concerned with the
sentence following the above referenced Section as follows:
"The amount of the penalty shall be calculated based on the
employee's straight time rate of pay for an eight-hour
day." He felt as though this placed a greater limit on
what could be awarded by setting a specific dollar amount.
He thought that the amount of the penalty should be at
least equal to a calculated amount based on an employee's
work hours. He offered that this would give the court
discretion to award a larger amount if they thought it was
warranted.
AL DWYER, Director, Division of Labor Standards & Safety,
Department of Labor & Workforce Development responded that
he would like to see a provision such as this one included,
but asked that the word "maybe" be put back in this Section
based on prior discussions.
Mr. Carr stated that the bill does not reflect the current
language that exists in AS 23.05.140(d) which establishes a
"waiting time" penalty as discretionary. He noted that a
modification to this language exists in Section 3. He
continued with noting a related subsection (e) that says,
in cases brought by the department a "waiting time" penalty
shall be mandatory, including a corresponding formula for
how this penalty should be calculated.
Senator Wilken stated that he remained concerned about the
word "shall." He hoped that either Section 3 was deleted
or amended.
Co-Chair Torgerson asked Mr. Carr to explain penalties as
outlined in subsection (d).
Mr. Carr responded that subsection (d) of the current law
provides for up to 90 working days of penalty, but it does
not address or define in any manner, what a working day is
or how that value is to be calculated. He stated that, the
suggested language of Section 3 in the bill before the
Committee, allowing for a 90 working day penalty is
mirrored as a maximum potential penalty. He added that it
sets forth a suggested method of calculating the "working
day" value to be used as the multiplier for however many
days of penalty is assessed.
Co-Chair Torgerson referred to subsection (b), which
states: "employment is terminated regardless of cause of
termination, all wage and salary compensation are due in
three days." He noted how this language went to the heart
of Section 3 and then referred to subsection (d), which
states that if compensation is not paid in three days, a
90-day time frame is allowed for a maximum penalty. He
added that Section 3 then states that an employer shall pay
the penalty, using an eight-hour day as a benchmark
calculation. He wondered if most of these exceptions were
from an employer terminating due to an employee theft or
the like.
Mr. Carr responded that this was not the genesis for most
of the cases, which deal with "waiting time" penalties. He
continued that the largest number of cases, which the
department deals with, are situations where an employee is
simply not paid. He noted that it seemed odd that anyone
would continue to work for an employer and accrue a debt of
wages totaling $10,000 or more, but the department sees
this type of thing on a weekly basis. He added that there
are exceptions to the present law dealing with these
situations and pointed out that these employers who have a
legitimate dispute with an employee, as to the amount of
wages due, can make a case as to why the wages should not
be paid.
Co-Chair Torgerson asked if conflicting statutes existed
now, with the existence of Section 3 in the Committee
Substitute, which notes an employer "shall" pay and AS
23.05.180 where an employer will pay under certain
circumstances.
Mr. Carr responded that there was potential for conflict.
Senator Wilken referred to employee terminations and asked
if the same rules applied for voluntary quit situations.
Mr. Carr responded affirmatively and gave the existing
section of law covering this situation. He generally noted
that an employee must be paid back wages within three
working days regardless of termination cause.
Co-Chair Torgerson stated that SB 193 would be HELD in
Committee.
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