Legislature(2003 - 2004)

04/29/2003 01:37 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
        CSHB 214(JUD)-PUNITIVE DAMAGES AGAINST EMPLOYERS                                                                    
                                                                                                                                
CHAIR BUNDE announced CSHB 214(JUD) to be up for consideration.                                                                 
                                                                                                                                
REPRESENTATIVE RALPH SAMUELS,  sponsor of HB 214,  said this bill                                                               
adds a section to the  punitive damages statute that would create                                                               
a  guideline  for damages  against  an  employer under  vicarious                                                               
liability.  It   stipulates  that   an  employer  shall   not  be                                                               
responsible  for  paying  punitive damages  unless  the  employer                                                               
okays the  act or knew about  it later or that  the employer knew                                                               
the  employee  to be  unfit  and  recklessly employed  them.  One                                                               
example would be a construction  company owner that requires drug                                                               
testing and training and specifically  tells his employee that he                                                               
cannot drive the  forklift or truck because the  employee has not                                                               
been trained.  If the  employee does so  anyway and  someone gets                                                               
injured,  then  the company  should  still  be  on the  hook  for                                                               
compensatory damages to  pay for the pain and  suffering, but the                                                               
company  should not  be  punished  if it  has  not done  anything                                                               
wrong.  Their policies  would  not be  changed  and the  punitive                                                               
damage factor should not apply.                                                                                                 
                                                                                                                                
REPRESENTATIVE SAMUELS  explained that  the bill does  not affect                                                               
any portion of  the law with respect to direct  liability. If the                                                               
company,  itself, does  something  wrong, the  current law  would                                                               
apply and  this does nothing to  change that. It does  not affect                                                               
the ability  of the  plaintiff to  get compensatory  damages. The                                                               
language came  almost word for  word from a restatement  of tort,                                                               
which is  an amalgamation  of case law  from across  the country.                                                               
The standard also  comes from the Laidlaw Case,  heard before the                                                               
Supreme Court, which  commented if this had been brought  up at a                                                               
trial, it  would have  ruled with  language that  is in  the case                                                               
right now.                                                                                                                      
                                                                                                                                
MR. STEVEN CONN,  AkPIRG, cautioned against passage  of this bill                                                               
because  although a  small  employer  would deserve  immunization                                                               
from punitive damages  in that particular instance,  the only way                                                               
to  motivate  larger  corporations   is  with  punitive  damages.                                                               
Hopefully, a message will be sent  to big companies to tighten up                                                               
and improve their  hiring and training practices.  He opposed the                                                               
bill for its broad reach and asked them to trust civil juries.                                                                  
                                                                                                                                
MS. MARSHA DAVIS,  General Counsel, Era Aviation,  said the Exxon                                                               
Valdez punitive damages issue had  been raised in the House Labor                                                               
and  Commerce committee  and the  actual issues  had been  pretty                                                               
well clarified there. The $5  billion in punitive damages that is                                                               
being batted  around in court  right now was a  direct assessment                                                               
against Exxon,  therefore this  bill would  not touch  that. This                                                               
bill  does  not  affect  employers' direct  liability  for  their                                                               
compensatory damages or direct liability.  What would be at stake                                                               
would  be  the  $5,000  in punitive  damages  that  was  assessed                                                               
against  Mr.  Hazelwood  and  the question  is  would  Exxon,  in                                                               
addition, be  vicariously liable  for that  $5,000. The  issue of                                                               
big versus small is also a red herring. She told members:                                                                       
                                                                                                                                
     The size of the employer  isn't the issue; it's whether                                                                    
     or not an  employer should be held  strictly liable for                                                                    
     punitive  damages  assessed   against  their  employee.                                                                    
     While the  punitive damages are intended  to motivate a                                                                    
     change  in  behavior, then  it  does  no good  to  make                                                                    
     strict  liability, because  you  have disconnected  the                                                                    
     employer's  behavior from  the liability  outcome. Only                                                                    
     where the  employer's behavior  affects the  outcome of                                                                    
     that liability  do you have a  motivation. For example,                                                                    
     at  Era Aviation,  we do  our  best to  make sure  that                                                                    
     employees  are  screened  for drug  and  alcohol  usage                                                                    
     problems. We do drug and  alcohol testing on a pre-hire                                                                    
     basis.  We   do  required  random  testing   at  a  set                                                                    
     percentage established by the  FAA regulations. We also                                                                    
     have a right  to do for cause drug  and alcohol testing                                                                    
     anywhere  we have  suspicions of  abuse.  We do  annual                                                                    
     training of  all supervisors to  spot drug  and alcohol                                                                    
     problem  usage   amongst  employees  so  that   we  can                                                                    
     activate our for cause program.                                                                                            
                                                                                                                                
     Yet, we  had a  situation several  years back  where an                                                                    
     employee  stopped at  their lunch  break,  drank a  few                                                                    
     beers, drove the  company van and hit  a motorcycle. If                                                                    
     there's strict liability for  the punitive damages that                                                                    
     would  be  assessed  against  our  employee,  what,  if                                                                    
     anything, could  Era have done differently?  The answer                                                                    
     is nothing.  So, in that  instance, where Era  does not                                                                    
     have a  fault, has not  done something wrong,  it makes                                                                    
     no  sense  to  make   us  vicariously  liable  for  the                                                                    
     punitive  damages assessed  an  employee  who may  have                                                                    
     acted   outrageously   or   recklessly.   Rather,   the                                                                    
     standards set out in this  bill are totally reasonable.                                                                    
     They  have   been  tested  and  tried   throughout  the                                                                    
     nation...We  strongly support  the  bill and  encourage                                                                    
     its passage.                                                                                                               
                                                                                                                                
MS.  PAM LABOLLE,  President, Alaska  State Chamber  of Commerce,                                                               
stated support for fairness in  the civil justice system and said                                                               
CSHB  214(JUD)   brings  a  greater  degree  of fairness  to  the                                                               
system. Punitive  damages are intended to  punish wrongdoers, who                                                               
through  outrageous conduct  and acts  of malice  or indifference                                                               
have harmed or  caused loss to another. To  hold employers liable                                                               
for  punitive  damages when  their  acts  have  no affect  on  an                                                               
employee's behavior  is not what  punitive damages  were intended                                                               
for.                                                                                                                            
                                                                                                                                
MS.  JESSICA   GRAHAM,  Anchorage  Society  of   Human  Resources                                                               
Management, said she  is also an employment  lawyer. She strongly                                                               
seconded  Marsha Davis's  comments  and added  that  in the  last                                                               
several years when she has  been litigating employment cases, she                                                               
has  not seen  a  complaint that  has not  included  a claim  for                                                               
punitive damages. She  feels this is a feather in  the cap of the                                                               
plaintiff's bar  that they regularly  use to up the  ante against                                                               
employers.  It increases  the cost  for litigation  regardless of                                                               
whether the claim actually has any merit or not. She commented:                                                                 
                                                                                                                                
     Secondly, in  the greater scheme  of things,  under the                                                                    
     current system, if an employer  is held strictly liable                                                                    
     for the  actions of an employee,  regardless of whether                                                                    
     the employer did anything to  encourage it or benefited                                                                    
     in any way, what happens at  the end of the day is that                                                                    
     the employer can  pay out an enormous sum  of money and                                                                    
     do  enormous  damage  to   their  ability  to  continue                                                                    
     business while the employee, who  actually did the harm                                                                    
     probably gets fired, walks  off essentially scott free,                                                                    
     goes  and gets  another  job at  a different  employer,                                                                    
     does not disclose  where he previously works  and a new                                                                    
     employer is going to be  ultimately responsible for the                                                                    
     same kind of  conduct that can happen  again and again.                                                                    
     In the  general spirit of Alaska  independence you want                                                                    
     to put the  responsibility where it lies and  put it on                                                                    
     the   individuals  who   are  doing   these  kinds   of                                                                    
     activities that  give rise  to these  punitive damages.                                                                    
     If you want to stop  the conduct, tell the employee who                                                                    
     sexually  harasses someone  that  they  will hold  them                                                                    
     personally  liable  rather  than tagging  that  on  the                                                                    
     employer who has otherwise done everything right.                                                                          
                                                                                                                                
SENATOR  FRENCH  said he  heard  her  and others  mention  strict                                                               
liability with respect to assigning  fault to an employer for the                                                               
acts of their  employees and asked what cases in  Alaska have set                                                               
forth that standard.                                                                                                            
                                                                                                                                
MS.  DAVIS replied  in 1986  the Alaska  Supreme Court  initially                                                               
enunciated the  standard that is  called the Scope  of Employment                                                               
Rule for  liability for punitive  damages in the  Alaskan Village                                                               
versus  Spaulding  case. That  case  was  over  a dogfight  in  a                                                               
trailer court and was later cited  by the Alaska Supreme Court in                                                               
the  Laidlaw case  and  others  as the  standard  in Alaska.  She                                                               
continued:                                                                                                                      
                                                                                                                                
     Essentially the  public employment rule as  the Supreme                                                                    
     Court enunciated it is if  an employee is acting within                                                                    
     the scope  of their employment  at the time  the injury                                                                    
     or damage  is incurred  and the jury  assesses punitive                                                                    
     damages  against that  employee, the  employer will  be                                                                    
     vicariously  liable for  those damages  the same  as it                                                                    
     would be for the comparative or the standard damages.                                                                      
                                                                                                                                
     That  stands  in  contrast to  the  restatement,  which                                                                    
     essentially sets out a set  of four criteria that needs                                                                    
     to be met  before an employer could be  held liable for                                                                    
     those punitive damages.                                                                                                    
                                                                                                                                
SENATOR  FRENCH asked  if  that  is what  she  would call  strict                                                               
liability.                                                                                                                      
                                                                                                                                
MS. DAVIS replied  that it's strict liability if  you assume that                                                               
acting  within the  scope of  employment is  a given  on both  of                                                               
those standards. For  instance, the employee was  hired to drive,                                                               
and while the employee wasn't  hired to drive drunk, the employee                                                               
was doing  something in furtherance  of the employer's  conduct -                                                               
as opposed  to them employee  driving the company vehicle  on his                                                               
own time  at night to a  bar when the vehicle  wasn't supposed to                                                               
be used.                                                                                                                        
                                                                                                                                
CHAIR BUNDE  asked if  the legal arguments  could be  deferred to                                                               
the   Judiciary  Committee.   Representative  Samuels   indicated                                                               
concurrence and the Chair set HB 214 aside.                                                                                     

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