Legislature(1993 - 1994)

03/30/1993 01:38 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  SENATOR KELLY announced  SB 174  EXEMPTING CAB DRIVERS  FROM                 
  EMPLOYMENT LAW to be up for consideration.                                   
  JOSH FINK, Aide for Senator Kelly, explained the legislation                 
  clarified  existing  statues  to  maintain  the  independent                 
  working conditions of taxicab drivers  who currently operate                 
  as  independent  contractors.    More  than 177  drivers  in                 
  Anchorage signed a petition requesting this  legislation and                 
  more than 300 drivers in Juneau and others.                                  
  WILLIAM COLBURN, Anchorage,supported SB 174.                                 
  JIM BRENNAN, Attorney representing a  group of permit owners                 
  and  operators  in  Anchorage, said  the  statutory  test of                 
  whether  one  is considered  an  employee or  an independent                 
  contractor for purposes  of the  Employment Security Act  is                 
  producing absurd results in this particular field of taxicab                 
  drivers.     Any   common  sense   interpretation  of   what                 
  constitutes an employer/employee relationship  has to assume                 
  that  the  so-called  employer  is  paying  a  wage  to  the                 
  employee.  This is not the case for the operators covered in                 
  this  bill.   This  is not  a  scheme to  try to  get around                 
  employer  requirements,  this  is a  situation  that  exists                 
  naturally, because  there is no  way an employer  could keep                 
  track of the amount of money a taxi driver makes.                            
  The Department of Labor's concern with  Section 5 is that it                 
  would  violate  the constitutional  prohibition  against ex-                 
  post  facto  clause.   He  said  that clause  has  only been                 
  applied to criminal  statute and this applies  to Employment                 
  Security.    He  said  there  is  nothing  wrong  with   the                 
  retrospective clause.                                                        
  SENATOR KELLY interrupted  Mr. Brennan  saying there were  a                 
  lot of people who wanted to  testify and asked him to remain                 
  on line so he could comment.                                                 
  ROBIN BIEBERDORF, Petersburg,  said he was concerned  if the                 
  bill  didn't pass, it  would severely  limit the  service to                 
  small areas all  over the state of Alaska.   It would either                 
  close his doors to have an employer/employee relationship or                 
  just about  double the  price of  a fare  around town.  It's                 
  important to have this  service around. They take care  of a                 
  lot  of seniors  and  other people  who couldn't  get around                 
  ROBERT GARRETT, King Cab Company  in Fairbanks, said his was                 
  the  second  company  in  Alaska  to  be   assessed  by  the                 
  Employment Security Division as having their drivers defined                 
  as employees.  This amounted to about $23,000 in back taxes.                 
  He didn't have control of the  driver's funds.  He said they                 
  have  employees mechanic,  managers, etc., but  the drivers,                 
  themselves work  on another type  of agreement.   They never                 
  pay the  drivers.   They get  their income  solely from  the                 
  TAPE 93-24, SIDE B                                                           
  Number 561                                                                   
  KIRSTEN BOMENGEN, Department of Law, said she provides legal                 
  counsel to the Department of Labor.  She said there did seem                 
  to be a  problem with retrospective application.   Currently                 
  it  is   only  intended   to  apply   to  the   Unemployment                 
  Compensation Act.   The law may  be unclear.  She  presented                 
  some  instances a  court might  look at  in considering  the                 
  retrospective application on vested rights to cab drivers in                 
  similar circumstances.   She mainly wanted  them to see  how                 
  the court may construe the situations.                                       
  SENATOR KELLY  noted that  Terry Craemer,  Legislative Legal                 
  Services, said it is constitutionally sound.                                 
  The following is  a verbatim excerpt  that was requested  by                 
  the Committee.                                                               
  Number 520                                                                   
  SENATOR KELLY                                                                
  My understanding is  we're here today because  somebody from                 
  the Department of  Labor wrote a  letter and said you  folks                 
  were  now going  to be  covered under  workmen's  comp laws,                 
  unemployment law, etc.,  etc.   Is that person  in the  room                 
  ARBE WILLIAMS, Special Assistant, Department of Labor                        
  We have Jim Coate here from Unemployment insurance.                          
  SENATOR KELLY                                                                
  O.K. Can  you explain  to us  today why  the Department  has                 
  taken this particular position.                                              
  JIM COATE, Department of Labor                                               
  I  can  only  speak  to  parts  of  the  bill  that  reflect                 
  unemployment insurance today.  In  terms of the Department's                 
  position on the bill,  the language that was referred  to by                 
  SENATOR LINCOLN only refers to the section 5 language.                       
  SENATOR KELLY                                                                
  Nonetheless, there has been no change in statute in the last                 
  several years and  all of a sudden the DOL is asking them to                 
  change the way they make their computation.  What's changed?                 
  MR. COATE                                                                    
  It's not because of  a law change or any  particular change,                 
  but an issue  was raised  to the department  from a  company                 
  that caused an audit to occur on a taxicab in the  state and                 
  part  of  the argument  they  used  on appeal  was  that the                 
  Anchorage people  are doing it  this way,  why can't I.   In                 
  terms of fairness  that brought the Department to  the place                 
  where we have started an audit process for taxicab companies                 
  across the state  in order to make sure  we are dealing with                 
  folks fairly.                                                                
  MR. COATE                                                                    
  The only other  comment I wanted  to add was the  Employment                 
  Security Act  itself is  there to  protect the employees  of                 
  this  state  and  so  when  considering  an  exception,  the                 
  consideration must  be  in the  light of  protection of  all                 
  employees.  There are  already exceptions in the law.   This                 
  would add an  additional one.   Most of the exceptions  that                 
  are  in  there   are  for  various  kinds   of  federal  and                 
  governmental kinds of  relationships and the other  one that                 
  sticks out  a  lot  are  the professional  real  estate  and                 
  insurance kinds of  people.   The only thought  I can  leave                 
  there is most of the time  those people are aware when  they                 
  take those  kinds of  jobs that  they don't  have rights  to                 
  these  particular benefits.    Personally,  when someone  is                 
  being  hired  as  a  cab  driver,  I'm not  sure  that  they                 
  understand  all  those   rights.    That's  only   for  your                 
  consideration.  That's all I've got to say.                                  
  SENATOR LINCOLN                                                              
  Are you speaking, then, for DOL?                                             
  MR. COATE                                                                    
  I'm speaking for the Employment Security Division.                           
  Number 404                                                                   
  ARBE WILLIAMS                                                                
  My  name  is Arbe  Williams.  I'm Special  Assistant  to the                 
  Commissioner  of  Labor.   Our  position paper  reflects our                 
  concern that that is not clarified.   Part of the problem we                 
  understand here is  that the  Department of  Labor has  come                 
  into audits and investigations in response to the  laws that                 
  are on the books at this point.   If this body does not want                 
  us to investigate certain types of employees, want's to make                 
  clear to the Department that  certain types of employees are                 
  exempted from the provisions of the employment laws, then we                 
  need clear direction to that effect.  This  is just so there                 
  is no confusion at a later  date.  Providing clear direction                 
  to us  would be  making it  clear  that there  is a  written                 
  contractual relationship.  If that is  not in there, someone                 
  will come, and whether the law  says the people are eligible                 
  for  minimum  wage  or for  unemployment  insurance,  or for                 
  worker's comp coverage,  they will file a complaint with us,                 
  in any  case.  They  don't go to  the statutes first.   They                 
  come  to the Department  of Labor.   We have to  look at the                 
  law.  If the law  is unclear, we will have to go  in and try                 
  to determine if there  is a contractual arrangement.   If it                 
  is oral,  or if it  is in writing,  and we  do not have  the                 
  staff  or the  expertise  to  do  that.   So  we  will  find                 
  ourselves back in  the same situation  we are in right  now.                 
  That's  why just  to clarify  and  provide direction  to the                 
  Department, we've asked for  that amendment to be made.   If                 
  that is the wish of the body...                                              
  SENATOR KELLY                                                                
  I'm getting  the feeling that we  might be able to  reach an                 
  agreement on this bill.   If we can work with  staff and Mr.                 
  Coate and  Arbe and the  Commissioner, Mr.  Brennan and  Joe                 
  Hayes, the taxi  folk's representative, I think we  might be                 
  able to come back  with a committee substitute that  will be                 
  acceptable  to the  Department and  would take  care of  the                 
  SENATOR LINCOLN                                                              
  As I  understood from  you're earlier  statement... maybe  I                 
  misunderstood, Department of Labor did  not force going onto                 
  a  payroll.   Isn't  that  correct?    Wasn't Department  of                 
  Labor... Didn't I  hear you  all say that  this is  proposed                 
  that you haven't forced anybody to go on a payroll yet.                      
  MR. COATE                                                                    
  All  this   actually  occurs...  We  have   determined  that                 
  employee/employer   relationship   to   exist   in   certain                 
  instances, and I'm not up to speed on exactly what companies                 
  -  what details.   We  have made  a determination  in  a few                 
  instances at this point and we're  in the process of looking                 
  at   others   to   determine   if   that   employer/employee                 
  relationship exists,  an if  it does,  determining what  the                 
  wages would be and what the taxes do.                                        
  SENATOR KELLY                                                                
  So you're taking the companies one by one?                                   
  MR. COATE                                                                    
  SENATOR KELLY                                                                
  ...and how do you determine the order in which you take 'em?                 
  MR. COATE                                                                    
  We have field tax offices in, except for S.E. Alaska, Kenai,                 
  Anchorage, and Fairbanks.  Each  of those field tax  offices                 
  is working  the companies  of  their particular  areas.   So                 
  there are several that are going on at the same time.                        
  SENATOR KELLY                                                                
  So there might  be companies that you've  already approached                 
  and here are your choices and  other that haven't heard from                 
  you yet but expect to.  They  don't give you a choice.  What                 
  do they say?                                                                 
  MR. COATE                                                                    
  We can't determine how they do their particular arrangements                 
  for payment.   But if we  determine, under the law,  if that                 
  relationship  exists,  under the  ABC  test that  we've been                 
  talking about,  then they're liable for  employment security                 
  taxes.  That's all that...                                                   
  REGINA DOYLE                                                                 
  I  can  only  speak  to  the  Anchorage district.    We  are                 
  currently under  investigation.   That  is  our  assumption.                 
  Twenty-two or more  drivers were subpoenaed... just  one day                 
  some  subpoenas came  out to  these  drivers asking  them to                 
  produce records  for the  prior year,  etc.   That is  still                 
  ongoing.  Then came subpoenas  to the dispatch companies for                 
  "check-in sheets" as  we commonly refer  to them.  You  know                 
  daily  logs as  to who  is working  and how  many days  they                 
  worked.  That is where we're  at right now.  We've heard  no                 
  more from them at this point.                                                
  SENATOR KELLY                                                                
  Who is spending the money to do this?  Department of Labor?                  
  MR. COATE                                                                    
  SENATOR LINCOLN                                                              
  If this bill  should pass, you  would cease and desist  with                 
  what  you  are doing  right  now with  the employer/employee                 
  MR. COATE                                                                    
  This bill, as  I understand it, if  the relationship between                 
  the dispatch services  and the lessees and/or  drivers meets                 
  the  criteria  that's set  out in  the  bill, they  would be                 
  exempt  from our definition of wages which is the particular                 
  statute  we are dealing with.   If there are no wages, there                 
  is no relationship, there would be no taxes due.                             
  SENATOR KELLY                                                                
  What you're saying is if that were to come out in  the bill,                 
  that they still might  have problems with the IRS.   They're                 
  saying we don't have a problem with the IRS.                                 
  MR. COATE                                                                    
  I'm  not speaking to  whether there is  or is not  a problem                 
  with the IRS.   I don't know their  rules all that well.   I                 
  made up copies  of how  they make their  determinations.   I                 
  raise it  only as a  potential issue.   It happens  in every                 
  other case where a state passes a law that's more lenient or                 
  restrictive.  It depends on which  side you're looking at it                 
  from,  but where we  would exempt something  from wages that                 
  they, in fact,  call wages, then  the situation I  described                 
  MS. PUTNAM, Manager, Taku Taxi, Juneau                                       
  We are under  audit by this  Department and we are  awaiting                 
  the outcome of it which from what I know they are going back                 
  over the last two years and they're going to present us with                 
  this neat little bill.  In my opinion, we couldn't afford to                 
  run on an employer/employee relationship.                                    
  SENATOR LINCOLN                                                              
  I  don't  want to  see our  state  government become  such a                 
  bureaucracy that  the  mom  and  pop operations  go  out  of                 
  business.  That is not what the state of Alaska, or  some of                 
  us  anyway,  intend.     When   they  talk  about   economic                 
  development for our  state and  to promote that  is the  big                 
  theme of the last couple of years...I don't hear that coming                 
  from what's been going on here.   I'm not necessarily saying                 
  I'm for or against the bill, but it just seems to me that if                 
  this bill should pass, Mr. Chairman, DOL is going to look at                 
  it  a  little differently.   Certainly,  we should  have DOL                 
  cease and desist until we get  this bill resolved which will                 
  be done shortly, I'm sure.                                                   
  SENATOR KELLY                                                                
  I think what we ought to say is "lighten up."                                
  SENATOR LINCOLN                                                              
  I'm  worried  that  those individuals,  like  you  said, one                 
  individual in Ketchikan had to fold because of us being like                 
  a gestapo,  I guess, that  go out there to  investigate.  It                 
  just doesn't make  sense to me, Mr. Chairman.   I would hope                 
  DOL  does not..we are  cutting budgets  and it  doesn't make                 
  good sense to me  to have the state  out there spending  all                 
  this money unnecessarily.                                                    
  MR. COATE                                                                    
  I would just say the efforts  we have undertaken, while they                 
  seem  like,  and the  taxicabs,  in general,  are relatively                 
  small companies.   The fact  that we have tried  to make the                 
  playing ground equal..if we make  this kind of determination                 
  on one  company, is it fair,  really, to stop  at that point                 
  and not take  a look  at some of  the others.   Particularly                 
  when one  company, in  testimony before  our appeals,  named                 
  another  company and said  they are doing it  that way.  Our                 
  decision was to  start on this process.  Once we can work on                 
  and figure out,  because I don't  have good knowledge and  I                 
  will need our  Department of Law person on the retroactivity                 
  portion of  this bill..which  I'm not  sure anybody  totally                 
  understands  at this point..I  could give  you an  answer on                 
  when we would  stop, but  it might be  that this  definition                 
  doesn't go  into effect until the bill becomes effective and                 
  so  there might  be payments due  up until that  point.  And                 
  that's what we need to work on, I guess.                                     
  TAPE 93-25, SIDE A                                                           
  Number 001                                                                   
  BART LAIR, Workers Compensation Board,  said they have found                 
  sometimes that taxi drivers are employees.                                   
  SENATOR KELLY  asked if they passed  legislation delineating                 
  employee  and  contractor,   would  Workmen's   Compensation                 
  recognize  that?   MR.  LAIR said  that  was correct.   This                 
  legislation would  change the  way they operate.   It  would                 
  exempt taxicab drivers from being employees under their Act.                 
  JOHN HIBBERT, Alaska  Cab in Kenai/Anchorage, has  about 140                 
  employees most of whom are for this bill.                                    
  SENATOR KELLY  said they needed  to make the  definitions of                 
  employee and contractor a little more clear.                                 
  MR. HIBBERT said he asked the IRS about this issue and  they                 
  said if they ran  their business like the ones  in Anchorage                 
  there   would  be   no   problem.     There   would  be   no                 
  employer/employee relationship.  He noted that fishermen are                 
  exempt from the Wage and Hour Act and Worker's Compensation,                 

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