Legislature(1993 - 1994)
03/30/1993 01:38 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 otherwise. 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 public. 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 today? 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 problem... 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 Correct. 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 Yes. SENATOR LINCOLN If this bill should pass, you would cease and desist with what you are doing right now with the employer/employee relationship? 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 occurs. ... 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, too.