Legislature(2005 - 2006)BELTZ 211
03/17/2005 01:30 PM Senate LABOR & COMMERCE
Audio | Topic |
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Start | |
HB102 | |
SB124 | |
SB131 | |
SB138 | |
SB130 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
*+ | SB 131 | TELECONFERENCED | |
*+ | SB 138 | TELECONFERENCED | |
+= | SB 124 | TELECONFERENCED | |
+= | HB 102 | TELECONFERENCED | |
+= | SB 130 | TELECONFERENCED | |
SB 131-WAGE & HOUR ACT: EXEC/PROF/ADMIN/SALES CHAIR CON BUNDE announced SB 131 to be up for consideration. SENATOR SEEKINS moved to adopt CSSB 131(L&C), version G. Senator Ellis objected for an explanation. JOHN SEDOR, Anchorage Society for Human Resource Management, said the changes were proposed by the Department of Labor and Workforce Development. GREY MITCHELL, Director, Division of Labor Standards and Safety, Department of Labor and Workforce Development (DOLWD), explained the differences in the CS. Two sections were left off the particular exemption that exists currently in the definitions of what a professional employee is. Those are on page 3, lines 17 - 22, and essentially include teachers and people who are working as teachers in schools and other educational establishments and computer-related occupations that have been exempt from overtime under the professional exemption for a while. CHAIR BUNDE asked if that language was left out inadvertently. 1:48:25 PM MR. MITCHELL replied yes. He further elucidated that language on page 3, line 26, related to the question of whether someone who spent most of their time sweeping the floor, but spent a little time making sales, would qualify as an outside salesperson. That would be confusing without the primary duty language. It was not the intent of the sponsor to include them if it isn't their primary duty. On page 4, line 6, the primary duty element was also added for straight-commission sales workers. 1:50:51 PM SENATOR ELLIS asked about section 1 that deletes the exemption for supervisory work from AS 23.100.60(a). CHAIR BUNDE clarified that the CS doesn't change section 1. The only changes are in section 3. MR. SEDOR explained how it applies to all salaried employees over time, but does not impact anyone earning an hourly wage. 1:54:14 PM He said the federal Fair Labor Standards Act (FLSA) looks at whether an employee is exempt because of his primary duties or not. The State Department of Labor and Workforce Development used that regulation, which had two tests - the primary duties component and the 80/20 component. 1:54:59 PM The 80/20 component is a time-based analysis of a person's daily duties and was originally put in to address lower-end employees. So, it applied to people who were making $159 - $249 per week. That original 80/20 test has not been applicable in Alaska for a long time, because even minimum wage is above that. And yet under the state system, it still does apply. So, in essence, what you have if you're a business owner in the State of Alaska or an employee, what you have is ambiguity and you have confusion, because you have the same words - administrative, professional, executive - and yet you have two different tests. One a duties test and one a time-based test. The problem with a time-based test, among others, is that the way a business is organized. It does not provide for the oversight necessary to ensure that the 80/20 is being met and what the 80/20 is is that you cannot spend more than 20 percent of your time doing non-exempt duties. If you have an employee who you have hired in your organizational system to be a manager, an administrator, an executive - you are not overseeing him by definitions. So, for instance, there's a national non-profit that has an Alaska chapter, also, that had a director of marketing. That director of marketing oversaw seven stores.... By definition, that individual didn't have somebody sitting in the car next to him or following him around to each store detailing and overseeing to determine what they were doing each and every day. So, when a dispute arose on other aspects of their employment, that individual, that director says, 'I've been working more than 20percent of my time on non-exempt duties' - whether it's making a pot of coffee, whether it's unlocking a door, whatever it is they may say. That is a difficult thing for an employer to address in a situation where the person is not in a position where they get the oversight. 1:59:05 PM The FLSA applies to everyone in the country and the committee should consider why Alaska has two separate systems for overtime and require employers to apply two different systems to each of their exempt employees. One thing that might be Alaskan is the rate of pay, which historically has been higher. That is addressed in the bill by requiring two times the minimum wage. This has never been the case before. Currently, a bill last year made some changes, but historically there has been no requirement other than when making a 60/40 test, a separate issue. Alaska has not had any wage requirements. So, you could previously had paid somebody - or even currently - paid somebody minimum wage and still qualify them for the exemption. But, what this bill does is say no, 'If you're going to meet one of these exemptions, you are going to pay a level of pay that would be higher than what the federal minimums are.' - which the federal minimums right now are $455 per week. Two times minimum wage in Alaska would be more than that. SB 131 doesn't push into the new frontiers in the state in general. Thirty-two of the 51 jurisdictions in the country follow lock-step with the FLSA. Eight other jurisdictions follow a short test with the primary duties component that tracks closely. "Alaska is only one of seven jurisdictions that still uses the old test - the long test - the 80/20 test." 2:02:21 PM This bill puts Alaska on the same track as the federal system for clarity. 2:03:42 PM CHAIR BUNDE asked if this only applies to a wage segment that doesn't exist. MR. SEDOR replied that in Alaska, the 80/20 test is used for anybody. "You could be paying somebody $100,000 a year and they have to pass the 80/20 test...." 2:05:19 PM CHAIR BUNDE asked if there are existing lawsuits that would be addressed by this legislation. MR. SEDOR replied that wage and hour litigation is on-going throughout the state, including issues pertaining to exemption status. 2:05:47 PM SENATOR SEEKINS asked under current law, if he were an employee in supervisory status, would there be a requirement for him to time clock by task so his employer could prove that he didn't have to pay him overtime. MR. SEDOR replied, "Correct." 2:08:36 PM KAREN ROGINA, Alaska Hospitality Alliance, said she represents the Alaska Hotel and Lodging Association and the Alaska Restaurant and Beverage Association, said: This bill transcends all industries and addresses the need of employers to be able to employ salaried workers in the correct manner, because it eliminates the time-based 80/20 rule and allows for primary duties. It will impact employers of all exempt workers. The good news is that it benefits both employers and employees. On the employer side, it takes away the exposure that an employer has today when employing any salaried worker since they aren't keeping track of how that person is spending their time every hour. Today, they can't say for sure if that person is eligible to be exempt. The reason this benefits employees is because today a lot of employers chose not to have any salaried employees at all. They will employ managers as hourly workers because they are afraid of the exposure from that employee coming back later. This bill takes the employee out of a class that would have otherwise provided them with the opportunity to have benefits; denies employees benefits, because an employer can segregate employees as exempt employees or salaried profession, executive staff and gives them other benefits that they wouldn't have to give to their entire staff. By allowing this bill to have a segregated group, like an executive staff, professional exempt salaried workers, since this group is now all hourly, they're not getting the benefits they would otherwise be afforded by their employer. 2:12:32 PM SENATOR ELLIS asked if the bill provides an opportunity for an employer to provide benefits for professional employees as opposed to a salaried worker and is it still up to the employer in the hiring negotiating process to determine that. MS. ROGINA answered by giving an example of a hotel that has 100 employees and five executive staff. The owners would like to reward the executive staff with health insurance, but if they are all hourly, which many of them are, that group can't be segregated for benefits. Since they are hourly, they would have to give it to their other 100 employees and they can't afford to do that. As a result, all of their employees are hourly and none of them get health insurance.... 2:14:50 PM SENATOR ELLIS asked if a manager pitches in when a housekeeper doesn't show and that amounted to 20percent of their time, would an employer be obligated to pay overtime for those duties. "Isn't that the situation that gave rise to the bill?" MS. ROGINA replied that type of situation occurred and when the employee left, he presented a log of extra things he did while managing. The owner didn't clock those things and had no control over the things the manager did. SENATOR ELLIS asked how that situation would be handled if this becomes law. Would "pitching in" just be part of professional supervisory duties? MS. ROGINA replied that a manager would have management skills enough to hire the right staff so they don't have to do extras. They could still fill in, but not on a regular basis. 2:17:58 PM SENATOR ELLIS asked if there is any interplay between the union versus non-union situation using the hotel example again. MS. ROGINA replied that this bill addresses the private sector, because unions have their own contracts that deal with hourly workers. SENATOR ELLIS asked if she means union versus non-union in the private sector. MS. ROGINA responded, "Right." 2:19:16 PM BOSCO BALDWIN, Vice President, Human Resources and Logistics, Alaska Commercial Company, agreed with previous testimony in support of SB 131. He disagreed, however, with the statement that companies don't get sued for someone working four or five hours doing non-exempt work in a workweek. That's simply not true. I think you can find lots of case law up here that will absolutely show that that's the case. If you think about that. If you have someone who upon termination - and this happens all the time - someone who writes, documents in their own book - whether they create it after the fact or not, that becomes fact. Unless the employer, on a daily basis, is sitting there watching what this employee is doing on his tasks. If you take four hours a day times whatever their rate of pay is times 52 weeks and then you put in punitive damages over the course of time, you're talking about a pretty hefty bill that an employer would be faced to pay. What actually ends up happening is employers are forced to settle these cases, because it's cheaper to settle and give somebody money than to take it to court. It would cost you $50,000 just to get to the point where you're walking into a courtroom. The way the law is set up today, in our case, with Alaska Commercial Company, we span the whole state.... Our home offices are based out of Anchorage.... We have 25 stores. We can't be everywhere at one time. That puts us at a pretty unfair advantage when you think about it - when we are forced...to be able to identify what each of our management employees are doing on a day to day basis - making sure that 80percent of the time they are actually performing what their job description says. He related how a former employee sued his company as an example of what can happen. 2:25:16 PM JACK AMON, representing the Alaska Restaurant and Beverage Association (ARBA) and the Marks Brothers Café and Catering, supported SB 131 and previous testimony in its favor. He said: The changes made in the duties test for exempt employees is a great stride forward in modernizing Alaska's labor laws to more accurately reflect the current work place. Only two of his 12 employees at the restaurant would qualify as exempt employees in the new statute - his chef de' cuisine and floor manager. He disagreed that one would give an hourly employee a supervisory position. These are people who are your supervisors and who are your top-level employees. In my mind, if one has the authority to hire and fire and is responsible for the work, they are managers whether they manage from behind the stove or behind a desk. I, myself, often manage with my hands in a dish sink. I'm afraid that opponents of this bill will state that it's an attempt by business owners to cheat-hard working employees out of the overtime they deserve. Nothing could be farther from the truth. In order to run a successful business, it's essential to retain your top-quality employees. These top workers know their work and there's demand for their skills. One could not keep them long by taking advantage of them. There was constant talk that this is going to be - there was some talk yesterday that owners are going to look for ways to work people 60 or 70 hours a week. You know, we know that the productivity of employees drop off by working those long hours. There's really no benefit to doing that. This change in the statute will allow more flexibility for employers and employees to make compensation arrangements that are beneficial to both. 2:28:22 PM BARBARA HUFF-TUCKNESS, Director, Governmental and Legislative Affairs, Teamsters Local 959, opposed SB 131 in its current form. She referenced Senator Ellis' question about whether this affected unions or not saying: We looked at this potential impact on every Alaskan worker in the state, whether they're union or non- union. Our biggest concern traditionally has been the impact on the lower-paid, not the professionals. Technically, I don't think that that's where traditionally over the years that there have been abuses. She related how the 80/20 rule came about because at that time there were many lawsuits on the books and a lot of abuse by employers. The 80/20 legislation helped level the playing field with equitable treatment for workers in general. Her initial concern with the original bill was the impact on the low-paid worker. She commended Representative Rokeberg for maintaining the double-minimum wage. She stated: I will say on the record that having still the double- minimum wage we do believe will help protect the majority of those entry level workers. I will use, for example, the McDonald's manager who does flip burgers and they put a manager sign on him. I'm sorry, but it does happen. At least the double minimum wage will help discourage that. What I am here to talk about and it is a concern.... While one of the earlier speakers addressed federal regulations, we do have a concern with the fact that the primary duty definition is not addressed in the bill.... We do believe that definition should be defined in state statute - while we believe regulation is fine whether it's on a state level or a federal level, for that matter. We believe that having that in our state law will actually help clarify for the employee as well as the employers when they are reviewing our state laws so that they don't have to go from a state law and then funnel through the FLSA, which is literally a fact. I also want to go on record with respect to a comment made...that there is a lot of federal case decisions that have been made. So, adopting the FLSA is the right thing for the State of Alaska to do. I would just caution everyone there's been a drastic change in the Federal Labor Standards Act and I don't believe that there has been near the litigation. I mean, it's been in place less than a year. You are going to be challenged, we're concerned, even with the primary duty definition. While it's not clear, it gives some guidance out there for the employers and/or employees when it's being applied. But, we do believe that it is somewhat ambiguous and you will probably see lawsuits come out of the application of that as well.... She suggested amending the bill to include a primary duty definition. Other terms used in the bill should also be defined in statute including customarily and regularly, discretion and independent judgment, and matters of significance - so they are applied consistently regarding primary duties. 2:33:56 PM Lastly, she noted another exemption for employees who make at least $100,000 or more per year in last year's implementation of the FLSA that was strongly supported by labor and management and said she would like to see it in this bill. CHAIR BUNDE asked how replacing "supervisory" with three other definitions - executive, administrative and professional - would be more workable and exact. MR. MITCHELL explained that currently there is an exemption for an employee employed in a supervisory capacity. This bill proposes to remove that exemption. There are also currently exemptions for the five categories: administrative, executive, professional and two sales jobs - straight commission and outside sales. They are defined in regulation and this bill takes those definitions and makes them meaningless, basically, and establishes statutory definitions for them. CHAIR BUNDE asked if the definitions are just being taken out of regulation and being put into statute. MR. MITCHELL replied: No, the terms are currently in statute and then they are defined in regulation. What this bill does is it takes the definitions that are in regulation and uses bits and pieces of them and some of the federal regulations and takes those definitions basically out of the regulations and put them into statute. CHAIR BUNDE thanked him for his explanation and set SB 131 aside for further consideration at a later date.
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