Legislature(2005 - 2006)BELTZ 211

03/17/2005 01:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Bills Previously Heard/Scheduled
Moved CSSB 124(L&C) Out of Committee
Moved HB 102 am Out of Committee
Heard & Held
         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                                                                    
     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                                                                    
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                                                               
     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                                                               
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                                                                    
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                                                               
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                                                                    
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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