Legislature(2009 - 2010)BELTZ 105 (TSBldg)

04/01/2010 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
Moved SB 303 Out of Committee
Scheduled But Not Heard
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SB 303-WORKERS' COMPENSATION AND CONTRACTORS                                                                      
3:04:13 PM                                                                                                                    
CHAIR PASKVAN  announced SB  303 to be  up for  consideration. He                                                               
recapped that SB  303 was originally addressed a week  ago and he                                                               
hoped the  committee members  had the  opportunity to  review the                                                               
bill that  is "just an  undo of what was  done a number  of years                                                               
ago."  The  state had  a  system  that adequately  operated  from                                                               
statehood  for approximately  45 years  and then  the system  was                                                               
changed in what he thought was an improper manner.                                                                              
He said he thought  SB 303 was the right policy  for the State of                                                               
Alaska. He noted a Legal  Services memo that indicated the extent                                                               
of  the  injustice  -  even  if someone  operated  with  a  gross                                                               
deviation from  the standard  of care they  would be  immune from                                                               
responsibility or accountability for their  conduct as the law is                                                               
now written.  Generally, when people  hear that someone  could be                                                               
criminally negligent in their conduct  and not be accountable for                                                               
it they are troubled.                                                                                                           
3:06:31 PM                                                                                                                    
TRENA  HEIKES,  Director,   Division  of  Workers'  Compensation,                                                               
Department of  Labor and Workforce Development  (DOLWD), said she                                                               
would answered questions.                                                                                                       
SENATOR MEYER said he still  couldn't remember why it got changed                                                               
and asked  if there was some  concern and does this  bill rectify                                                               
double dipping by a victim. In  other words, can an injured party                                                               
sue the  subcontractor who they  are working for and  the general                                                               
who hired the sub-contractor?                                                                                                   
MS.  HEIKES replied  that they  could never  sue their  employer.                                                               
"The  exclusiveness of  liability  for an  employer  is still  in                                                               
effect  under   this  bill   as  it   has  been   since  workers'                                                               
compensation  systems were  first developed  at the  turn of  the                                                               
century."  There   would  be  no  double-dipping   vis-a-vis  the                                                               
employer  and  employee,  and  if they  sued  the  general  their                                                               
recovery would  be offset  under AS  23.30.015 by  the employer's                                                               
lien,  a   lien  that  is   equal  to  the  amount   of  workers'                                                               
compensation  benefits  that  the  employer  has  paid  less  the                                                               
employer's  pro-rata  share of  attorney's  fees,  per a  Supreme                                                               
Court decision.                                                                                                                 
SENATOR  MEYER apologized  for being  so dense,  but asked  again                                                               
hypothetically if  Senator Paskvan is the  general contractor and                                                               
hires  him  as  the  subcontractor,  and  he  was  delinquent  in                                                               
providing  a safe  working environment  and an  employee that  is                                                               
working for him gets injured, can  the employee come back to both                                                               
him and Senator Paskvan or just to him as the sub-contractor.                                                                   
MS. HEIKES answered:                                                                                                            
     If  you're  insured   for  workers'  compensation  your                                                                    
     insurance  carrier  would   provide  benefits  to  that                                                                    
     injured worker. If you were  uninsured, then under that                                                                    
     statute  as it  now reads  and as  it would  read, with                                                                    
     [SB] 303,  the general  contractor would be  liable for                                                                    
     the workers' compensation benefits.  As the statute now                                                                    
     reads,  if   the  general   contractor  was   the  tort                                                                    
     'feeser,' you  couldn't sue  the general  contractor or                                                                    
     the  project   owner.  And  you  can   never  sue  your                                                                    
     employer, period  - unless they are  uninsured. If they                                                                    
     are  uninsured  for  workers'  compensation,  then  you                                                                    
     lose,   understandably,   the  benefits   of   workers'                                                                    
     compensation which is the exclusive liability.                                                                             
SENATOR MEYER  asked why  a general contractor  would hire  a sub                                                               
that didn't have insurance.                                                                                                     
MS. HEIKES said  that was a good question. As  the law now reads,                                                               
and  as  it  will read  if  SB  303  were  passed, it  makes  the                                                               
contractor  responsible   for  making  sure  subs   are  carrying                                                               
workers' compensation,  because otherwise  their carrier  will be                                                               
on the hook.                                                                                                                    
SENATOR MEYER  said he understood  that in  the past the  sub was                                                               
able  to  do  the  work  cheaper because  they  didn't  have  the                                                               
MS. HEIKIS answered  that was correct. If a  subcontractor is not                                                               
carrying  workers'   compensation  insurance   they  are   at  an                                                               
advantage in a bidding situation because of its expense.                                                                        
3:10:45 PM                                                                                                                    
KEITH MONTGOMERY,  Alaska Regional Council of  Carpenters (ARCC),                                                               
Anchorage, said he supported SB 303.  He said that this bill is a                                                               
start to solving  a bigger problem that  affects the construction                                                               
industry as  a whole. Last  year he said  he testified on  HB 22,                                                               
and both  bills have  a piece  of puzzle  correct, but  with many                                                               
holes   and   missing   puzzle   pieces   such   as   independent                                                               
subcontractors and  tier subcontractors.  He said the  real issue                                                               
is to  close the loophole that  will level the playing  field and                                                               
protect the  construction industry  and Alaskan workers  and stop                                                               
labor  brokers that  refuse to  take personal  responsibility for                                                               
workers that get hurt on jobs.                                                                                                  
MR.  MONTGOMERY  said that  he  recently  spoke to  a  contractor                                                               
working on  a state construction  project who said the  reason he                                                               
tier  subcontracted is  that they  have many  levels where  these                                                               
workers  don't   provide  workers'  compensation.  Why   would  a                                                               
contractor  hire these  guys? It's  because they  can come  in 30                                                               
percent lower on the  bid and get the job. So, you  have a sub of                                                               
a sub of a sub that  has no workers' compensation; he directs the                                                               
work and employees of the  subcontractor, but each person carries                                                               
a  business license.  This  contractor said  the  reason he  tier                                                               
subcontracts in  the State of Alaska  is because he can  get away                                                               
with it; that Alaska laws are real weak.                                                                                        
3:13:31 PM                                                                                                                    
SCOTT HANSEN, Alaska Regional Council  of Carpenters (ARCC) Local                                                               
1281, Anchorage,  said in  the construction  industry the  use of                                                               
subcontracting, independent  contracting and tier  contracting as                                                               
become  totally out  of control.  They receive  information on  a                                                               
daily  basis  on  tier  contracting 3-4  levels  deep  where  the                                                               
"employees"  are   not  under  a  workers'   compensation  policy                                                               
anywhere  past  the general  contractor  or  the first  level  of                                                               
subcontractor.   This   is   very   detrimental   to   legitimate                                                               
subcontractors and  gives a huge  advantage to  the subcontractor                                                               
who  in  turn hires  the  independent  tier contractors.  A  high                                                               
percentage of these  independent contractors work as  subs to the                                                               
subs  to  the subs,  but  they  are  truly working  within  every                                                               
definition as an employee. They are  required to show up and work                                                               
certain hours and  work off of other  contractor's equipment, but                                                               
do not  supply any materials and  have no risk for  loss. General                                                               
contractors  should be  scared  to death  of  the possibility  of                                                               
independent contractors working on their jobs.                                                                                  
He said that SB 303 is  a start in controlling this situation and                                                               
will help protect legitimate contractors.  It will help the abuse                                                               
of 1099  issues in  the non reporting  problem in  the prevailing                                                               
wage reporting, as well.                                                                                                        
3:14:47 PM                                                                                                                    
CHRIS GREGG,  Business Manager, Painters and  Allied Trades, said                                                               
he supported SB  303. He said this issue  affects his contractors                                                               
immensely.  They  have a  2-25  percent  bigger disadvantage  for                                                               
providing  workers'  compensation  for their  employees.  It  has                                                               
become common business practice to  subcontract all work to avoid                                                               
workers'   compensation,   social   security   and   unemployment                                                               
insurance. While  this bill is not  the complete answer, it  is a                                                               
start.  If you  don't  get  action on  this  bill  "You can  kiss                                                               
legitimate  contracts  goodbye  they   can't  compete  with  this                                                               
loophole   available   to   unscrupulous  business   owners   who                                                               
misclassify their employees as owner-operators."                                                                                
CHAIR PASKVAN thanked  them for their comments;  he closed public                                                               
testimony and asked for discussion.  He said there is "absolutely                                                               
no double dipping." If there  is a recovery workers' compensation                                                               
is reimbursed and it's allocation according to fault.                                                                           
SENATOR  THOMAS stated  he  didn't remember  the  genesis of  the                                                               
bill,  but he  did remember  that some  people were  killed on  a                                                               
particular  job.  He  wasn't  sure  that  the  subcontractor  had                                                               
workers' compensation or not. It  almost sounds like if they did,                                                               
that  would have  been the  only recovery.  He thought  something                                                               
else  allowed  the  owner  to  be  sued  because  they  had  been                                                               
negligent  in  performance  of  their  duties  in  preparing  the                                                               
workplace as they had the authority  to do. But today, it appears                                                               
that  some  subs don't  purchase  workers'  compensation and  the                                                               
generals  don't require  them to  do  what they  are supposed  to                                                               
which  is post  the proof  of their  workers' compensation  or at                                                               
least give  them a  copy of  their binder.  So, therefore,  in an                                                               
attempt to  make sure  that people  are protected,  including the                                                               
generals, one  of the ways  to do it is  to implement a  law that                                                               
allows  them to  be responsible  if they  are not  going to  hold                                                               
their    subcontractors   responsible    for   having    workers'                                                               
3:18:33 PM                                                                                                                    
SENATOR  THOMAS  moved  to  report SB  303  from  committee  with                                                               
individual  recommendations  and  attached zero  fiscal  note(s).                                                               
There were no objections and it was so ordered.                                                                                 
Finding  no further  business to  come before  the committee,  he                                                               
adjourned the meeting at 3:20.                                                                                                  

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