Legislature(2015 - 2016)BELTZ 105 (TSBldg)

03/19/2015 01:30 PM Senate LABOR & COMMERCE

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Audio Topic
01:31:03 PM Start
01:32:07 PM Confirmation Hearings
01:36:31 PM SB58
02:39:45 PM SB71
02:42:14 PM SB2
02:54:21 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Public Testimony --
Heard & Held
Heard & Held
+ Board and Commission Appointees: TELECONFERENCED
Board of Marital & Family Therapy
Occupational Safety & Health Review Board
Board of Psych. & Psych. Assoc. Examiners
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved SB 71 Out of Committee
         SB  58-TRANSPORT NETWORK SVES. & WORKERS COMP                                                                      
1:36:31 PM                                                                                                                    
CHAIR COSTELLO announced the consideration of SB 58. "An Act                                                                    
relating to workers' compensation and transportation network                                                                    
companies; and providing for an effective date."                                                                                
1:37:10 PM                                                                                                                    
SENATOR BILL STOLTZE, speaking as chair of the Senate State                                                                     
Affairs Committee, said he introduced SB 58 by request. He spoke                                                                
to the following sponsor statement:                                                                                             
     Senate  Bill  58  establishes  a  workers'  compensation                                                                   
     exemption  for individuals who  operate a motor  vehicle                                                                   
     under   a  service  agreement   with  a   transportation                                                                   
     network company.                                                                                                           
     Recently  emerging  in  Alaska,  transportation  network                                                                   
     companies provide  services by connecting  passengers to                                                                   
     drivers  through  a  digital network,  commonly  in  the                                                                   
     form of a mobile device application.                                                                                       
     Currently,  taxi  companies  are  allowed  an  exemption                                                                   
     from  the Workers'  Compensation Act,  which creates  an                                                                   
     unfair    advantage    over    transportation    network                                                                   
     companies. Senate  Bill 58 is intended to  provide equal                                                                   
     treatment  between  taxis   and  transportation  network                                                                   
     The  communities   of  Chugiak  and  Eagle   River  have                                                                   
     desperately   sought  transportation   options   without                                                                   
     success.  Hopefully, this  small piece  of the  solution                                                                   
     will  allow  municipalities,  including  Anchorage,  the                                                                   
     ability  to facilitate  unmet  transportation needs  for                                                                   
     all Alaskans.                                                                                                              
SENATOR   STOLTZE  related   that  horse   carriage  drivers   are                                                              
disadvantaged by  current law  and he'd like  that to be  added to                                                              
the bill.                                                                                                                       
1:42:47 PM                                                                                                                    
CHAIR COSTELLO  noted the  supporting letter  in the packets  from                                                              
legislators in the greater Anchorage area.                                                                                      
SENATOR   GIESSEL  asked   him   to  comment   on   the  lack   of                                                              
transportation services  in other  areas of the municipality.  She                                                              
said Eagle River and Girdwood come to mine.                                                                                     
SENATOR  STOLTZE confirmed  that there  is an  issue in  Girdwood.                                                              
People  are willing  to pay  for transportation  services but  the                                                              
industry isn't  responsive. This  is an effort  to remove  some of                                                              
the obstacles.                                                                                                                  
SENATOR MEYER agreed  there is need for additional  transportation                                                              
services city wide.  He asked if this is an insurance  or workers'                                                              
compensation bill.                                                                                                              
SENATOR STOLTZE  described it  as an  insurance bill that  relates                                                              
to a potential industry.                                                                                                        
1:46:26 PM                                                                                                                    
SENATOR  MEYER asked  how  this  bill compares  to  the way  other                                                              
states have dealt with transportation issues.                                                                                   
SENATOR  STOLTZE said  he didn't  know;  he was  relying on  input                                                              
from the municipality and trying to remove a barrier.                                                                           
SENATOR  MEYER  said  he  appreciates  that  the  legislation  was                                                              
introduced because he has heard it is a problem in many areas.                                                                  
1:48:47 PM                                                                                                                    
MICHAEL  MONAGLE,  Director, Division  of  Workers'  Compensation,                                                              
Department of Labor  and Workforce Development  (DOLWD), testified                                                              
in opposition  to SB  58. He  said the  department doesn't  have a                                                              
problem with  the concept  if the  transportation network  company                                                              
is  defined similar  to a  taxicab business,  but the  application                                                              
could  be  broader  than  that because  of  the  wording.  A  tour                                                              
company  could  use  this  model   and  be  exempt  from  workers'                                                              
compensation  insurance, for  example.  If the  bill was  strictly                                                              
limited to  taxicabs and  limousine type  services the  department                                                              
wouldn't have as much concern.                                                                                                  
He raised  concern with the language  in subparagraph (C)  on page                                                              
2, line  25. It  says a  person is  exempted once  they take  on a                                                              
passenger  and  that  concludes   when  the  passenger  exits.  He                                                              
questioned  what happens with  insurance in  between the  time the                                                              
network driver  drops off one passenger  and picks up  another. He                                                              
also raised  concern with Sections  3 and 4  on page 3  that apply                                                              
the  legislation  retroactively.  If  a  driver  currently  had  a                                                              
workers'  compensation  claim or  the  division had  a  proceeding                                                              
before   the  Workers'   Compensation  Board,   those  claims   or                                                              
proceedings  or  claims would  be  set  aside by  the  retroactive                                                              
clause. If  the bill  moves forward,  the department would  prefer                                                              
that provision be deleted.                                                                                                      
SENATOR  STEVENS asked  why taxicab  companies  are exempted  from                                                              
workers' compensation.                                                                                                          
MR. MONAGLE  said he  didn't know  the history  of the  exemption,                                                              
but there  are specific limitations  to that exemption.  There has                                                              
to  be a  written  contract between  the  business  owner and  its                                                              
drivers  and under  the labor law  there are  restrictions  on how                                                              
the person can accept payment.                                                                                                  
1:53:25 PM                                                                                                                    
SENATOR STEVENS  questioned the  rationale for exempting  taxicabs                                                              
in the first place.                                                                                                             
MR. MONAGLE  said the broader question  is whether a person  is an                                                              
employee or an  independent contractor. The  legislature concluded                                                              
that  a  taxicab   driver  is  an  independent   contractor.  This                                                              
legislation  provides   a  similar   exemption  under   that  same                                                              
CHAIR COSTELLO  asked who, other  than taxicab drivers,  is exempt                                                              
from workers' compensation.                                                                                                     
MR.  MONAGLE read  the list  found  under AS  23.30.230. He  added                                                              
that there  is a "relative nature  of the work" test  to determine                                                              
whether there  is an employee  employer relationship in  the event                                                              
of an accident.                                                                                                                 
CHAIR  COSTELLO   asked  if  the  department's  concerns   can  be                                                              
addressed through an amendment.                                                                                                 
MR.  MONAGLE  answered  yes  and  highlighted  the  concern  about                                                              
whether  there  is  sufficient   insurance  in  the  event  of  an                                                              
1:59:33 PM                                                                                                                    
CHAIR COSTELLO  asked Mr. Hester  if he  wanted to comment  on the                                                              
1:59:52 PM                                                                                                                    
MARTY  HESTER,  Director,  Division of  Insurance,  Department  of                                                              
Commerce, Community  and Economic Development (DCCED),  said SB 58                                                              
does  not  affect  Title  21,  the   insurance  statute,  but  the                                                              
division  is  monitoring   the  bill  to  ensure   that  there  is                                                              
insurance provided  during all  phases of  the operation  of these                                                              
2:01:04 PM                                                                                                                    
BRYCE  EDWARDS,   Operations  Manager,  Uber  in   the  Northwest,                                                              
explained  that  Uber  is  a  technology  platform  that  connects                                                              
riders  and drivers.  The  system  is cashless  and  brings in  an                                                              
unprecedented  level of accountability.  SB  58 solely focuses  on                                                              
workers' compensation  and whether the people that  partner on the                                                              
system  are  small  businesses  or  employees.  He  explained  the                                                              
process for becoming  a driver on the Uber platform.  Once someone                                                              
becomes a driver  they have the flexibility to log  on and log off                                                              
the  application as  they  see fit.  Drivers  average  20 hours  a                                                              
month,  are not  dispatched,  take  80 percent  of  the fare,  and                                                              
receive a 1099 at the end of the year.                                                                                          
MR.  EDWARDS  advised  that  Uber  is working  with  the  city  of                                                              
Anchorage to address transportation network companies.                                                                          
2:07:28 PM                                                                                                                    
SENATOR MEYER  asked how a passenger  knows what the rate  will be                                                              
and whether the Uber driver is taking the correct route.                                                                        
MR. EDWARDS  explained that a rider  can open the  application and                                                              
click on the  rates. This shows  costs per mile and per  minute as                                                              
well  as  the   base  charge.  The  rider  can   enter  the  final                                                              
destination  and receive an  estimate for  the trip. To  determine                                                              
the  best route  the rider  can  enter the  final destination  and                                                              
push the  navigate button  to get  step-by-step instructions.  The                                                              
rider can rate  the driver at the  end of the trip on  a five star                                                              
scale.  A three  star  or  below is  an  indication  to Uber  that                                                              
follow up is needed.                                                                                                            
SENATOR MEYER asked  if there is an opportunity for  a third party                                                              
to track the rider.                                                                                                             
MR. EDWARDS  confirmed that  is possible if  the rider  chooses to                                                              
share the information.                                                                                                          
SENATOR  MEYER  asked if  Uber  encourages  drivers  to put  up  a                                                              
Plexiglas barrier behind the front seat as a safety measure.                                                                    
MR.  EDWARDS  said Uber  drivers  feel  very  safe; they  are  not                                                              
carrying  cash  and  they  have  the  option  of  turning  down  a                                                              
passenger. He hasn't seen the Plexiglas shield.                                                                                 
SENATOR STEVENS  asked him to  address Mr. Monagle's  concerns and                                                              
if some common ground could be found.                                                                                           
MR.  EDWARDS addressed  the  concern about  opening  the door  for                                                              
other  types  of  operators.  He  said the  bill  has  a  standard                                                              
definition of  what a transportation  network company  (TNC) does.                                                              
It  clearly  states  that  the  partners  in  the  system  pick  a                                                              
passenger up  and carry them from A  to B. The issue  of a package                                                              
provider  was  mentioned  but  Uber   doesn't  own  or  lease  any                                                              
vehicles.  He  said  that  Uber  prefers that  Sections  3  and  4                                                              
relating  to retroactivity  remain in  the bill  because Uber  has                                                              
been giving many of free rides in Anchorage.                                                                                    
CHAIR COSTELLO  asked how  other states  have addressed  the issue                                                              
of employee versus independent contractor.                                                                                      
MR. EDWARDS said  it is being addressed in a number  of states and                                                              
Arkansas and Florida are the farthest along.                                                                                    
CHAIR  COSTELLO   asked  if  they're  moving   toward  identifying                                                              
drivers as independent contractors.                                                                                             
MR. EDWARDS replied  it is shifting in that direction  in Arkansas                                                              
and Florida.                                                                                                                    
CHAIR COSTELLO asked if there has been litigation on the issue.                                                                 
MR. EDWARDS said  he isn't familiar with any outside  the piece in                                                              
2:16:36 PM                                                                                                                    
SENATOR  ELLIS  asked  what  insurance   is  affected  other  than                                                              
workers' compensation. He noted there could be some interplay.                                                                  
MR.  EDWARDS  offered  to  distribute  a  handout  showing  Uber's                                                              
insurance information.                                                                                                          
2:17:16 PM                                                                                                                    
At ease                                                                                                                         
2:18:54 PM                                                                                                                    
CHAIR COSTELLO reconvened the meeting.                                                                                          
MR.  EDWARDS explained  that the  insurance for  TNCs bridges  the                                                              
gap  between   what  is  typically   a  commercial   and  personal                                                              
insurance industry.  From the time the driver  accepts a passenger                                                              
through  the application  to the  time that the  rider leaves  the                                                              
vehicle,  there is  $1 million  primary  insurance coverage.  That                                                              
extends to  underinsured and uninsured  motorist coverage  as well                                                              
as comprehensive  coverage. When the application is  on but before                                                              
the ride  has been  accepted, there  is contingent insurance  that                                                              
would cover in the  case of any issues with the  driver's personal                                                              
insurance.  This is  referred to  as period 1.  No transaction  is                                                              
occurring and the driver's personal insurance is primary.                                                                       
CHAIR COSTELLO opened public testimony.                                                                                         
2:21:28 PM                                                                                                                    
SHELDON  WINTERS retained  counsel, State  Farm Insurance,  stated                                                              
that State Farm  has no position on whether or not  TNCs should be                                                              
exempt  from workers'  compensation  insurance,  but has  concerns                                                              
about  the  narrow definition  of  TNCs  in  SB 58.  As  currently                                                              
drafted  it  may   have  unintended  but  dire   consequences  for                                                              
insurance coverage  liability issues.  He referenced  the consumer                                                              
warning on the  Division of Insurance website which  has joined 22                                                              
other  states  by  issuing  warnings   about  the  risks  of  ride                                                              
sharing/vehicle sharing  programs. The key point  is that personal                                                              
auto  insurance is  not intended  to  cover people  who use  their                                                              
vehicles for commercial  purposes and coverage in the  event of an                                                              
accident in those cases is unlikely.                                                                                            
MR.  WINTERS  maintained  that  commercial  activities  by  a  TNC                                                              
driver  that are  not covered  by a  personal policy  do not  just                                                              
begin and end with  picking up a passenger and  dropping them off.                                                              
Commercial activities  include the moment the TNC  driver turns on                                                              
the application and  is open for business, similar  to the taxicab                                                              
driver that turns on their "for hire" light.                                                                                    
Reiterating the  concern about the  narrow definition of  TNCs, he                                                              
directed  attention  to  the  language  on  page  3,  line  6  and                                                              
suggested that  the language  should be  broadened to  include all                                                              
aspects  of T&Cs.  He discussed  problems that  occurred in  other                                                              
states after  an accident and  warned that  if the bill  passes in                                                              
its current form  it could be used to preclude  an injured party's                                                              
recovery  from  the  TNC.  He  noted  that  State  Farm  submitted                                                              
broader  language to  the  sponsor of  SB 58  and  the sponsor  of                                                              
companion legislation.                                                                                                          
SENATOR  STEVENS   assumed  that  commercial  insurance   is  more                                                              
expensive  than private  insurance. He  asked him  to discuss  the                                                              
insurance requirements for taxicabs.                                                                                            
MR. WINTERS confirmed  that a commercial insurance  policy is more                                                              
expensive  than  a  personal  policy   and  advised  that  taxicab                                                              
insurance requirements are set through municipal code.                                                                          
SENATOR  STEVENS  asked  if  a taxicab  has  to  carry  commercial                                                              
insurance  24 hours a  day with  no switching  back to  a personal                                                              
MR. WINTERS  said that is probably  true, but State Farm  does not                                                              
insure  taxicabs. He  clarified  that insurance  companies do  not                                                              
accommodate switching  back and forth and it's a  problem that TNC                                                              
drivers  are under  the mistaken  impression  that their  personal                                                              
policy will cover them.                                                                                                         
2:31:54 PM                                                                                                                    
ARMAND SELICIANO,  Property Casualty  Insurers Association  (PCIA)                                                              
of  America,  stated  that  PCIA  has deep  concerns  with  SB  58                                                              
because  it  does  not address  liability  insurance.  Nothing  in                                                              
Alaska  law addresses  the liability  aspect  in the  event of  an                                                              
accident involving  a TNC.  The bill  provides two definitions  of                                                              
TNC  services but  neither covers  the roaming  period. Under  the                                                              
language in  SB 58 Uber could argue  that a driver who  is roaming                                                              
and  gets  in  an  accident  is  not  covered  by  the  commercial                                                              
insurance. He  cited a case in  California with that  fact pattern                                                              
and Uber  made that  argument. He suggested  amending the  bill to                                                              
include the  roaming period and  keeping an eye on  the litigation                                                              
in  California where  Uber drivers  filed suit  claiming they  are                                                              
employees, not independent contractors.                                                                                         
2:36:39 PM                                                                                                                    
CHAIR COSTELLO  announced that she  would hold SB 58  in committee                                                              
with public testimony open.                                                                                                     

Document Name Date/Time Subjects
Accountancy - Johnson #3.pdf SL&C 3/19/2015 1:30:00 PM
Board of Public Accountancy
Marital and Family - Webber #3.pdf SL&C 3/19/2015 1:30:00 PM
Board of Marital and Family Therapists
SB 58 - Version A.PDF SL&C 3/19/2015 1:30:00 PM
SB 58
SB 58 - Sponsor Statement.pdf SL&C 3/19/2015 1:30:00 PM
SB 58
SB 58 - Hearing Request.pdf SL&C 3/19/2015 1:30:00 PM
SB 58
SB 58 - Sectional Analysis.pdf SL&C 3/19/2015 1:30:00 PM
SB 58
SB 58 - Fiscal Note.pdf SL&C 3/19/2015 1:30:00 PM
SB 58
SB 58 - Letter of Support - CER Chamber.pdf SL&C 3/19/2015 1:30:00 PM
SB 58
SB 58 - Supporting Documents - MOA Bus Service Change Proposal.pdf SL&C 3/19/2015 1:30:00 PM
SB 58
SB 2 - Version H.pdf SL&C 3/19/2015 1:30:00 PM
SB 2
SB 2 - Sponsor Statement.pdf SL&C 3/19/2015 1:30:00 PM
SB 2
SB 2 - Hearing Request.pdf SL&C 3/19/2015 1:30:00 PM
SB 2
SB 2 - Letter of Support - DOD.pdf SL&C 3/19/2015 1:30:00 PM
SB 2
SB 2 - Supporting Documents - Veterans Employment Facts.pdf SL&C 3/19/2015 1:30:00 PM
SB 2
SB 2 - Title 18 Excerpt.pdf SL&C 3/19/2015 1:30:00 PM
SB 2
SB 2 - NCSL Briefing Paper.pdf SL&C 3/19/2015 1:30:00 PM
SB 2