Legislature(2003 - 2004)
04/07/2004 03:27 PM House L&C
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ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 7, 2004
3:27 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Carl Gatto, Vice Chair
Representative Nancy Dahlstrom
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 550
"An Act setting a timeline for decisions of the Regulatory
Commission of Alaska; relating to competitive telecommunications
markets; and providing for an effective date."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
HOUSE BILL NO. 542
"An Act relating to specialty construction contractors and to
construction contractor exemptions."
- MOVED HB 542 OUT OF COMMITTEE
HOUSE BILL NO. 545
"An Act relating to the extension under the State Procurement
Code of terms for leases for real estate and certain terms for
certain state contracts for goods and services; and providing
for an effective date."
- BILL HEARING POSTPONED
PREVIOUS COMMITTEE ACTION
BILL: HB 550
SHORT TITLE: TELECOMMUNICATIONS & RCA ACTIONS
SPONSOR(S): LABOR & COMMERCE
04/01/04 (H) READ THE FIRST TIME - REFERRALS
04/01/04 (H) L&C, JUD
04/07/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 542
SHORT TITLE: CONSTRUCTION CONTRACTORS
SPONSOR(S): LABOR & COMMERCE
03/24/04 (H) READ THE FIRST TIME - REFERRALS
03/24/04 (H) L&C
04/02/04 (H) L&C AT 3:15 PM CAPITOL 17
04/02/04 (H) Scheduled But Not Heard
04/07/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
SUE STANCLIFF
House Majority Office
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 542.
EDEN LARSON
Alaska Chapter
Associated Builders and Contractors, Inc. (ABC)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 542.
ROCKY SMITH, Owner
Preferred Plumbing and Heating;
Member, Alaska Chapter
Associated Builders and Contractors, Inc. (ABC)
Kenai, Alaska
POSITION STATEMENT: Expressed the need for an enforcement
provision in HB 542.
JOHN BITNEY, Lobbyist
for Alaska State Homebuilders Association (ASHBA)
Palmer, Alaska
POSITION STATEMENT: Testified that ASHBA supports HB 542.
ACTION NARRATIVE
TAPE 04-40, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:27 p.m. Representatives
Anderson, Gatto, Dahlstrom, Crawford, and Guttenberg were
present at the call to order. Representatives Rokeberg and Lynn
arrived as the meeting was in progress.
HB 550-TELECOMMUNICATIONS & RCA ACTIONS
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 550, "An Act setting a timeline for decisions
of the Regulatory Commission of Alaska; relating to competitive
telecommunications markets; and providing for an effective
date."
Number 0075
CHAIR ANDERSON assigned HB 550 to a subcommittee consisting of
Representative Dahlstrom, chair; Representative Gatto; and
Representative Guttenberg. He asked the subcommittee to have
interested parties submit written testimony, to filter through
the main issues, and then to provide the full committee with a
verbal analysis. [HB 550 was held over.]
HB 542-CONSTRUCTION CONTRACTORS
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 542, "An Act relating to specialty
construction contractors and to construction contractor
exemptions."
Number 0207
SUE STANCLIFF, House Majority Office, Alaska State Legislature,
presented HB 542, sponsored by the House Labor and Commerce
Standing Committee. Noting that this is basically consumer-
protection legislation, she paraphrased the sponsor statement,
which read [original punctuation provided]:
HB 542 lowers the limit of a project cost from $10,000
to $5,000, and expands the work that can be done by a
specialty contractor. Under current law, exemptions
allowed under AS 08.18.161(8) [allow] unlicensed
persons to act as contractors, when they are not. In
fact, they compete with contractors and are not
required to have a bond or insurance. The $10,000
limit on the value of work they can do makes this an
attractive alternative. However, having no bond or
insurance gives the consumer no protection from faulty
work.
Occupational Licensing issues these individuals a
business licensed under a 2360 code, which says their
license is "Construction related Exempt from
contractors registration". If they were to show their
license to someone, they would probably get the idea
that they were licensed contractors.
To help alleviate the problem, Occupational Licensing
has created [a] category under the 8101 code, and
called them Handymen, which is what they have always
been called, yet there is nothing in law or
regulations that use that name.
The changes provided in HB 542 will go a long way
toward resolving the issue and provide a greater level
of consumer protection.
Number 0358
CHAIR ANDERSON posed a situation in which a painter considers
himself a specialty contractor painter, rather than a general
handyman. He asked what difference [HB 542 would make].
MS. STANCLIFF answered that under current law a handyman can
accept a job to paint someone's house for under $10,000, while
the licensed contractor painter can perform any job. Although
[the handyman category] is an attractive field, consumer
protection is in danger because "a lot of people who don't have
the ability to go after someone's faulty work through their
bond."
CHAIR ANDERSON surmised, then, that with a lower limit of
$5,000, the [handyman] would have to obtain a specialty
contractor designation, and thus there would be a bond and a
higher fee.
MS. STANCLIFF agreed. A contractor who is licensed and bonded
assures a quality of work, she suggested, whereas a handyman
isn't required to [be licensed and bonded]; therefore, lowering
the limit will make the playing field more [balanced] and more
in line with what is reasonable for a handyman, while providing
consumer protection against faulty work.
Number 0507
REPRESENTATIVE GUTTENBERG asked if a history of abuses led to
[introduction of this legislation].
MS. STANCLIFF stated her belief that there is [such a history],
but deferred to the department and those in the industry with
regard to documented cases.
REPRESENTATIVE ROKEBERG related his understanding that HB 542
basically expands the definition of specialty contractor in
order to include persons who were formally categorized as
handyman when they do work valued in excess of $5,000.
Representative Rokeberg recalled that some states have regulated
handymen and provided licensure for them.
MS. STANCLIFF said she believed that was correct. She added
that the Division of Occupational Licensing, Department of
Community & Economic Development (DCED), hadn't regulated or
separately classified handymen and specialty contractors,
although that's now the case under [the division's] code 8101.
Number 0639
REPRESENTATIVE ROKEBERG noted concern with regard to raising the
bonding limit on specialty contractors. He asked if there has
been any discussion with regard to tightening the title of
HB 542 so any "mischief" could be kept minimal.
MS. STANCLIFF replied no, but said she'd be open to it, if it's
the will of the committee.
REPRESENTATIVE ROKEBERG remarked that he has heard rumors of
concern that the bonding level is too low. He expressed
interest in knowing the bonding level, especially since one
reason given for [HB 542] is consumer protection. However, he
noted concern with regard to increasing the bond levels because
it will increase costs for specialty contractors, including the
newly included home inspectors. He acknowledged there may be a
reason to increase the bonding level; however, if there isn't
going to be any discussion on the matter, the title shouldn't be
written to allow amendments that aren't desired, he said.
CHAIR ANDERSON suggested that once the committee has completed
its questions, the [title] could be tightened because he knew
there was no intention to impact the bonding.
Number 0765
EDEN LARSON, Alaska Chapter, Associated Builders and
Contractors, Inc. (ABC), in response to Representative
Rokeberg's earlier question, said the current bond limit for
specialty contractors is $5,000 and $10,000 for general
contractors. She related her understanding that any discussion
on raising those bonding limits has been dropped, at least for
this year.
MS. LARSON announced that Associated Builders and Contractors,
Inc., supports HB 542 as a step in the right direction to
enforce licensing requirements. A handyman is intended to be an
individual who performs small repair work and light residential
work. Ms. Larson said ABC's contractors have experienced
handymen-bid commercial work, which is outside the scope of the
handyman classification. She clarified that ABC remains
concerned that HB 542 doesn't address license enforcement
issues, and believes the true issue is that existing licensing
requirements aren't enforced thoroughly.
REPRESENTATIVE GUTTENBERG said he could foresee conflicts. He
posed an example in which someone installs a deck worth about
$4,000; the homeowner discovers that the septic [system] is shot
and the cost of replacement is $5,000 to $6,000; the homeowner
doesn't want to find a contractor to do it, and therefore asks
if the handyman would take care of it. He invited Ms. Larson to
comment.
MS. LARSON said examples will always push the limits of the law,
but with a septic system, she believes a mechanical contractor
might need to be involved. She highlighted that a handyman's
license isn't available to any of the licensed trades.
REPRESENTATIVE GUTTENBERG commented that the cost of everything
is increasing, although the [limit of a project cost] is being
decreased.
Number 0999
REPRESENTATIVE ROKEBERG remarked, "The current loss is when the
work is divided into contracts of amounts less than $10,000, now
$5,000, for the purpose of evasion." Therefore, he related his
understanding that it would be the aggregate amount of the
contract; it couldn't be split up in order to avoid the cap.
MS. LARSON replied that the problem is that the individuals
receiving the handyman license aren't clearly understanding the
limitations intended by that license classification. Therefore,
by reducing the limit of the project cost to $5,000, it's such a
small project that it clearly communicates that the intent [of
the handyman license] is for very minor work. Returning to
Representative Guttenberg's example, she said an individual
constructing a deck who also would feel competent to handle
repairing a septic system would likely be a candidate for a
specialty contractor license rather than a handyman license.
Number 1092
REPRESENTATIVE GATTO posed a scenario in which he purchased an
exterior door from an antique shop for thousands of dollars and
some mahogany to be installed in his house. Although labor
costs might amount to $500, the material costs amount to $5,000.
Therefore, the price is over the $5,000 project cost limit. He
asked: Still, doesn't it fall under the handyman's [license]
because the individual is only being paid $500 for a few days of
work? He suggested separating the costs for [materials and
labor]. Representative Gatto opined that if he had purchased
the materials, the job would fall under the [handyman license],
whereas if the handyman purchased the materials, the job
wouldn't fall under it.
MS. LARSON pointed out that HB 542 only addresses the size and
scope. If there is concern that the proposed limit of a project
cost would cause a much greater number of interpretive
challenges, that would be something to consider. However, she
said, [ABC's] legislative affairs committee feels HB 542 is a
step in the right direction as an educational piece for
handymen, and didn't really see a substantive difference between
$5,000 and $10,000. The issue is in regard to enforcement, she
said. She clarified that if the legislative change helps to
educate handymen and encourage appropriate licensing for
specialty contractors, then [ABC] would support it.
CHAIR ANDERSON pointed out that on page 1, line 11, if the
language "and materials" were deleted, then that would address
Representative Gatto's concern and target the labor costs.
REPRESENTATIVE GATTO commented that the materials cost isn't an
issue. He related his belief that the cost for the handyman's
labor is [what the legislation is trying to address].
MS. LARSON, in response to Chair Anderson's suggestion to delete
the language "and materials", said she didn't have a strong
opinion. She acknowledged that the cost for materials could
consume a large portion of the $5,000 early in the process. She
opined, "I think if you take the materials out, I guess my
thinking is, then ... there's no substantive difference between
removing 'materials' and reducing it to $5,000 or leaving
'materials' and leaving it at $10,000."
Number 1297
REPRESENTATIVE CRAWFORD remarked that $5,000 worth of labor is
quite a bit; if the materials cost wasn't included, the limit
would be raised over the present limit [of $10,000].
CHAIR ANDERSON agreed.
MS. STANCLIFF interjected that the "heart of it" is the
contract. She said, "I would think that the department would
look at that on a basis of if you're hiring someone only for
their labor, or if you're hiring someone to take care of the
whole project, perhaps they might interpret it that way like
Representative Crawford indicated there too."
CHAIR ANDERSON surmised, then, that if an individual purchases
$2,500 worth of paint and the labor will cost $3,500, the
department probably wouldn't view that as a project requiring a
specialty contractor.
MS. STANCLIFF indicated that was her understanding.
REPRESENTATIVE DAHLSTROM remarked that often when her husband
bids on projects, the bid includes the price of the equipment
because he can purchase that equipment at a better price than
the homeowner can.
Number 1398
REPRESENTATIVE CRAWFORD said he agrees with the intent of
HB 542, which is to have more people licensed and bonded. He
highlighted that under the current $10,000, there are roofers
who aren't licensed or bonded who are installing roofs.
Representative Crawford said he'd prefer going with the $5,000
limit that includes labor and materials.
REPRESENTATIVE ROKEBERG referred to page 1, line 12, which
relates the current law. He emphasized that if the [work is
only part] of a larger [operation], this exemption doesn't work.
However, he wasn't sure it would be enforced. Representative
Rokeberg noted his agreement with Representative Crawford, and
pointed out that the committee packet includes a letter from the
Alaska State Homebuilders Association (ASHBA) that relates it
would be [willing to support lowering the amount] to $2,500 and
[suggested inserting language] to support enforcement.
Number 1485
ROCKY SMITH, Owner, Preferred Plumbing and Heating; Member,
Alaska Chapter, Associated Builders and Contractors, Inc. (ABC),
related that any solution should contain an enforcement
provision. With regard to the earlier septic system example,
Mr. Smith informed the committee that someone can't install a
septic system in Alaska without being licensed through the
Department of Environmental Conservation (DEC). Therefore, it
wouldn't be something that a specialty contractor could perform.
CHAIR ANDERSON surmised that Mr. Smith supported HB 542, but was
suggesting including an enforcement mechanism. He pointed out
that including an enforcement mechanism could create a fiscal
note.
MR. SMITH agreed there should be some fine. He suggested
perhaps the second fine could be higher than the first. He
further suggested the fines could be laid out in law and there
would be no need to go to court.
Number 1574
JOHN BITNEY, Lobbyist for Alaska State Homebuilders Association
(ASHBA), announced that ASHBA supports HB 542. Mr. Bitney said
he would like to echo Ms. Larson's testimony. Although the
letter from ASHBA specifies the belief that HB 542 would be
better with a lower limit, ASHBA believes passage of HB 542 will
do some good. At the time HB 542 was introduced, ASHBA had been
discussing this issue from the enforcement angle and had
developed some language. He pointed out that the suggested
language is attached to the letter from ASHBA. Although the
letter relates the possibility of including the suggested
language in the legislation, ASHBA's legislative co-chairs have
agreed that attaching such language would slow this legislation.
MR. BITNEY explained that ASHBA is requesting that the language
not be included, but be considered for another time. The
enforcement language would provide the department with civil
authority to issue a fine and have a hearing officer within the
department assess a fine and a penalty against a violator,
rather than the current system of going through the attorney
general's office. Such a system, ASHBA believes, would help
with first- and perhaps second-time violators. However,
multiple violations would probably need to meet due process
requirements and go to the attorney general's office.
CHAIR ANDERSON said he would like to follow Mr. Bitney's
recommendation to move HB 542 on to the House floor and review
the enforcement issue later.
REPRESENTATIVE CRAWFORD pointed out that an individual who
receives a ticket for running a red light can take the matter to
court. He said he didn't like allowing a fine to be issued on
the spot without recourse. He noted his agreement and support
of HB 542 as written, but also noted that going further will
require him to rethink it.
Number 1724
REPRESENTATIVE GATTO pointed out that there could be scenarios
in which kids home from college are hired to do various projects
such as painting a house. He asked: Would the individual
hiring that college kid be breaking the law?
MR. BITNEY replied that a person wouldn't be a lawbreaker if the
amount was within the aggregate amount of a contract. He
pointed out that one would be contracting with someone who is
exempt from insurance and safety requirements. Violations and
problems in the area reflect on the industry as a whole, and
therefore this enters into the consumer protection
considerations. The aforementioned is the policy statement
being made with this legislation.
REPRESENTATIVE GATTO asked if "handyman" is a legal term that
the college kid should [register as] in order to work in the
scenario presented earlier.
REPRESENTATIVE CRAWFORD pointed out that when someone hires an
individual at $12 an hour, the hiring party becomes an employer
and [should] register, pay social security, and so forth. In
the alternative, the employing party could do a contract with
the employee because he or she is an independent contractor.
Therefore, Representative Crawford opined that if an individual
is merely paying someone else $12 an hour [to perform a job],
then the employing individual is a lawbreaker.
REPRESENTATIVE GATTO asked if it would be legal to contract the
individual.
AN UNIDENTIFIED SPEAKER interjected, "Under $600."
REPRESENTATIVE ROKEBERG mentioned the casual labor exemption.
CHAIR ANDERSON closed public testimony.
Number 1873
REPRESENTATIVE DAHLSTROM moved to report HB 542 out of committee
with individual recommendations and the accompanying zero fiscal
note. There being no objection, HB 542 was reported from the
House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:00 p.m.
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