Legislature(1995 - 1996)

02/01/1995 03:01 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
           HOUSE LABOR & COMMERCE STANDING COMMITTEE                           
                        February 1, 1995                                       
                           3:01 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Pete Kott, Chairman                                            
 Representative Norman Rokeberg, Vice Chairman                                 
 Representative Brian Porter                                                   
 Representative Jerry Sanders                                                  
 Representative Beverly Masek                                                  
 Representative Kim Elton                                                      
 Representative Gene Kubina                                                    
 MEMBERS ABSENT                                                                
 COMMITTEE CALENDAR                                                            
 * HB 72:"An Act enacting the Uniform Fraudulent Transfer Act."               
 PASSED OUT OF COMMITTEE                                                     
 HB 115:"An Act relating to settlement and payment of claims                  
 for minimum wage and overtime compensation claims and                         
 to liquidated damages and attorney fees for minimum                           
 wage and overtime compensation claims."                                       
 PASSED OUT OF COMMITTEE                                                     
 (*First Public Hearing)                                                       
 WITNESS REGISTER                                                              
 DEBORAH PERELMAN, Legislative Counsel                                         
 National Conference of Commissioners on Uniform State Laws                    
 Chicago, IL                                                                   
 Telephone (312) 864-0323                                                      
 POSITION STATEMENT: Testified in favor of HB 72.                              
 JERRY K. WEAVER, Senior Vice President                                        
 Commercial Loans                                                              
 National Bank of Alaska                                                       
 Secretary, Alaska Bankers Association                                         
 301 West Northern Lights Blvd.                                                
 Anchorage, AK 99503                                                           
 Telephone:  (907) 265-2920                                                    
 POSITION STATEMENT:  Testified in favor of HB 72.                             
 TOM EVANS, President                                                          
 Anchorage International Credit Association                                    
 2700 E. Tudor Rd.                                                             
 Anchorage, AK 99507                                                           
 Telephone:  (907) 762-8878                                                    
 POSITION STATEMENT:  Testified in favor of HB 72.                             
 MARY ELLEN BEARDSLEY, Assistant Attorney General                              
 Attorney General's Office                                                     
 Department of Law                                                             
 1031 W. 4th Ave., No. 200                                                     
 Anchorage, AK 99501                                                           
 Telephone:  269-5218                                                          
 POSITION STATEMENT:  Testified in favor of HB 72.                             
 GEORGE DOZIER, Committee Aide                                                 
 Labor and Commerce Committee Aide                                             
 Capitol Bldg., Rm 17                                                          
 Juneau, AK 99801                                                              
 Telephone:  465-4954                                                          
 POSITION STATEMENT:  Provided information on HB 115.                          
 TERRY CRAMER, Attorney                                                        
 Legal Services Division                                                       
 Legislative Affairs Agency                                                    
 130 Seward St., Suite 409                                                     
 Juneau, AK 99801                                                              
 Telephone: 465-2450                                                           
 POSITION STATEMENT:  Provided legislative counsel on HB 115.                  
 SHERRIE GOLL, Lobbyist                                                        
 Alaska Women's Lobby                                                          
 P.O. Box 22516                                                                
 Juneau, AK 99802                                                              
 Telephone:  463-6744                                                          
 POSITION STATEMENT:  Testified against HB 115.                                
 PAM NEAL, President                                                           
 Alaska State Chamber of Commerce                                              
 217 Second St.                                                                
 Juneau, AK 99801                                                              
 Telephone:  586-2323                                                          
 POSITION STATEMENT:  Testified in favor of HB 115.                            
 ED FLANAGAN, Assistant Commissioner                                           
 Department of Labor                                                           
 1111 W. 8th St.                                                               
 Juneau, AK 99801                                                              
 Telephone:  465-2700                                                          
 POSITION STATEMENT:  Provided information regarding HB 115.                   
 PREVIOUS ACTION                                                               
 BILL:  HB  72                                                               
 SHORT TITLE: UNIFORM FRAUDULENT TRANSFER ACT                                  
 SPONSOR(S): REPRESENTATIVE(S) PORTER,Bunde                                    
 JRN-DATE     JRN-PG               ACTION                                      
 01/06/95        39    (H)   PREFILE RELEASE                                   
 01/16/95        39    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/16/95        39    (H)   LABOR & COMMERCE, JUDICIARY, FINANCE              
 01/19/95        91    (H)   COSPONSOR(S): BUNDE                               
 02/01/95              (H)   L&C AT 03:00 PM CAPITOL 17                        
 BILL:  HB 115                                                                
 SHORT TITLE: DAMAGES & ATTY FEES FOR UNPAID WAGES                             
 SPONSOR(S): LABOR & COMMERCE                                                  
 JRN-DATE    JRN-PG                ACTION                                      
 01/25/95       130    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/25/95       130    (H)   LABOR & COMMERCE, JUDICIARY                       
 01/30/95              (H)   L&C AT 03:00 PM CAPITOL 17                        
 01/30/95              (H)   MINUTE(L&C)                                       
 ACTION NARRATIVE                                                              
 TAPE 95-4, SIDE A                                                             
 Number 000                                                                    
 CHAIRMAN PETE KOTT called the meeting of the House Labor and                  
 Commerce Standing Committee to order at 3:01 p.m.  Members                    
 present at the call to order were Representatives Kott, Rokeberg,             
 Sanders, Masek, Porter and Elton.  He stated there was a quorum               
 HL&C - 02/01/95                                                               
 HB 72 - UNIFORM FRAUDULENT TRANSFER ACT                                     
 Number 035                                                                    
 REPRESENTATIVE BRIAN PORTER, prime sponsor of HB 72, read the                 
 following sponsor statement:                                                  
 "The Uniform Fraudulent Transfer Act (UFTA) provides creditors                
 with a remedy when debtors transfer or hide assets that would                 
 otherwise be available to satisfy legitimate debts.  HB 72 is                 
 modeled after the uniform law adopted by the National Conference              
 of Commissioners on Uniform State Laws.  The Attorney General of              
 the state of Alaska is in support of this legislation.                        
 "Alaska law in this area was adopted in 1949 from the state of                
 Oregon and has received little legislative attention.  Yet, many              
 changes in both state and federal law, particularly in the area               
 of bankruptcy, and relationships between creditors and debtors                
 have become more complex.                                                     
 "At this time, Alaska law provides that a conveyance of real or               
 personal property will be void if it was made `with the intent to             
 hinder, delay, or defraud creditors.'  AS 34.40.010.  The                     
 existence of this fraudulent intent is a question of fact and the             
 burden of proof is upon the creditor (Summers v. Hagen_P.2d_,                 
 No.3961, May 28, 1993). This burden of proof can be extremely                 
 hard to prove.  UFTA would eliminate the present Alaskan                      
 necessity of finding actual intent by a property transferor to                
 hinder, delay  or defraud a creditor in many situations where the             
 transferor is obviously transferring assets solely to keep them               
 out of reach of transferor's creditors.  UFTA sets out numerous               
 nonexclusive factors to be considered by the court when                       
 determining if the debtor had `actual intent.'                                
 "Thirty-two states have adopted UFTA into their laws.  Uniformity             
 has become not only a question of law between states, but also                
 between state and federal law.  Without uniformity, credit                    
 becomes less available, and the credit mechanism is less                      
 reliable.  The Uniform Fraudulent Transfer Act takes into account             
 the current development in both law and practice in                           
 creditor-debtor relationships."                                               
 CHAIRMAN KOTT said this bill is a complex matter and draws on the             
 Federal Conveyance Act as well as drawing in the Bankruptcy Act               
 of 1918.  He then called for teleconference witnesses.                        
 DEBORAH PERELMAN, Legislative Counsel, National Conference of                 
 Commissioners on Uniform State Laws, testified via teleconference             
 from Chicago.  She explained that this organization is a national             
 statutory drafting committee made up of lawyers, judges, and law              
 professors who draft laws that the organization feels are needed,             
 on a uniform basis, throughout the country.  They did work such               
 as the Uniform Commercial Code (UCC), and numerous family law                 
 acts.  She stated the bottom line is that the acts that come out              
 of the National Conference are as unbiased and as unpartisan as               
 can be in order to achieve a noncontroversial adoption throughout             
 the country.  The UFTA from 1984, is a revision of the Uniform                
 Fraudulent Conveyance Act (UFCA) which was drafted by the                     
 conference in 1918.  The latter was adopted by over half the                  
 states.  Alaska did not adopt the UFCA, but instead adopted the               
 law of the state of Oregon.  The purpose of the UFTA is basically             
 the same as the earlier Act in that it's a category of transfers              
 as fraudulent to creditors and it provides creditors with a                   
 remedy for such transfers.  The basic premise is that a person                
 who has acquired debt should not be able to manipulate his or her             
 assets so that the creditors will be deprived of their value if               
 the debtor defaults on his or her debt.  The Act provides                     
 creditors with a remedy when debtors hide or transfer their                   
 assets.  The conference decided to revise the UFCA because the                
 terminology was archaic and because the Bankruptcy Reform Act of              
 1978 had dramatically changed the federal law.  Ms. Perelman                  
 stated that the relationship between the debtor and creditor had              
 become a great deal more complicated.  The UFTA has been adopted              
 by 33 states so far, and a number have indicated an interest in               
 passing the Act this year or next.  She urged Alaska to adopt the             
 Act in order to be in agreement with most of these other states.              
 Number 169                                                                    
 CHAIRMAN KOTT  stated for the record that Representative Kubina               
 arrived at 3:02 p.m.                                                          
 REPRESENTATIVE KIM ELTON asked Ms. Perelman if Oregon had adopted             
 the UFTA.                                                                     
 MS. PERELMAN stated that Oregon had adopted the Act.                          
 CHAIRMAN KOTT asked if there are any circumstances by which a                 
 transferee of a good faith transfer for value would be subject to             
 MS. PERELMAN answered that the Act sets out badges of fraud which             
 allow that even if there was a good faith transfer for value, it              
 can still be considered a fraudulent transfer under the Act, if               
 certain components of the Act are met.  She restated that her                 
 answer was "yes" there are transfers that can still be considered             
 a fraudulent transfer, even if done in good faith.                            
 Number 196                                                                    
 JERRY WEAVER, Senior Vice President and Manager of Commercial                 
 Loans, National Bank of Alaska and Secretary, Alaska Bankers                  
 Association, stated that the Bankers Association supports HB 72.              
 He agreed with Ms. Perelman's reasons.  He stated that fraudulent             
 transfer of bank collateral has been a growing problem since the              
 late 1980s.  He explained that because it is so difficult to                  
 prove the intent fraudulent transfer, few creditors would even                
 begin an action.  Mr. Weaver thinks it is time to bring this code             
 up to par with other states, and this bill would have some                    
 bearing on the outside credit that is made available within the               
 state as well as affecting creditors within the state.  He also               
 stated his organization supports updating most of the uniform                 
 state statutes and this works well in making uniform credit                   
 available throughout the country.  He also pointed out that this              
 Act is endorsed by the American Bar Association, most of the                  
 state banking associations, and several other creditor groups.                
 TOM EVANS, President, International Credit Association, testified             
 via teleconference from Anchorage.  He stated his organization                
 supports HB 72.  He said the creditors have the right to know                 
 that the debtor is not using fraudulent or illegal means to                   
 enhance his position.  He stated he is not asking that the debtor             
 lose any of his rights, but is asking that the creditor also gets             
 their rights.  He informed the committee that recent surveys show             
 that certain creditors only receive an average of 20 cents on the             
 Number 262                                                                    
 MARY ELLEN BEARDSLEY, Assistant Attorney General, Department of               
 Law, State of Alaska.  She stated she was speaking on behalf of               
 the Attorney General's Office in support of passing HB 72.  She               
 agreed with Ms. Perelman's arguments and gave an example of where             
 this Act would be very important.  She explained the following:               
 In a current civil lawsuit of Alaska Housing Finance Corporation              
 the plaintiff, Alaska Housing, sued the defendant for money owed              
 to them and attached some of his property.  After this                        
 attachment, the defendant proceeded to transfer the property to               
 his brother, and then claimed that the property was always owned              
 by his brother.  Ms. Beardsley stated current law requires that               
 Alaska Housing must show that the defendant had the actual intent             
 to fraudulently transfer this property to his brother.  She                   
 explained this is extremely difficult because this is all done                
 through circumstantial evidence.  If the UFTA had been in                     
 existence prior to this transfer, then Alaska Housing could have              
 used factors set out in that Act to show that the defendant had               
 the intent to fraudulently transfer the property.  She further                
 explained that part of the badges of fraud are that the transfer              
 is to an insider, and certainly the brother is an insider.  She               
 further stated the badges include that the debtor has                         
 retained control of the property and the transfer occurred after              
 the lawsuit.  She said the burden of proof then would be                      
 transferred over to the defendant, and he would have to show good             
 cause for the transfer.  Ms. Beardsley stated she thought this                
 case would be a good example of how the two laws differ.                      
 Number 317                                                                    
 CHAIRMAN KOTT asked Ms. Perelman what the justification of                    
 combining treatment of past and present creditors might be.                   
 MS. PERELMAN replied that the debtor would know he would be owing             
 this money, he then makes a fraudulent transfer.  That future                 
 creditor should have recourse as well.                                        
 Number 339                                                                    
 CHAIRMAN KOTT opened public testimony in Juneau for HB 72.  There             
 being no public testimony, it was then opened for discussion by               
 the committee.                                                                
 REPRESENTATIVE PORTER closed the sponsor's comment by saying that             
 Alaska laws on this case are way behind the power curve.  He                  
 further stated that HB 72 passed the House last year and got all              
 the way through the Senate, but died there in the last moments of             
 Number 351                                                                    
 CHAIRMAN KOTT commented that Ms. Beardsley indicated that our                 
 existing law isn't working.  There being no further comments,                 
 Chairman Kott said he would entertain a motion.                               
 Number 360                                                                    
 REPRESENTATIVE KUBINA moved to pass HB 72, with individual                    
 recommendations out of committee.                                             
 CHAIRMAN KOTT moved HB 72 with individual recommendations and                 
 accompanying fiscal notes out of committee.                                   
 CHAIRMAN KOTT called for a brief recess at 3:21 p.m.                          
 HL&C - 02/01/95                                                               
 HB 115 - DAMAGES & ATTY FEES FOR UNPAID WAGES                               
 Number 369                                                                    
 CHAIRMAN KOTT reconvened at 3:33 p.m.  HB 115, the labor wage and             
 hour bill, was brought before the committee.  Chairman Kott                   
 summarized the previous meeting of January 31, 1995; the changes              
 needed on HB 115 were concerning settlements between employees                
 and employers and also the way attorney fees are paid to the                  
 prevailing party.  Chairman Kott said the employee could work                 
 through the Department of Labor.  Chairman Kott called on his                 
 committee aide to give a brief overview of McKennon v. Nashville            
 Banner Publishing Co. and how it ties in with Mr. Legacki's                 
 testimony of January 31, 1995.                                                
 Number 403                                                                    
 GEORGE DOZIER, Committee Aide, House Labor & Commerce Committee.              
 Mr. Dozier cited McKennon v. Nashville Banner Publishing Co.                
 Supreme Court #93-1543, decided January 23, 1995.  Mr. Dozier                 
 described the case as the employee, Mrs. McKennon, had worked for             
 said company for 30 years, she was 62, and felt she was going to              
 be let go because of her age.  She started taking confidential                
 memos on the financial status of the company and showed them to               
 her husband.  The employer let her go allegedly because of a re-              
 entrenchment of the company.  Mrs. McKennon then brought suit                 
 under the federal act.  Mr. Dozier explained that later in the                
 case, Mrs. McKennon had given a deposition and it came out that               
 she had shown confidential material to her husband.  The company              
 then let her go again saying they had just cause.  The employer's             
 attorney then brought a summary judgment motion against her in                
 U.S. District Court and argued that because the employer had just             
 cause to dismiss her even though they had no knowledge at the                 
 time, this gave them an absolute defense to the age                           
 discrimination suit.                                                          
 Number 436                                                                    
 MR. DOZIER related that both the District Court and Circuit                   
 Courts ruled in her favor.  The Supreme Court was then faced with             
 deciding whether the existence of just cause, not known to the                
 employer, constitutes a defense for dismissal in an age                       
 discrimination case.  Mr. Dozier stated the Supreme Court ruled               
 that no, it didn't constitute an absolute defense.  This was                  
 after noting that some of the portions of the Age Discrimination              
 Act were very similar to the remedial portions of the Fair Labor              
 Standards Act (FLSA).  Mr. Dozier explained that Congress, in                 
 enacting the Age Discrimination Act, had a dual purpose both                  
 public and private.  The public act was to discourage employers               
 from discriminating against individuals, and the private                      
 motivation was to enable those individuals discriminated against              
 to recoup their damages.  Mr. Dozier summarized that the intent               
 of the decision is, that just focusing on the private aspect of               
 the Act would be sufficient in allowing individuals to recoup                 
 damages, but the public aspect wouldn't be served.  Essentially,              
 Mr. Dozier commented that what the Supreme Court did was adjust               
 the damages and allowed the lawsuit to proceed with the ruling                
 that damages would be cut off as of the date the employer learned             
 it had just cause.                                                            
 Number 466                                                                    
 REPRESENTATIVE PORTER asked if it did decide that the damages                 
 were cut off at the time of cause?                                            
 MR. DOZIER said that damages could not be computed at the time                
 the employer learned of (Indisc.--static).                                    
 CHAIRMAN KOTT asked if there were additional questions for Mr.                
 REPRESENTATIVE PORTER asked what the connection is between this               
 case and HB 115.                                                              
 CHAIRMAN KOTT responded that it did seem impossible to tie in                 
 some connection.                                                              
 TERRY CRAMER, Attorney, Legal Services Division, Legislative                  
 Affairs Agency, stated that the case sounded like there were                  
 similar statutes which may be changed by the legislature.                     
 Number 485                                                                    
 REPRESENTATIVE ELTON asked if the body should get back in touch               
 with Mr. Legacki to see if they'd missed his point of testimony.              
 MR. DOZIER stated that only connection with HB 115 and McKennon             
 v. Nashville Banner Publishing Co., and he felt it a weak                   
 connection, was that perhaps Mr. Legacki was arguing that like                
 the Supreme Court emphasized the public purpose, the dual aspect              
 of this particular statute, the age discrimination placed                     
 reliance on an importance on the public purpose behind the Act,               
 thereby allowing the damages.  He stated that perhaps by way of               
 analogy it would do the same when confronted with the Fair Labor              
 Standards Act and further by way of inference that state statutes             
 would diminish remedial rights of the FLSA.  Mr. Dozier stated                
 this was the only connection that he could perceive.                          
 Number 507                                                                    
 REPRESENTATIVE ELTON stated they should move HB 115 forward to                
 Judiciary so they could get back in touch with Mr. Legacki to see             
 if they missed something.                                                     
 Number 513                                                                    
 CHAIRMAN KOTT turned to public testimony in Juneau.                           
 SHERRIE GOLL representing the Alaska Women's Lobby, indicated her             
 concern that HB 115 seemed contrary to the letter of the Fair                 
 Labor Standards Act.  Ms. Goll outlined three areas that                      
 concerned her the most.  The first was the change from current                
 exemption from court rule; specifically, prohibiting the                      
 defendant from collecting attorney fees.  She asked why we can                
 get away with changing the Act in the state, but under the larger             
 umbrella act we can't get away with it?  She went on to say this              
 change would say that liquidated damages can be bargained away or             
 waived.  She also stated if the case is taken through the                     
 Department of Labor, damages would be automatic, but if you have              
 an attorney, your damages may or may not be awarded.  She talked              
 to someone from the Department of Labor prior to testifying and               
 asked them what would make an employee not take their case                    
 through the Department of Labor.  She explained that the                      
 Department of Labor sometimes tells employees to get counsel.                 
 She stated further the federal act doesn't allow people to waive              
 their rights.  She pointed out for the record that when HB 115                
 was in the session last year in the senate, in the title there                
 was a court rule change, because this bill was making a change to             
 Alaska Rule of Civil Procedure 82.  She asked why a court rule                
 change was required by the same legislation, and with the new                 
 redrafted version, there was no required court rule change in the             
 CHAIRMAN KOTT asked if there was anyone else to testify on HB
 CHAIRMAN KOTT described a memo from Parry Grover dated May 9,                 
 1994, that appeared to be relevant.  Chairman Kott noted in the               
 memo it states that federal law does not prohibit states from                 
 adopting their own wage and hour laws.  Chairman Kott pointed out             
 that prior to the Kinney case, settlements between employers and              
 employees were the most expeditious thing to do to resolve                    
 matters.  Chairman Kott commented that since the Kinney case                  
 though, that was no longer the case.  He further stated the                   
 purpose behind HB 115 was to bring us back to pre-Kinney days.                
 Chairman Kott described what HB 115 was attempting to do, and                 
 that was to grant the court discretion to award less than full                
 liquidated damages with no guarantee that the court has to do                 
 this, since the burden of proof is on the employer.  The                      
 Department of Labor is only there to negotiate.  If the employee              
 agrees with the negotiation, he/she can then waive their rights               
 and then a settlement can take place.  Chairman Kott explained                
 that with this, they were opening up an option for the employee               
 to deal directly with the employer with certain safeguards that               
 must be followed, which are detailed in HB 115.  Chairman Kott                
 summarized that the last provision of HB 115 was that they were               
 conforming to civil law by awarding the prevailing party attorney             
 fees.  Chairman Kott then reiterated that HB 115 has a Judicial               
 referral, and they would attempt to contact Mr. Legacki and Mr.               
 Blasco for further testimony if needed.                                       
 Number 610                                                                    
 REPRESENTATIVE KUBINA requested permission to ask Terry Cramer                
 who drafted HB 115 some questions.  He stated that when we change             
 a court rule it takes a two-thirds vote, and he asked, if we                  
 exempt something from court rule, what majority does that take?               
 Number 614                                                                    
 TERRY CRAMER answered she didn't believe that it did, but she                 
 would check.  She also stated she wasn't sure why the Senate                  
 version had a court rule change notation and this didn't.                     
 REPRESENTATIVE KUBINA stated that when HB 115 was written                     
 originally as awarding to the plaintiff, it doesn't appear from               
 what was taken out, it referred to a court rule and would have                
 had the effect of altering the court rule.                                    
 MS. CRAMER replied that if, the court rule were in existence at               
 the time this was written.                                                    
 CHAIRMAN KOTT remarked that then what they were doing in essence,             
 was repealing an exemption to the existing court rule and not                 
 actually changing the court rule; so therefore a court rule                   
 change wouldn't be required in this legislation.                              
 Number 634                                                                    
 REPRESENTATIVE PORTER remembered that last year when this went                
 through Judiciary, they addressed the same question and                       
 determined that it wasn't required; it was a substantive change,              
 not a procedural change.                                                      
 REPRESENTATIVE ELTON stated he was concerned with the sectional               
 analysis; it says the rest of the Act applies to actions in which             
 a final judgment hasn't been entered yet.  He further stated in               
 Section 4 of HB 115 (indisc.--paper shuffling).                               
 TAPE 95-4, SIDE B                                                             
 Number 000                                                                    
 REPRESENTATIVE ELTON asked whether an employer could present the              
 employee with a written settlement agreement prior to employing               
 that person and whether signing that agreement could be a                     
 condition of employment.                                                      
 Number 032                                                                    
 MS. CRAMER stated that would be something that this doesn't                   
 directly address, but it sounds like the employer would have too              
 much power holding the employee to that bargain.  She further                 
 stated it really depends on the facts of the case.                            
 Number 046                                                                    
 CHAIRMAN KOTT asked what the terms would be in that type of                   
 REPRESENTATIVE ELTON replied that perhaps the employee wouldn't               
 seek liquidated damages, or if they did, they couldn't collect                
 more than fifty cents on the dollar of minimum wage or overtime.              
 Representative Elton essentially wanted to make sure that a                   
 written settlement couldn't be a condition of employment.                     
 MS. CRAMER believed that a court might not recognize that as a                
 settlement if it were entered into before there was a claim.  Ms.             
 Cramer stated that a settlement was a resolution of an existing               
 dispute and there is no dispute until the hours have been worked.             
 CHAIRMAN KOTT concurred that you couldn't settle something until              
 it exists.                                                                    
 Number 050                                                                    
 REPRESENTATIVE ELTON asked whether the Federal Fair Labor                     
 Standards Act would allow the state to set a standard that is                 
 less than the federal standard; and if so, would the federal                  
 standard prevail despite the lower state standard.                            
 MS. CRAMER responded that the federal standard would apply for                
 the Feds and they have the responsibility for enforcing the                   
 Federal Fair Labor Standards Act; the state has the                           
 responsibility for enforcing the state act.  She stated the state             
 act was different in that our minimum wage is higher by statute,              
 and our overtime provisions specify no more than an eight hour                
 day.  The federal statute says that after forty hours a week,                 
 you're entitled to overtime.  Ms. Cramer stated if there was a                
 case that violated both federal and state laws, and the federal               
 government wanted to enforce their Act, then the federal law                  
 would apply.  She stated that any state standards not included in             
 the federal law should not be available.  She noted that when the             
 state went to enforce its law, it would have to comply with what              
 the legislature had established as state policy.                              
 REPRESENTATIVE ELTON asked if attorney fees by the employer could             
 be classified as a business expense.                                          
 MS. CRAMER replied she would assume that they could be, but she               
 wasn't a tax lawyer.                                                          
 CHAIRMAN KOTT called Pam Neal to testify.                                     
 Number 116                                                                    
 PAM NEAL, President of Alaska State Chamber of Commerce, stated               
 the chamber was in support of HB 115.  She feels it a punitive                
 measure having to pay liquidated damages without giving thought               
 to what the cause was.  Ms. Neal said that bringing it more in                
 line with federal law would be a fairer measure.                              
 Number 135                                                                    
 REPRESENTATIVE ELTON asked Ms. Neal if she had looked at the                  
 issue of attorney fees.                                                       
 MS. NEAL responded that there was more of move to balance the                 
 playing field with having attorneys fees.  Knowing that if you                
 lose you have to pay attorney fees might limit the number of                  
 frivolous lawsuits.                                                           
 Number 153                                                                    
 CHAIRMAN KOTT asked Ms. Neal if she felt that HB 115 would ease               
 some of the burden on the court system.                                       
 MS. NEAL responded not only the court system, but the                         
 administrative process also.                                                  
 Number 163                                                                    
 CHAIRMAN KOTT asked Ms. Neal to comment on some of the safeguards             
 that have been built into the legislation; did she feel they were             
 too weak or too strong?                                                       
 Number 167                                                                    
 MS. NEAL believed that the safeguards were still there for the                
 employee.  It isn't good for the business community, as a whole,              
 not to be interested in the welfare of the employee.  Ms. Neal                
 explained there ought to be opportunity for hearing the intent                
 behind the error, and these damages are punitive in thinking, and             
 therefore, there should be some measure of judgment on whether                
 there was fault or not.                                                       
 ED FLANAGAN, Assistant Commissioner for the Department of Labor,              
 commented on Ms. Cramers' comments regarding a case of an                     
 employer having the employee sign a settlement prior to                       
 employment.  Mr. Flanagan stated this was the situation down line             
 after the claim is incurred.  With regard to conformity under                 
 federal law, under the FLSA there isn't any provision for                     
 attorney fees for plaintiffs.  The McKennon case reaffirmed                   
 public policy, where plaintiff suits are fostered by an award of              
 attorney fees only to that party.  Mr. Flanagan disclosed that                
 the Department of Labor felt that unless there are some tight                 
 parameters, it's just too easy to end up in an ignorance of the               
 law defense.  Mr. Flanagan then described a federal case where a              
 motel association put out a newsletter that showed how their                  
 employees weren't covered by the FLSA, and a motel owner went by              
 that and was let off the hook for liquidated damages.  Mr.                    
 Flanagan stated that the law is punitive, and the way to protect              
 yourself is to be informed of the law.                                        
 Number 224                                                                    
 REPRESENTATIVE ELTON asked if there might be more administrative              
 resolving of these issues.  If so, if more are diverted to                    
 administrative resolution, would the Department of Labor be                   
 Number 233                                                                    
 MR. FLANAGAN agreed that it was possible.  He stated that if we               
 go to pre-Kinney where you could settle for less than full                    
 liquidated damages, the department would support that.                        
 Number 240                                                                    
 REPRESENTATIVE ELTON asked if there would be a fiscal impact on               
 the department if they resolve more of these cases                            
 Number 248                                                                    
 MR. FLANAGAN responded that it could go either way.  There                    
 probably will be less of these cases.  If you go to the court                 
 rule, the issue is that the fees are 30 percent of the reasonable             
 fees that currently are awarded with these cases.  It will have               
 an effect of putting more of a burden on the department because               
 it would discourage employees from taking them on and attorneys               
 from representing them.                                                       
 CHAIRMAN KOTT closed public testimony.                                        
 Number 261                                                                    
 REPRESENTATIVE KUBINA stated he was concerned with the courts                 
 being able to award judgment on the prevailing party.  He felt it             
 would be hard for an employee to defend his rights.  He brought               
 up the fact that Tesoro supports this bill, but obviously they                
 have attorneys on staff, so it's not as much of a burden for them             
 as for an employee to try to find an attorney to represent them.              
 Representative Kubina asked if the sponsor would consider it a                
 friendly amendment to delete section two - to leave the lawyers               
 the way the law is now.                                                       
 Number 290                                                                    
 CHAIRMAN KOTT replied that he would not consider it because what              
 the intent is, is to reduce the number of frivolous lawsuits.                 
 Number 299                                                                    
 REPRESENTATIVE PORTER stated he supports moving HB 115 out.                   
 Number 334                                                                    
 REPRESENTATIVE ELTON agreed with the need to reduce the load on               
 the courts, but didn't agree with the attorney fees paid by the               
 prevailing party.  Representative Elton described a case in the               
 fishing industry where the company has made a practice of not                 
 paying overtime, and to pay less than minimum wage.  Every time               
 they get caught they declare bankruptcy, re-form under a new name             
 and do it again.  These people that are bringing the actions are              
 minimum wage.  What we're doing with the prevailing party                     
 provision in this bill is making them make an additional                      
 decision.  He believes we're increasing the risk to them, they                
 know they can't afford to lose.  Essentially, Representative                  
 Elton stated he would feel a lot more comfortable voting to pass              
 HB 115 out if section two was deleted.                                        
 Number 386                                                                    
 CHAIRMAN KOTT asked what the will of the committee was.                       
 Number 391                                                                    
 REPRESENTATIVE MASEK made a motion to move HB 115 to the                      
 Judiciary Committee.                                                          
 CHAIRMAN KOTT stated there was a motion to move HB 115 out of the             
 Labor & Commerce Committee to the Judiciary Committee.  Hearing               
 no objection, HB 115 with accompanying fiscal notes and                       
 individual recommendations was passed out.                                    
 There being no further business to come before the House Labor                
 and Commerce Committee, Chairman Kott adjourned the meeting.                  

Document Name Date/Time Subjects