Legislature(2003 - 2004)

04/07/2004 03:27 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    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                                                               
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                                                               
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                                                                    
     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                                                               
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                                                               
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                                                               
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                                                               
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                                                                 
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.                                                                                    
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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