Legislature(2003 - 2004)
03/01/2004 03:20 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 1, 2004
3:20 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. 488
"An Act relating to actionable claims against state employees;
relating to the state's defense and indemnification of its
employees and former employees with respect to claims arising
out of conduct that is within the scope of employment; amending
the Public Employment Relations Act regarding claims against the
state or state employees; and providing for an effective date."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
HOUSE BILL NO. 517
"An Act relating to registration in beneficiary form of certain
security accounts, including certain reinvestment, investment
management, and custody accounts."
- MOVED HB 517 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 488
SHORT TITLE: CLAIMS AGAINST STATE EMPLOYEES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) L&C, JUD
03/01/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 517
SHORT TITLE: SECURITY ACCOUNT BENEFICIARY DESIGNATION
SPONSOR(S): LABOR & COMMERCE
02/23/04 (H) READ THE FIRST TIME - REFERRALS
02/23/04 (H) L&C, JUD
03/01/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
GAIL VOIGTLANDER, Chief Assistant Attorney General -
Statewide Section Supervisor
Torts and Worker's Compensation Section
Civil Division (Anchorage)
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Introduced HB 488 and answered questions.
KATHLEEN STRASBAUGH, Assistant Attorney General
Labor and State Affairs Section
Civil Division (Juneau)
Department of Law
Juneau, Alaska
POSITION STATEMENT: Answered questions on HB 488.
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 488.
JIM GASPER, Counsel
Public Safety Employees Association
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns about HB 488.
JOE D'AMICO, Business Manager
Public Safety Employees Association
Anchorage, Alaska
POSITION STATEMENT: Voiced concern about the effects of HB 488
on law enforcement personnel and said it is bad public policy.
JOSH APPLEBEE, Staff
to Representative Tom Anderson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As committee aide, introduced HB 517,
sponsored by the House Labor and Commerce Standing Committee.
LORIE HOVANEC, Senior Trust Administrator
Wells Fargo Bank
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 517.
ACTION NARRATIVE
TAPE 04-22, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Representatives
Anderson, Gatto, Dahlstrom, and Guttenberg were present at the
call to order. Representatives Lynn, Rokeberg, and Crawford
arrived as the meeting was in progress.
HB 488-CLAIMS AGAINST STATE EMPLOYEES
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 488, "An Act relating to actionable claims
against state employees; relating to the state's defense and
indemnification of its employees and former employees with
respect to claims arising out of conduct that is within the
scope of employment; amending the Public Employment Relations
Act regarding claims against the state or state employees; and
providing for an effective date." [HB 488 was sponsored by the
House Rules Standing Committee by request of the governor.]
Number 0118
GAIL VOIGTLANDER, Chief Assistant Attorney General - Statewide
Section Supervisor, Torts and Worker's Compensation Section,
Civil Division (Anchorage), Department of Law, noted that she
supervises and practices in defense of the state and state
employees in court actions. She explained that HB 488 provides
a process by which claims filed against individual state
employees are subject to the scrutiny of the attorney general
(AG); if the AG finds that the actions complained of arose in
the course and scope of the employee's work, the claim is
converted into a claim against the state. The state employee
would be dismissed from the case, and the state would be
substituted in as the defendant in the action.
MS. VOIGTLANDER said the language is taken from AS 09.50.250,
which was taken directly from the Federal Tort Claims Act; she
noted that the certification process, another part of the
Federal Tort Claims Act, is missing.
MS. VOIGTLANDER discussed why she believes the certification
process is a positive one. In lawsuits where several state
employees are sued in addition to the state, the AG's office is
involved either for the state or for the state employee. When
several state employees are sued individually, the process takes
them off the job and they are distracted by the litigation;
reviewing documents, preparing depositions, and staying informed
about litigation requires the employee to be absent from work.
She provided an example, saying this bill would enable state
employees to continue to do their jobs; the litigation would be
handled by the Office of the Attorney General, and the state
would be the named defendant. She said this process parallels
how the Federal Tort Claims Act works.
MS. VOIGTLANDER pointed out that the second part of the bill
sets forth in one place, in one statute, the state's obligations
to its employees when they are sued, including the state's
defense and indemnification obligations. It sets rules for the
state employees' obligations when they are sued, in terms of
giving notice to the AG and cooperating in the defense of the
action.
MS. VOIGTLANDER explained that many collective bargaining
agreements have provisions dealing with defense and indemnity,
and several labor agreements don't have sections on defense and
indemnity. There is no unifying law regarding suits that the
AG's office can point an employee towards that includes
collective bargaining agreements, labor agreements, and
partially exempt and exempt employees.
Number 0456
MS. VOIGTLANDER said this bill would put in statute the answers
to a state employee's questions. All state employees would be
handled the same way and would have the same obligations. The
state would also have the same obligations to defend and
indemnify them in the action. She admitted the bill is somewhat
ponderous, but said she felt a state employee could read the
language and know his or her obligations and those of the state.
Number 0516
KATHLEEN STRASBAUGH, Assistant Attorney General, Labor and State
Affairs Section, Civil Division (Juneau), Department of Law,
testified to share the source of the language in this bill and
identify the circumstances under which it would arise. The AG's
office used some of the language in HB 110, introduced by then-
Representative Porter, and also borrowed from virtually all of
the collective bargaining agreements that have an
indemnification provision in them. She said they took the basic
principles and exact language, for the most part, and applied
them to everybody. These provisions, starting at proposed
Sec. 09.50.254, would apply in cases where [Sec. 09.50].253, the
first section of the bill, does not.
MS. STRASBAUGH noted that 43 U.S.C. Sec. 1983, the federal
statute under which people sue for constitutional violations,
authorizes and compels a plaintiff to sue individual officials.
There are a few other statutes, possibly the whistleblower
section, that authorize relief against individual state
employees. She continued:
For those cases, we must have a process, and we have
had a process in place which covered all of these
types of cases. It will now cover only a small number
because the quitclaims will take virtually all of the
court cases out of the process and have those cases
pursued only with the state.
For those, everyone gets a defense unless they acted
willfully or negligently or outside the scope of their
employment. These are the standards that are now
applied to those, both in and out of court, the
binding agreements. One of the aims is to enshrine it
in statute, rather than continuing to leave it to
collective bargaining. [One of the aims] is the
uniform treatment of state employees. ...
This type of decision must be left to the attorney
general, and it is not suitable for arbitration.
However, there has been some litigation filed by the
correctional office of the Public Safety Employees
Association that is now before the supreme court, and
we are concerned, as we've indicated elsewhere, that
the result of the litigation might be that they have
to arbitrate defense decisions.
Number 0733
MS. STRASBAUGH pointed out that this bill also provides a remedy
for the rather small group of employees that the AG declines to
defend on the basis that they generally are being disciplined
for misconduct. She said she felt uniformity and a predictable
procedure were appropriate, and operating under court rules for
disagreeing about the defense decision was best.
REPRESENTATIVE CRAWFORD asked what the practical application of
this bill was. He gave the example of a state employee who is
driving to a meeting and inadvertently hits another vehicle. He
asked how this bill would limit a lawsuit, and whether the state
would be held accountable for the actions of the individual in
some cases.
MS. VOIGTLANDER responded that if the plaintiff in that action
had sued both the state and the individual state employee
driver, then, if the driver had merely been negligent, the AG
would determine that the employee was acting within the scope of
employment. That employee would be dismissed from the case as
an individually sued defendant, and the claim would simply
proceed against the State of Alaska. The defenses that might
then be asserted would be those found in AS 09.50.250, which has
a list of excluded torts, the same as the Federal Tort Claim
Act. She opined that in Representative Crawford's scenario,
none of those excluded torts would be implicated.
Number 0943
REPRESENTATIVE CRAWFORD asked what the outcome would be if the
scenario included that the employee had been drinking.
MS. VOIGTLANDER replied if the state employee had been drinking
at the time of the accident, the AG would probably find that the
person wasn't acting within the scope of employment, and
wouldn't certify that state employee in this process. That
employee would continue to be an individually sued defendant in
the action, and would have to provide for his/her own
representation because, if drinking on the job, the person would
clearly not be acting within the course of employment.
MS. VOIGTLANDER said the only scenario she could think of that
gets to the core of the question would occur if a state employee
were to assault someone on the job. Assault is an excluded tort
under AS 09.50.250(3). If the AG under the circumstances
somehow found that, despite the assault, the employee was acting
within the course and scope of the job, then it would convert
into a claim against the state, and the state cannot be sued for
an assault. If, however, the individual employee had actually
committed an assault, he or she might well be outside the
parameters of state-paid defense and indemnity, in which case
there wouldn't be that certification process.
REPRESENTATIVE CRAWFORD asked if that was the only instance that
Ms. Strasbaugh could think of where this bill would actually
change the outcome. He noted that this bill isn't very broad in
scope.
Number 1077
MS. VOIGTLANDER reiterated that HB 488 mirrors the way the
Federal Tort Claims Act handles claims against state employees.
She opined that it would be the rare case that would get a
certification and yet trip into an area where the state would
have an exclusion under AS 09.50.250. Civil rights claims
founded upon the U.S. Constitution are excluded from that
certification process.
REPRESENTATIVE CRAWFORD surmised that this bill wouldn't have a
practical effect on anyone's life.
MS. VOIGTLANDER answered that she felt it would have a great
effect on state employees' lives because many state employees
are distracted when they have their name listed as a defendant
in a civil action for damages where the claim may be made for
several hundreds of thousands or millions of dollars, whether
they're defended and indemnified by the state or not. They
worry about the litigation and they're taken off the job to have
to work on the litigation. She said she thought there'd be few
circumstances in which this proposed law would substantively
affect a claimant's ability to pursue a claim, however.
Number 1173
REPRESENTATIVE GATTO referred to the phrase "within the scope of
employment" and said:
Let's say we hire somebody to go and change the light
right up there in the corner. You put the ladder
there; while we're here, he doesn't secure the door,
somebody walks in, knocks him off the ladder, he falls
on the Representative from Fairbanks. The
Representative from Fairbanks now has a claim against
that individual. Was he operating within the scope of
his employment by not making the area safe, even
though he's operating within the scope that he was
asked to go and change the light?
MS. VOIGTLANDER replied that the state employee's malfeasance
would probably be simply in the nature of negligence, and so
would still be within the course and scope. The definitional
section under Section 3 defines acting within the scope of the
employee's office or employment and is basically looking to
those services that the employer authorized to perform. The
employee is performing within the authorized time and space
limit, activated by purpose to serve the state, and this doesn't
constitute acting or failing to act with willful, reckless, or
intentional misconduct, gross negligence, or malice.
Number 1241
REPRESENTATIVE GATTO asked whether the outcome would be the same
if the employee had had a previous warning, or several previous
warnings, about a similar action.
MS. VOIGTLANDER replied that even with a previous warning, it is
still the nature of the employee's acts that are at issue. In
the case of several previous warnings, it's still the point, if
that conduct on this one occasion is what is going to be the
test for purposes of the lawsuit. If that conduct on that
occasion was no longer merely negligent, but rose to the level
to those excluded areas, then the employee wouldn't be operating
within the course and scope.
Number 1292
CHAIR ANDERSON said:
Let's say an employee is accused of misconduct and
receives discipline; then the alleged misconduct
results in a lawsuit, and that's filed against the
state and the employee. Your office determines that
the employee is not entitled to be indemnified and
defended at state expense. Then, under this
hypothetical, let's say the union files a grievance
challenging the state's misconduct decision and it
wins. So, now, the union's won. The employee's
discipline for misconduct under this scenario is
reversed in arbitration. How will that arbitration
award affect the attorney general's indemnification
decision?
MS. STRASBAUGH replied that the outcome depends on timing. She
said she hadn't encountered this particular scenario; she'd
rarely encountered the scenario where the AG wouldn't defend an
employee, since discipline had occurred and a grievance was
pending. Describing this situation as a "horserace" between the
arbitration and the tort suit, she elaborated:
The problem is that if arbitration results in a
finding that they tolerate mistakes in law, mistakes,
in fact, lessening mediation of penalty, and whether
or not that finding would ... prevent the state from
going forward with its initial decision, really
depends on the circumstances of each arbitration.
Arbitrations are binding on the parties for many
purposes, but possibly not for causes of action in
court. This is an area that varies from case to case.
... I don't mean ... to be vague, but it's very
difficult to answer your question.
Number 1423
CHAIR ANDERSON asked how many grievances were pending
arbitration as a challenge to the AG's decision not to indemnify
a state employee.
MS. STRASBAUGH replied that perhaps two or three cases were
pending.
MS. VOIGTLANDER added that based on her knowledge of the court,
it is rare that the state doesn't provide defense to a state
employee.
REPRESENTATIVE GUTTENBERG asked what other states' legislation
had been used to model this bill.
MS. VOIGTLANDER replied that several states had adopted the
Federal Tort Claim Act, but she didn't have the names of those
states at this time.
Number 1573
REPRESENTATIVE ROKEBERG asked if this bill would be able to
screen the state and the employee because the state can claim
sovereign immunity in certain instances. He also asked whether
this bill would decrease vexatious litigation.
MS. VOIGTLANDER replied that sovereign immunity for the State of
Alaska is covered in the area of excluded torts under
AS 09.50.250(3): assault, battery, false imprisonment,
interference with a contract, misrepresentation, and other
excluded torts. Once the lawsuit was converted to a lawsuit
only against the state, if any of those excluded torts were a
basis for the claim, they'd fall out under the sovereign
immunity that the state has retained in AS 09.50.250.
REPRESENTATIVE ROKEBERG asked, "So our assertion of sovereign
immunity is based on our statutory scheme right now; is that
correct?"
MS. VOIGTLANDER affirmed that.
Number 1591
REPRESENTATIVE ROKEBERG wondered if the impact of this
legislation was to standardize collective bargaining activities.
He asked if the intention was to remove this as a bargaining
point within contract negotiations or was simply to make the
effect of this type of legislation consistent.
MS. STRASBAUGH acknowledged that HB 488 has a provision that
would take the issue out of collective bargaining while
preserving existing collective bargaining agreements.
Number 1648
REPRESENTATIVE ROKEBERG asked if this was a point of contention
in the past in bargaining agreements.
MS. STRASBAUGH replied that traditionally the collective
bargaining agreements between the state and those unions that
bargain about it have a provision that says this defense
provision of the contract is not subject to arbitration,
although one unit that does have such language has brought a
suit forward asking the administrative appeal to the Alaska
Labor Relations Agency (ALRA). Subsequently, the court is
asking that the state be forced to arbitrate the decision
because it's a mandatory subject of bargaining. She noted that
ALRA said it was waived, but Judge Reese said under previous
case law of the Alaska Supreme Court it had to be arbitrated
under [AS] 23.10; that issue is before the Alaska Supreme Court.
REPRESENTATIVE ROKEBERG observed that this bill would settle
this issue prospectively, but not retrospectively.
MS. STRASBAUGH agreed.
REPRESENTATIVE ROKEBERG asked if Judge Reese's opinion was a
surprise to the state.
Number 1734
MS. STRASBAUGH replied, "There is an old case that made a
holding similar to this. The supreme court will be asked to
consider its ruling."
REPRESENTATIVE ROKEBERG asked if the administration's position
was that this bill was not intended to affect collective
bargaining activities.
MS. STRASBAUGH said the intent of the bill was to make the
process uniform and "take it off the table" so that in future
years it would not be subject to bargaining.
REPRESENTATIVE ROKEBERG asked if it was a problem in the recent
past in the collective bargaining process.
MS. STRASBAUGH answered that she wasn't aware that other
bargaining units had argued about the scope of this particular
clause.
Number 1783
REPRESENTATIVE GUTTENBERG referred to page 7, line 5, "does not
include an employee of (i) the University of Alaska; (ii) the
Alaska Railroad Corporation". He asked why Alaska Housing
[Finance Corporation] or other state agencies weren't included.
MS. VOIGTLANDER explained that the University of Alaska has a
separate existence from the state. Claims against it aren't
claims against the state, but must be made directly against the
university, and only university assets may be used to satisfy a
judgment. Statutes governing the University of Alaska also have
their own defense and indemnity language, and the university
isn't defended by the AG, but has its own counsel, risk-
management program, and insurance. Similarly, the Alaska
Railroad Corporation (ARRC), by its statute, has a legal
existence as a corporation and has to be sued in its own name.
Again, state assets may not be used to satisfy a judgment
against ARRC, it isn't represented by the AG's office, and it
isn't part of the state's risk-management arrangements.
MS. VOIGTLANDER pointed out, however, that the Alaska Industrial
Development and Export Authority (AIDEA) is within the risk-
management system. A claim against AIDEA is a claim against the
state.
Number 1880
BRAD THOMPSON, Director, Division of Risk Management, Department
of Administration, testified that his division administers the
self-insurance program for the State of Alaska and its agencies
and employees. He spoke in strong support of this legislation
because of the belief it will provide the same, consistent
protection from tort liability for all state employees, whether
they are in a classified position or are not within the defense
provisions. The bill basically codifies the existing practice.
He said the intention wasn't to leave anybody "out in the cold"
that wouldn't have been prior to this bill.
MR. THOMPSON explained that the process would be different
because actions against the individual would be treated now as
against the state only. He said the attorney general would
defend these actions, as well as the Department of Corrections
or the Department of Public Safety (DPS). He felt this bill
would simplify the process and make employees much more secure.
He commented that then-Representative Porter was still dealing
with suits from his former days with the Municipality of
Anchorage and the police department; he was still being named in
litigation many years after his service to the Municipality of
Anchorage, and this was his motive for putting forth
legislation. He also felt it would bring consistency and
conformity to union agreements and the state's practice in
defending its employees.
Number 1950
REPRESENTATIVE ROKEBERG asked Mr. Thompson to analyze the
incidence and source of these types of cases. He surmised that
the Department of Corrections and DPS might have the largest
percentage.
MR. THOMPSON replied that each agency, due to it operations, has
unique exposures and activities. The commissioner of the
Department of Transportation [& Public Facilities] often is
named solely as the executive of that agency, even though that
person really doesn't have any involvement with that activity.
Corrections is a very active environment for litigation by the
inmates, and he said healthcare and family-and-youth services
are two more areas in which liability claims are brought.
Number 2005
REPRESENTATIVE ROKEBERG asked if the incidence of these claims
was rising.
MR. THOMPSON surmised that detailed statistics are kept on each
agency's claims history, costs incurred, and outcomes. However,
identification isn't kept with regard to individually named
employees or officers. He offered to provide detailed
information for every fiscal year's activity claim for each
agency.
REPRESENTATIVE ROKEBERG asked about the supplemental budget.
MR. THOMPSON said the request would be for far less than last
year, partly because the state is totally self-insured. He
reported that the state had had excess liability insurance that
it no longer has. Thus the state is much more exposed than
formerly. The difficulty with large, significant court cases is
that it takes years to go through all the process. For example,
last year funding was requested for the resolution of one case
involving five wrongful deaths from an air crash that happened
over 10 years ago. The state had excess coverage for that
incident, he noted.
Number 2100
REPRESENTATIVE ROKEBERG asked if Mr. Thompson recalled the
annual premium for the insurance that was excessive, and also
wanted to know the number of annual cases.
MR. THOMPSON replied that he'd provide that information.
REPRESENTATIVE GUTTENBERG asked where the law had been "broken"
to the extent it needed to be fixed with this bill.
MR. THOMPSON said he believes this bill would codify an existing
practice, except for the transition of the individually named
employees that would be converted as against the state only. He
said the state, as the employer, is in most instances
responsible for the acts of its employees. Other than the
conversion of the individually named officers or state
employees, the purpose of the rest of the bill is to move
through the process consistently and make it uniform to all,
rather than for just those select few in certain classified
units that have negotiated different terms and conditions.
Number 2187
JIM GASPER, Counsel, Public Safety Employees Association (PSEA),
informed members that he was the attorney who took the case
before the Alaska Labor Relations Agency now pending before the
Alaska Supreme Court; he offered to answer questions about that
litigation. Addressing the exclusion of this process from
collective bargaining, he spoke on behalf of the correctional
officers and police officers represented by PSEA. He explained
that it is typical that someone in law enforcement is exposed to
a greater probability of being sued by someone for his or her
official conduct than the average public employee is.
MR. GASPER said aspects to this legislation place those
individuals - who already are in a position of making immediate,
snap decisions that come back to haunt them in litigation later
on - in a position of being victimized by this process. These
employees are constantly involved in litigation of one sort or
another; either they are prosecuting someone or answering to
some agency that would review their conduct, say, in a
correctional institution. Litigation is part of their lives,
and they are less concerned with time away from their jobs than
with protecting their legal rights.
MR. GASPER said the average public employee who doesn't cross
into the court's threshold doesn't have the same level of
concern that someone in public safety might have. He noted that
PSEA has had in its trooper-airport police contract, for almost
20 years, a provision that says the state will indemnify, very
similar to what the legislation intends to accomplish. But it
doesn't have an exclusion if the decisions are being challenged
through the grievance-arbitration process.
TAPE 04-22, SIDE B
Number 2272
MR. GASPER explained that the law says all grievances will be
subject to final and binding arbitration. As a matter of
policy, decisions about employee conduct have to go through this
informal dispute-resolution process. On the other hand, the
state, through this legislation, wants to take the decision
making out of that realm of scrutiny. He said, in a sense, when
an employee is told, "You've committed gross negligence,
willful, or intentional, or reckless misconduct," that employee
is being told he or she has acted improperly by an agency that
doesn't expect to be reviewed unless the employee goes to court.
If this bill becomes law, this employee, who through the union
had some level of protection, would have to defend himself or
herself. This person most likely lost his or her job or faces a
significant suspension. The person has to find an attorney and
litigate the issue of whether or not he/she committed gross
misconduct or some other willful act.
Number 2245
MR. GASPER explained that under a collective bargaining
agreement, a history of the meaning of the terms is developed
that is useful in analyzing one employee's conduct against
another's. Furthermore, employees' actions that may lead to
independent litigation against them - and whether they've acted
outside the scope of their official authority or duties - create
a history if that issue has been challenged. If someone has to
go to court each time to ask the court whether or not he/she is
eligible for indemnification, that will create an opportunity
for inconsistency: one superior court, one judicial district
versus a superior court in another judicial district, every case
turning on its own facts in separate forums. Mr. Gasper
suggested this process gives the state the upper hand when it
decides not to represent the individual, and that individual has
to then undertake a significant expense to change that decision.
MR. GASPER agreed this bill was patterned, to some extent, after
federal law. In his experience, however, he said federal law
significantly circumscribed the collective bargaining rights of
federal employees; many rights and obligations that employees
have under state law are absent because it is so highly
regulated. He didn't think it a good parallel to use the
federal practice, in this level of detail, to take this issue of
indemnification out of collective bargaining. Similarly, he
noted, there had been no testimony telling the committee that
states which have adopted the federal equivalent have collective
bargaining like Alaska does. That representation hadn't been
made, so he wondered how those states, in adopting the federal
equivalent, would apply it in the collective bargaining
scenario.
MR. GASPER pointed out that PSEA hasn't in its history
challenged an AG's decision to go to the court and provide
representation to a member that "we" represent under this long-
standing contractual clause. It has not been a problem, he
said. He added that he thinks this bill is particularly
suspicious in that it wants to take it out of the realm of
collective bargaining for a group of employees for whom it's
very important to have union representation.
MR. GASPER mentioned a provision that gives a short timeframe,
30 days, for the employee to give notice; thus the employee has
to find an attorney to bring a challenge within this timeframe
or lose the right to bring a challenge. This forecloses the
opportunity to effectively defend oneself under circumstances
that would be viewed as very negative for the individual.
Number 2117
MR. GASPER pointed out that this legislation wouldn't indemnify
an employee in a civil rights action. He said police and
correctional officers typically are sued under the federal civil
rights statute, since people who make allegations against their
use of official power sue under that statute. He said, "Yet we
view our indemnification clause in the contract to have broad
sweep to encompass that type of representation, so if a member
defends himself, he's going to be repaid the cost of doing that,
of performing his official job."
Number 2086
CHAIR ANDERSON posed a situation:
Let's suppose that the attorney general refuses to
indemnify an employee and then the employee challenges
the AG's determination in the court system, and the
court favors, ultimately, the employee. What's the
cost of litigating these issues, including the state's
obligation to indemnify an employee who is then denied
the representation?
MR. GASPER responded:
The employee, of course, has to find an attorney who
will represent the litigants in these seemingly
hopeless situations where they have been accused of
some level of conduct that did not justify
indemnifications. That's the first hurdle.
The second is that, most likely, they've suffered some
type of economic calamity - lost their job or whatever
- and are not able to underwrite the cost of potential
litigation. Since we're dealing in situations that
... may be remote, but we want to completely change
the law in the State of Alaska to reflect something
that might happen someday, if we're going to speculate
about this, the cost of getting independent, private
litigation is going to be significant compared with
the cost of being represented by the attorney
general's office.
In that particular situation that you mentioned in
Anchorage, the typical insurance-litigation attorney
charges between $175 and $325 an hour. This
individual is going to proceed against the state and,
if successful, be entitled to an award of attorney
fees against the state for having that issue resolved
against the state.
In fact, the state has a provision in here that they
may reserve rights against the employee. This appears
at [Sec.] 09.50.257. So basically what they're doing
is telling you, "We'll defend you, but we want to
protect ourselves." So they created this dual status.
Under Alaska case law, in insurance defense law, when
an insurance company tells a covered individual that
we're going to accept your tender of defense but we're
going to reserve these rights against you, the
employee doesn't have to accept the attorney that's
provided by the insurance company. They can go out
and get somebody else, and then the insurance company
is obligated to pay that individual.
Is it the AG's intent that if they reserve rights
against somebody in this situation, ... the individual
is going to select outside counsel to do the
representation and the AG's office is going to fund
that? In that sense, this statute raises a
significant question that's going to provoke some
level of judicial interpretation, and that question is
not answered.
Number 2017
CHAIR ANDERSON said it seemed less expensive to have an
assistant AG represent the employee than to hire a private
attorney.
MR. GASPER noted that state attorneys general are paid as state
employees, and thus there are substantial savings.
Number 1930
REPRESENTATIVE ROKEBERG asked Mr. Gasper to repeat the citation
he had referred to earlier and to tell the committee if it was
different from the current status.
MR. GASPER stated it to be [Sec.] 09.50.257. He said he didn't
know what the present practice is. In his union contract, he
said, typically a member would advise the AG. He explained:
The departments that our members work under have
procedures that govern these practices. You will have
a certain period of time to notify us and let us know.
They do not cover this particular instance here. But
what this does is, it gives them the right to decide,
if we have a reservation, we may provide a legal
defense. But the term "may" is discretionary. They
may not. Then the individual is going to be right
where they started. It is typical that people who
accept (indisc.) defense raise reservations. I'm not
aware that any members have had to defend themselves
if the attorney general's office creates a reservation
that needs to be addressed by individuals.
Number 1856
REPRESENTATIVE ROKEBERG asked:
Isn't that permissive word there because many times
there are issues whether or not, inside or outside the
scope of work, and the attorney general, by default,
would take the case and in the trial of fact ... that
would come out. The case itself would determine
ultimately, in the judgment of the court, to where the
facts and the judgment of the court might militate
towards a - I'm trying to find what the proper term
for that would be - to be based on the reservation of
rights. You're suggesting that's not included in your
contract currently.
MR. GASPER replied:
That is not presently included in our contract because
the term "indemnification" is broadly drawn, so it
would have a greater scope in trying to detail it. If
you were going to draft a clause that was as extensive
as this statute, it would be a significant negotiating
challenge.
Number 1815
REPRESENTATIVE ROKEBERG asked if the current status of civil
rights actions is that the cause of action would be directed
towards the individual under federal statute and the
constitutional claim.
MR. GASPER replied, "That is the status. And typically,
however, our members, when they successfully defend themselves
in these actions, expect to be reimbursed, since their actions
would come within the scope of their regular employment."
REPRESENTATIVE ROKEBERG asked if their contract called for the
AG to make the primary defense. If that didn't happen, would
the membership make the primary defense and then seek
indemnification from the state?
MR. GASPER said the contract didn't call for the AG to make the
primary defense. He continued:
I can tell you that we had a trooper that was accused
of excessive force, and he retained an attorney to
defend him. He was not ultimately sued by the person
who complained, because they raised the complaint
through the [U.S.] Department of Justice, which
commissioned the FBI [Federal Bureau of Investigation]
to investigate. He did need representation. The
position of the state was, "We can't provide you with
legal representation at this phase." So he would have
to take that up on his own. When he successfully
defeated the claim and the investigation resulted in
no further prosecution by the U.S. Attorney's office,
he was reimbursed for his cost of defense.
Number 1743
REPRESENTATIVE ROKEBERG asked if this example is similar to the
status quo, and if this proposed statutory change would affect
that particular area of contracts. He asked Mr. Gasper if,
under this statute, the state would be obligated to reimburse an
employee for the defense.
MR. GASPER replied:
I would have to speculate about the motives of the
state in excluding that from the realm of indemnified
conduct, but there is not even the supposition that
the employee would be successful in defending
themselves. Under our collective bargaining agreement
the state has provided coverage.
Number 1707
REPRESENTATIVE ROKEBERG stated:
You indicated the case at bar right now is one that
this bill would affect how you believe the current
status is of arbitration. I don't understand those
regulations and rules. Is that because of Judge
Reese's decision or because of the current contract
that you made that statement, that would change the
current status quo?
MR. GASPER responded:
There is currently case law from the Alaska Supreme
Court saying that because the Public Employment
Relations Act has mandatory grievance arbitration in
every collective bargaining agreement, ... possibly
anything within a contract has to go through the
grievance arbitration process if there's a dispute.
The language in the correctional officers' bargaining
agreement that is the subject of this challenge was
borrowed from the General Government Unit collective
bargaining agreement; at the time, the correctional
officers left the General Government Unit and became
part of PSEA. In the interim, there was acceptance of
what had been the standing General Government Unit
agreement.
We had several members who were sued by individuals
who claimed that they engaged in certain conduct, and
there was a determination by the attorney general's
office that they were involved in misconduct that
disqualified them. We wanted to challenge those
determinations, saying they were punitive. The state
refused to proceed to arbitration. What we did was,
we presented the issue to the Alaska Labor Relations
Agency.
Number 1672
The Alaska Labor Relations Agency made two findings.
The first was that under federal private-sector labor
law, and those states that have collective bargaining
who have addressed the issue, indemnification is a
mandatory subject of bargaining. However, the agency
said there was no opportunity or obligation on the
part of PSEA to insist that this piece of the contract
and disputes over that piece of the contract go
through grievance arbitration.
We appealed that decision to the superior court.
Judge Reese ruled, "Well, you have this previous
decision of the supreme court saying that, as a matter
of public policy, contracts have to have a grievance
arbitration provision. So if they do, then, if it's
in the contract, it has to be subject to that
procedure. Now, if that issue is decided by the
supreme court -- and I can tell you that the supreme
court's case-management page says there is a draft
circulating on this appeal, meaning there's an opinion
due to come out.
Number 1591
REPRESENTATIVE ROKEBERG asked if his position was that it was a
case of second review or second impression and therefore he was
"served against the law." He also asked the timeframe of this
case.
MR. GASPER replied that was correct and said:
We are trying to apply existing precedent to this
particular practice, saying that the contract can't
exclude indemnification decisions from the grievance-
arbitration process. The agency decided the case in
2001. Judge Reese decided the case in 2002. The
supreme court had oral argument last May on this
issue.
Number 1552
JOE D'AMICO, Business Manager, Public Safety Employees
Association, testified that he was also a retired Alaska State
Trooper, having served twenty years with the troopers and then
two years with the U.S. Marshals. He said the troopers were
very concerned about the proposed fundamental change in that
state troopers are currently indemnified. He had been sued as a
state trooper, he noted, and said the current system worked
quite well, in his experience.
MR. D'AMICO reviewed the current process, saying he thought the
troopers, when notified of a lawsuit, had a period of 10 days to
notify the AG's office of that suit. At that time, the AG steps
in to defend, since the contract requires that the state
indemnify the AG unless a court decides that the trooper acted
outside the scope of his or her duties. The third-party court
is the entity that decides whether or not this trooper did the
wrong thing or didn't operate correctly.
MR. D'AMICO pointed out that the proposed system removes that
level of third-party neutrality to other state employees. He
said the problem with this bill, from the law-enforcement
standpoint, is that most decisions made by troopers and other
law enforcement officers that result in litigation happen in the
blink of an eye. For example, he was shot at a few years ago
and had to decide instantly whether to shoot back; he didn't
shoot, he noted, which was the right decision because there was
a hostage involved whom he was unaware of.
MR. D'AMICO pointed out that under this bill, however, the
decision of whether his conduct was just would be made by
someone who gets to sit in an office and refer to law books. He
said, "It's just not right. We have a system. The system
works. It's not broken with regard to the troopers or airport
police. It is broken with regard to correctional officers."
Number 1455
MR. D'AMICO informed the committee that when the correctional
officers came into the PSEA, the language in their contract that
was written by the General Government Union came with them.
This language, he believed, was inadequate to protect them,
since correctional officers work with very litigious people who
have a lot of time on their hands. Inmates bring many lawsuits
against the state and state employees, many of which he believed
were unjust. He cited examples where the state had chosen not
to indemnify an employee and said:
This new bill may work well for employees who aren't
faced with life-and-death decisions in the blink of an
eye or working with people who have nothing but time
on their hands and want to sue the state. I can't
speak for those. But I can tell you, from the law
enforcement standpoint, this bill is bad public
policy. It scares the death out of state troopers and
the other employees I represent.
We have a 20-year contract with the troopers, and we
have a system that works quite well. To go backwards
on that now is robbing these employees. There's not
enough troopers out there already. It puts a big fear
over their head. They're not distracted now because
the state indemnifies them. They're going to be
distracted because they don't know if the state's
going to indemnify them. And it's no longer going to
be up to a judge; it's going to be up to someone who
isn't a neutral third party. That's what we believe
is the problem with this bill.
REPRESENTATIVE DAHLSTROM thanked Mr. D'Amico for his years of
service to the State of Alaska.
Number 1314
MS. VOIGTLANDER responded to previous testimony, stating her
understanding that the current contract allows defense with
"reservational" rights. She said the AG oftentimes defends with
a reservation of rights and that this is included in the PSEA
contract under Article 29, subsection (e). Generally, a letter
is sent to the state employees being sued, saying the state will
defend and indemnify the employee with the reservation of
punitive damages, because in the contract the state doesn't
cover punitive damages. She said this bill doesn't change the
way the state defends employees in terms of reservation of
rights.
MS. VOIGTLANDER said she believed the case where a trooper paid
his costs of defense involved a federal criminal investigation,
and the state doesn't defend individuals for criminal
investigations. Under this particular agreement, if there is a
criminal investigation and the trooper is absolved of
misconduct, then he or she can come back and ask for defense.
But the state, which is oftentimes the prosecutor of actions,
cannot prosecute with one hand and defend a state trooper who is
alleged to have committed a criminal act with the other. She
said the contract is different from other collective bargaining
agreements that allow defendants who are found to not have
committed the criminal conduct to ask for reimbursement for
defense costs in the action.
MS. VOIGTLANDER said she routinely defends state employees when
they are sued for civil rights actions. In this bill, the AG
can certify that an employee was within the course and scope,
and can convert the suit to a claim against the state for the
reason that the state cannot be sued for a violation of federal
constitutional rights, since the state is not a person under
that law. If civil rights actions were included in this bill,
it would create a "dead end" for that plaintiff.
Number 1130
REPRESENTATIVE ROKEBERG said Ms. Voigtlander had previously
testified that the right to defend was already in the contract
and that the state is currently defending in those cases.
MS. VOIGTLANDER reiterated that the state is defending, but this
bill could not convert a civil rights claim against an
individual into a claim against the state because, under federal
law, the state is not a person who is subject to a civil rights
claim for damages.
REPRESENTATIVE ROKEBERG asked if this bill excludes PSEA from
negotiating with the administration to have an exception for
that particular ability to defend. He suggested that many times
the civil rights statutes are used as a tool to try to attack
law enforcement people.
MS. VOIGTLANDER responded that the state defends troopers when
they are sued in their own names for those actions, and would
continue to defend them when they're sued. The first part of
the bill speaks to this conversion whereby a claim against a
state employee is converted into a claim against the state. The
second part talks about when that mechanism is not available,
for example, in a civil rights case; it says the state will
defend and indemnify an employee who is individually sued, as
long as it's within the scope of employment. Directing
attention to page 3, line 13, Sec. 09.50.254, she said this
would be the operative provision for a state employee who is
individually sued for violation of federal constitutional right
under 42 U.S.C. Sec. 1983.
Number 1026
REPRESENTATIVE GUTTENBERG cited an example of a trooper doing
what his supervisor says and following procedures, but something
happens to someone who then sues, saying his civil and
constitutional rights were violated. Representative Guttenberg
offered his understanding that the trooper wouldn't be
indemnified under this bill.
MS. VOIGTLANDER replied that the state would indemnify unless it
didn't provide state-paid defense, and except for punitive
damages. If the finding stated the employee did violate
constitutional rights, but the facts showed he didn't act, there
would actually be no violation because in order to violate
someone's civil rights, clearly established law must be
violated. If the officer didn't violate clearly established
law, he has a qualified-immunity defense to the constitutional
rights violation and cannot be held liable for a constitutional
rights violation. A constitutional rights violation always
requires something more than negligence, she pointed out.
Number 0827
CHAIR ANDERSON assigned a subcommittee chaired by Representative
Dahlstrom, with Representatives Guttenberg, Crawford, and
Rokeberg as the other members. He requested that they assess
the indemnification aspect of the bill.
REPRESENTATIVE ROKEBERG suggested the Department [of Law] should
be involved because of the different approaches, the exceptions
for law enforcement officers, and the issue of civil rights.
[HB 488 was held over.]
HB 517-SECURITY ACCOUNT BENEFICIARY DESIGNATION
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 517, "An Act relating to registration in
beneficiary form of certain security accounts, including certain
reinvestment, investment management, and custody accounts."
[Chair Anderson turned the gavel over to Vice Chair Gatto.]
Number 0725
JOSH APPLEBEE, Staff to Representative Tom Anderson, Alaska
State Legislature, speaking as the committee aide, introduced
HB 517, which was sponsored by the House Labor and Commerce
Standing Committee. He said HB 517 will permit an investment
management or custody account with a trust company or a trust
division of a bank with trust powers to have a beneficiary
designation take effect upon death of the owner. Under current
law, securities and brokerage accounts may have beneficiary
designations take effect upon the death of the owner pursuant to
the Uniform Transfer on Death Security Registration Act.
MR. APPLEBEE explained that the current definition of "security
account" in the uniform Act isn't broad enough to include
investment management or custody accounts, which are generally
used by trust departments. The legislation will allow all of
these products - and thus bank customers - to avoid probate by
providing a statutory authorization to use a beneficiary
designation. It will also put bank trust departments on an
equal footing with brokerage firms. Mr. Applebee said the
problem cannot be solved other than by statute. Several states,
including California, Idaho, Iowa, Minnesota, and Washington,
have enacted similar legislation in the last three years.
Number 0584
LORIE HOVANEC, Senior Trust Administrator, Wells Fargo Bank,
Anchorage, noting that she is an attorney, reinforced
Mr. Applebee's explanation. She said under current law whereby
securities and brokerage accounts may have beneficiary
designations that take effect upon the death of the account's
owner, the assets of the account pass automatically to
designated beneficiaries upon the death of the owner without
having to go through probate. The definition of security
accounts in this transfer-on-death statute wasn't broad enough
to include investment management for custody accounts, products
generally offered by bank trust departments. Alaska's transfer-
on-death statute is similar to that in other states. It was
initially drafted as a uniform state law and subsequently was
adopted in most states.
MS. HOVANEC said custody and investment management accounts are
similar to brokerage accounts except they are accounts at banks
or trust companies, not at brokerages. These accounts may
contain stocks and bonds, just like brokerage accounts. A
custody account is customer-directed: the bank or trust company
holds or "custodies" assets and then the customer manages and
directs the investment by picking the stocks, bonds, and other
assets. In contrast, in an investment management account the
bank or trust company manages the assets.
Number 0410
MS. HOVANEC provided her understanding that when the model
transfer-on-death statute was drafted and adopted in Alaska, the
drafters were focused on accounts offered by brokerages, since
it was generally assumed that bank accounts would fall under
another statute. She said HB 517 would simply make it possible
to meet customer expectations. The proposal would benefit
customers directly by avoiding probate in the same way that
other pay-on-death and transfer-on-death accounts may avoid
probate through use of these beneficiary forms. She said she
didn't think this change was controversial, and said in other
states in which this law had been enacted there haven't been any
problems with customers, to her knowledge.
VICE CHAIR GATTO asked if the probate process is difficult in
Alaska.
MS. HOVANEC replied that probate "isn't too bad" in Alaska. She
said Alaska adopted the Uniform Probate Code, which helped the
process. In response to a question from Representative Lynn,
she said the avoidance of probate is the main reason she
supports this bill.
REPRESENTATIVE ROKEBERG said sometimes trusts provide ongoing
income on a periodic basis to recipients of the trust. He asked
if this bill would help prevent interrupting the cash flow from
these trusts. He gave the example of a child as a sole survivor
after the death of his only parent and asked if the transfer by
avoiding probate would be faster.
MS. HOVANEC affirmed that.
REPRESENTATIVE ROKEBERG asked if this bill would only affect
those security accounts within the trust situation or affects
checking accounts or other types of accounts.
MS. HOVANEC replied, "The language in the amendment specified
investment management account or custody accounts, which are
with the trust division of a bank with trust powers."
TAPE 04-23, SIDE A
Number 0010
REPRESENTATIVE DAHLSTROM moved to report HB 517 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 517 was reported from the
House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:57 p.m.
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