Legislature(2019 - 2020)BELTZ 105 (TSBldg)
02/20/2020 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings | |
| Presentation: Employment Preference Overview | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 20, 2020
1:32 p.m.
MEMBERS PRESENT
Senator Click Bishop, Chair
Senator Gary Stevens, Vice Chair
Senator Mia Costello
Senator Joshua Revak
Senator Elvi Gray-Jackson
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
Senator Donny Olson
COMMITTEE CALENDAR
CONFIRMATION HEARINGS
Alaska Workers' Compensation Board
Lake Williams - Fairbanks
- CONFIRMATION ADVANCED
Board of Barbers and Hairdressers
Michelle McMullin - Anchorage
- CONFIRMATION ADVANCED
Occupational Safety and Health Review Board
Vincent Perez - Wasilla
- CONFIRMATION ADVANCED
PRESENTATION: ALASKA EMPLOYMENT PREFERENCE LAWS SINCE THE 1960s
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LAKE WILLIAMS, Appointee
Alaska Workers' Compensation Board
Department of Labor and Workforce Development (DOLWD)
Fairbanks, Alaska
POSITION STATEMENT: Testified as re-appointee to the Alaska
Workers' Compensation Board.
VINCENT PEREZ, Appointee
Occupational Safety and Health Review Board
Department of Labor and Workforce Development (DOLWD)
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Occupational
Safety and Health Review Board.
MICHELLE MCMULLEN, Appointee
Board of Barbers and Hairdressers
Department of Commerce, Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Board of
Barbers and Hairdressers.
JOSEPH DUNHAM, Supervisor
Wage and Hour Section
Labor Standards and Safety Division
Department of Labor and Workforce Development (DOLWD)
Anchorage, Alaska
POSITION STATEMENT: Participated in the presentation on Alaska's
employment preference laws since the 1960s.
JOSEPH KNOWLES, Deputy Director
Division of Labor Standards and Safety
Department of Labor and Workforce Development (DOLWD)
Juneau, Alaska
POSITION STATEMENT: Participated in the presentation on Alaska's
employment preference laws since the 1960s.
ACTION NARRATIVE
1:32:12 PM
CHAIR CLICK BISHOP called the Senate Labor and Commerce Standing
Committee meeting to order at 1:32 p.m. Present at the call to
order were Senators Gray-Jackson, Costello, Revak, and Chair
Bishop. Senator Stevens arrived soon thereafter.
^Confirmation Hearings
CONFIRMATION HEARINGS
Alaska Workers' Compensation Board
Board of Barbers and Hairdressers
Occupational Safety and Health Review Board
1:33:27 PM
CHAIR BISHOP announced the first order of business would be
consideration of governor appointees. He asked each appointee to
place their name and affiliation on the record, give a brief
introduction, and discuss the reason they want to serve on the
board or commission. He advised that public testimony would be
taken after all appointees have testified and the names would be
forwarded to the full body for consideration. The hearing was
not a recommendation on any subsequent vote.
1:35:20 PM
LAKE WILLIAMS, Appointee, Alaska Workers' Compensation Board,
Department of Labor and Workforce Development (DOLWD),
Fairbanks, Alaska, stated that he was born and raised in
Fairbanks. He attended and received a Bachelor of Business
Administration from the University of Iowa in 2000. During that
time he was also an apprentice with the International Union of
Operating Engineers Local 302 and Senator Bishop was his
apprentice coordinator. He graduated from that program in 2002
and is currently the district representative of Local 302 in
Fairbanks. He related that he had served on the Fairbanks
Chamber Board and the Fairbanks Economic Development Council,
and was currently the president of the Fairbanks Building and
Construction Trades. He noted that he was also a training trust
trustee and a Big Brother from Big Brothers Big Sisters.
MR. WILLIAMS stated that he was first appointed to the Workers'
Compensation Board By Governor Parnell in 2014 and this would be
his second reappointment. He said the decisions this board makes
affect people's lives but it also makes a difference. He
emphasized that he was committed to trying to improve the system
for contractors, employers, and workers. Serving can sometimes
be difficult and this board requires its members to do the work,
he said. Fortunately, his employer supports his service.
1:38:20 PM
SENATOR REVAK commented that Mr. Lake has lots of professional
experience and he appreciates that he is a Big Brother. It
speaks volumes to his character.
MR. WILLIAMS responded that he was matched with his little
brother Ryan when he was 12 and they remained together until
they timed out when Ryan reached age 18. They are still in
contact as he and his mother became part of the Williams family.
1:38:56 PM
SENATOR STEVENS joined the committee.
CHAIR BISHOP shared that it had always been his philosophy to
get all the education possible. Therefore, as the apprenticeship
coordinator he allowed Mr. Williams to attend college and get a
BA from the University of Iowa while he was an apprentice.
He recognized that Senator Giessel was in attendance.
1:40:30 PM
VINCENT PEREZ, Appointee, Occupational Safety and Health Review
Board, Department of Labor and Workforce Development (DOLWD),
Anchorage, Alaska, stated that this was a reappointment and he
had enjoyed serving for the last two years. He related that he
chose to move to Alaska and raise his family here. He had
enjoyed working in the safety field since leaving the Army in
1991. Serving on this board is a small way to give back to the
state that has given him so much, he said.
1:41:57 PM
CHAIR BISHOP reviewed Mr. Perez's resume and described him as
consistent in his education and work which was now with
Anchorage Municipal Light and Power (ML&P). It is important work
to keep employees safe so there was no need to visit the appeals
commission.
MR. PEREZ responded that was why he was in business.
1:42:52 PM
MICHELLE MCMULLEN, Appointee, Board of Barbers and Hairdressers,
Department of Commerce, Community and Economic Development
(DCCED), Anchorage, Alaska, thanked the committee for the
opportunity for a reappointment. She stated that she had lived
in Alaska since 1996. She received her license in Georgia to be
a nail technician before age 18 and moved to Alaska shortly
thereafter. She raised her family in Alaska. In 2012 she
received her esthetician's license from a local school. She
expressed gratitude for the opportunity to help the industry in
Alaska to ensure it was in tune with what was happening in the
Lower 48, licensees follow appropriate standards, and the public
was safe.
CHAIR BISHOP commented on her extensive experience and that she
knows what to look for.
MS. MCMULLEN agreed.
1:45:01 PM
CHAIR BISHOP stated that in accordance with AS 39.05.080, the
Senate Labor and Commerce Standing Committee reviewed the
following and recommends the appointments be forwarded to a
joint session for consideration:
Board of Barbers and Hairdressers
Michelle McMullin - Anchorage
Alaska Workers' Compensation Board
Lake Williams - Fairbanks
Occupational Safety and Health Review Board
Vincent Perez - Wasilla
He reminded members that signing the reports regarding
appointments to boards and commissions in no way reflects
individual members' approval or disapproval of the appointees;
the nominations are merely forwarded to the full legislature for
confirmation or rejection.
1:45:39 PM
At ease
^Presentation: Employment Preference Overview
Presentation: Employment Preference Overview
1:47:21 PM
CHAIR BISHOP reconvened the meeting and announced the final
order of business would be an overview of employment preference
in Alaska.
1:47:50 PM
JOSEPH DUNHAM, Supervisor, Wage and Hour Section, Labor
Standards and Safety Division, Department of Labor and Workforce
Development (DOLWD), Anchorage, Alaska, stated that he and
Deputy Director Joseph Knowles were asked to provide an overview
of Alaska's employment preference laws since 1960. He related
that he started as an investigator with the Wage and Hour
Section in 2005 and was promoted to his current position as
statewide supervisor in 2011.
MR. DUNHAM advised that the terms "employment preference,"
"resident hire," and "36.10" are synonymous but he would
primarily refer to resident hire throughout the presentation. He
reported that the first resident hire law was enacted in 1960
with the intention of putting Alaskans to work on the Trans
Alaska Pipeline. The next resident hire law, which passed in
1972, applied to all oil and gas leases, easements or rights-of-
way permits for oil or gas pipeline purposes, utilization
agreements, or any renegotiation of any of the preceding to
which the state was a party. The law included a one year
durational residency requirement.
1:52:54 PM
MR. DUNHAM turned to the first Constitutional Challenge to the
law, Hicklin v. Orbeck, 437 US 518 - Supreme Court 1978. He
reviewed the following from slide 4:
In 1975, the Department received numerous complaints
that alleged nonresident workers were dispatched to
jobs on the Trans-Alaska Pipeline while Alaska
resident workers were not. The Commissioner of the
Department of Labor issued cease and desist orders to
labor unions who had dispatched workers to the job and
required that qualified Alaska residents be preferred
and dispatched before any non-residents were
dispatched. As such, several workers including Hicklin
were unable to gain employment on the project.
Alaska's Supreme Court ruled that the 1-year residency
requirement unfairly discriminated against newcomers
to the state, but held that the Act's general
preference for Alaska residents was constitutionally
permissible.
Hicklin appealed to the US Supreme Court.
US Supreme Court reversed the Alaska Supreme Court
decision. The US Supreme Court held that the State did
not show that the hiring of nonresident workers
constituted a peculiar source of the "evil at which
the statute is aimed." The US Supreme Court found that
"Alaska Hire" violated the Privileges and Immunities
Clause of Art. IV, ? 2 and the Equal Protection Clause
of the Fourteenth Amendment.
1:53:34 PM
CHAIR BISHOP noted that last week the committee heard that the
US Supreme Court talked about the law in terms of a "peculiar
source of evil." He then asked Mr. Dunham if he recalled when
residents were issued an Alaska resident hire card
MR. DUNHAM answered no.
1:54:33 PM
MR. DUNHAM moved to slide 5 that lists the following points in
the first revision of the Alaska resident hire law:
Alaska's Legislature drafted a new law that was
designed to give Alaska residents preference on
public works projects and on construction jobs.
AS 36.10.010 required that all work on all public
construction projects be performed almost entirely
by Alaska residents.
The Alaskan preference applied to all job
classifications regardless of whether Alaska residents
in those classifications were in need of work.
He noted that this law required 95 percent resident hire
unless the project had 10 or fewer employees in which case
only 90 percent resident hire was required.
1:55:25 PM
MR. DUNHAM directed attention to slide 6, Constitutional
Challenge No. 2. He paraphrased the following points:
Robinson v. Francis 713 P. 2d (Alaska 1986)
Department issued enforcement notice to contractor on
a public construction contract at North Pole High
School in 1983. Subsequently, a non-resident
ironworker was terminated. Terminated non- resident
worker sued the State seeking
declaration that AS 36.10.010 was
unconstitutional under privileges and immunities
and equal protection clauses of the US
Constitution and the Alaska Constitution.
Injunctive relief and damages under 42 U.S.C. ?
1983
The Alaska Superior Court entered partial judgment for
Francis in the amount of $30,676 in wages, and
declared AS 36.10.010 violated the privileges and
immunities clause. The State and Francis appealed.
The Alaska Supreme Court held that AS 36.10.010
violated the privileges and immunities clause of
article IV, 2 of the US Constitution. However, it
reversed the Superior Court's award of damages and
held that the State may not be held liable for damages
arising from the passage of a law later found to be
unconstitutional
In response to the Alaska Supreme Court ruling, the Alaska
resident hire law underwent revision No. 2. He spoke to the
following points from slides 7 and 8:
Legislature enacted a new statute designed to give
residents preference on public works and construction
jobs in May of 1986. Became effective in spring of
1987.
Created four hiring preferences.
• Eligible individuals residing within a zone
of underemployment (AS 36.10.150)
• Eligible residents of an economically
distressed zone (AS 36.10.160)
• Eligible economically disadvantaged minority
residents of a zone (AS 36.10.170)
• Eligible economically disadvantaged female
residents of a zone ((AS 36.10.175)
The revised law differed from the previous versions in
that:
• The law was only triggered when the
unemployment rate reached certain levels,
• The Commissioner of the Department Labor
made employment preference determinations,
• Preference required on a craft-by-craft
basis,
• Imposed only for those job categories
that had high resident unemployment,
and
• Included special provisions for
minority and female hire preference.
MR. DUNHAM reviewed the points of the third constitutional
challenge of resident hire outlined on slide 9:
State v. Enserch Alaska Const., Inc., 787 P. 2d 624
Alaska: Supreme Court 1989.
The State and Enserch entered into a contract for the
construction of the Red Dog Mine Road Project in 1987.
Later that same year, the Northwest Arctic Borough
requested that the Commissioner of Labor declare the
borough an economically distressed zone. The
Commissioner reviewed and evaluated information
related to the Borough's request and subsequently
issued emergency regulations that declared the Borough
was an economically distressed Zone.
CHAIR BISHOP commented that the borough requested that the
commissioner determine that the borough was an economically
distressed zone.
MR. DUNHAM agreed and continued to review the challenge:
The Red Dog project was subject to the employment
preference requirements of AS 36.10.160 dealing with
residents of an economically distressed zone.
(at the time 50% resident hire required)
In 1987, Enserch filed suit seeking
• declaration that AS 36.10.160 violated equal
protection guarantees and federal privileges
and immunities clause
• damages for increased costs incurred to
comply with the law.
Alaska Superior Court entered partial judgement for
Enserch, the State appealed
MR. DUNHAM highlighted the request for damages.
CHAIR BISHOP observed that the superior court entered a partial
judgement for Enserch and the state appealed.
MR. DUNHAM said yes and one of the issues was the request for
damages. He continued to review the third constitutional
challenge to the resident hire law outlined on slide 11:
The Alaska Supreme Court found that:
• The disparate treatment of unemployed
workers in one region in order to confer an
economic benefit on similarly- situated
workers in another region was not a
legitimate legislative goal,
• Alaska's constitution guarantees rights of
"persons", not communities. Communities are
separate from the people who constitute the
communities,
• AS 36.10.160 and implementing regulations
contravened the equal protection clause of
the state constitution, and
• Enserch had no right to seek damages for the
State's enforcement of the unconstitutional
law.
CHAIR BISHOP commented that this ruling gets to the current law.
1:59:42 PM
MR. DUNHAM agreed. He reviewed the current law under AS 36.10 as
outlined on slide 12:
Current Law AS 36.10
90% of workers in applicable crafts must be Alaska
residents.
Per AG guidelines addressed in WHPL 71A
(12/27/1984), Employment Preference is only
enforced if classification appears in Laborers' &
Mechanics' Minimum Rates of Pay, Pamphlet 600.
Not enforced for Foremen or Superintendents who
do not perform hands-on work, i.e., Architects,
Engineers
Penalties are assessed on a weekly basis and are equal
to the wage amount that should have been paid to
displaced Alaska resident workers.
Applies to non-federally funded public construction
contracts let by the state or political subdivisions
of the state and certain construction contracts which
utilize state funds.
Requires 90% preference for qualified, eligible
residents.
Residents must be eligible for preference AS
36.10.140.
MR. DUNHAM clarified that a state-funded project that receives
no federal money would trigger the resident hire employment
preference.
2:01:57 PM
CHAIR BISHOP thanked him for the clarification and commented
that that narrowed the scope of applicability.
MR. DUNHAM agreed and continued to review the points in the
current resident hire law:
Worker must reside in zones of underemployment (AS
36.10.150)
• Determinations made by Commissioner of Labor
and Workforce Development valid for 2 fiscal
years.
• Unemployment rate in the zone must be 10% or
greater than the federal rate.
• The Commissioner's most recent determination
(July 2019) identifies the entire state as a
zone of underemployment.
Alaska's unemployment rate in
December of 2019 was 6.1%.
The federal unemployment rate was
3.5%.
CHAIR BISHOP advised that next week people from DOLWD Research
and Analysis will discuss the mechanics of those determinations.
2:04:08 PM
MR. DUNHAM directed attention to slide 14 that depicts the most
recent DOLWD Employment Preference Determination. It lists the
23 craft classifications that qualify for a minimum of 90
percent resident hire preference.
He referenced slide 15 and explained that while the attorney
general declined to defend the current resident hire law, the
statute was still on the books. Many agencies are still
enforcing the employment preference laws on their contracts
because it is the law and the contractors are questioning DOLWD
in light of the attorney general opinion. He described it as an
odd scenario.
2:06:04 PM
MR. DUNHAM turned to slide 16 and discussed the waivers
available under certain circumstances:
Waivers 8 AAC 30.078(d)
Contractors who are unable to locate eligible
resident workers can request waivers to
employ non-resident workers.
He recalled the situation where the inside of the silo at the
Kodiak rocket station was corroding from the salt air and had to
be painted with a special epoxy paint that required special
expertise to prep and apply. The contractor requested a waiver
and it was granted.
CHAIR BISHOP commented that common sense applies, which was why
there is a waiver process.
MR. DUNHAM agreed and continued to review the formal waiver
process outlined on slide 16:
Waivers 8 AAC 30.078(d) (cont'd)
Formal process:
• Request must be submitted seven calendar
days prior to the waiver being
considered for approval
• Should include minimum qualifications
for position that the contractor wishes
to employ non-resident worker
• Department reviews minimum
qualifications
• Once minimum qualifications are
approved, employer must advertise using
at least one public form of
advertisement
The public advertisement and facilitated
recruitment must run for at least 3 days, and
both must
• State that the purpose of the request is to
satisfy Employment Preference requirements
under AS 36.10: applicants must be residents
of the state,
• List the job title and minimum
qualifications accepted by the department,
• Identify the rate of pay including fringe
benefits and other compensation,
• Identify the job location, expected duration
of the job, and the number of expected daily
and weekly work hours, and
• Specify that all job seekers apply through
the Alaska Job Center Network.
Once recruitment process concludes, employer completes
a waiver request form to the Department.
If an employer can establish that there are no
qualified eligible residents, the department will
approve the waiver.
• Waivers are issued for specific workers
• Waivers are not retroactive
• Waivers expire after 6 months.
2:08:57 PM
CHAIR BISHOP recognized that Senator Olson had joined the
committee.
MR. DUNHAM turned to slide 19 that discusses how the law is
enforced. He reviewed the following:
How is the law enforced?
Currently, the majority of violations are
identified through the audit of certified payroll
reports; and through complaints from stakeholders
such as contractors, labor unions, resident
workers and contracting agencies.
Regarding Employment Preference, where potential
violations were identified, an investigation
would be opened, and the contractor would be
afforded due process under 8 AAC 30.090, and 8
AAC 30.100. This process also applies to
Prevailing Wage violations.
MR. DUNHAM explained that if an Alaskan was displaced for 40
hours per week for eight weeks, that money would be withheld
from the contract. He noted that some investigations resulted in
$100,000 violations.
CHAIR BISHOP asked if there was a provision to negotiate the
penalty down.
MR. DUNHAM answered yes; that would be addressed on slide 21.
2:13:27 PM
SENATOR STEVENS asked what happens to the money that's assessed
for violations and if the Alaskans who are left out of work
receive any benefit.
MR. DUNHAM replied the money is subtracted from the contract,
per the statute, and retained by the agency.
MR. DUNHAM reviewed the investigative process outlined in slides
20-22:
Investigative Process (8 AAC 30.900)
Division investigates potential violations on its
own motion or on the complaint of any person.
Where department finds probable cause that
violation exists, the respondent receives a copy
of the complaint or description of alleged
violation via personal service or certified mail.
Under current regulations and procedure, copies
of complaint must also be provided to the prime
contractor and contracting agency
Division attempts to eliminate the alleged
violation through conference and persuasion.
Provide respondent/prime opportunity for an
informal conference to discuss matter and
attempt to eliminate alleged violation
If informal conference fails to resolve the
violation, Division issues a Notice of Findings
to the violating contractor.
Notice is copied to prime contractor and to
contracting agency.
Includes notification of the failure of the
informal conference failed, and the
Department's investigative findings.
Respondents have the right to challenge our
findings. 30 day period from date of findings
to request a formal hearing as part of the
administrative process.
After Notice of Findings, Department may
issue a notice to withhold funds in an amount
equal to potential penalties, or may wait
until 30 day period has lapsed depending on
the amount of funds left on the contract.
For example, a $30,000 penalty that was not disputed would
be subtracted from the contract and the state agency would
retain those funds.
If no formal hearing is requested, the
decision of the Department becomes final. A
notice is issued to the contracting agency
which directs them to withhold and retain the
calculated penalty.
If a formal hearing is requested, the Department
would follow regulation 8 AAC.30.100. Pending the
outcome of the hearing, the Department may direct
the agency to withhold and retain funds or
release funds.
SENATOR GRAY-JACKSON asked how frequently violations occur.
MR. DUNHAM replied there were 24 violations in FY2019 and a
total of $78,632.00 was withheld from those contracts.
SENATOR GRAY-JACKSON asked for the statistics for violations for
the last 10 years.
MR. DUNHAM agreed to provide the information to the committee.
2:19:22 PM
CHAIR BISHOP asked if there is still the ability to negotiate
the penalty down, even after a formal hearing.
MR. DUNHAM said yes, although there are times the contractor
doesn't want to negotiate. The department does not try to be
heavy-handed; it always offers options.
SENATOR STEVENS asked if the department had found that the same
companies commit multiple violations or if they learn their
lesson once a fine is assessed.
MR. DUNHAM replied there have been frequent fliers but the
majority are first-time offenders. Oftentimes the contractor
stops the work when they are informed that they are potentially
in violation.
SENATOR STEVENS asked if the department was less forgiving for
frequent fliers.
MR. DUNHAM answered yes, especially if the previous violation
was recent. The department's policy had always been to offer an
informal conference to the contractor and seek a remedy. If the
mitigating factors showed that the contractor didn't know
better, the penalty would be reduced 90 percent. If it's the
second time, and the mitigating explanation was that it's a
special craft that required a particular crew, the department
would explain the waiver process and reduce the penalty 50
percent. Thereafter, the department would generally have the
agency withhold 100 percent of the penalty from the contract.
2:25:08 PM
SENATOR GRAY-JACKSON asked if there was an RFP [request for
proposal] process before a contract was awarded.
MR. DUNHAM replied the agency is supposed to let the contractors
know the requirements of a project.
SENATOR GRAY-JACKSON expressed concern that contractors wouldn't
be aware of the rules because the RFP was supposed to contain
information about a resident hire requirement.
2:26:01 PM
CHAIR BISHOP asked him to include in Senator Gray-Jackson's
request for 10 years of data on violations a breakdown of which
violations were from out-of-state contractors and which were
instate contractors.
MR. DUNHAM said he'd provide the data but the violations are
primarily from out-of-state contractors.
2:26:59 PM
MR. DUNHAM turned to slide 23 that highlights the differences in
staffing at the Division of Labor Standards and Safety between
1988 and 2020. He reviewed the following points:
Staffing at Wage and Hour Then and Now
In 1988, LSS [the Division of Labor
Standards and Safety] had 12 staff
members [in the Wage and Hour Section]
statewide dedicated solely to the
enforcement of Employment Preference.
In 2020, LSS has 21 positions statewide [in
the Wage and Hour Section] that are
responsible to enforce all Wage and Hour
programs.
He added that until recently the four investigators in the Wage
and Hour Section looked into potential violations of employment
preference as they found a problem.
SENATOR STEVENS asked if he understood correctly that in 1988
there were 12 people enforcing the employment preference law and
now there are only four.
MR. DUNHAM clarified that the division has four investigators
but they are primarily looking for prevailing wage deficits, not
the enforcement of employment preference. Staffing was
insufficient to look specifically for employment preference
violations.
2:28:29 PM
MR. DUNHAM turned to slide 24 that discusses the history of the
penalties that have been assessed. He reviewed the following
points:
History of penalties assessed
Donations made by contractors into Alaska training
opportunities were often accepted in lieu of penalty
retention by State agency.
First time offenders were often allowed to have
only a portion of the penalty amount to be
retained by the contracting agency. In these
cases, or when other mitigating factors were
presented, penalties were often reduced by 90%.
He explained that since the Enserch ruling, a tool the division
uses in the informal conference to reduce or eliminate the
penalty is to offer the contractor the option to donate an
equivalent percentage of the proposed penalty to any training
program in the state that focuses on training young Alaskans to
work in the blue collar construction field. For example, a
contractor in the early 90s who was facing a $50,000 penalty
would be given the option of donating to any of the existing
training programs, including the UAA welding shop. The division
would likely accept that donation (through the conference and
persuasion process under AAC 30.090) in lieu of the penalty. The
logic was that instead of those funds going back into the
general fund, they were directly supporting the intent of the
employment preference law, which was training Alaskans to work
in Alaska. That decades long process was changed a few years ago
when the attorney general put a stop to it, calling it a breach
of ethics. The division repeatedly asked under what
circumstances that process could be used and recently they
received an email from an (assistant) attorney general that said
a donation to the University of Alaska was acceptable because it
was a state agency.
2:32:45 PM
CHAIR BISHOP asked which attorney general issued the opinion.
MR. DUNHAM replied it was an email from the assistant attorney
general assigned to the Department of Labor and Workforce
Development (DOLWD). Responding to a further question, he said
the email was sent less than a year ago.
CHAIR BISHOP pointed out that an employer facing a $50,000 fine
could make the donation to the University of Alaska and take
advantage of the education tax credit.
MR. DUNHAM agreed and added that contractors who donated in lieu
of their penalty have followed up and advertised their
donations.
2:34:03 PM
MR. DUNHAM turned to slide 25 that outlines the alternative
penalty efforts. He reviewed the following points:
Alternative Penalty Efforts Workforce Investments
Rationale
To reduce legal costs from both sides, donations
into various training programs that focused on
introducing and were accepted by providing blue-
collar skills to young Alaskans.
This type of settlement agreements has been
accepted by the Department for decades.
Benefits
The donated funds directly supported and
promoted the mission of the Employment
Preference, as opposed to the funds being
retained by the various State agencies and
placed back into the General Fund.
MR. DUNHAM discussed the following points outlined on slide 26
relating to the fourth constitutional challenge of the
employment preference law:
Constitutional Challenge No. 4
• 17 projects identified as out of compliance
• Contractor's position was that the Employment
Preference Act was unconstitutional
• July 2019, the contractor filed suit
• AG agreed to issue a formal opinion declaring AS
36.10 to be unconstitutional.
• Based on AG Opinion, the Department was directed
to cease enforcement of Employment Preference
provisions, and all investigations into alleged
or potential Employment Preference violations
were closed.
MR. DUNHAM explained that in July 2019, a contractor in
Juneau filed suit after 17 of his projects were found out
of compliance with the employment preference law. The
contractor maintained that the Employment Preference Act
was unconstitutional. As part of the negotiation process,
Attorney General Clarkson agreed to issue an opinion and
that resulted in DOLWD being directed to stop enforcing
employment preference and all cases of alleged violations
of that law were closed.
CHAIR BISHOP thanked him for the presentation and advised that
he would have his staff follow up with another request for
information from one of the committee members.
2:36:21 PM
There being no further business to come before the committee,
Chair Bishop adjourned the Senate Labor and Commerce Standing
Committee meeting at 2:36 p.m.
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