SB 160 EXCLUSIONS FROM UNEMPLOYMENT COVERAGE  CHAIRMAN KELLY called the Senate Labor and Commerce Committee meeting to order at 1:40 p.m. and announced SB 160 to be up for consideration. DWIGHT PERKINS, Department of Labor, was not able to testify, but submitted this statement: The Department of Labor opposed SB 160, for the following reasons: 1. The Employment Security Act already goes far enough in excluding employment of children by their parents and excluding employemnt of students by educational institutions. Coverage of student workers should not be further eroded. AS 23.20.526 (d)(5)- (6) excludes service by a regularly enrolled student, or a student enrolled in a work study program for a school, college, or university. AS 23.20.526(a)(4) excludes service for a parent by a minor. The bill would go much further. It would exclude service for any employer whatsoever, by a worker of any age, so long as the employer is a parent and the worker is a student between terms. For example, a thirty-five year old worker with a family, who happened to be working in a parent-operated business, could be excluded from coverage shortly after entering training to improve his or her skills. The worker would be denied UI protection if the training were interrupted, or the new occupation did not materialize, or the current employment came to an end. There is no reason to subject these employees to greater risk than others, just because they happen to be working for their parents and going to school when the wage credits are earned. 2. The bill would also create a conflict with federal coverage provisions. It would exempt students of any age. However Section 330(c)(5) Federal Unemployment Tax Act (FUTA) does not exempt service of a worker age 21 or older (student or otherwise) in the employee of his or her parents. An employer would, therefore, still be liable for the full FUTA tax on affected employees who are 21 or older. Employers are eligible for a credit against the FUTA tax if the FUTA taxable service is covered under state law, but the credit would not be available on this particular service, since the employer would not be paying state taxes on the service under an approved state law. If reducing the tax burden is an object of the legislation, very little will be gained by removing the state tax liability and replacing it with the full federal FUTA liability. 3. The tax burden on the affected students is minimal and the number of such students is very small. A full-time employee will pay maximum of $119.50 in UI contributions for the entire calendar year 1995. A student employed between school terms would pay much less. The bill addresses only students employed by their parents, a tiny fraction of the work force. 4. The bill would create an unjustifiable disparate impact on student workers. It would not affect other similarly situated workers who happen not to be employed by their parents. The Department firmly believes that expanding the exemption to these other students is an even worse idea, but there is no sound policy reason for targeting a subset of workers on the basis of family relationship. 5. The terms of the exclusion are vague and there is no feasible way to base tax liability on a worker's "intention" to remain in school. Would coverage be retroactive if the worker did not return to school? Would employer be allowed to certify to the worker's intentions? The provision would be difficult to enforce and easy to abuse. SENATOR TORGERSON explained that SB 160 is just a relief for mom and pop buisnesses that have the burden of paperwork slapped on them by undue regulations. It exempts parents from paying unemployment tax when a child is in college and comes back and goes to work for them. SENATOR KELLY said he supported this bill. SENATOR TORGERSON moved to pass SB 160 from committee with individual recommendations. There were no objections and it was so ordered.