HB 121-OCC. HEALTH AND SAFETY CIVIL PENALTIES  2:31:15 PM CHAIR CLAMAN announced that the final order of business would be HOUSE BILL NO. 121, "An Act relating to occupational safety and health enforcement penalties; and providing for an effective date." 2:31:51 PM The committee took a brief at ease. 2:32:49 PM BIANCA CARPENETTI, Staff, Representative Sam Kito, III, Alaska State Legislature, advised that the legislation is a House Labor and Commerce Standing Committee by request of the Department of Labor & Workforce Development (DLWD). She briefly paraphrased the following: House Bill 121 brings Alaska's Occupational Safety and Health (AKOSH) state plan into compliance with federal requirements, ensuring continued eligibility for federal grant funds and helping to protect workers from workplace injuries, illnesses, and fatalities. 2:34:01 PM DEBORAH KELLY, Director, Division of Labor Standards and Safety, Department of Labor & Workforce Development, paraphrased her written testimony as follows: I'm sure you are all familiar with OSHA [Occupational Safety and Health Administration]. Well, Alaska Occupational Safety and Health or (AKOSH) is Alaska's state plan. This means that Alaska Occupational Safety and Health receives federal grants and is responsible for the safety and health standards that protect almost all Alaskan workers. ... A state plan such as AKOSH must be at least as effective as federal OSHA, so Alaska's program develops and implements safety and health standards that fit Alaska's unique environment using input from Alaskan industries, workers, and the public. Federal standards are much less responsive to local needs. Alaska's program also provides free consultation services to employers with an emphasis on small employers, helping them to understand the standards and implement them to keep their employees safe. AKOSH inspects all private and public workplaces in Alaska, with a few federal exceptions. 2:35:21 PM If, during the course of an inspection, an employer is found violating a safety or health standard, AKOSH may issue a citation to the employer that includes penalties. The maximum penalties, and one minimum penalty, that AKOSH may access for various types of violations are set in Alaska's statutes. Now, maximum penalties mean just that, the maximums. These are the amounts reserved for the most egregious and severe cases. The actual penalties accessed are calculated based on numerous factors beginning with the probability of an injury or illness actually occurring, and the severity of the injury or illness that could occur. After that, the penalties reduce based on numerous factors. The biggest single reduction factor is business size, small employers see a standard reduction of 60 percent and even more in some cases. Penalties are also reduced for good faith efforts on the part of the employer to keep their employees safe, as well as the employer's history of violations with AKOSH. Penalties can be, and often are, reduced up to 100 percent. To illustrate the difference between the statutory maximums and what employers actually pay, we looked at the difference between penalties collected in FY2016, and the maximum amount that AKOSH could have assessed for all violations. So, for FY16 -- 2016, AKOSH collected roughly 6 percent of the statutory maximum for the violations cited. This is not a fluke, it just reflects the built-in process that protects small businesses, and protects the majority of employers who hard to keep their employees safe. So, in 2015 Congress passed an Act requiring many agencies to adjust penalties for inflation going back to 1990, and then to continue to adjust those penalties yearly with the consumer price index. OSHA complied and raised their penalties in July of last year, Alaska has six months to come into compliance with federal changes like these, and as of January 1, 2017, we are out of compliance. So why does this matter? A failure to comply will risk most of the over $2 million in federal grant funds we receive every year, and eventually will risk a federal takeover of jurisdiction. This means federal OSHA will come in and enforce the higher penalty amounts anyway, the over $1 million in estimated yearly penalties that we will bring in will go to the federal government instead of to the state general fund. Businesses will face the burden of out-of-state proceedings when they disagree with citations, and we will lose the safety and health standards developed locally to fit Alaska's unique conditions, such as logging, oil and gas, and temporary labor camp standards. And, Alaskan businesses will lose the high level of input they currently have in the development of safety and health standards. Loss of state jurisdiction would also mean that state and local government employees would lose their work -- workplace safety and health protections since federal OSHA does not have jurisdiction over those public employees. 2:38:49 PM The fact is that local enforcement works. AKOSH has concentrated on the transportation and warehousing industry which saw over an 18 percent decline in lost time injury rates last year. Our emphasis in the construction industry has also paid off, lost time industry -- injuries in that industry fell over 32 percent last year. The 10 year averages for our emphasis industries show a long-term decline in injury and illness rates. And, in fact, lost time injuries and illnesses for working Alaskans, overall, has fallen by over 50 percent in the last 10 years. The payoff is huge for businesses who save on workers' compensation costs, and for families and workers who get to go home safe every day. House Bill 121, is a bill to bring Alaska Occupational Safety and Health in compliance. No more, no less. The bill requires the Department of Labor and Workforce Development to adopt maximum penalty amounts by regulation and limits those amounts to the corresponding federal amounts for each violation type. This simply allows the department to comply with federal law and stay compliant -- in compliance as the consumer price index adjusts from year to year. This will preserve our state plan and ensure that we can continue in our effort to reduce injuries, illnesses, and fatalities for Alaskan workers. 2:40:40 PM REPRESENTATIVE KOPP surmised that this federal compliance request was asked of all 50 states to stay current with the federal penalty schedule. He asked whether Alaska must comply by law. MS. KELLY responded that there are 26 state plans, including Porto Rico and perhaps one other territory. She advised that the federal jurisdiction states had already raised their penalties, and the 26 state plans are required to come into compliance as a condition of their state plan, which was a law passed in 2015. REPRESENTATIVE KOPP surmised that by not adopting the updated schedule, Alaska would then fall under federal jurisdiction. MS. KELLY answered that the failure to at least maintain the same penalties as the federal OSHA would result in a federal jurisdictional takeover, and many states are dealing with that now. Although, she explained, as long as Alaska makes positive progress toward adopting the federal penalties, it will be recognized because the legislative process does take time. REPRESENTATIVE KOPP pointed out that Alaska has AKOSH regardless, and asked "Do we do business with the devil we know, or the devil we don't -- with state employees or with the feds?" MS. KELLY responded that this issue was debated around 1999, and many local businesses and industry representatives came out to support the Alaska plan. Ms. Kelly said she would paraphrased a quote from a representative of the industry at that time as follows: "AKOSH may be SOB's, at least they are Alaskan SOB's." She remarked "And, that's a fact," people can talk with the division on developing standards that work for Alaskan industries and Alaskan businesses. 2:43:55 PM REPRESENTATIVE LEDOUX surmised that in the event the federal government takes over, Alaskan residents would be working for the federal government and administration and wouldn't be "our SOB's?" She asked the amount of money the state would save by calling the federal government's bluff and letting them have jurisdiction. MS. KELLY agreed that on site compliance officers under federal jurisdiction would be Alaskan residents, but the people overseeing those residents would not be Alaskans. In the event an employer appealed a citation it would not be an Alaskan process as it would take place with an administrative law judge out-of-state. More importantly, she explained, Alaska would lose numerous local and state standards specific to Alaska. In response to the amount of money Alaska would save, she said she would perform research and get back to the committee. 2:45:54 PM SAM KITO, III, Alaska State Legislature, added that another dynamic to consider is that Alaska could not expect that the federal government would open an office in Alaska. Therefore, it is likely that the Alaska office of Occupational Safety and Health would not be managed by Alaskan residents, and would possibly be out of San Francisco or Seattle because the federal government was also experiencing budgetary constraints. Also, in the event the legislature lets the Alaska Occupational Safety and Health revert to the federal government, Alaska would lose the protections it currently has for state employees not covered under a federal plan. 2:47:14 PM REPRESENTATIVE REINBOLD asked whether it is true the fees are being removed from statute and put into regulations. REPRESENTATIVE KITO responded that HB 121 allows the Department of Labor & Workforce Development to have the statutory authority to produce regulations allowing continued compliance with the federal government's requirements, of which possibly changes annually. He opined that probably the legislature does not want to come back here and establish those maximum standards every year because they are indexed to inflation. In the event the legislature allows the department the regulatory authority, it can keep up with the federal changes with regulations, as opposed to coming back to the legislature every year, he described. 2:48:29 PM REPRESENTATIVE REINBOLD offered that "where the rub hits with me is I don't want any -- any less authority" and this shifts authority from the legislature to the executive branch "that has a whole lot of power." and that she is a local control person. She then asked whether that was his understanding. REPRESENTATIVE KITO answered that that was his understanding. As a sitting legislator, he pointed out, there are various concerns as to whether or not to put automatic increments into state law, except in this case, the federal government does have an automatic increment and this does take control away from the legislature to adjust every year. He asked whether this was something the legislature really wants to deal with every year, given it has the budget and such to deal with. Statutorily, he acknowledged, he does not know of another way to effectively deal with the department meeting compliance, unless the legislature goes in and far exceeds the maximums of the federal government in the hopes it wouldn't catch up with Alaska for a few years and allow the department to work below that number. He described that it was sloppy because it establishes a standard that a legislature in two to four years down the road may have forgotten about, thereby, leaving a number out there that people may not change, and possibly may not remember why it was established. He expressed that it is important, in this situation, to allow the department that flexibility. 2:51:12 PM REPRESENTATIVE REINBOLD offered concern about constantly changing fees and yielding to the federal government rather than keeping things local. She offered further concern about increasing penalties and how it would impact businesses when Alaska was in a recession. 2:52:17 PM MS. KELLY responded to Representative Reinbold as follows: This bill is very strictly written, so that while it is moved to regulations, the department is really only given one option which is to set the federal amounts, and no more. So, that does limit that. But, I would like to speak to your concern about raising penalties because you're right. Quite frankly, all these penalties will automatically -- this first adjustment will be a 78 percent increase. And, I can't sugarcoat that, and keep in mind these are maximums, these are not the actual penalties. So, when you see those numbers, that sticker shock isn't what most businesses are seeing when a cost shows up. That being said, it -- it's a tough call, but it's either us issuing those higher penalties, or it's the federal government issuing those higher penalties and taking that money back to the federal government instead of depositing it as into the state general fund. Second of all, I -- I have several studies here that show that an employer who receives a penalty from OSHA or from AKOSH, in this case, actually sees a pretty large savings over the next several years in reduced injury and illness and; therefore, reduced workers' compensation costs that far exceed the amount in penalties that they paid. So, there's actually an economic benefit for an employer paying those penalties because it -- I mean, some employers, a few, actually see these visits from OSHA as a low cost consultation service. It may have been involuntary -- involuntary, but in the end, they are able to get assistance and additional knowledge on what the requirements are and how to better keep their employees safe. So, those workers' compensation costs are really much higher. The cost of an injury and illness are way higher than what the penalties are. 2:54:25 PM REPRESENTATIVE REINBOLD agreed that it as sticker shock. Now, she said, the big gun was being used by increasing penalties by 78 percent, and she had received many complaints about these agencies being trigger happy. 2:54:53 PM CHAIR CLAMAN commented that the bill presents an interesting situation in that the federal government doesn't state that Alaska must raise its statute, it leaves it up to Alaska to choose with the caveat that if Alaska doesn't follow the federal government it will come in and take over. The price for maintaining some degree of autonomy is that Alaska must be in compliance with the federal limits. The legislature could make the choice to let the federal government come in but, he surmised, most of the public would prefer the legislature maintain control of this particular element, and he offered concern about the cost of compliance. He then referred to a death at an Anchorage construction site because the employer was grossly out-of-compliance and when looking at those high fines, they were appropriate. Everyone wants employers to succeed but not by putting their workers in dangerous situations, he stressed. 2:56:22 PM REPRESENTATIVE EASTMAN referred to the statement that the state had only one option in dealing with the maximum amount established on the federal side, and noted that the language in the bill read as follows: "not more than the maximum amount." He commented that it would be appealing to save lots of money by eliminating the state work if the state was just doing exactly what the federal government would be doing anyway. In the event the state has another governmental partner willing to do work for the state, he said he is all for it in some circumstances. He then asked whether the state was expected to access fines at that maximum amount if the department or other persons setting those amounts chose to set a low amount. He further asked whether the federal government would come in and say that Alaska was out of compliance because it was not fining enough, even though the legislature gave statutory authority to fine to that maximum amount. 2:57:34 PM MS. KELLY addressed the first part of Representative Eastman's question, and related that she does not believe the department was doing exactly what the federal government was doing, such that the department develops local safety and health standards unique to Alaska's industries. It also provides coverage to both state and local public employees that federal OSHA would not provide, and as far as the ability of the commission to set lower amounts, Representative Eastman was correct. This puts the department between two limits, and the Alaska statutory limit would be the higher limit, and the federal grant requirements and jurisdictional requirements would be the lower limit. Therefore, if a commissioner did decide to set lower amounts by regulation, then the federal equivalents would decide that Alaska was not complying with its requirements. She said that the division ran some numbers and assessed that it was less than 10 percent of the maximum penalties. She reiterated that the numbers of the sticker shock are theoretical maximums and reserved for egregious cases, such as the case Chair Claman referred to earlier. She explained that that situation was what the statutory maximums were there for, and a situation such as that would be the only time the division would assess such high penalties. 2:59:28 PM REPRESENTATIVE KREISS-TOMKINS asked the industry's perspective on this because he did not see documents in support or opposition. MS. KELLY responded that the perspective from the industry was that no one loves OSHA, but in 1999 the overwhelming response was in favor of Alaska jurisdiction. In addition, the division does provide free consultation service wherein it shows up to an employer, with no penalties or citations involved, and assists the employer in coming into compliance and learning how to keep their employees safe and healthy on the job. She described it as a popular program because it helps folks in the seafood processing industry, in particular, come into compliance and determine how to keep their people safe in that high hazard industry. The OSHA is not popular, but federal OSHA is less popular than AKOSH, she remarked. 3:01:05 PM REPRESENTATIVE KREISS-TOMKINS requested the quantity of consultations AKOSH performs annually. MS. KELLY replied that in addition to consultation, AKOSH also offers training to the public and employers which reaches an additional set of people. She said she could provide this information after the meeting. 3:02:01 PM CHAIR CLAMAN advised Ms. Kelly that she could provide the answer to his query at the next meeting. He continued that Representative Reinbold raised an interesting question of going through the regulation process and, he commented, that "there's a level that what we're essentially doing is saying, in the legislative sense, 'Uncle, we'll -- we'll use your maximum rates.'" He described a component in which one might ask, why the legislature needs to go through the exercise of a regulation, why not just have a statutory provision which read that the Alaska maximum rate would be the maximum rate established by whatever federal statute setting this up. At some point, he asked, why doesn't the legislature just say, "Uncle as a matter of Alaska statute?" Thereby, he remarked, the regulatory process would be unnecessary because the legislature in recognizing the federal government's maximum, would be the maximum Alaska would have. 3:03:20 PM MS. KELLY explained that it was a balancing test the division performed while it looked at what other states were working on, and the division considered what might be the most acceptable to folks. Quite frankly, she advised, the division ended up balancing on the side of the regulatory process, but it was not opposed to putting it into the statute. REPRESENTATIVE REINBOLD reiterated that it is critical the legislature writes the statutes, determines the budget, and not just at the beck and call of the federal government. She pointed out that the legislature needs to keep as much local control and state control as possible, and she agreed that it is a balancing act. 3:05:05 PM REPRESENTATIVE KOPP surmised that the committee was simply adopting a maximum penalty schedule, and nothing at all about what the discretion was in that range. He said he understands that there is an approximate 60 percent discount of the penalty schedule for small businesses as a base line. 3:05:47 PM REPRESENTATIVE KITO remarked that the legislature was establishing, either through regulation or however the committee ends up doing this bill, a federal maximum penalty. He reiterated Ms. Kelly, and said that even with the current penalty system, the assessments were less than 10 percent of the maximums. [HB 121 was held over.]