HB 289-EMPLOYMENT TAX EXEMPTION: SPILL RESPONSE 3:05:33 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 289,"An Act exempting employers from paying unemployment tax for crewmembers on fishing vessels that respond or prepare to respond to, or that prepare for or engage in an emergency or practice drill response to, an oil spill; and providing for an effective date." [Before the committee was CS HB 289(FSH)]. REPRESENTATIVE PAUL SEATON, Alaska State Legislature, speaking as one of the joint prime sponsors, stated that commercial fishermen paid solely by the catch are exempt from unemployment insurance under state and federal law. However, commercial fishermen who are paid by any other method are considered employees and are not exempt. This bill would exempt commercial fishermen who participate in oil spill response training and duties from having to pay unemployment taxes so long as the duration is seven days or less. This bill stems from a key element of the federal Oil Pollution Act of 1990 (OPA 90). Oil spill contingency plans provide for vessels of opportunity and fishing vessels that contract with the oil spill response organization to form the basis for an oil spill response. The crew must undergo annual training to maintain their hazardous materials operator cards. Although the crew is paid for the training, their wages are outside the percentage of the catch. Thus, the oil spill training wages are subject to the unemployment insurance tax. Since annual training averages one day, or eight hours a year, the person will never qualify for unemployment insurance, he opined. Therefore, HB 289 would exempt vessel owners and crew so long as the training does not exceed seven days of training. In the case of a major spill, the crew would likely work more than seven days, he opined. In those instances the vessel owners and crew would be subject to the unemployment, he noted. REPRESENTATIVE SEATON pointed out that the vessel owners or crew may also opt into the unemployment insurance program. He noted that there has not been any opposition to HB 289. The committee packet includes an email exchange from the federal counterpart of the Department of Labor & Workforce Development relating that excluding workers from the state unemployment tax for temporary services will not pose any federal violations. He characterized HB 289 as a bill needed to maintain an oil spill response capability. 3:11:59 PM REPRESENTATIVE GATTO pointed out that those who do not pay the unemployment tax are not eligible to receive benefits. He inquired as to whether it is possible for someone to abuse the system. He further inquired as to how often over a one-month period, could a person work fewer than seven continuous days. REPRESENTATIVE SEATON noted the difficulty for vessel operators to maintain a crew, which is such that a vessel operator would not likely switch out crew to take advantage of the exemption. He stated that HB 289 would only affect commercial fishermen and not crew on tenders, since the tender crewmen or tugboat operators are paid employees and not subject to earning a percentage of the catch. 3:14:43 PM REPRESENTATIVE GATTO inquired as to whether each training period is considered separately, and further inquired as to how HB 289 would apply if there were several training sessions. REPRESENTATIVE SEATON answered that when a crew member worked more than seven days in oil response training, the employer would automatically submit the unemployment tax paperwork. He said he hasn't considered instances in which crew might only require one additional day of training. 3:15:25 PM REPRESENTATIVE BUCH asked how often oil spill response training is offered. REPRESENTATIVE SEATON answered that training time varies and he explained the oil spill response training times: In Cook Inlet all participants are required to have 1-day training, approximately 12 vessels participate, and the remaining 100 do not; in Prince William Sound the training is for approximately 1 week each year, with 50 core vessels participating; a second group trains for a shorter period of time; yet another group comprises the "vessels of opportunity" who sign up and agree to certify crews, and their training is similar to Cook Inlet vessels. While there are several layers of oil spill response training, none of the training exceeds seven continuous days, he noted. 3:17:34 PM REPRESENTATIVE GARDNER expressed concern with respect to the trigger of "seven continuous days" such that if training were interrupted due to a storm, the training period might exceed seven days. She asked the sponsor to consider amending the language in HB 289 to limit the specific number of hours of training that a vessel owner or crew could participate in such as 56 hours, before he/she would be required to pay the unemployment tax. REPRESENTATIVE SEATON explained the purpose for designating seven continuous days is to ensure that if there was a massive response to a spill that the vessel owner or crew would be subject to the unemployment tax. Since training offered does not exceed seven days, and compensation is limited, the "seven continuous days" satisfies the intended purpose. 3:20:06 PM ROCHELLE VAN DEN BROEK, Executive Director, Cordova District Fishermen United (CDFU), related that the CDFU supports HB 289. The CDFU represents over 1,000 commercial fishermen in Prince William Sound, including over 150 vessel owners that participate in oil spill response training, she noted, and are trained as professional oil spill responders. The vessel operators are required to hire crew members several times a year to participate in training activities, but the training is limited to a few days a year. She surmised that the individual earnings for each crew member are less than $700 annually. Last year, vessel owners received letters notifying them oil spill response training is subject to the unemployment insurance tax. Many vessel owners found the paperwork and tax activities onerous and threatened to abandon the training activities. Since the paperwork and tax collection places a disproportionate burden on vessel owners, CDFU lobbied for change. In the wake of the Exxon Valdez oil spill, the state needs to ensure adequate vessel owners and crew trained to respond in the event of another major oil spill, she opined. 3:22:37 PM TRACY MAYHEW, Port Representative, Seafarers International Union (SIU), stated that the SIU represents merchant mariners on large ocean going vessels. The SIU supports HB 289, she related. The contingency plan relies on commercial fishermen and vessel owners' participation. In fact, if vessel owners and commercial fishermen do not participate in oil spill response efforts, the contingency plan could be held noncompliant, she cautioned. She said, "Who better to protect Alaska waters than Alaskans." She stressed that the contingency plan needs commercial fishermen involved consistently to provide for a well trained oil response team. She offered that SIU supports the training for crew members and vessel owners. She said that HB 289 would create an exemption from unemployment tax. However, the absence of an exemption would create a disincentive for vessel owners and commercial fishermen to participate in this vital program. It would also put other Alaska livelihoods at risk, she opined. 3:24:24 PM JOHN DEVENS, Ph.D., Executive Director, Prince William Sound Regional Citizens Advisory Commission (RCAC), stated that the RCAC was created after the Exxon Valdez oil spill to prevent accidents and ensure improved cleanup if another oil spill happens. With respect to cleanup, fishing vessels play a vital role in the system. This bill is an important measure to ensure that Alaska's fishing vessel program continues to function as it should. Last summer, the Department of Labor & Workforce Development (DLWD) informed fishing vessel captains that they were required to collect unemployment tax on crew members engaged in oil spill response training, who are exempt from unemployment coverage during normal fishing activities. The RCAC held discussions with vessel captains and became concerned that many of them might drop out of the program due to the recordkeeping and collection of the unemployment tax. This bill would provide a remedy by allowing an exemption for vessel owners and commercial fishermen involved in training [of limited duration] for oil spill response. He related that the Prince William Sound RCAC urges the committee to pass HB 289. He characterized HB 289 as "a good thing that everybody favors." 3:26:38 PM REPRESENTATIVE BUCH referred to a letter from Mr. Devens, with respect to questions on HB 289. He inquired as to whether the questions have been addressed in the bill. DR. DEVENS offered that he was misinformed at the time he wrote the letter. He offered that he was under the assumption the matter of unemployment tax had to be handled through the U.S. Department of Labor, but he was mistaken. He said he subsequently wrote to the DLWD and rescinded his earlier letter. 3:28:18 PM CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 289. 3:29:22 PM REPRESENTATIVE BUCH inquired as to whether all the questions with the U.S. Department of Labor have been answered with respect to the unemployment tax in HB 289. PAULA SCAVERA, Special Assistant, Office of the Commissioner, Department of Labor & Workforce Development (DLWD), referred to an e-mail exchange in the committee packet between Robert Johnston, Supervisor, State Conformity and Compliance Team, U.S. Department of Labor and Mr. Berkowitz, Director, Pacific Coast Operations, Transportation Institute, Seattle, Washington. Mr. Johnston reviews all state laws and regulations to ensure that they comply with federal law, she noted. She read into the record: Mr. Berkowitz, I have reviewed the draft legislation that you provided regarding the Alaska UI coverage issue for fishermen participating in oil spill exercises/drills/response. As drafted, it does not appear to create any issues with Federal unemployment compensation law and as such will not endanger the certification of Alaska's UC law under FUTA. MS. SCAVERA noted that FUTA refers to the Federal Unemployment Tax Act. 3:31:09 PM REPRESENTATIVE GARDNER moved to report the CSHB 289(FSH) out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 289(FSH) was reported from the House Labor and Commerce Standing Committee.