HB 237 WORKERS' COMPENSATION AMENDMENTS  CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 9:14 a.m. The committee took up SCS CSHB 237 (L&C). KEVIN DOUGHERTY, co-chair of the Ad Hoc Committee, and a member of the Workers' Compensation Committee since 1981, testified HB 237 represents a joint effort between labor and management members of the committee. He urged the committee's support of the bill. WILLIE VON HEMERT, co-chair of the Ad Hoc Committee, discussed his background. He stated SCS CSHB 237 (L&C) is essentially the same as SB 140, with the following three exceptions. A House amendment adopted on the floor presented problems and was removed by the Senate Labor and Commerce Committee. The second change also made by the Senate Labor and Commerce Committee, pertains to the method of calculating expendable wages, for seasonal and temporary workers new to the workforce. The third change is a narrower definition of "seasonal." The Ad Hoc Committee supported all three changes. He reiterated Mr. Dougherty's statement about the hard work done by both labor and management to make this bill a fair compromise. Number 102 NOEL LOWE, legislative aide to Rep. Sanders, a member of the House Labor and Commerce Committee, gave the following testimony. Rep. Sanders is concerned with subsection 7 on page 6, line 23. The Representative sought opinions from Legal Services and the Director of Workers' Compensation on the language. The legal opinion states that if the employee does not disclose, or if the employer is not aware, of multiple employment prior to an injury, then the employer liable for workers' compensation benefits does not have to take into account the wages from both jobs, to calculate the benefit. Representative Sanders is concerned that employees may lose a job if they disclose that they have additional jobs. Number 136 SENATOR TAYLOR noted Senator Adams will be offering an amendment to change subsection 7. He asked if this provision exists under current law. MR. LOWE replied it is a change from current law. SENATOR TAYLOR clarified existing law requires the employee to notify employers of other employment. He believed this proposed change would give the employee with multiple jobs a larger income base from which benefits would be calculated if injured. If a person earned $20,000 per year driving a delivery van, and $40,000 per year as a longshoreman, and is injured while driving the delivery van, the workers' compensation benefit would take into account the wages lost from both jobs. He felt both employers would need to know about the other employment in order to make adequate benefit payments. MR. LOWE commented it is Rep. Sanders' opinion, that under current law, regardless of whether or not employer A is aware of employer B, the wages from employer B are being used to determine weekly gross income. The employee is receiving worker compensation benefits based on both incomes. Rep. Sanders' concern is that requiring employees to notify employers of other employment may prompt an employer to dismiss the employee for several reasons, notably the assumption the employee's job performance will diminish. Number 190 SENATOR ADAMS indicated the amendment would keep current practice in place by eliminating the proposed requirement of employer notification. SENATOR GREEN asked what specifically requires employer notification in lines 23-26, since the language reads if the employer is aware. SENATOR TAYLOR remarked subsection 7 acts as a penalty so that if an employee failed to notify the employer, the employee could not collect benefits based on other employment. SENATOR GREEN stated the subsection does not specifically require notification. Number 210 MR. LOWE added if an employee was injured on a job, and had not notified the employer of other employment, the benefit would be limited to the income earned on the job where injured. SENATOR ADAMS moved amendment #3 (there was no objection to moving the amendments out of numerical order). SENATORS GREEN and MILLER objected. PAUL GROSSI, Director of the Division of Workers' Compensation, testified. He was uncertain as to whether the removal of subsection 7 would require an employer to consider all wages when determining the workers' compensation benefit amount. Under current law, the benefit is based on two historical years, not on wages at the time of injury. The bill keys everything in to wages at the time of injury. He was uncertain whether multiple earnings would be included without language specifying that intent. He expressed concern that by deleting subsection 7 the possibility of including multiple earnings might be eliminated. Number 244 SENATOR TAYLOR agreed the deletion of subsection 7 might prevent multiple earnings from being used in the benefit calculation because of the contents of the rest of the bill. He noted the purpose is to not force people into disclosure when it might jeopardize their employment, yet they might be jeopardizing the benefit package they would receive should they fail to do so. The subsection does not mandate any form or type of requirement for notification. The question would then become a factual one before the worker's compensation board, as to whether the employer had knowledge of other employment. MR. GROSSI commented the burden of proof would fall on the employer to prove he/she did not have knowledge. Number 270 MR. LOWE suggested a conceptual amendment to the amendment that would state that when an employee works under concurrent contract with two or more employers, the employee's earnings from all employers is considered as if earned from the employer liable for compensation. [Delete "and the employer liable for compensation has knowledge of the dual employment before the injury" from subsection 7.] He stated regardless of the vagueness of the paragraph, that language would still permit the employee to have benefits based on multiple jobs, without notifying the employer. Number 294 SENATOR ADAMS asked Mr. Grossi's position on the amendment proposed by Mr. Lowe. MR. GROSSI replied the Department of Labor did not have a position on that amendment at this time. SENATOR ADAMS asked Senator Taylor if he intended to hold the bill for a week for further review. SENATOR TAYLOR responded that was not his intention and that he planned to move it out since both chambers were quickly drawing to a close. SENATOR GREEN asked Senator Adams why he was offering the amendment. SENATOR ADAMS replied he was concerned that people working two jobs might be terminated if the employer found out, and that many people cannot make ends meet without working two jobs. SENATOR TAYLOR felt the Ad Hoc Committee must have been concerned on the part of employers about how to calculate the base for risk. He assumed that would have to be based upon some knowledge of the exposure of an employee. He illustrated his point by saying if McDonald's has four employees who are working in other jobs that pay a great deal more, but are injured while at McDonald's, McDonald's would be hit with a much higher rate of compensation that has to be paid than what their carrier contemplated paying. KEVIN DOUGHERTY informed the committee there is a model, known as the Uniform Act, which is used by many states and was cited by the Supreme Court in the Gilmore decision. The bill is based on that Act. The Ad Hoc Committee discussed the fact that having knowledge is a much lower standard than employee notification, whether formal or informal, and that the employer would have to project benefit costs. He was unsure whether the Uniform Act contained a rationale for the provision. Number 351 MR. VON HEMERT commented the two-year "look back" approach used by the Division of Workers' Compensation seemed like a very fair approach in most cases, and Alaska was one of the few states that used it. The model language contained a 13 week "look back" period, and the majority of the courts and people who deal with this issue believe that basing benefits on immediate wages is the fairest way to apply workers' compensation benefits, which is the premise of the bill. He believed that eliminating subsection 7 would hinder the process. Making notification mandatory would have an impact on the rating system for workers' compensation benefits, and rates would increase. Number 374 SENATOR ADAMS repeated his intent for proposing the amendment was to enable people who have to work two jobs to do so. He did not want employers to be able to dismiss an employee because the employer feels there is additional risk or a conflict. He asked if there was any opposition to working on the amendment to the amendment as follows: (7) when the employee is working under concurrent contracts with two or more employers and the employees earnings from all employers is considered as if earned from the employer liable for compensation; SENATOR ADAMS stated he was merely trying to protect Alaska workers who have two jobs. He asked why it is taking so long for the Division to respond to this suggestion. MR. GROSSI answered the Division studied the bill without the amendment, therefore had no time to consider it. He noted Senator Taylor's concern about calculating compensation premiums is part of the problem. Number 396 SENATOR ELLIS noted requests to hold the bill for one week, then three days, were denied. He asked if the Chairman would consider holding the bill for one day so that the Division could review it. SENATOR ADAMS asked if the bill could be held until the 1:30 p.m. meeting. SENATOR TAYLOR stated that would create difficulties as far as reading it over to the Rules Committee. MR. LOWE agreed with Mr. Von Hemert's assessment that this might result in an adjustment in unemployment insurance. Conversely, if there is no amendment, such as the one proposed, it is guaranteed that a lot of low income Alaskans will lose jobs, and will need public assistance. SENATOR TAYLOR noted there was objection to the motion to adopt the amendment proposed by Senator Adams. The motion passed with Senators Green, Ellis, and Adams, voting "yea," and Senators Miller and Taylor voting "nay." DAVE HUTCHENS, Executive Director of the Alaska Rural Electric Coop Association, testified on behalf of most of the electric utilities in the state, and the ARECA insurance exchange which insures many of the electric utilities. ARECA supports the bill as it is a reasonable package that compromises the interests at play. He stated from ARECA's perspective, the most important section is Section 12. ARECA has an extensive safety program, financed by the insurance operation, but it has become much less effective over the years because of the Van Bien decision. ARECA has been hopeful this bill would address that issue. He believed the workers' compensation programs needs many corrections, and that HB 237 should be passed this session, and another bill should be introduced next session to deal with other issues. Number 450 SENATOR TAYLOR moved the adoption of amendment #1 (Ford, 5/2/95). Amendment #1 slides the effective date back six months on the provision of benefit payments. The Ad Hoc Committee failed to take into consideration that many people in the construction industry already entered into their contracts for this summer season. Many of those contracts are dependent on the total cost of workers' compensation coverage. If the effective date takes place in July, a major shift in benefits will occur halfway through the construction season, and a surcharge will be charged. The amendment will allow carriers and employers to negotiate a fair rate that everyone can be advised of before entering into contracts for the next construction season. There being no objection to amendment #1, the motion carried. SENATOR TAYLOR moved amendment #2. The purpose of amendment #2 is to provide simple and definitive language for injuries that occur at remote camp sites or remote job sites where that injury occurs outside the normal work pattern. If, in fact, one is working seven days per week, 12 hours per day for ARCO on the North Slope, and staying within a confined building, that employee is obviously still on the work site. In Southeast Alaska, where people live at remote sites, and literally live there for years, such as Thorne Bay which is a city, people reside year round. Pursuant to an earlier decision, all recreational activities are required to be covered on remote sites under the workers' compensation law. This problem predates Van Bien, and each of the other cases discussed today. SENATOR ELLIS objected to the motion to adopt amendment #2. Number 488 MICHAEL HINCHEN, general manager and comptroller of the Alaska Timber Insurance Exchange, testified from Ketchikan. The remote site issue is one the timber industry feels strongly about because of the remote locations of many logging camps. Most employers involved in the industry provide off-work coverage for their employees in the form of health insurance. In situations where an employee is injured off the job, that coverage should be relied on, rather than workers' compensation. One of the problems that has resulted from remote site liability is the restriction of personal freedom for workers that work at the camps. The employer, fearing the possibility of injury while not working, restricts the activities of employees. Number 512 SENATOR TAYLOR asked if rates have been impacted. MR. HINCHEN replied the bill would help lower rates. He noted an employee who broke his back on a rope swing was considered to be compensable under the Workers' Compensation Act because the accident occurred on a worksite. SENATOR ADAMS asked Mr. Hinchen his definition of a remote job site. MR. HINCHEN answered a remote site is one that does not have road access to an incorporated town. SENATOR ADAMS asked Mr. Hinchen if he would be amenable to an amendment that says, "a remote job site not near a community." MR. HINCHEN expressed concern that such language would leave too much room for interpretation because of the word "near," since a town could be 10 miles away with no road access, or 100 miles away with road access. Number 537 MR. GROSSI noted the department would have some concerns with such an amendment. The remote site rule was adopted because there is increased risk in remote sites. Although employees might be injured while not working, they would not be under those risks except for that employment, and would be home in a safer environment. A roll call vote was taken on the motion to adopt amendment #2. The motion passed with Senators Taylor, Green, and Miller voting "yea," and Senators Ellis and Adams voting "nay." Number 555 SENATOR ADAMS referred to a letter to committee members from committee staff regarding Section 9, subsection 10. He asked if anyone was available to testify on that section and the effect that language might have on the disabled. MR. GROSSI explained that provision has to do with permanent or long term disability cases. If the wages calculated under Sections 1-7 don't fairly calculate the employee's earning capacity is, the employee can appeal to the board for a change in the compensation rate, and vice versa, the employer would have the same right. SENATOR ADAMS asked what would happen if Section 10 was eliminated. MR. GROSSI replied the right to an appeal would not be available. TAPE 95-28, SIDE B SENATOR TAYLOR asked if this provision works as a "catch all" in case the formula calculation does not fit. MR. GROSSI stated it does, but only for permanent or long term disability cases. SENATOR TAYLOR commented Senator Adams' concern is that it is limited to permanent or long term disability cases and should be available to others. SENATOR ADAMS commented he brought it to the attention of the committee in case an amendment is offered to change that section. SENATOR MILLER moved CSHB 237 (JUD) out of committee with individual recommendations. SENATOR ADAMS objected and stated he has not had a chance to review this bill in light of tort reform and several Alaska Supreme Court cases. He stated he was objecting because moving the bill is premature since tort reform hearings will be held this summer. A roll call vote was taken. Senators Taylor, Green, and Miller voted "yea," and Senators Ellis and Adams voted "nay," therefore the motion carried.