SB 354-HUMAN RIGHTS COMMISSION PROCEDURES  MR. SCOTT NORDSTRAND, Deputy Attorney General, Civil Division, Department of Law (DOL), told members he spent about 15 years practicing in the employment field when in private practice. He practiced before the Human Rights Commission on many occasions and is familiar with its procedures. He maintained that the state has an interest in having an effective administrative procedure to root out discrimination and provide remedies, and to have a procedure that is fair to the state when the state is the defendant. MR. NORDSTRAND explained that SB 354 is designed to rebalance some of the Human Rights Commission's (HRC's) procedures to provide more fairness in the process and more effective use of the HRC's resources. He gave the following synopsis of the measure: The primary thing that this does is it gives the executive director of the commission the power to pick and choose those cases that are most deserving of proceeding to hearing. That power was essentially lost to the director in the case that's referenced here, Department of Fish and Game v. Meyer, 906 P.2d 1365 (Alaska 1995). To understand this, you have to understand a little bit about what the procedure is when you go before the commission. Let's assume for a moment we're talking about an employer-employee situation, which is the most common kind of case that comes before the commission. There are housing cases and other cases but that's the most common and probably the most contentious. A question of whether there was discrimination based upon age in hiring comes before the commission. The way that happens is the person who didn't get the job would go down to the commission, would say that they felt they had been discriminated against based on age, and then the commission staff would assist them and prepare a complaint.... You can see that's AS 18.80.100, that process. So the complaint is filed and it's sent to the employer. The employer has an opportunity to respond and generally that's the point at which the employer would hire an attorney if they choose to and the attorney would gather evidence about the circumstances and prepare...a response back to the commission saying why they didn't think there was discrimination or, on occasion, there may have been something wrong and they offer to remedy it in some way. And so, then the process begins for the commission to assign an investigator. The investigator is assigned to look into both sides of the matter and make a determination ...under AS 18.80.110 that there was substantial evidence of a discriminatory practice. That still is the norm. That has not changed under here. So an investigator, if an investigator finds there's substantial evidence of discriminatory practice, then the case is sent to something called conciliation. You might call it mediation, whatever you want to call it. It's a time when the employer and the employee and the commission staff sit down and see if they can work something out. If there's a failure of consideration, as they say, at the commission, then the executive director certifies that fact and it's assigned forward to hearing. And at that point a human rights advocate, which is an attorney employed by the commission, is assigned to the case to represent the executive director. They don't technically represent the employee but they pursue their interests before the commission. They go through a formal discovery process...not unlike any lawsuit you're in - depositions, interrogatories, all of that kind of thing happens and all of the costs associated with that happen too. It may be somewhat quicker, but it is, by no means, a particularly inexpensive way to come to conclusion, and much more than a civil case. And then at the end, if there's a hearing, a hearing officer is assigned. The case is not heard before the commission.... Generally a contract-hearing officer is hired. They hear the case, they write a recommended decision, an order, that's then recommended to the Human Rights Commission that it ultimately can adopt or not. The commission has remedial powers that are limited. They don't include, for example, the power to award punitive damages, the power to award non- economic damages, which is pain and suffering, that kind of - emotional stress kinds of things. Generally it's injunctive relief, like putting them back to work, back pay, benefits, that kind of thing - as they indicate, making the employee or the plaintiff whole. Now what happened in this Meyer case that created the problem was that the Supreme Court determination of what is substantial evidence to require a hearing, that is, if you have substantial evidence, you have to have a hearing - that's what the Supreme Court says and that's what the law has said to date. Unfortunately...the standard is very low, according to the Supreme Court, and I'm not sure if that's because of the way the statute is written or because of the Supreme Court's interpretation of it. Regardless, the standard is very low. In fact, the allegation has to be completely lacking in merit in order not to go to hearing. That's a very low standard. And so, as a result, essentially any case that's got any scrap of evidence at all of a discriminatory event goes to hearing. That's a problem for the commission because the commission really has no way to weed out the good cases from the bad and use its resources most effectively and to be the most effective agency it can. Let me give you a comparison, for example, of what the Equal Employment Opportunity Commission - the feds do. The feds do the same thing. They have an investigation process but, in fact, they decide whether to take the case or not. The feds don't have, in fact, a commission or hearing process to go to. If they want to bring charges of discrimination under federal laws, civil rights laws, they have to go to the federal courts. They have to go downtown to the courthouse and file a lawsuit. That's not the case here. But in any case, they have the power to choose amongst the various cases. What this bill does is it gives the executive director the power to say no, that case really isn't a very good case. We're not going to win that case so we're not going to take that one forward. We'll use our resources somewhere else. That's the primary thing that this bill does. MR. NORDSTRAND referred to the analysis section entitled "Improves commission procedures" and said it contains remedies to many small problems encountered by attorneys over the years. First, the HRC is not authorized to compromise claims during the conciliation process. Therefore, if a person didn't get a job on May 1 and the hearing is on December 1, the HRC would have no choice but to order back pay for seven months. Under the bill, the HRC would have the choice of ordering less back pay. The bill also requires the HRC to follow the Administrative Procedures Act, unless otherwise provided for in statute. It also allows a hearing officer to grant summary judgment, either for or against a case before him or her. Right now, commission regulations preclude a hearing officer from doing that. He told members that an attorney could file every case that goes before the HRC as a lawsuit in court and have access to more remedies, such as non-economic damages. However, in the court system, if a case is very bad or very good, the amount the court must hear can be limited by a summary judgment ruling. Because that option does not exist with the HRC, the HRC must hear every case before it. SB 354 will address that issue. SENATOR THERRIAULT asked why the HRC is precluded from summary judgments now. MR. NORDSTRAND said he believes the HRC did not want to deal with summary judgment motions because of the workload of the human rights advocates. However, on the flip side, allowing those motions will potentially prevent a number of cases from going to a hearing. He said it is his understanding that summary judgment motions were specifically excluded from the HRC regulations. He then said, regarding SB 354 enhancing fairness of the commission's procedures, in the example of an age discrimination case, if a finding of substantial evidence is made, the case would go forward to discovery. However, in the past, if the problem was determined to be sex discrimination rather than age discrimination, the HRC could go forward with a hearing on any claims it amended its complaint to include. He stated: What we have found is that there are times when - I mean that's simply sort of sidestepping the requirement. If we're to believe that substantial evidence should be found for every claim that goes to hearing, then if a new issue comes up in discovery for which there has been no finding of substantial evidence, this simply provides that it goes back to that process. An investigator looks at it and determines if there's substantial evidence before that complaint can be amended and go forward so that the employer or the respondent can have the benefit of the informal process of going back through investigation, a response on the sex discrimination case, for example, and an opportunity to conciliate. And perhaps, in the face of the new evidence, conciliation might actually be more likely, who knows? But it's just a matter of fairness that that's the door that opens to hearing - substantial evidence. It should be there for every claim that's asserted. MR. NORDSTRAND then said the commission has taken the view that it has a 10.5 percent interest rate available to it. The bill will tie that rate to the standard interest rate charged by other agencies. Regarding the remedies available, MR. NORDSTRAND said AS 18.80.130(a) contains a list of possibilities the HRC can award and says it can award any appropriate relief. In DOL's estimation, it is simpler to list what the actual remedies are in a system that is designed to have limited remedies. DOL identified the injunctive relief reinstatement, training requirements, and financial remedies used by the HRC. The financial remedies consist of back pay and front pay, which is from the time of the hearing forward to remediate any difficulties in putting that person back into the workforce at the same pay level. DOL codified that. MR. NORDSTRAND indicated the controversial part is the cap on the front pay. DOL's original cap in the bill was set at two years of wages. The Senate State Affairs Committee lowered that cap to one year. He pointed out the bill contains a standard of what a complainant must prove to be eligible for front pay [bottom of page 4]. He noted that DOL discussed this bill with the HRC and found the commission to be in agreement with the proposed changes with the exception of the front pay issue. DOL believes that in order to divine what economic damages are in an employment case, one has to determine how much the employee would have earned if he or she had not been discriminated against. The amount that person earned in alternative income is then subtracted. Front pay is a different animal, in that no one knows what income he or she will earn in the future and how far out into the future that money should be awarded. AN UNIDENTIFIED SPEAKER asked how that number is determined. MR. NORDSTRAND said the compromise was to cap that amount. DOL believes this system was designed to provide limited remedies by the government, rather than taking a case to court. He pointed out the language in the current version of the bill doesn't necessarily support an award of front pay. The HRC has interpreted that language to mean that front pay is available but that point could be argued. SENATOR THERRIAULT asked Mr. Nordstrand for that citation. MR. NORDSTRAND pointed to Section 6(a)(1). SENATOR FRENCH referenced the word change in Sec. 18.80.100 and asked the difference between "practice" and "conduct." MR. NORDSTRAND said that word change was made for the sake of consistency. He believes "practice" is the better word because the word "conduct" could be interpreted to mean an action. He noted the HRC did not object to that change. SENATOR FRENCH responded that his "first blush" response is that a "conduct" is something a person does once, while a "practice" is something that is done more than once. 8:30 a.m. SENATOR OGAN agreed with Senator French's interpretation. MR. NORDSTRAND maintained that DOL was making no attempt to change the scope of what the HRC or act does; that change was simply an attempt to use better language. SENATOR FRENCH asked if the EEOC does summary judgment motions and dismissals. MR. NORDSTRAND replied, "Well certainly the EEOC, when they go to court, are subject to all of the federal rules of civil procedure." SENATOR FRENCH asked if the EEOC has an in-house type of system, similar to the HRC. MR. NORDSTRAND explained: No, the EEOC itself doesn't - with rare exception. There are some very rare exceptions that involve political appointees where the EEOC has a hearing officer system that is then subject to appeal, I believe, to the Circuit Court. It's an odd system designed to take the political issues out of the local courts I think. Other than that, they don't have a commission that sits like the Human Rights Commission as an adjudicator that can award relief. They have to go downtown to the courthouse and so when they get there, they would have the full benefit of Civil Rule 56 for summary judgment. CHAIR SEEKINS asked Ms. Fitzpatrick to testify. MS. LISA FITZPATRICK, chair of the HRC, told members the HRC consists of seven individuals. She noted, in response to a statement made by Mr. Nordstrand about remedies available to the HRC, the HRC believes that Section 6(a)(1) will not provide enough relief to make the complainant "whole." The HRC is involved in ongoing discussions with the Governor about its concerns and is hopeful that they can agree on language that addresses those concerns. The HRC believes the existing language is not comprehensive enough and would prefer to use a "catch-all" phrase or to use an enumerated list of remedies. CHAIR SEEKINS asked if the HRC has a guideline for appropriate remedies. MS. FITZPATRICK said the guidelines are set to allow the HRC to provide "whole" relief. The HRC has never awarded any non-economic damages, however, if an employee is ill, loses his job and medical insurance and incurs huge medical costs, the language in the bill would prevent the HRC from requiring that individual to be compensated for those medical costs. MR. NORDSTRAND informed members that DOL met with the HRC and presented the bill. The HRC provided written comments, from which DOL made significant changes to the bill, for example removal of a provision that would allow payment of attorney's fees to the prevailing employer. Other changes were made in regard to mitigation of damages and amending complaints. The HRC asked for four specific changes and the only change DOL and the HRC could not agree on was front pay. He said he was unaware that the HRC met and decided to challenge the remedy section of the bill. His understanding was that the only issue that remained was that of front pay and the HRC's vote to cap front pay at two years failed with 4 against and 3 in favor. CHAIR SEEKINS asked if the HRC pays all attorneys fees for the complainant. MR. NORDSTRAND said it does. CHAIR SEEKINS asked if the employer cannot recover any damages if the employer prevails. MR. NORDSTRAND said that is not specifically precluded. A provision at the end of the act says the HRC can award attorneys fees, however, the HRC does not do that. He explained: In other words, if you go through a whole hearing and at the end there's a question should the commission award attorneys' fees, well they're not going to award attorneys' fees. They could theoretically seek attorneys' fees to cover their costs - I mean they have a human rights advocate who is proceeding. I don't know that they do that. And if they were to award, say if the employer were to win the case, the only party against whom they could award attorneys' fees would be the commission. In other words, they'd be awarding fees against themselves essentially because the control of the case going through hearing is with the executive director. It's not with the individual, the employee, per se, and they don't actually represent the employee in these hearings. They represent their interests. So, there's power in the statute to award attorneys' fees but they don't do it, so an employer gets nothing if they win. CHAIR SEEKINS asked if the case was in court, the parties would be subject to Rule 82. MR. NORDSTRAND said that is correct. If an attorney brought the case to court and the employer were to prevail, partial attorneys' fees would be awarded under Rule 82. CHAIR SEEKINS asked Ms. DeYoung to address Senator French's concern about the word change from "conduct" to "practice." MS. JAN DeYOUNG, Assistant Attorney General, DOL, said her recollection is that no one had a problem with the word "conduct," but several phrases were used throughout the bill so the purpose was to provide consistency. She said she had a particular concern with using the word "discrimination" by itself because only unlawful discrimination is problematic. Many differences are recognized in the law as valid discrimination. She said her point is that no one was concerned that the word "conduct" was bad; the concern was with inconsistency throughout the statutes. MR. NORDSTRAND said AS 18.80.110, the original substantial evidence language, says if the investigator determines that the allegations are supported by substantial evidence, the investigator shall immediately try to eliminate the discrimination. He explained that parts of the act speak just to discrimination, yet people act discriminatorily all of the time and those acts may or may not be illegal. DOL was attempting to make the language more precise. SENATOR FRENCH asked, for the record, if Mr. Nordstrand is saying it is his belief that nothing about that word change would prevent a person from bringing a complaint before the HRC based on a single act. MR. NORDSTRAND responded, "Absolutely not, that is a practice." MS. FITZPATRICK clarified, regarding the HRC's concern about the relief provision, the HRC did not pay sufficient attention to that provision during the first go-around and did not appreciate the gravity of it. Upon closer scrutiny, the HRC realized it will create a significant problem and decided to meet. The six commissioners present felt it needed to be addressed. CHAIR SEEKINS asked if the HRC discussed that provision after it met with DOL. MS. FITZPATRICK said it did. She furthered that Mr. Nordstrand was out of town at the time so she ended up speaking with Mr. Tibbles about the problem. CHAIR SEEKINS announced that with no further participants, public testimony was closed. SENATOR FRENCH asked Chair Seekins if it was his intent to move the bill from committee today or whether he planned to give the two parties time to work on the disputed topic. CHAIR SEEKINS asked Mr. Nordstrand if DOL wished to have additional time to talk to the HRC. MR. NORDSTRAND believed it was safe to say that DOL has agreed to disagree with the HRC on that issue. He explained that the general concept is that the bill will either contain a specific list of remedies that identify what can and cannot be done or it will have open-ended relief language, and that is precisely the issue that DOL is trying to solve. DOL believes that people who participate in a government-funded process should expect limited remedies from that process. He noted that unfettered remedies permit interesting settlement negotiations. For example, he learned in DOL's discussions with the HRC, that front pay has settlement implications because it can be calculated at any number and be used as a negotiating tool. Any good lawyer would have an economist try to maximize the front pay number. If the economist determined the front pay to be $50,000 for 5 years, another $250,000 would be on the negotiating table. DOL is saying that some level of certainty, in this case one year of front pay, is a fair balance and will create more certainty of outcome and encourage settlement. It will also give reasonable expectations to the claimants. He repeated that DOL simply disagrees that an appropriate list is limiting. CHAIR SEEKINS asked, using Ms. Fitzpatrick's example of an employee who lost a job with medical benefits and incurred huge medical costs, whether an employer would be required to pay back pay and the loss of benefits. MR. NORDSTRAND said, in general, part of the compensation package would be the benefit package. However, there is an ongoing debate about whether the employer would be liable for the cost of insurance versus the consequential damages. DOL falls on the side of the employer's benefits being the defining term. He noted that although consequential things can happen, many of those things are within the employee's control. He said there are people who have no job and not enough money to buy medical insurance and incur medical costs. If those costs are so consequential to that case, for example if a catastrophic medical injury occurs, then the case should be in court. He said his friends in the plaintiffs' employment bar often monitor the HRC's cases and take the good cases to court. He continued, "There is a limit. Yes. And in this case, we would not be funding a million dollars of medical costs that were uninsured. We would be funding, and our understanding would be, the benefit cost." CHAIR SEEKINS asked if the [HRC] would be making the determination on whether the practice that caused the person to lose his job was discriminatory but the court system would determine the damages that resulted from the lost job because the HRC is not the proper venue for that kind of a claim. MR. NORDSTRAND replied, "Any more than punitive damages is because they don't have the authority to award those damages." SENATOR FRENCH thought the HRC exists because many cases are for perhaps $5,000 and, although that amount might be a crushing amount for the plaintiff, it is not worth an attorney's time. MR. NORDSTRAND said that is certainly true and the small cases are the business of the HRC to some degree, but the director will be given discretion. He noted there is a point where one has to consider whether the cost of litigating such a case is worth the HRC's time to go through the entire proceeding. He said the EEOC is very good at getting the big cases where it tackles class action suits or cases that will set things right for a lot of employees. But the HRC has been bogged down with a lot of cases that perhaps shouldn't go to hearing and it would be more advantageous to use its resources for investigations. He offered that a person with $5,000 in medical costs could also file a claim in small claims court. CHAIR SEEKINS agreed that small claims court is very effective and efficient but expressed concern that the financial limit for that court is too low. SENATOR THERRIAULT asked if a plaintiff could take the HRC's determination as fact before the court. MR. NORDSTRAND said that is an interesting question. He commented: It would be subject to review, like any administrative agency finding, but it would go up through that process and, for example, if you - theoretically, I haven't seen it done but theoretically, if you had a finding here of discriminatory conduct, you might be able to go forward in court and seek other remedies too. SENATOR THERRIAULT said a person without the money to go to court who went through the HRC process first and was successful would be getting something of tremendous value without going to court. MR. NORDSTRAND said DOL discussed whether to include an opt-out provision so that a person who went through the HRC process would be opting out [of court]. MS. DEYOUNG stated that provision was not included in the bill. TAPE 04-46, SIDE B  CHAIR SEEKINS said his concern was that this bill would not give a person who was collaterally damaged recourse within the system but his concern has been addressed. MS. DEYOUNG informed members that regarding the substitution of the word "practice" for "conduct," discriminatory practices are defined in the human rights law, which is why the word "practice" was chosen. CHAIR SEEKINS noted he saw no reason to hold the bill in committee. SENATOR THERRIAULT moved SB 354 from committee with individual recommendations and its zero fiscal note. CHAIR SEEKINS announced that with no objection, the motion carried. He then announced a 5-minute recess.