CSHB 214(JUD)-PUNITIVE DAMAGES AGAINST EMPLOYERS  CHAIR BUNDE announced CSHB 214(JUD) to be up for consideration. REPRESENTATIVE RALPH SAMUELS, sponsor of HB 214, said this bill adds a section to the punitive damages statute that would create a guideline for damages against an employer under vicarious liability. It stipulates that an employer shall not be responsible for paying punitive damages unless the employer okays the act or knew about it later or that the employer knew the employee to be unfit and recklessly employed them. One example would be a construction company owner that requires drug testing and training and specifically tells his employee that he cannot drive the forklift or truck because the employee has not been trained. If the employee does so anyway and someone gets injured, then the company should still be on the hook for compensatory damages to pay for the pain and suffering, but the company should not be punished if it has not done anything wrong. Their policies would not be changed and the punitive damage factor should not apply. REPRESENTATIVE SAMUELS explained that the bill does not affect any portion of the law with respect to direct liability. If the company, itself, does something wrong, the current law would apply and this does nothing to change that. It does not affect the ability of the plaintiff to get compensatory damages. The language came almost word for word from a restatement of tort, which is an amalgamation of case law from across the country. The standard also comes from the Laidlaw Case, heard before the Supreme Court, which commented if this had been brought up at a trial, it would have ruled with language that is in the case right now. MR. STEVEN CONN, AkPIRG, cautioned against passage of this bill because although a small employer would deserve immunization from punitive damages in that particular instance, the only way to motivate larger corporations is with punitive damages. Hopefully, a message will be sent to big companies to tighten up and improve their hiring and training practices. He opposed the bill for its broad reach and asked them to trust civil juries. MS. MARSHA DAVIS, General Counsel, Era Aviation, said the Exxon Valdez punitive damages issue had been raised in the House Labor and Commerce committee and the actual issues had been pretty well clarified there. The $5 billion in punitive damages that is being batted around in court right now was a direct assessment against Exxon, therefore this bill would not touch that. This bill does not affect employers' direct liability for their compensatory damages or direct liability. What would be at stake would be the $5,000 in punitive damages that was assessed against Mr. Hazelwood and the question is would Exxon, in addition, be vicariously liable for that $5,000. The issue of big versus small is also a red herring. She told members: The size of the employer isn't the issue; it's whether or not an employer should be held strictly liable for punitive damages assessed against their employee. While the punitive damages are intended to motivate a change in behavior, then it does no good to make strict liability, because you have disconnected the employer's behavior from the liability outcome. Only where the employer's behavior affects the outcome of that liability do you have a motivation. For example, at Era Aviation, we do our best to make sure that employees are screened for drug and alcohol usage problems. We do drug and alcohol testing on a pre-hire basis. We do required random testing at a set percentage established by the FAA regulations. We also have a right to do for cause drug and alcohol testing anywhere we have suspicions of abuse. We do annual training of all supervisors to spot drug and alcohol problem usage amongst employees so that we can activate our for cause program. Yet, we had a situation several years back where an employee stopped at their lunch break, drank a few beers, drove the company van and hit a motorcycle. If there's strict liability for the punitive damages that would be assessed against our employee, what, if anything, could Era have done differently? The answer is nothing. So, in that instance, where Era does not have a fault, has not done something wrong, it makes no sense to make us vicariously liable for the punitive damages assessed an employee who may have acted outrageously or recklessly. Rather, the standards set out in this bill are totally reasonable. They have been tested and tried throughout the nation...We strongly support the bill and encourage its passage. MS. PAM LABOLLE, President, Alaska State Chamber of Commerce, stated support for fairness in the civil justice system and said CSHB 214(JUD) brings a greater degree of fairness to the system. Punitive damages are intended to punish wrongdoers, who through outrageous conduct and acts of malice or indifference have harmed or caused loss to another. To hold employers liable for punitive damages when their acts have no affect on an employee's behavior is not what punitive damages were intended for. MS. JESSICA GRAHAM, Anchorage Society of Human Resources Management, said she is also an employment lawyer. She strongly seconded Marsha Davis's comments and added that in the last several years when she has been litigating employment cases, she has not seen a complaint that has not included a claim for punitive damages. She feels this is a feather in the cap of the plaintiff's bar that they regularly use to up the ante against employers. It increases the cost for litigation regardless of whether the claim actually has any merit or not. She commented: Secondly, in the greater scheme of things, under the current system, if an employer is held strictly liable for the actions of an employee, regardless of whether the employer did anything to encourage it or benefited in any way, what happens at the end of the day is that the employer can pay out an enormous sum of money and do enormous damage to their ability to continue business while the employee, who actually did the harm probably gets fired, walks off essentially scott free, goes and gets another job at a different employer, does not disclose where he previously works and a new employer is going to be ultimately responsible for the same kind of conduct that can happen again and again. In the general spirit of Alaska independence you want to put the responsibility where it lies and put it on the individuals who are doing these kinds of activities that give rise to these punitive damages. If you want to stop the conduct, tell the employee who sexually harasses someone that they will hold them personally liable rather than tagging that on the employer who has otherwise done everything right. SENATOR FRENCH said he heard her and others mention strict liability with respect to assigning fault to an employer for the acts of their employees and asked what cases in Alaska have set forth that standard. MS. DAVIS replied in 1986 the Alaska Supreme Court initially enunciated the standard that is called the Scope of Employment Rule for liability for punitive damages in the Alaskan Village versus Spaulding case. That case was over a dogfight in a trailer court and was later cited by the Alaska Supreme Court in the Laidlaw case and others as the standard in Alaska. She continued: Essentially the public employment rule as the Supreme Court enunciated it is if an employee is acting within the scope of their employment at the time the injury or damage is incurred and the jury assesses punitive damages against that employee, the employer will be vicariously liable for those damages the same as it would be for the comparative or the standard damages. That stands in contrast to the restatement, which essentially sets out a set of four criteria that needs to be met before an employer could be held liable for those punitive damages. SENATOR FRENCH asked if that is what she would call strict liability. MS. DAVIS replied that it's strict liability if you assume that acting within the scope of employment is a given on both of those standards. For instance, the employee was hired to drive, and while the employee wasn't hired to drive drunk, the employee was doing something in furtherance of the employer's conduct - as opposed to them employee driving the company vehicle on his own time at night to a bar when the vehicle wasn't supposed to be used. CHAIR BUNDE asked if the legal arguments could be deferred to the Judiciary Committee. Representative Samuels indicated concurrence and the Chair set HB 214 aside.