SB 124-FISHERIES BUSINESS LICENSE; BOND  CHAIR BUNDE announced SB 124 to be up for consideration. SENATOR SEEKINS moved to adopt CSSB 124, version G. SENATOR ELLIS objected for an explanation. CHUCK HARLAMERT, Juneau Section Chief, Department of Revenue, said the changes in the CS are technical corrections and eliminate redundant language. SENATOR ELLIS removed his objection and CSSB 124(L&C), version 24-GS1013\G, was adopted. MR. HARLAMERT explained that CSSB 124(L&C) seeks to improve the protections the state affords employees of fish processors and primary fish buyers and to impose some increase accountability for processors' taxes and assessments that support the industry. Section 1 adds seafood marketing assessments levied under AS 16.51, contributions imposed under AS 23.20 (Alaska Employment Security Act) and any administrative penalties assessed under AS 18.60.093 for a violation of a provision of AS 18.60.010 - 18.60.105 to the existing taxes in Title 43 that must be paid in order to obtain a license (OSHA fines levied by the (DOLWD). 1:56:27 PM Section 2 repeals and reenacts the bonding requirements. The basic now is a $10,000 labor bond that is required of every processor or primary fish buyer who buys fish and/or has employees. The bond is used to protect employees and fishermen for unpaid claims. The changes proposed by the bill will restrict use of real property in lieu of a bond to taxpayers who do not have a history of non-payment of any of these obligations. A claim on the bond is sufficient to trigger an increase in the bond level. It also allows Department of Labor and Workforce Development to reach the bond without obtaining a formal judgment in a court. 1:58:27 PM CHAIR BUNDE asked if the essence is that someone has an arrearage and a judgment against him, his bond goes up and he has to pay the state in order to keep doing business in Alaska. MR. HARLAMERT replied the current rule is that basic bond level is $10,000. If a claim is made against the bond and it's not enough to cover it, the bond is automatically increased to either $50,000 or $100,000. The requirement is that the bond actually be used to pay the judgment. The processor could pay directly and avoid that consequence. What this bill does instead of requiring that the bond be actually used to pay that obligation, it simply requires that there be a judgment in excess of $10,000. It considers that a sufficient [indisc.] of risk and increases the bond level accordingly. 1:59:52 PM SENATOR ELLIS asked if the bill preserves the existing statutory priority for use of the bond to pay fishermen and employees first and does the CS modify that priority in any way. MR. HARLAMERT replied that that priority is not modified and actually strengthened under this bill, because while the threshold is lowered for the DOLWD to go after the bond, if subsequent to that, a fisherman or an employee achieves a judgment against that bond and it is insufficient, the department is obligated to "cough up" whatever they have collected to cover that claim. So, you could actually have a taxpayer, for example, who had say $5,000 in ESU claims, take from the bond; they replace their bond. A fisherman comes along with a $15,000 claim and under current law, they would be limited to $10,000 bond for recovery. Under this bill, they could actually get the whole $15,000. 2:01:28 PM SENATOR BEN STEVENS asked if the $5,000 comes from the Department of Labor. MR. HARLAMERT replied: Yes, under this bill, labor, in order to preserve the preference given to employees and fishermen over labor's claims against the bond, while at the same time allowing labor to get at that bond through a more efficient process, we've built in basically a kickback provision that says if necessary, labor has to repay that money - put it back in the pool to pay the claims of fishermen and employees in the event that their subsequent claims are not satisfied from the bond. SENATOR BEN STEVENS said the confusing part is where he says it comes from labor to pay labor. "It comes to the department to pay labor." CHAIR BUNDE pointed out a zero fiscal note. 2:02:42 PM SENATOR BEN STEVENS asked on page 5, lines 3-11, if the commissioner finds the processor is not in compliance and he has the ability to raise the bond, does he still issue the bond. MR. HARLAMERT replied: We don't actually issue the bond. We require them of the processor. So, you actually do have dual protections for labor. We can pay out of the bond a claim for ESC from labor at which point the processor has to immediately replenish that bond. If that doesn't happen and they are still delinquent with the Department of Labor, we can revoke their license for failure to be current on their ESC.... The bond could be in the form of a bond with an insurance company; it could be in the form of cash residing with us - but it is always provided by the taxpayer. 2:05:13 PM SENATOR BEN STEVENS asked: If we know there's an entity in violation... and we keep issuing the license and the bond - you know there are people that do that - does this help you in that in efforts to deter that, then? MR. HARLAMERT replied: It absolutely does. Presently there is no requirement for the processor to be current with their ESC and they can and do go unpaid and continue to be licensed by us under current law. We don't have a choice. If they meet our requirements, we license them. Whether they are being responsible with other agencies is irrelevant - under current law. Labor, under current law, has to obtain a court judgment to get at that bond and that would be the only instance in the current law where labor for an ESC claim would affect their license ability. In current law, what happens if they ever get a judgment and that judgment used up that bond and the taxpayer failed to replenish it immediately, we could revoke their license. But if they did replenish it immediately, we would have to maintain their license, yes. GRAY MITCHELL, Director, Labor Standards and Safety, explained that the bill allows department to stop fish processing companies that are in violation of health and occupational standards and have been issued a penalty and failed to pay it. It is a penalty that has been affirmed through the Occupational Safety and Health Review Board or was not appealed. In the past, companies that did have fines on the books were given licenses and continued to operate and this caused huge problems. For instance, in Egegik, employees, fishermen and companies are owed hundreds of thousands of dollars because a company was basically on its last leg. Had this bill been in place last year, they wouldn't have been able to get a license without paying these fines. Then they would be subject to some other issues on their bonding. 2:10:11 PM CHAIR BUNDE asked how the worker who is having the problem is going to get $5,000 from the Department of Labor and how does the department recoups its money. MR. MITCHELL answered that was a general example and he didn't know where the $5,000 came from. But if a worker is owed $5,000 and at the same time the Employment Security Tax people come in and they seize the $10,000 processor bond for unpaid Unemployment Insurance Taxes, that worker could then get a judgment and within a certain timeframe be able to trump the Department of Labor's tax collection on that bond and the Department of Labor would essentially have to give $5,000 of that back to Revenue and then Revenue would get that money to the worker. CHAIR BUNDE said, "Assuming you're not getting blood out of a turnip, the department would go after the processor?" MR. MITCHELL replied, "Right." 2:11:24 PM PAT SHIRE, Deputy Director, Employment Security Division, DOLWD, supported SB 124. He remarked: If the department can provide a mechanism to at least clean the slate before the next season, we're far, far ahead of where we were last year when we had fish sitting on docks and workers standing there with the dilemma of how we're going to make sure that these obligations are met.... 2:12:25 PM CHAIR BUNDE asked if this would prevent licensure of people who are not in compliance. MR. SHIRE replied yes. CHAIR BUNDE announced that CSSB 124(L&C) would be set aside for another hearing.