SB 58-TRANSPORT NETWORK SVES. & WORKERS COMP  1:36:31 PM CHAIR COSTELLO announced the consideration of SB 58. "An Act relating to workers' compensation and transportation network companies; and providing for an effective date." 1:37:10 PM SENATOR BILL STOLTZE, speaking as chair of the Senate State Affairs Committee, said he introduced SB 58 by request. He spoke to the following sponsor statement: Senate Bill 58 establishes a workers' compensation exemption for individuals who operate a motor vehicle under a service agreement with a transportation network company. Recently emerging in Alaska, transportation network companies provide services by connecting passengers to drivers through a digital network, commonly in the form of a mobile device application. Currently, taxi companies are allowed an exemption from the Workers' Compensation Act, which creates an unfair advantage over transportation network companies. Senate Bill 58 is intended to provide equal treatment between taxis and transportation network companies. The communities of Chugiak and Eagle River have desperately sought transportation options without success. Hopefully, this small piece of the solution will allow municipalities, including Anchorage, the ability to facilitate unmet transportation needs for all Alaskans. SENATOR STOLTZE related that horse carriage drivers are disadvantaged by current law and he'd like that to be added to the bill. 1:42:47 PM CHAIR COSTELLO noted the supporting letter in the packets from legislators in the greater Anchorage area. SENATOR GIESSEL asked him to comment on the lack of transportation services in other areas of the municipality. She said Eagle River and Girdwood come to mine. SENATOR STOLTZE confirmed that there is an issue in Girdwood. People are willing to pay for transportation services but the industry isn't responsive. This is an effort to remove some of the obstacles. SENATOR MEYER agreed there is need for additional transportation services city wide. He asked if this is an insurance or workers' compensation bill. SENATOR STOLTZE described it as an insurance bill that relates to a potential industry. 1:46:26 PM SENATOR MEYER asked how this bill compares to the way other states have dealt with transportation issues. SENATOR STOLTZE said he didn't know; he was relying on input from the municipality and trying to remove a barrier. SENATOR MEYER said he appreciates that the legislation was introduced because he has heard it is a problem in many areas. 1:48:47 PM MICHAEL MONAGLE, Director, Division of Workers' Compensation, Department of Labor and Workforce Development (DOLWD), testified in opposition to SB 58. He said the department doesn't have a problem with the concept if the transportation network company is defined similar to a taxicab business, but the application could be broader than that because of the wording. A tour company could use this model and be exempt from workers' compensation insurance, for example. If the bill was strictly limited to taxicabs and limousine type services the department wouldn't have as much concern. He raised concern with the language in subparagraph (C) on page 2, line 25. It says a person is exempted once they take on a passenger and that concludes when the passenger exits. He questioned what happens with insurance in between the time the network driver drops off one passenger and picks up another. He also raised concern with Sections 3 and 4 on page 3 that apply the legislation retroactively. If a driver currently had a workers' compensation claim or the division had a proceeding before the Workers' Compensation Board, those claims or proceedings or claims would be set aside by the retroactive clause. If the bill moves forward, the department would prefer that provision be deleted. SENATOR STEVENS asked why taxicab companies are exempted from workers' compensation. MR. MONAGLE said he didn't know the history of the exemption, but there are specific limitations to that exemption. There has to be a written contract between the business owner and its drivers and under the labor law there are restrictions on how the person can accept payment. 1:53:25 PM SENATOR STEVENS questioned the rationale for exempting taxicabs in the first place. MR. MONAGLE said the broader question is whether a person is an employee or an independent contractor. The legislature concluded that a taxicab driver is an independent contractor. This legislation provides a similar exemption under that same analysis. CHAIR COSTELLO asked who, other than taxicab drivers, is exempt from workers' compensation. MR. MONAGLE read the list found under AS 23.30.230. He added that there is a "relative nature of the work" test to determine whether there is an employee employer relationship in the event of an accident. CHAIR COSTELLO asked if the department's concerns can be addressed through an amendment. MR. MONAGLE answered yes and highlighted the concern about whether there is sufficient insurance in the event of an accident. 1:59:33 PM CHAIR COSTELLO asked Mr. Hester if he wanted to comment on the legislation. 1:59:52 PM MARTY HESTER, Director, Division of Insurance, Department of Commerce, Community and Economic Development (DCCED), said SB 58 does not affect Title 21, the insurance statute, but the division is monitoring the bill to ensure that there is insurance provided during all phases of the operation of these vehicles. 2:01:04 PM BRYCE EDWARDS, Operations Manager, Uber in the Northwest, explained that Uber is a technology platform that connects riders and drivers. The system is cashless and brings in an unprecedented level of accountability. SB 58 solely focuses on workers' compensation and whether the people that partner on the system are small businesses or employees. He explained the process for becoming a driver on the Uber platform. Once someone becomes a driver they have the flexibility to log on and log off the application as they see fit. Drivers average 20 hours a month, are not dispatched, take 80 percent of the fare, and receive a 1099 at the end of the year. MR. EDWARDS advised that Uber is working with the city of Anchorage to address transportation network companies. 2:07:28 PM SENATOR MEYER asked how a passenger knows what the rate will be and whether the Uber driver is taking the correct route. MR. EDWARDS explained that a rider can open the application and click on the rates. This shows costs per mile and per minute as well as the base charge. The rider can enter the final destination and receive an estimate for the trip. To determine the best route the rider can enter the final destination and push the navigate button to get step-by-step instructions. The rider can rate the driver at the end of the trip on a five star scale. A three star or below is an indication to Uber that follow up is needed. SENATOR MEYER asked if there is an opportunity for a third party to track the rider. MR. EDWARDS confirmed that is possible if the rider chooses to share the information. SENATOR MEYER asked if Uber encourages drivers to put up a Plexiglas barrier behind the front seat as a safety measure. MR. EDWARDS said Uber drivers feel very safe; they are not carrying cash and they have the option of turning down a passenger. He hasn't seen the Plexiglas shield. SENATOR STEVENS asked him to address Mr. Monagle's concerns and if some common ground could be found. MR. EDWARDS addressed the concern about opening the door for other types of operators. He said the bill has a standard definition of what a transportation network company (TNC) does. It clearly states that the partners in the system pick a passenger up and carry them from A to B. The issue of a package provider was mentioned but Uber doesn't own or lease any vehicles. He said that Uber prefers that Sections 3 and 4 relating to retroactivity remain in the bill because Uber has been giving many of free rides in Anchorage. CHAIR COSTELLO asked how other states have addressed the issue of employee versus independent contractor. MR. EDWARDS said it is being addressed in a number of states and Arkansas and Florida are the farthest along. CHAIR COSTELLO asked if they're moving toward identifying drivers as independent contractors. MR. EDWARDS replied it is shifting in that direction in Arkansas and Florida. CHAIR COSTELLO asked if there has been litigation on the issue. MR. EDWARDS said he isn't familiar with any outside the piece in Alaska. 2:16:36 PM SENATOR ELLIS asked what insurance is affected other than workers' compensation. He noted there could be some interplay. MR. EDWARDS offered to distribute a handout showing Uber's insurance information. 2:17:16 PM At ease 2:18:54 PM CHAIR COSTELLO reconvened the meeting. MR. EDWARDS explained that the insurance for TNCs bridges the gap between what is typically a commercial and personal insurance industry. From the time the driver accepts a passenger through the application to the time that the rider leaves the vehicle, there is $1 million primary insurance coverage. That extends to underinsured and uninsured motorist coverage as well as comprehensive coverage. When the application is on but before the ride has been accepted, there is contingent insurance that would cover in the case of any issues with the driver's personal insurance. This is referred to as period 1. No transaction is occurring and the driver's personal insurance is primary. CHAIR COSTELLO opened public testimony. 2:21:28 PM SHELDON WINTERS retained counsel, State Farm Insurance, stated that State Farm has no position on whether or not TNCs should be exempt from workers' compensation insurance, but has concerns about the narrow definition of TNCs in SB 58. As currently drafted it may have unintended but dire consequences for insurance coverage liability issues. He referenced the consumer warning on the Division of Insurance website which has joined 22 other states by issuing warnings about the risks of ride sharing/vehicle sharing programs. The key point is that personal auto insurance is not intended to cover people who use their vehicles for commercial purposes and coverage in the event of an accident in those cases is unlikely. MR. WINTERS maintained that commercial activities by a TNC driver that are not covered by a personal policy do not just begin and end with picking up a passenger and dropping them off. Commercial activities include the moment the TNC driver turns on the application and is open for business, similar to the taxicab driver that turns on their "for hire" light. Reiterating the concern about the narrow definition of TNCs, he directed attention to the language on page 3, line 6 and suggested that the language should be broadened to include all aspects of T&Cs. He discussed problems that occurred in other states after an accident and warned that if the bill passes in its current form it could be used to preclude an injured party's recovery from the TNC. He noted that State Farm submitted broader language to the sponsor of SB 58 and the sponsor of companion legislation. SENATOR STEVENS assumed that commercial insurance is more expensive than private insurance. He asked him to discuss the insurance requirements for taxicabs. MR. WINTERS confirmed that a commercial insurance policy is more expensive than a personal policy and advised that taxicab insurance requirements are set through municipal code. SENATOR STEVENS asked if a taxicab has to carry commercial insurance 24 hours a day with no switching back to a personal policy. MR. WINTERS said that is probably true, but State Farm does not insure taxicabs. He clarified that insurance companies do not accommodate switching back and forth and it's a problem that TNC drivers are under the mistaken impression that their personal policy will cover them. 2:31:54 PM ARMAND SELICIANO, Property Casualty Insurers Association (PCIA) of America, stated that PCIA has deep concerns with SB 58 because it does not address liability insurance. Nothing in Alaska law addresses the liability aspect in the event of an accident involving a TNC. The bill provides two definitions of TNC services but neither covers the roaming period. Under the language in SB 58 Uber could argue that a driver who is roaming and gets in an accident is not covered by the commercial insurance. He cited a case in California with that fact pattern and Uber made that argument. He suggested amending the bill to include the roaming period and keeping an eye on the litigation in California where Uber drivers filed suit claiming they are employees, not independent contractors. 2:36:39 PM CHAIR COSTELLO announced that she would hold SB 58 in committee with public testimony open.