HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 14, 1997 3:17 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery, Vice Chairman Representative Bill Hudson Representative Jerry Sanders Representative Joe Ryan Representative Tom Brice MEMBERS ABSENT Representative Gene Kubina COMMITTEE CALENDAR *HOUSE BILL NO. 217 "An Act relating to certified nurse aides; and providing for an effective date." - MOVED CSHB 217(L&C) OUT OF COMMITTEE *HOUSE BILL NO. 237 "An Act relating to payment of minimum wages to tipped employees; and providing for an effective date." - MOVED HB 237 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 217 SHORT TITLE: CERTIFIED NURSE AIDES SPONSOR(S): REPRESENTATIVE(S) RYAN JRN-DATE JRN-PG ACTION 03/27/97 872 (H) READ THE FIRST TIME - REFERRAL(S) 03/27/97 872 (H) L&C 04/14/97 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 237 SHORT TITLE: MINIMUM WAGE FOR TIPPED EMPLOYEES SPONSOR(S): LABOR & COMMERCE BY REQUEST JRN-DATE JRN-PG ACTION 04/07/97 1013 (H) READ THE FIRST TIME - REFERRAL(S) 04/07/97 1013 (H) LABOR & COMMERCE 04/14/97 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER REPRESENTATIVE JOE RYAN Alaska State Legislature State Capitol, Room 420 Juneau, Alaska 99801 Telephone: (907) 465-3875 POSITION STATEMENT: Provided information on HB 217 as Sponsor GAIL MCGUILL, President Alaska Nurses Association 237 East 3rd Avenue Anchorage, Alaska 99501 Telephone: (907) 264-1710 POSITION STATEMENT: Testified on HB 217 RON COWAN Department of Health and Social Services Division of Health Facilities, Licensing and Certification 4730 Business Park, Blvd. 18 Anchorage, Alaska 99503 Telephone: (907) 561-8081 POSITION STATEMENT: Testified on HB 217 PAT DOOLEY, Board Member Alaska State Nurses Association 9100 Centennial Drive Anchorage, Alaska 99504 Telephone: (907) 269-3223 POSITION STATEMENT: Testified on HB 217 CAROL CLAUSSON, Private Citizen 13200 Ridgeview Drive Anchorage, Alaska 99516 Telephone: (907) 261-3141 POSITION STATEMENT: Testified on HB 217 MARY WEISS, Registered Nurse P.O. Box 221514 Anchorage, Alaska 99522 Telephone: (907) 786-4565 POSITION STATEMENT: Testified on HB 217 SUE NIKODYM, First Vice President Alaska Nurses Association P.O. Box 2154 Wrangell, Alaska 99929 Telephone: (907) 874-2081 POSITION STATEMENT: Testified on HB 217 BARBARA HUFFTUCKNESS, Director Legislative and Governmental Affairs for the Teamsters 4300 Boniface Parkway Anchorage, Alaska 99804 Telephone: (907) 269-4236 POSITION STATEMENT: Testified on HB 217 CATHERINE REARDON, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Testified on HB 237 LOUISE DEAN, Chair Alaska Board of Nursing 1911 Waldron Drive Anchorage, Alaska 99807 Telephone: (907) 563-3500 POSITION STATEMENT: Testified on HB 237 JACK AMON, Partner Marx Bros. Cafe 627 West Third Avenue Anchorage, Alaska 99501 Telephone: (907) 278-2133 POSITION STATEMENT: Testified on HB 237 ROBERT GILL, Secretary/Treasurer Hotel Employees and Restaurant Employees Union 530 E 4th Avenue Anchorage, Alaska 99501 Telephone: (907) 272-6591 POSITION STATEMENT: Testified on HB 237 FRED ROSENBERG, Owner Red Robin Restaurant 4450 Cordova Street, Number 200 Anchorage, Alaska 99503 Telephone: (907) 563-7777 POSITION STATEMENT: Testified on HB 237 ANGELINA CHRISTIANSEN, Business Representative Hotel Employees and Restaurant Employees Union, Local 878 530 E 4th Avenue Anchorage, Alaska 99501 Telephone: (907) 272-6024 POSITION STATEMENT: Testified on HB 237 WILLIAM J. CULLINANE, Owner Inn at the Waterfront 455 S. Franklin Juneau, Alaska 99801 Telephone: (907) 586-2050 POSITION STATEMENT: Testified on HB 237 THERESA PEREZ, Waitress 1326 W 25th, Number 5 Anchorage, Alaska 99503 Telephone: (907) 272-4215 POSITION STATEMENT: Testified on HB 237 CHRIS ANDERSON, Owner Glacier BrewHouse 737 W 5th Avenue Anchorage, Alaska 99501 Telephone: (907) 274-2739 POSITION STATEMENT: Testified on HB 237 DWIGHT PERKINS, Special Assistant Commissioner of Labor Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Testified on HB 237 KYLE PARKER, Lobbyist P.O. Box 241043 Anchorage, Alaska 99524 Telephone: (907) 566-1220 POSITION STATEMENT: Testified on HB 237 TRINA JOHNSON, Owner La Mex Restaurants 2550 Spenard Road Anchorage, Alaska 99501 Telephone: (907) 274-7511 POSITION STATEMENT: Testified on HB 237 ACTION NARRATIVE TAPE 97-40, SIDE A Number 000 CHAIRMAN ROKEBERG called the House Labor & Commerce Committee to order at 3:17 p.m. Members present at the call to order were Representatives Cowdery, Ryan, Hudson, and Sanders. Representative Brice arrived at 3:21 p.m. Representative Kubina was absent. HB 217 - CERTIFIED NURSE AIDES CHAIRMAN NORMAN ROKEBERG indicated that the committee would consider HB 217, "An Act relating to certified nurse aides; and providing for an effective date." Representative Ryan came forward as sponsor to provide information to the committee. Number 050 REPRESENTATIVE JOE RYAN testified on HB 217 as sponsor to this legislation. The need for this bill was brought to his attention and it's a means to give legislative authority to the nursing aide certification program established by executive order. Through the Board of Nursing this establishes minimum requirements for nurse aide training. This legislation also calls for a registry of certified nursing aides. REPRESENTATIVE RYAN stated that since Certified Nurse Aides (CNA) requirements were established by executive order, there is no legislative authority to take disciplinary action against these individuals. If they prove to be incompetent or injure people, the Board of Nursing doesn't have any authority. This bill allows the Board of Nursing to deny, suspend or revoke a nurse aide certificate for reasons such as conviction of a crime related to a nurse aide function, negligence that results in an injury, risk of the health or safety of a client or an addiction to illegal drugs or alcohol. REPRESENTATIVE RYAN continued that this legislation will continue to allow the Department of Health and Social Services to maintain a list of CNAs who have worked in state licensed long term care facilities and home health agencies who have committed abuse, neglect or misappropriation of property. The medical profession is moving very quickly these days and the number of people in the country, especially those growing older, requires more and more medical attention. There have been a lot of instances in the Lower 48 where hospitals and nursing facilities, etc. have tried to get these CNAs to perform duties for which they really weren't trained. REPRESENTATIVE RYAN added that this legislation allows for the Board of Nursing to have authority over these individuals to maintain adequate training and at the same time if they commit acts which are not ethical and/or criminal a means to reprimand. The Board of Nursing will have the authority to remove this license, suspend it or to take the appropriate action. Representative Ryan noted that his wife was a registered nurse in the state of Alaska which might be considered a conflict of interest. Number 399 REPRESENTATIVE RYAN introduced and moved a new committee substitute for HB 217 labeled 0-LS0737\B, dated 4/9/97, to be adopted by the committee. Hearing no objection it was so moved. Number 580 GAIL MCGUILL, President Alaska Nurses Association came forward to testify on HB 217. She's a registered nurse, a Licensed Nursing Home Administrator, and is presently employed as the Director of Quality Management at Columbia Alaska Regional Hospital in Anchorage. On behalf of the Alaska Nurses Association she spoke in support of HB 217. The protection of Alaska's senior citizens and others in need of nursing aide services is of utmost importance to their organization. MS. MCGUILL continued that the Alaska Nurses Association has worked with the Alaska Board of Nursing for over seven years in trying to achieve the public protection goals which this legislation provides. In 1989, the governor signed the Administrative Order 115 calling for the Department of Commerce to take responsibility for the training, certification and registration of nurse aides required by the federal government. Since this time the Board of Nursing has worked with the Division of Medical Assistance, the Office of Certification and Licensing, and the industry's long-term care facilities and home health agencies to maintain standards for nurse aide training testing and competency. The Board of Nursing has shown fairness and cooperation in working with the nurse aides, employers of nurse aides, and home health aides. MS. MCGUILL stated that the Alaska Nurses Association believes the statutory and regulatory authority for nurse aides should rest with the Board of Nursing, the state agency responsible for regulating nursing care in Alaska. This legislation will strengthen the board's ability to protect the public. It will grant the board the ability to set standards for certification, for defining competency for nurse aides, it also sets standards for the certification and training curriculum and does allow the board the ability to discipline nurse aides by revoking certification when appropriate in the same way it does with Registered Nurses (RNs) and Licenses Practical Nurses (LPNs). MS. MCGUILL continued to state that although the board has set standards for education and competency testing for nursing aides since 1989, it has not been able to perform any disciplinary action because it lacked the statutory authority to do so. The Department of Health and Social Services has had responsibility to do investigations only when the allegations involve client abuse, neglect or misappropriation of funds only when the individual is employed in a long term care facilities or a home health agency. In fact, over the past seven years, staff from the Board of Nursing have provided professional consultation to the department and Senior Ombudsman in investigating complaints related to certified nurse aides and nursing care of Alaska's senior citizens. She pointed out that this bill provides the board the ability to protect the public with regard to all the nurse aides who are certified. Number 775 REPRESENTATIVE JOHN COWDERY understood that the Board of Nursing has the authority to oversee training of nurse aides. He wondered what defined the word "oversee." MS. MCGUILL responded that there were 34 programs already approved in the state that provide basic education. The number of hours ranges depending on which program someone is enrolled, with a minimum of 75 hours. There is hands on training and classroom training. Number 841 REPRESENTATIVE COWDERY asked in relation to becoming a registered nurse could an individual build from their training as a nurse aide. This was how she got started. MS. MCGUILL stated that a nurse aide is an entry into becoming a nurse. Number 877 REPRESENTATIVE BILL HUDSON asked if there was a compelling concern regarding public safety and these nursing aide individuals? MS. MCGUILL responded that the concern they have relates to the fact that the state of Alaska is limited in preventing someone from continuing to practice if they're working in a variety of different settings. Number 934 REPRESENTATIVE HUDSON asked if there was a possibility that this legislation may serve as a bar to some folks getting into this field? He wondered otherwise if this legislation would serve as a registration and management scheme program and an ability to take action in the interest of safety. MS. MCGUILL agreed with the latter representation. Number 962 REPRESENTATIVE COWDERY asked if this legislation would be a burden for the Department of Health and Social Services in relation to fielding complaints. MS. MCGUILL responded that Catherine Reardon from the department might speak to this question. The fiscal note does call for an investigator in occupational licensing. Number 986 REPRESENTATIVE RYAN alluded to the case loads of registered nurses which are currently picking up in volume. MS. MCGUILL responded that case load depended on settings and the kinds of services provided. Registered nurses are responsible for more patients. Number 1035 REPRESENTATIVE RYAN added that nurse aides are required to help nurses perform their duties. MS. MCGUILL responded that this was one of the reasons why the Alaska Nurses Association supports this bill. Number 1072 REPRESENTATIVE HUDSON asked that when "they" establish a regimen for control do they also have a testimonial to qualifications. If so, do they have additional liability by asserting that someone meets certain qualifications when it turns out they might not. MS. MCGUILL responded that the individual who becomes certified has additional responsibilities in order to maintain this certification and to practice in accordance with this certification, along with the regulations that are applied to this occupation. Number 1138 CHAIRMAN ROKEBERG asked if the Board of Nursing has disciplinary and enforcement power over their current membership. MS. MCGUILL responded that they do over registered nurses. CHAIRMAN ROKEBERG asked if they are able to met out fines, punishments, investigation powers, revoke and suspend licenses. MS. MCGUILL responded that, "yes" they do. Number 1261 RON COWAN, Department of Health and Social Services, Division of Health Facilities, Licensing and Certification testified from Anchorage via teleconference on HB 217. This division is responsible for the licensing of health care facilities in the state including the certification of facilities to receive medicare and medicaid funding. One of the responsibilities is to conduct complaint investigations which sometimes involve certified nursing assistants. The department supports this bill and he reiterated everything Ms. McGuill said about the need for this legislation. MR. COWAN stated that they've been hamstrung for years without statutory authority for the board to take action in regards to existing federal law and also because the number of nursing assistants has grown to over 5,000. The clientele are often times vulnerable and in need of some type of consumer protection. As a result of their investigations they've found instances of abuse, neglect and misappropriation of funds. Without this legislation, neither they nor any other entity in the state would be allowed to take appropriate action. MR. COWAN mentioned that it recently came to the department's attention that there was a possible problem in the bill, specifically with Section 16 which is a change to existing law. This affects the assisted living homes and the sharing of information related to investigations. Number 1395 REPRESENTATIVE RYAN stated that he has an amendment suggested by the department which addresses the investigation of an individual when it's found they are not guilty of what they were accused. In the course of this investigation, if it's found that additional information incriminates a different person, presently no action can be taken because of confidentiality. This amendment would allow this additional individual to be investigated. He moved amendment one on page 7, line 27 the deletion of language "certified nurse aides." He also noted the change to the bill title as follows, "An Act relating to certified nurse aides; disclosure of investigative information to the appropriate agencies and providing for an effective date." Hearing no objection it was so ordered. Number 1521 REPRESENTATIVE HUDSON asked if there would be anyone caught in the "middle of this thing," people who are subject to higher standards and "shoved out of the pipeline" here, or does this legislation take care of everyone that's already in these programs. MR. COWAN responded that this legislation provides the board with authority to take action and to adopt regulations for those persons who are currently certified. This will also impact those individuals who become certified after the passage of this legislation. This will not retroactively affect anyone relative to their current status as being certified. If they were to perpetrate one of the acts for which disciplinary action is appropriate they would be impacted by this, but it would not change the current certification requirements for those who have already gone through the process. Number 1582 CHAIRMAN ROKEBERG referred to the enforcement provisions of this legislation. It seems in these sections the department has the duty to create new regulations for implementation of the enforcement provision, but noted the zero fiscal note at the same time. He asked if this meant that their existing investigative staff and hearing officers are adequate to meet the concerns that are specifically required for the Health and Social Services Department, as opposed to Occupational Licensing. MR. COWAN responded that the nursing assistants that may be subject to this legislation, the number that would actually fall within the department is a very small one. Also, it's important to note that they receive reimbursement from the federal government to provide this service. They anticipate this funding to continue. This funding has been adequate to date to carry out their responsibilities. Number 1653 CHAIRMAN ROKEBERG asked if their purview was only for those areas covered by medicaid and/or other medicare type programs under the department's jurisdiction. He also wondered if this legislation was in conflict with the federal Health Care Financing Administration (HCFA) requirements. MR. COWAN responded that Chairman Rokeberg was correct in the relation to the first question and stated that he was involved with the original legislation. He believed there was nothing in this legislation which is contradictory, in fact, some of the language is specifically written to avoid conflicts with the federal requirements. Number 1722 PAT DOOLEY, Board Member, Alaska State Nurses Association testified from Anchorage via teleconference on HB 217. She added that she was the Director of Nursing at the Mary Conrad Center in Anchorage. She wished to respond to the nursing assistants program being an entry level into the nursing program. She said this was true for many of the nurse assistants, but they don't have the same level of education that nurses do. Nurses take a lot of classes which help them understand anatomy and physiology, including pharmacology. Although nursing assistants conduct a lot of hands on care they do lack the ability to access a patient's condition. She said this would be like asking a cashier at a gas station to open the hood of someone's car to make an assessment. MS. DOOLEY continued that the other concept she'd like to address relates to delegation. When a situation has been delegated nurses have a specific scope of practice. When they delegate, they still retain responsibility for the outcome. They determine what the task might be with specific guidelines to follow. A big concern to nurses is that it's great to have nursing assistance to do the more repetitive tasks which don't require the years of training and knowledge. It's a concern to nurses that when they still retain responsibilities for things, that they don't have the ability to follow up if individuals aren't doing things correctly or if there's a need for a disciplinary process. This situation is a catch 22 because usually people are doing more with less and these people are asked to supervise when they don't have any control over the quality of the staff that they supervise. Number 1879 CAROL CLAUSSON, private citizen, testified via teleconference from Kenai. She is also a registered nurse. She testified in favor of this legislation. She felt that anyone who worked with the patients, the vulnerable public, needs to have a minimum of training while being held accountable for their actions. There needs to be a mechanism in place to assure this. Since nurse aides work under licensed nurses the regulation of these aides is best done by the Board of Nursing. She hoped that in the future nurse aides working in the hospital setting will be required to be certified. Number 1937 MARY WEISS, Registered Nurse, testified via teleconference from Anchorage. She read a letter which she received from a nursing assistant. "My name is Judy Lowberg. I've been working as a certified nursing assistant in an Anchorage home care facility for over four years. I urge you to require mandatory certification for all nursing assistants as a condition of work. First of all, certification provides a way for CNAs to be current on changes by requiring continuing education for recertification. Secondly, certification provides a way to track information about past work experiences, training and even any criminal history about people who are giving direct care to patients of nursing assistants." MS. WEISS stated that as a registered nurse who has worked in rural areas she found out how very difficult it was to get certified nursing assistants. Number 2048 SUE NIKODYM, a Registered Nurse; First Vice President, Alaska Nurses Association; and Long Term Care Coordinator at the Wrangell General Hospital came forward to testify on HB 217. She said that she works with CNAs every day. She plans, implements and coordinates their education. Their facility is one of 34 which is certified with the state to teach courses. MS. NIKODYM spoke in support of HB 217 which would bring the regulatory authority of CNAs under the Board of Nursing. As a nurse, she is responsible for all aspects of care to their elderly population which also encompasses the actions of CNAs. This legislation will give the Board of Nursing the authority to regulate education, incompetency of CNAs, as well as act in a disciplinary capacity if necessary. MS. NIKODYM stated that the Alaska Nurses Association is taking positive approaches toward the regulation of all nurse aides in the state. Through these regulations this ensures quality and safe patient resident care. She also was a member of the American Nurses Association Task Force that looked at federal regulation of all nursing assistants and through this task force they came up with guidelines for the state nurses association. This association advocates competency based education for all nursing assistants despite the area of health care that they work within. MS. NIKODYM continued that the state Board of Nursing would be able to maintain competency based education, as well as maintaining a national registry database that pertains to health care. With downsizing and deregulation they must help to protect this group of health care providers by helping them maintain their competency levels and by giving the RNs and the Board of Nursing to go to for advice and counsel. Number 2163 BARBARA HUFFTUCKNESS, Director, Legislative and Governmental Affairs for the Teamsters, came forward to testify on HB 217. The Teamsters represent CNAs, as well as RNs and several of the hospitals around the state. The Teamsters support this legislation. They do have a certified program in place with respect to at least one of the hospitals in Alaska. This bill will bring a more focused umbrella by having all these programs under the Board of Nursing. They also believe it will reinforce some valuable perspectives with requirements being set forth in the law. Number 2255 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development came forward to testify on HB 217. The department supports this legislation and the Board of Nursing is on record in support as well. First, the Division of Occupational Licensing already certifies CNAs. There are approximately 2,000 of them in Alaska and the department certifies them under a federal law, a federal requirement. This does not take a group of people who have not had any interaction with government already. This legislation gives the department and board the tools they need to make the system work better and to protect the public. MS. REARDON believed that public protection was the real benefit of this legislation. The federal government has required they certify nurse aides only in relation to their activities in a small sub-set of facilities. There are approximately 2,000 individuals out there who have state certification, but they could commit any type of heinous act and as long they didn't do it in one of these licensed facilities she would have no way of taking away their certification. This legislation would allow the division under the Board of Nursing to investigate, suspend or revoke CNA certification for offenses that take place in other locations. MS. REARDON added that it's difficult to administer a program under federal law without any state law accommodations. They can't write regulations since they have no statutory authority to do so. This legislation would rectify this situation. In conclusion, this is not an attempt to block entry of a new group and it's not a mandatory licensure law. Anyone who has not been required to have CNA certification before will be required to have it now. Anyone can be hired to take care of an elderly adult in a home, for example, but if someone chooses a CNA or are part of a staff that is licensed by the federal government, the public can be more assured that these individuals have the qualifications and are under the disciplinary regulations that make them safe practitioners. Number 2434 REPRESENTATIVE RYAN stated for the record that he appreciated the fiscal note and noted that it seemed to be a wash, even though there is an expense the division anticipates program receipts for the licenses to cover these expenses. MS. REARDON responded that with all the occupational licensing programs the fees will cover the cost. There will not be any new general funds used. The fiscal note primarily allows for an investigator because the division is taking on the responsibility for disciplining a new set of licenses, it's important to follow up on complaints. Number 2470 CHAIRMAN ROKEBERG asked about subsection (e) and how the board can establish procedures regarding abuse, neglect, misappropriation of property, etc. and that they would write regulations. His concern is that there is nothing in the statute that provides for a hearing to take place where the offending CNA can bring exculpatory information. TAPE 97-40, SIDE B Number 000 CHAIRMAN ROKEBERG asked about the division's fiscal note. He took legislative notice that this was not a general fund, but will become part of the general fund budget number. "I am concerned though that it may cause a burden on the certified nurse aides in the state because if you use even the larger figure of 2500 CNA, a potential CNA in the state by your $86,000 fiscal note that's approximately rounded up to $35.00 per year or how we do it by annually normally a $70.00 bi-annual cost. Is that about how you reckon it?" MS. REARDON stated that she believed the bi-annual fee will probably be around $100.00. She noted that nurses pay $135.00 every two years presently. This fiscal note reflects the additional expenditures the state will make and the revenues which balance out as a result. The nurse aide share of the Board of Nursing per capita cost is not reflected. That's why the math does not work. With enforcement and investigative activity they match this to the complaints that come in. If they find they're not getting quite that many complaints concerning CNAs and they have some investigator time to spend on nursing RNs they will do this and the CNAs won't be billed for it. Number 146 LOUISE DEAN, Chair, Alaska Board of Nursing, testified via teleconference from Anchorage on HB 217. She is a public member on the board and could not stress enough the importance of this legislation. She's been on the board since 1990 and this has been a project they've tried to pass through since that time. Each week the number of nurse aides grows larger and larger. She also wanted to stress that the right to practice, whether someone is licensed or certified, is a privilege that someone works for and it needs to be held by certain standards. CHAIRMAN ROKEBERG noted that the committee had not taken any testimony from any actual nurse aides. He asked if she was aware of anyone in this category who might be against this bill or negatively impacted by it? Number 211 MS. DEAN responded that she had not heard anything and mentioned a letter they would be faxing in support of it, a letter from a CNA. Any nurse aides she has spoken to support this bill. She knows several CNAs who have gone through nurse aide training as part of the jobs program and they were in support of this effort. They feel they are a group of professionals and want to be held to certain standards. CHAIRMAN ROKEBERG noted that this legislation in certain instances exempts the division from the provisions of the Administrative Procedures Act and then implements others..."requires that you write regulations as the board under Title 8 and then brings in the department." It appears to him that there are two different enforcement agencies under this bill. He was concerned with this. Number 286 MS. REARDON responded that this was a bit complex. Mostly the reason for this was because of the federal law which overlays the entire system and the division's inability to get around it. As Mr. Cowan noted earlier there is a federal requirement that only his agency can make a finding of abuse concerning CNAs in certain licensed facilities. His department, HESS, will continue to conduct this function under due process and make the finding of abuse for those CNAs in those limited number of facilities. The Board of Nursing with Commerce's assistance regulates all of the other Nurse Aides who might commit offenses or become incompetent. If HESS makes a finding of abuse concerning a CNA in one of their facilities they will conduct due process hearings, finish findings and report them to the Board of Nursing. The Board of Nursing will immediately, without conducting a second hearing, revoke the license. Their main goal was to avoid two due process hearings for the same event, since this would slow the process down. HESS and Commerce would still discipline nurse aides, HESS the smaller group and Board of Nursing/Commerce conducting the remainder. MS. REARDON stated that the APA question might be addressed to Mr. Cowan. HESS would like the ability to have flexibility in what due process system they establish when they discipline a nurse aide while meeting constitutional due process rules, but not necessarily under the due process system required by the APA. The Department of Commerce and Board of Nursing have been operating under the APA. She wanted to make sure that on page 3, line 30, regarding notice, the board shall immediately revoke certification without a hearing. She wanted to retain this because a second hearing would be avoided for the exact same offense. MS. REARDON stated that she was not certain they would need an exemption from the APA to do this. They may need the exemption, but this is the only reason they would be interested in being exempted from the APA. HESS has other reasons to be exempted from the APA. Number 474 CHAIRMAN ROKEBERG called for a public hearing recess on this legislation and delayed it to the latter part of the committee meeting. Number 487 HB 237 - MINIMUM WAGE FOR TIPPED EMPLOYEES CHAIRMAN ROKEBERG indicated that the committee would consider HB 237, "An Act relating to payment of minimum wages to tipped employees; and providing for an effective date." He noted that this was a committee bill by request and he referred the committee to the Marx Bros. Cafe letter dated April 10, in the committee packet. Number 521 JACK AMON, Partner, Marx Bros. Cafe, Anchorage, came forward to testify on HB 237. He spoke in support of this legislation on behalf of the Alaska Cabaret Hotels Restaurants and Retailers (CHARR). This legislation allows employers of tipped employees to use a portion of their tipped income to satisfy hourly requirements under the Federal Minimum Wage Guidelines. He gave a brief history regarding these efforts. MR. AMON continued that minimum wage was established in 1938 by the Roosevelt Administration under the Fair Labor Standards Act. Its intent was to establish a liveable wage for workers in the manufacturing industry. It was not extended to tipped employees until 1967, at this same time the federal government included tipped employees under the minimum wage requirements. They also enacted a tipped credit which is still on the federal government books along with 43 other states. MR. AMON submitted a chart to the committee which shows how a tipped credit works and how this situation is handled in 43 other states. He referred to this chart entitled, "State Wage Laws." This chart reflects how tipped credits work on the federal level and each of the states. On the first line, federal numbers are outlined for minimum wage, which is $4.75 per hour. The tipped credit is the amount of tipped income that an employer, following the federal guidelines, can use to satisfy the minimum wage. The cash wage is the minimum wage that employer must pay. If someone is in a state that follows federal law, for example, Alabama which doesn't have an applicable law, they would follow federal legislation. An employer in this situation is required to pay an hourly wage of $2.13 an hour and would be allowed a tipped credit of up to $2.62 an hour. MR. AMON added that many states provide anywhere from 50 percent of the cash wages of tipped income to 23 percent. Some put a cap figure on this. He stated that an important feature of this legislation is that it in no way exempts the employers from the minimum wage and in no way does it cap the state's minimum wage. Any employer cannot take a credit for tips that were not earned and reported by that employee. If any employee does not make enough in tipped income to satisfy the state's minimum wage requirement then the employer is responsible for the difference. In no way, under enactment of this statute, would an employee ever earn less than the state's prevailing minimum wage, whatever that may be. Nor does it change the state's differential which is 50 cents higher per hour than the federal minimum wage. MR. AMON noted that what CHARR is seeking to do with this legislation is to cap the cash portion of the wage that an employer would pay at $5.25 an hour. This is 240 percent above the federal requirement presently. When the minimum wage goes up again in September, Alaska would have a tipped credit of 40 cents an hour. Number 707 CHAIRMAN ROKEBERG noted the two handouts in the committee packet published by the IRS called "Tips on Tips." He asked Mr. Amon to explain briefly the procedures under the IRS rules, whether there is a daily requirement for recording. This provision provides that an individual will never receive less than the minimum wage and is easily accountable because of the requirements of the IRS. MR. AMON stated that the IRS requires all employees to report 100 percent of all tips earned in a restaurant. The tips are usually accounted for on a time card that the employee submits. By correlating the amount of hours worked and the amount of tipped income reported it would be very easy to discern how much per hour an employee made. The reason they seek this relief, is that the IRS has precipitated this formula because not only do they treat tips as wages for withholding purposes, but tips are also treated as wages for matching FICA and FUDA amounts. "We feel if we are being, making a payroll matching amount, we have a payroll burden on tipped income then we feel that they are wages and we should be able to count them in our compensation packages." He pointed out that tipped employees generally are well above minimum wage and from additional testimony it will be shown that these hourly wages range from $8.00 to $20.00. Number 806 CHAIRMAN ROKEBERG reiterated that "Nobody's going to get 'rooked or gypped' out of their wage on a daily basis because they had a bad day, it snowed bad, they didn't have enough customers, their going to be fully compensated the Alaska statutory minimum wage if they had no tips that day." MR. AMON stated, "absolutely." An employer would be required to make up the difference on a daily basis. He assumed that this would be addressed in regulation. Number 857 REPRESENTATIVE RYAN asked what this would do to Worker's Compensation Insurance costs if an employer is required to contribute to an employee who nets $20.00 per hour. MR. AMON responded that when an employer conducts their Worker Compensation audit, gratuities are excluded from a Worker's Compensation audit. This would help keep Worker's Compensation amounts from going up. Number 890 REPRESENTATIVE RYAN asked if there was a general average among restaurants regardless of their characteristics, such as a fast- food business and a more formal establishment, as to a gross or a net, a margin in order to determine what the restaurant's expenses are, etc. MR. AMON responded that on a statistical analysis provided by the National Restaurant Industry Operations Report, profitable restaurants run anywhere from the lower quartile of net operating profit of 5 percent to a high of an upper quartile of 7.9 to 8.0 percent. These restaurants operate on slim margins that are quite labor intensive. It takes a lot of people to run a restaurant. "You have to really generate a 10 to 1 sales to bottom line relationship." If a restaurant has a $4,000 increase in costs they would have to generate $40,000 to put themselves back in the same spot. Number 949 REPRESENTATIVE HUDSON stated that he was contemplating this issue on Workers Compensation. He could certainly see where the added cost for Workers Compensation Insurance would benefit "a place." He wondered what affect this would have on the workers who would have to collect for some reason. He affirmed that this compensation would be figured on the basis of the Alaska minimum wage. MR. AMON stated that when an insurance premium is considered the payroll is figured by allowed subtracted gratuities and overtime compensation. This is in accordance with current law. Number 1000 REPRESENTATIVE COWDERY asked what the hours worked were for a normal shift in a restaurant. MR. AMON responded that this shift is anywhere between 6 and 8 hours. On average a waiter or waitress work 35 hours a week. Number 1014 REPRESENTATIVE COWDERY asked about full service restaurants and assumed there were more tips to be made in these establishments. MR. AMON noted that the upcoming testimony would shed light on this issue. A representative from the Red Robin Restaurant in Anchorage would address this common misperception. While each table might generate more tips they do considerably less volume. Say for example, the restaurant Gwennie's, their tipped employees are doing better in this establishment than someone in the Marks Bros. Cafe. because of the volume they generate. Number 1049 REPRESENTATIVE COWDERY asked how many persons would a waiter or waitress serve during a normal shift in Mr. Amon's establishment? MR. AMON responded that their restaurant was unique since they have a team operation. They probably average about 20 individuals an evening. Number 1075 REPRESENTATIVE COWDERY asked what the average tip was in his restaurant in regards to the average meal served. MR. AMON responded 15 to 20 percent. Number 1112 CHAIRMAN ROKEBERG asked if any employee in the Marx Bros. Cafe made minimum wage. MR. AMON responded, "no, sir." Number 1124 CHAIRMAN ROKEBERG also confirmed that Mr. Amon was a national board member of the National Restaurant Association. He also asked if Mr. Amon had any idea how many tipped employees there are in the state of Alaska. MR. AMON stated he had no idea how to answer this question. Number 1154 REPRESENTATIVE COWDERY asked what the Marx Bros. Cafe employee turnover was. MR. AMON said they have not had much turnover. Their wait staff goes through a major turnover every two to three years. Currently their newest waitress has been with them for a year and some of them have been there from four to five years. Number 1213 ROBERT GILL, Secretary/Treasurer, Hotel Employees and Restaurant Employees Union (HERE), testified via teleconference from Anchorage on HB 217. This union represents approximately 2,000 employees throughout the state of Alaska and they are vigorously opposed to this bill for numerous reasons. Although there are many servers who do make an excellent income the vast majority of servers in the state make $20,000 to $30,000 a year. According to the Alaska Department of Labor statistics, a family income of $25,000 is considered extremely low. The same could be said of $30,000. This tipped credit bill will serve to increase the welfare rolls and not serve to take people off of welfare. With the new five year welfare rolls they need incentives to get people off of welfare and back to work. He thought it was a great thing that Alaska had a 50 cent tie in with the federal minimum because of the higher cost of living in Alaska. MR. GILL continued that 40 cents cash reduction in wages a year constitutes $800 a year which constitutes food, clothing and housing for Alaska citizens. This bill would freeze the tipped credit at $5.25. There are so many unemployed single mothers who are trying to get off welfare and work. Many work at places such as Denny's, Village Inn, etc., which are not represented by the Hotel Employees and Restaurant Employees Union. Very few have health and welfare benefit packages, as do the union hotels and union restaurants. They feel that this tipped credit law will not serve the people of the state of Alaska well. If everyone in these situations were making $50,000 a year, he would probably not be opposed to this legislation, but the fact is most people make between $20,000 and $30,000 a year which is considered very low to low income. He noted that there was no reference in this legislation to collective bargaining agreements. "I presume it's the intent of the bill not to prohibit minimums much higher than that." He suggested that collective bargaining be referred to in the statute. Number 1435 REPRESENTATIVE HUDSON asked if Mr. Gill represented the lion's share of the employees within these restaurants that are in the non-tipped category, that is the employees who are cooks, etc., who work strictly for salary. MR. GILL responded that yes he did. At the union hotels the disparity in wages between the front of the restaurants and the back is not as great. Many of their cooks and dishwashers make $10.00 to $13.00 an hour. The disparity is not as great as it is in the non-union hotels. In his negotiations he always addresses this disparity. Number 1522 REPRESENTATIVE HUDSON stated that he was trying to understand what, with the passage of the minimum wage as adjusted for Alaska, was some of the information he has received is that all of the restaurants and food service folks within the industry are confronted with $70,000 a year of added costs. This has to come out of the bottom line, if it does this could have a negative impact on those non-tipped employees and it was for this reason that he was attracted to this legislation. He felt it would provide some opportunity for the owners of these establishments to upgrade the salary of the non-tipped employees. He thought that since Mr. Gill represents them, Representative Hudson thought he would have some sympathy on their behalf. MR. GILL responded that he does have some sympathy for them. So many of the servers in the state work at moderate priced restaurants. He could say unequivocally that if every server in the state made the type of income at Mr. Amon's restaurant which is a higher cover cost, "but there are so many people who work in the state that work at places that are like Denny's, Village Inn or Elmers that really do not make the type of income, and they need that protection of that extra 40 cents an hour." Without a union contract there is no guarantee that this 40 cents would go either to the "back of the house" or would go to a benefit package as has been suggested. Number 1736 CHAIRMAN ROKEBERG asked if any of the people that he represents are presently in a tipped employee category? MR. GILL responded about 25 percent of their 2,000 members are in the tipped category. Number 1760 CHAIRMAN ROKEBERG asked if any of these individuals have a wage schedule that is at or below the minimum wage? MR. GILL noted that in some of the houses the employees are at the minimum wage, but not below. He gave some examples of these. He said that many of the union houses are a significant degree higher than the non-union sector and it was his responsibility to make sure that the wage scale of union employees is not undercut. He made the argument that they shouldn't lower the wages in "the front of the house" in order to bring the "back of the house" up. Number 1942 FRED ROSENBERG, Owner, Red Robin Restaurant, Anchorage, testified from Anchorage via teleconference on HB 237. Previously he submitted to Representative Rokeberg an excerpt from payroll records to take an extract of numbers. What they found, based on reported tips (all employees are required federally to report 100 percent of their tips) is that their servers are making from $3.75 per hour to $8.09 cents per hour, just tips. When added to the present minimum wage they make between $9.13 and $13.34 per hour based on the reported tip records. MR. ROSENBERG continued that by comparing his establishment to the more fine dining restaurants with larger customer meal checks, their average check at lunch is under $10.00 and at dinner, it's right around $10.00. The Red Robin also has a larger turnover of customers. He referred to the bottom line information Mr. Amon spoke about in relation to the national standards for profitability in a restaurant. He then quoted the numbers of profitability as previously noted. The Red Robin falls into this range on the low side and part of this is that they try to be a very value oriented restaurant while keeping their prices down. The 50 cent increase in the minimum wage in 1996 reflects $125,000 to his bottom line. His business is making $125,000 less than it was before accounting for 25 to 30 percent of his profit. These are real numbers and he would have to generate over an additional $1 million in sales, which is impossible, just to break even on. MR. ROSENBERG noted that freight expenses are up, food and beverage costs are up and menu prices in no way can keep pace with this. There is no way to operate a small business and still provide a benefit. In order to make a profit they are required to monitor expenses. He conceded that tipped employees do make different wages depending on who they work for, but they do well. It's not possible for them to make up these differences. He also noted that the cost of living in Anchorage was equal with Seattle, even though they have a 50 cent differential in the minimum wage. Number 2265 CHAIRMAN ROKEBERG asked Mr. Rosenberg if he had done anything in his business practices that have negatively impacted his employees because of the last increase forced on them by the federal government. MR. ROSENBERG responded that they are not going ahead with any new benefits. New team members working for them are not in a position to get any of the benefits. They were contributing to medical packages. Outside of Red Robin they started two new restaurants and they haven't been able to afford providing any contribution towards medical or any other benefits. MR. ROSENBERG stated that in their restaurant they do not have anyone who gets paid minimum wage, they pay in excess of minimum wage except for the tipped employees. Their hosts and hostess, dishwashers and cooks are above minimum wage depending on their experience. He said they needed to keep the lid on these types of pay. In their two Red Robin Restaurants they employee 225 people. Number 2477 REPRESENTATIVE RYAN asked Mr. Rosenberg if he would be able to cover future increases in the minimum wage law with any type of cover charge or admittance charge into his establishment. MR. ROSENBERG responded, "not at all." He didn't think any restaurant could and the Red Robin is a very value oriented restaurant. They appeal to people of more modest incomes. There is no way they can afford to try and pass this on through a cover charge to the consumers, especially in light of additional competition. TAPE 97-41, SIDE A Number 001 REPRESENTATIVE HUDSON asked what the average income was of their tipped employees and the range for the non-tipped employees. MR. ROSENBERG gave the numbers again for the tipped employees and the non-tipped employees who make anywhere from $5.50 to $12.00. Number 130 ANGELINA CHRISTIANSEN, Business Representative, Hotel Employees and Restaurant Employees Union, Local 878, testified from Anchorage via teleconference on HB 237. She strongly opposed this bill. There is a reason why the federal minimum wage is higher in Alaska because of the higher standard of living. She noted the figures of $13.00 per hour as the high end for a 40 hour work week, this factors out to $27,000 a year. This is not high income. The exception to the rule are those individuals who make $50,000 a year and she guessed that not even five percent of Alaska servers make this much money. MS. CHRISTIANSEN continued that she has two children and is a single mother. She said that she's been on welfare before. Her day care bill alone for two children is $1194.00 a month. In reference to the comments made by the two previous restaurant owners who claim they pay their tipped employees above minimum wage, she wondered why they didn't pay them the minimum wage rate now if their costs are so high, especially since these employees are making the wages they claim. She also noted that most of the servers work more than one job and live paycheck to paycheck. Ms. Christiansen stated that they're trying to help people get off welfare. She noted that an individual should be able to depend on their paycheck. No one can depend on regular tips. She added that it's 40 cents this year, but what will it be next? Number 335 REPRESENTATIVE RYAN wondered if he had missed something in Mr. Amon's testimony regarding the fact that nobody could make below the minimum wage. Chairman Rokeberg said that this was correct and that's what the bill says. MS. CHRISTIANSEN also agreed, but she figured if an employee is making less than the minimum wage, including their tips, the employer is required to make up the difference. She offered, who could live off of minimum wage much less a single mother? Number 419 WILLIAM J. CULLINANE, Owner, Inn at the Waterfront, Juneau, came forward to testify on HB 237. He noted that Juneau has two seasons, the legislative season and the tourist season. He supports this legislation. He thought it made good economic and social sense. It simply recognizes the fact of what 43 other state legislatures have figured out. He asked how many politicians could be wrong. This legislation will help strengthen the restaurant industry. It will help with planning what labor costs will be for a particular time period and he thought it would generate more jobs in the industry. The restaurant industry is very competitive and it's marginal. The only way to improve a restaurant is through service and good tips are a reflection of this. Tips are income and it should be counted as such. MR. CULLINANE continued that their restaurant is a fine dining establishment. One of his employees makes 22 percent of the overall sales they singularly generate yearly. He also has some employees at 15 percent. Generally, this translates into $15.00 to $20.00 per hour. Usually in the summertime an employee will make between $120 to $125 per night and federal employment taxes must be paid on these amounts. He felt this legislation was long overdue. Number 691 THERESA PEREZ, Waitress, testified from Anchorage via teleconference on HB 237. She felt ambivalent about this legislation since she's not getting the answers that she'd like to hear. She inquired about the $5.25 figure as allotted for in the legislation and wondered if this would stay at this amount forever. If the minimum wage goes up, will this amount go up too? In the Lower 48 she was making $2.01 an hour and she was afraid that this figure of $5.25 would stay in effect for future generations. She said she'd be more than happy to give the 40 cents an hour to her boss as long as this amount is returned in the form of benefits or to the staff in the "back of the house." She didn't understand why tipped employees should be punished for making tips. CHAIRMAN ROKEBERG asked if she tipped some of the staff she worked with such as bus people, etc. Number 820 MS. PEREZ said that she did. She noted that without these individuals working for her she wouldn't make her tips. She urged the committee to be fair to the tipped employees and noted that she really depends on what she makes in tips. REPRESENTATIVE HUDSON stated that he believed by law that there is no way that the wages of these employees would go below minimum wage. This has been testified to. The only reason this legislation is before them is because of an increase in the minimum wage which adds pressure to the employer. This bill guarantees minimum wage and provides an offset to keep restaurants in business. As a result this provides job opportunities. Number 904 CHAIRMAN ROKEBERG asked Ms. Perez what she averaged in wages an hours. MS. PEREZ said she would not tell the committee this, but she wished to note that when the minimum wage goes to $5.65 then will "it" go up also? REPRESENTATIVE HUDSON stated yes. MS. PEREZ asked if there was any way for the employer to prove that they have done something constructive with the 40 cents an hour taken from each tipped employee to benefit the entire restaurant staff. She wanted to make sure that somehow the employees in the "back of the house" would benefit from this legislation. Number 957 CHAIRMAN ROKEBERG responded that there was nothing in the legislation to mandate an employer to prove what the money is used for. Number 1018 CHRIS ANDERSON, Owner, Glacier Brew House in Anchorage came forward to testify on HB 237. He stated that he has installed an insurance program at his restaurant and it's probably one of the finest in Anchorage. He supports this legislation. Within the last year the two increases in wages have cost him an additional $60,000. He's been in operation for nine months and he hasn't made it to a quadrant yet to realize a profit. This is not about making profits for himself, he doesn't look at this as something to take away from staff. He wants to be able to maintain his benefit program and to ensure that employees on the lower end are getting compensated. Every year he runs 70,000 man hours of tipped employees. He needs to put the relief on his non-tipped crew members, his line cooks, dishwashers, etc. He's very pleased with his sales and the fact that his employees are doing well. His dinner servers average $18.00 an hour, lunch $12.00 an hour. MR. ANDERSON continued that the way these employees make more money is by getting more guests in the restaurant, to provide more sales and to keep them busy. This happens by keeping prices low and being competitive. In order to do this he needs a staff to cook this food that are competent and capable. He pays his cook staff well and he'd like to keep doing so, but he weighs this against the bank's demands. He added that when he takes a $60,000 hit in wages within his first year of operation followed by approximately $50,000 in benefits for insurance alone, he stated that a quadrant for profit seems hard to find. He realizes that it's a challenge to raise well over $1 million in increased sales in his first year of business. Number 1182 REPRESENTATIVE HUDSON asked how many people did Mr. Anderson employ in his restaurant. MR. ANDERSON responded about 80 full time and seasonally, 110. Number 1193 REPRESENTATIVE RYAN asked how much an increase would it take to price himself out of the market and no longer be able to compete. MR. ANDERSON responded that this was a tough question. He felt that if the wages go up along with everyone else, they're in the same boat. For his business, a small increase could become a problem. He targeted a certain guest check average when he opened the restaurant in order to position himself in a segment of the market. By raising the guest check to cover costs this puts him in a segment where his guest counts decline. He works on volume. If he doesn't do a lot of volume, he doesn't make money. Number 1249 CHAIRMAN ROKEBERG asked what the average number of hours his staff works. MR. ANDERSON responded that in the summer time a server could work 40 hours and more, an average of 35 to 40. In the wintertime between 30 and 35 hours for dinner and roughly about the same at lunch time, maybe a little less. He outlined again the cost to payroll with the increases in minimum wage for Chairman Rokeberg. He noted that he would have to increase his gross sales by 25 percent to make up for this 40 cents an hour increase. He added that he will be very profitable in about five years from now. MR. ANDERSON continued that he had budgeted for this initial 50 cent increase in his annual plan. He did nothing different because he's looking at top line sales right now. He's in a brand new business and he has no plans to reduce benefits and costs. He's been open a year now, has a track record and will look to see where he can make this up. He'll have to take some preemptive action on this next increase of $30,000. In the future, when he looks at wages on an annual basis for his cooks, he might not be able to apply the same type of raise he'd like to apply without this $30,000 going to the "front of the house." MR. ANDERSON added that a lunch server at the BrewHouse makes approximately $12.50 an hour. A dinner server may make up to $18.00 an hour on an average. It is their policy that a tipped employee reports 100 percent of their tips. Number 1488 REPRESENTATIVE COWDERY wondered what made the difference between how one restaurant made more money than the other. MR. ANDERSON responded that they needed to address minimum wage. A minimum wage earner makes $10,900 per year. They're talking about individuals who make in-between low-end $15,000 and top-end $30,000 or $40,000. He said that he intends to compensate his high end employees with 5 percent increases every year, although he was more concerned about his dishwasher and his entry-level line cook at $8.00 an hour. He wanted to make sure they continued to receive insurance, crew meals, etc. He wanted to be able to give the higher end employees more money, but felt he could do so by putting more customers in the restaurant and attractive pricing to keep his business alive. Number 1580 REPRESENTATIVE COWDERY assumed he attributed some of this success to the good service his staff provides. MR. ANDERSON said he has a wonderful staff that opened a restaurant under very difficult situations. He wouldn't trade one of them for anything. He noted his turnover was very low. Number 1613 DWIGHT PERKINS, Special Assistant to the Commissioner, Department of Labor came forward to testify on HB 237. He cited some statistics from the department and mentioned that the Commissioner has some concerns with this legislation. They found that in 1995, 5,900 persons earned the majority of their wages including reported tips for that year as waiters or waitresses. These workers earned an average from all reported sources, including other occupations, of $6,667.00. This figure includes anyone who worked even a day as a waiter or waitress. They don't mean to represent this as an average wage for year round food service. MR. PERKINS continued that to obtain a better number they ran a check on all workers employed as waiters and waitresses in all four quarters of 1995 and came up with 1500 individuals who earned an average for the year of $12,213.00. Of this, 75 percent of the 1500 earned less than $16,139.00. This is also an imperfect measure and it does not mean that individuals were employed for full time, year round, only that they were employed as servers at some point in each of the four quarters of the year. MR. PERKINS stated that the department's mission was to foster and promote the welfare of the wage earners of the state, improve their working conditions and advance their opportunity for profitable employment. The Commissioner has a hard time understanding how this will help the wage earners of the state and didn't think it benefited them. He conceded that there were 43 other states that do allow less than minimum wage or minimum wage to reflect against tips, but this was not a national agenda to have tipped credits toward the employee wages considered. It used to be that Alaskans were proud to say that they didn't give a damn how "they" do it outside. The department felt that this was ill-advised legislation. MR. PERKINS summed up with a last statistic. In 1995, adjusted after inflation, the Alaska average monthly wage has fallen from 1985, at approximately $3100, to $2700 in 1995. The Alaskan worker has been taking hits for the last ten years and still continues to be hit. He stated that the department could not support this legislation. Number 1839 REPRESENTATIVE HUDSON asked if there was any benefit in this or any other leveling measure inherent in this legislation to create jobs which in his way of thinking is one of the justifiable reasons for trying to do something like this. He used examples of restaurants that have gone out of business and the fact that it's hard to make money in this business. If there's any merit to this legislation it's because it provides an opportunity for some private investor to put their money into an eating establishment and with a slight bit of assistance through this type of legislation to not have to absorb these high nationally imposed costs, they may keep these establishments open which creates jobs. This could conceivably maintain thousands of jobs for the state of Alaska which otherwise might not make it. If there are no jobs these individuals won't even make the minimum wage because they'll all be on assistance somewhere. Number 1922 REPRESENTATIVE RYAN stated that he was not trying to be cynical about this situation, but a person averaging $13.20 an hour with wages and tips figures to about $27,500. Legislators are paid approximately $11.54 per hour and for practical purposes they hold the fate of the state in their hands. He is not unsympathetic to labor or the people who are making a living. He didn't want to see anyone do any worse than they are now, but it's been demonstrated with the margins and increased costs to take in additional gross revenues to break even. If incremental costs keep rising there will be a lot of establishments going out of business because they can't afford to pay their overhead. MR. PERKINS stated that this was a difficult issue. One of the analogies he has heard is "we're all in this thing together." This goes to the analogy that the private sector employers should be supporting the public sector raises because if they don't get a raise they won't have that much expendable income and those "drinks on the bar will be sitting there for a while too." In the restaurant industry there won't be as much disposable income in order to go out for dinner. One hand feeds the other. A federally mandated minimum wage increase has been instituted and the restaurant industry wants to take care of this issue on a state level in order to avoid paying the increase by crediting towards tips instead. The department feels that this is a bad piece of legislation. Number 2070 CHAIRMAN ROKEBERG noted that this legislation speaks to a federally mandated and associated raise by his calculation as of October 1, 1996, this affords a 10.5 percent increase to minimum wage earners in the state of Alaska, reflected in the 50 cent increase. September 1 of this calendar year the federal law and concurrent state law would mandate an additional 40 cent increase or 7.6 percent accounting for almost an 18 percent increase in a period less than 11 months. This seemed like a pretty substantial increase for a non-bargained for wage increase particularly to the people they're talking about. He asked what the federal intent is for having a minimum wage. MR. PERKINS responded so that a threshold could be set in order for people to make a living. Number 2128 CHAIRMAN ROKEBERG stated that nobody in this industry who might be affected by this legislation makes a minimum wage, but they make more than a minimum wage. MR. PERKINS responded that the tipped credit would be made to the employer. The employee ends up having to pay for this. Number 2165 REPRESENTATIVE SANDERS said he understood that the way this legislation was drafted would pre-empt any negotiations under collective bargaining. MR. PERKINS responded that the way he read the bill was that there was no provision for collective bargaining. Number 2205 MR. ROSENBERG noted that the most restrictive regulation requirement someone is under is the law that prevails, much like the minimum wage law is more restrictive or higher than the federal. They are obligated to maintain this. CHAIRMAN ROKEBERG added that his reading of the statute and the supremacy clause is that there is nothing in this particular bill which would have any impact on the right of a collective bargaining unit to bargain for whatever wage level they would like. Therefore, there is no need to speak to this by exempting collective bargaining here. This is not the committee's intent to restrict a collective bargaining unit and anyone related to labor relations from instituting their own wage scale. Number 2251 MR. PERKINS stated that this would be the base line figure. The alternative is if the collective bargaining agreements don't reflect this increase the employer certainly can decide to opt out and become a non-union employer at the end of the contract. CHAIRMAN ROKEBERG responded that this didn't restrict them from offering a higher wage scale, "as we heard from the testimony there are higher wage scales except that they do agree with that." Number 2274 REPRESENTATIVE RYAN made an analogy between common law and the Napoleonic Code. "We follow the basic standard of the English Common Law versus the Napoleonic Code. Under the Napoleonic Code, unless something is expressly permitted, it's forbidden. Under English Common Law, everything is permitted unless it's expressly forbidden. So, where in this legislation does it say anything about somebody couldn't collectively bargain? I don't see the argument there." CHAIRMAN ROKEBERG stated that this was his opinion as well. Number 2299 REPRESENTATIVE BRICE noted their discussions about the 40 cent increase and he asked where in the statute would it prohibit an employer from providing a cash wage of zero with a tipped credit of $5.25. MR. PERKINS responded that on page two, line two, subsection (d) this language could be found. Number 2335 REPRESENTATIVE BRICE realized this, but made himself more clear. "Say you're a tipped employee and you're bringing in ten dollars tips an hour as averaged out. What's to say that, what's to keep the employer from basically as they do in New Jersey, having a zero cash wage and then using the tipped credit for the entire wage." REPRESENTATIVE HUDSON responded that on the first page of the bill it clearly states that the employer shall pay each employee wages at a rate of not less than 50 cents an hour, greater than the prevailing minimum wage law which is established by federal law. Number 2371 REPRESENTATIVE BRICE noted that this was true, but with the exception of (b) and (d) prior to this clause. CHAIRMAN ROKEBERG clarified that on page two that the employer must pay a tip (indisc.) to the employee of at least 25 cents an hour. Number 2387 REPRESENTATIVE BRICE agreed and that's what he's trying to point out is that the tipped credit can be the $5.25. CHAIRMAN ROKEBERG said that this sets up a "floor." Number 2396 REPRESENTATIVE SANDERS asked if this amount of $5.25 an hour was the federal minimum wage. CHAIRMAN ROKEBERG responded that this was the current amount until September 1, when it will be raised again. This legislation would exclude this provisional raise from the Alaska statute. The federal minimum wage is $4.75 an hour and will go up to $5.15 in September. Alaska is above this amount. Number 2422 REPRESENTATIVE SANDERS asked that when this federal amount is raised to $7.50 would the Alaska amount stay at $5.25. MR. PERKINS responded, "yes." Number 2433 KYLE PARKER, Lobbyist, came forward to testify on HB 237. He noted that the way this legislation will work is that when in the future the minimum wage goes up to $7.00, the cash portion of the wage paid to a tipped employee by his employer will be $5.25, however, this does not relieve the tipped employee's employer from the obligation of making up whatever difference there might be between $5.25 and $7.00. If the employee is not earning enough in tips to make up this differential the employer will make up this differential on a daily basis. REPRESENTATIVE SANDERS added that an employee will never get a raise. If the employee is making $5.25 now and $2.00 in tips this employee is making $7.25. If the minimum wage goes to $7.50 then they're.... Number 2472 MR. PARKER added that Representative Sanders was absolutely correct. As the minimum wage goes up 40 cents an employee will not receive this from their employer, but as stated previously, the employer is not relieved from his obligation to ensure that the employee is earning at least $5.65 an hour when their state wage goes to $5.65 in September. TAPE 97-41, SIDE B Number 000 REPRESENTATIVE SANDERS stated for the record, that this legislation in the long run will "turn around and bite ya." Once an employer pays $7.00 an hour and the minimum wage is $7.50 or $9.00, when the employee is not making an amount above minimum wage as they are presently, they will not want to work in Alaska anymore. Number 035 MR. PARKER submitted that if in the future the minimum wage in Alaska does ever get to $7.00 an hour he imagined they would revisit this concept of a tipped credit. The other states which have enacted this legislation, as minimum wage increases, they've increased this amount. These states have looked at their tipped credits to determine whether they are still appropriate. MR. PERKINS offered that tips were never considered part of wages, this amount used to be over and above what the servers have earned. This is money they deserve to keep and the department feels this legislation is a departure from this concept. He thought it was offensive. Number 079 CHAIRMAN ROKEBERG asked Mr. Perkins about employers that have tipped employees and whether they are required to pay FICA on this wage and if so, what was he saying? MR. PERKINS responded that he was a former owner of a restaurant and he stated that it's very difficult to tell someone that their tips will be counted towards their wages, that basically they will be paying for this 40 cent increase. Number 110 TRINA JOHNSON, Owner, La Mex Restaurants, came forward to testify on HB 237. She stated that if this tipped credit did not pass she will seriously be forced to think about cancelling health benefits for her employees. Over the years they've had benefits for paid breaks, paid vacations, paid holidays, full health benefits, and meals provided at no charge. In the last six or seven years health benefits is the only thing that's left. She can't afford to take any more cuts. REPRESENTATIVE RYAN stated that he operates on the notion that the word tip is an acronym, "insure prompt service." He said that if he does not receive good service at a restaurant he didn't feel he was there to support the restaurant owners employees, he goes to restaurants to eat a good meal and to be served. If he's not served well, he doesn't feel obligated to leave a gratuity. He noted that if Alaska ever gets a minimum wage of $7.00 to $9.00 an hour, having been a student of history, he could say that they would be heading towards hyper-inflation and an economic collapse. He saw both sides to this issue, but felt if they didn't pass this bill it would mean that restaurant owners who are not making a lot of money will be that much poorer, because they'll be driven out of business. To raise $500,000 to $1 million in newly generated income is impossible in face of the federal government raising the minimum wage. Number 194 CHAIRMAN ROKEBERG noted that Ms. Johnson had provided the committee with a chart reflecting that her "back of the house" employees would have a flat level of compensation as the minimum goes up. This minimum wage increase has had a demonstrative, statistical impact on these employees. MS. JOHNSON offered that no employee in their restaurants are paid minimum wage, except tipped employees. Their dishwashers make in excess of $6.00 to $7.00 an hour. The cooks and line servers make up to $10.00 to $12.00 an hour. The only employees affected wage wise are the tipped employees. Inevitably, what will happen is, if they don't get a tipped credit the first phase of the minimum wage increase, her costs related to the minimum wage will increase costing last year in excess of $20,000. The next increase will cost her $25,000 to $30,000. In a two year period this is $55,000. There is too much competition out there and she noted that she could not sustain this increase. Number 259 CHAIRMAN ROKEBERG asked if she was able to increase profitability whether Ms. Johnson would allocate some of this money to the employees. MS. JOHNSON noted that they've been trying year after year. She suggested that a year from now they see where the benefits lie. She said she would love to reinstitute some of these benefits. The quality of the employee has to be high and keeping someone at $5.25 an hour is impossible. Number 302 REPRESENTATIVE COWDERY asked how many restaurants were in Anchorage. CHAIRMAN ROKEBERG ventured to say that there were over 300. REPRESENTATIVE COWDERY recollected that this number may be over 500. Number 338 REPRESENTATIVE RYAN referred to previous testimony by Mr. Gill regarding his union and how they cover most of the hotel employees. He wondered if these businesses were not as captive of audiences versus people who come into her establishment off the street. He asked how this worked. MS. JOHNSON stated that she wasn't sure, but said that if they looked at the difference between Mr. Anderson's place and the Westmark, the latter has been in business for a long time. Their start-up costs have been paid for. Presently, there are a lot of start up businesses, new businesses that are trying to open while the older businesses are trying to survive. She noted these variables were proof of a difference. Number 377 CHAIRMAN ROKEBERG ventured to say that the differentials are caused by the fact that the food amenity services in some hotels are there as an amenity to the guests. They try to be profit centers, but aren't necessarily because they have a lower volume of traffic and they have to pay a higher base wage because the employees don't receive the amount of tips from a classic restaurant situation. Number 414 REPRESENTATIVE HUDSON moved and asked unanimous consent to move HB 237 out of committee with individual recommendations and accompanying zero fiscal note. REPRESENTATIVE BRICE objected. He noted that he saw this legislation as a kick-back payment to the employers by the employees. He saw tips specifically as something that he gives as a customer to servers as versus the employer. He pays his bill to the owners. This legislation is inappropriate and it does not address the needs stated by the restaurant owners, given that they don't have minimum wage employees. What this does do, is hits down on the lower end folks rather than those in the higher, more classy establishments. Number 483 CHAIRMAN ROKEBERG requested a roll call vote. Representatives Cowdery, Sanders, Ryan, Hudson and Rokeberg voted yes. Representative Brice voted no. House Bill 237 passed from the House Labor and Commerce Committee. Number 523 HB 217 - CERTIFIED NURSE AIDES CHAIRMAN ROKEBERG asked Ms. Reardon if there was sufficient due process in place on the part of an accused nurse aide to allow for a hearing or would the division need to draft regulations to provide these hearings under the statute. He was referring to Section 08.68.333 on page four of the original version, subsection (e). There is no provision in this subsection for a hearing by the nurse aide before the Administrative Procedures Act. Further, would this be covered by the APA? MS. REARDON responded that subsection (f) on line 16, does exempt the board from the requirement that the APA be followed for procedures under this whole section. She clarified for the chairman that his reference to AS 44.62.330 through .630 was related to the APA. This section says that the APA does not apply to hearings held or procedures established under this section. She reiterated that the Board of Nursing and the division feel very comfortable following the APA. Subsection (e) was put into their original draft of this legislation by the Department of Law. She thought it strange that this section was necessary at all. She didn't think it was, but the Department of Law came up with the idea in case of a mistaken identity. She noted they'd never had this problem before. Number 710 CHAIRMAN ROKEBERG referred to subsection .331, on page 2, line 30, as giving them powers under administrative procedures and what they are required to do when faced with a hearing regarding CNA infractions. MS. REARDON responded that Title 08.01 is their centralized licensing statutes where it doesn't necessarily give them directives, but outlines the punishments they may instruct. By all means, before anyone in the division disciplines a licensee, this licensee will have a hearing under APA strictures. Number 794 CHAIRMAN ROKEBERG noted that, "right where they can have their administrative hearing under the department's procedures, but they can also request a revocation through Ms. Reardon's department, so I understand that, but here we're talking about the revocation in other future, further suspension and the hearing process in case this happens." Number 825 MS. REARDON stated that she does not wish for the division or the Board of Nursing to be exempted from the APA. The HESS has a desire to be exempted from the APA. In trying to accommodate their desire to out from under the APA this type of language was added. CHAIRMAN ROKEBERG again pointed out that there was no provision in the legislation that provides for due process of somebody being disciplined. Number 860 MS. REARDON stated that it says they're exempt from the APA, but it doesn't say they're exempt from the constitutional obligation to give due process. If the APA process wasn't followed, a whole new procedure would have to be established to ensure due process. HESS seems to desire another alternative. CHAIRMAN ROKEBERG referred to page 2, line 31, the word "may." He wanted to know why "may" was used and not "shall." Number 941 MS. REARDON stated that this was discretionary. CHAIRMAN ROKEBERG referred to page 4, regarding the definition of "notice," and asked if this was an APA definition. Number 973 MS. REARDON responded she wasn't sure if it was the APA requirement, but stated they would like to follow this procedure. She said this could be done rather by certified mail. CHAIRMAN ROKEBERG said he would feel more comfortable with that. He moved a conceptual amendment to allow for this change on page 4, line 2, the addition of "certified mail." Hearing no objections, it was so moved. Number 1102 REPRESENTATIVE RYAN moved and asked unanimous consent to move 217 as amended out of committee with individual recommendations and accompanying fiscal note. Hearing no objection, HB 217 was moved out of the House Labor and Commerce Committee. ADJOURNMENT CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Committee at 6:06 p.m.