MINUTES SENATE FINANCE COMMITTEE February 22, 2000 9:02 AM TAPES SFC-00 # 34, Side A & B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:02 AM PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Lyda Green, Senator Randy Phillips, Senator Gary Wilken, Senator P. Kelly, Senator Donley, Senator Leman Also Attending: DENNIS POSHARD, Legislative Liaison/Special Assistant, Department of Transportation & & Public Facilities; ROXANNE BASH, Federal Programs, Department of Transportation & Public Facilities; KRISTOPHER KNAUSS, Legislative Assistant, Senator Pearce; AL DWYER, Director, Division of Labor Standards & Safety, Department of Labor & Workforce Development. Attending via Teleconference: CHRISTINE MCGARVIN, Human Resources Manager; JAY SEYMOUR, Attorney, Perkins Coie; RANDY CARR, Chief of Labor Standards & Safety, Department of Labor & Workforce Development. SUMMARY INFORMATION EO 101-TRANSFER ALASKA HIGHWAY SAFETY PLANNING AGENCY The Committee heard testimony from the Department of Transportation & Public Facilities. The Committee took no action on the bill. SB 123-ATTY FEES:APPORTIONMT/PUBLIC INT.LITIGANT The Committee amended this bill and reported it from Committee. SB 193-COLLECTION OF UNPAID WAGES The Committee heard testimony from the sponsor, the Department of Labor & Workforce Development and members of the public. The bill was held in Committee. EO 101 Transfer Alaska Highway Safety Planning Agency. Co-Chair Torgerson informed the Committee members that for this Executive Order 101, the Committee had sixty days in order to object to it, rather than being required to take any standard action on it. DENNIS POSHARD, Legislative Liaison/Special Assistant, Department of Transportation & Public Facilities spoke on behalf of Executive Order 101. He stated that this order was a mutual idea of both Commissioner Otte, Department of Public Safety and Commissioner Perkins, Department of Transportation & Public Facilities. He noted that the benefits for making this transfer was for greater synergy since this agency would be more centrally located, making it more efficient. He continued that this Agency administers Highway Safety Grant Programs, which are very similar to what the Department of Transportation & Public Facilities administers. Mr. Poshard added that both the Highway Safety Planning Agency and the Department of Transportation & Public Facilities rely on highway safety data collection and with their combined efforts, this collection could be more inclusive and improved. He noted that the merger of these two entities could improve communication and ensure that sanctions are not lodged against the state for not adopting specific safety related laws and programs. He summed up that this merger would be more cost effective in promoting the various safety measures implemented around the state. Senator Phillips asked if there were any concerns voiced by individuals outside either department. Mr. Poshard responded that he was not aware of any concerns outside of the department. He stated that initially, the department was contacted by the Regional Administrator for the Federal Highway Safety Planning Agency and his concern was that the federal government did not want the program buried within an agency. Mr. Poshard said that this federal agency was reassured. Co-Chair Torgerson asked for examples of sanctions, which were referred to previously. Mr. Poshard responded that to date there were no sanctions levied against the state, but this year the state faces the real threat of a sanction regarding "open container" laws. He continued that the federal government has stated that the State of Alaska's "open container" law does not meet the criteria established for their sanction program. He noted that the State of Alaska believes the federal government has misinterpreted the way in which the state statutes are written. He cautioned that if the federal government made the determination of non-compliance anyhow, the state would lose up to three percent of their federal highway formula funding. Co-Chair Torgerson asked if there was any general fund money involved in this possible sanction scenario. ROXANNE BASH, Federal Programs, Department of Transportation & Public Facilities responded that a general fund match, as requested in the Governor's Budget under public safety, would be transferred at the same level to the Department of Transportation budget. She continued that these funds would be moved to the capitol side because of the match to the federal grants and a small portion of this would be retained in the operating budget for the non- federal, eligible support for those individuals transferred to Public Safety. Co-Chair Torgerson asked of what money amounts Ms. Bash referred. Ms. Bash responded that this amount was $7,300 in general funds. Co-Chair Torgerson asked if the department anticipated reimbursable service agreement money to Public Safety in order to enforce their rules and programs, such as the "open container" law as noted. Mr. Poshard believed that a small amount of these funds would go back to the Department of Public Safety in order to fund programs as noted by the Senator. He continued that this money would be used for data collection and enforcement related to these activities. Co-Chair Parnell responded that this issue raised his initial concerns regarding this Executive Order. He has found no statutory basis for this change and added that he did not see a statutory mission for Public Safety to become involved with programs such as the one noted. He felt as though this change would bring the Department of Transportation & Public Facilities' mission out of alignment. Mr. Poshard responded that the Department of Transportation & Public Facilities has a significant role in highway safety and noted the department's Traffic Safety Engineers, Highway Safety Data Collection Personnel and that the department is required by the Federal Highway Administration to report on highway safety in order to receive federal allocations. He continued that these programs have somewhat of a different focus: the Department of Transportation & Public Facilities deals with issues such as guardrails and the structural parts of highway safety and the Highway Safety Planning Agency focuses on the driver behavioral side of highway safety, such as drunk driving or seatbelt laws. He noted that by combining these two agencies it would provide an opportunity for efficiency in administration, as well as some synergy to aid in program improvements. Co-Chair Parnell responded that currently the statutory mission of the Department of Transportation & Public Facilities, as passed last year, is to "plan, design, construct and maintain all state modes of transportation and transportation facilities." He asked if this mission should include a safety component if these agencies would in fact be combined. He then read the department's mission statement as posted on the web. Co-Chair Torgerson asked how the department anticipates enforcing subparagraph (c), on page two, line 24, which reads: "A peace officer who stops a driver for an alleged violation of AS 28.05.095 shall inform the driver about the loan program," regarding unrestrained infants and children in motor vehicles. He noted that this subparagraph was a directive to police officers who stop drivers that they need to inform individuals about loan programs. Co-Chair Torgerson felt that this responsibility did not belong under the Department of Transportation & Public Facilities. Mr. Poshard responded that the Highway Safety Planning Agency would continue to have a role in working with the Department of Public Safety. He felt as though this was not unusual. He added that the department is solely dependent on state troopers and local law enforcement to collect necessary data for the department's purposes. Co-Chair Torgerson called for an at ease at 9:20 AM. The Committee reconvened at 9:23 AM. The Committee took no action on EO 101 and the bill was HELD. SENATE BILL NO. 123 "An Act relating to public interest litigants and to attorney fees; and amending Rule 82, Alaska Rules of Civil Procedure." Co-Chair Torgerson noted that Version 1-LS0636\I had been previously adopted and was held over in order to incorporate Amendment number two. Amendment # 2: This amendment would add a new paragraph to the Alaska Rules of Civil Procedure to read: (5) If the court chooses to vary an award of attorney's fees under (b)(3) of this rule by increasing the award beyond the amounts provided in (b)(1) or (2) of this rule, then the court shall apportion the attorney's fees by issue and may only award the increased fees for an issue the party prevailed upon unless the court finds exceptional circumstances to be present that require an increased award of fees without apportionment by issue. Senator Donley made a motion to MOVE Amendment # 2. Co- Chair Torgerson noted an objection by Co-Chair Parnell. Senator Donley said that this amendment was an effort to compromise and to capture the best of the proposals before the Committee, which were discussed previously. He noted that this amendment would preserve Co-Chair Parnell's proposal regarding public interest litigants being treated the same as civil litigants under Rule 82, but it would go one step further. He added that if the court made a decision to award an amount of attorney's fees in excess of what is allowed under Rule 82, then this amendment would instruct the court to apportion attorney's fees by issue. He continued that this amendment would still allow the court not to apportion by issue if exceptional circumstances are found, not requiring a mandate for such a determination. Senator Adams noted that he was trying to understand the intent of this amendment. He used the Veneti case in the context of this amendment and he asked whether the type of payment would also need to be agreed upon before arguing the merits of a particular case. Senator Donley responded that the Veneti case was a federal one, without the jurisdiction of Rule 82. He continued that if this case had come under state jurisdiction, the amendment would be consistent with what the court decided in this instance. He added that the court tried to apportion as best it could for the proportional costs of the case. Co-Chair Parnell stated that Senator Donley met his objection by providing for public interest litigants enhanced attorney's fees. He also noted how this amendment made the playing field level for both public interest litigants and civil litigants. Senator Adams asked if reference to both public interest litigants and civil litigants should be provided for in the bill title. Co-Chair Parnell responded that he did not think so, since the title of the act was broad enough to include both types of litigants. Senator Adams noted that he had no objection to this amendment. Co-Chair Torgerson hearing no objection to Amendment # 2, ADOPTED the same. Senator Donley made a motion to move SB 123; Version 1- LS0636\I as amended from Committee with individual recommendations and attached zero fiscal note from the Alaska Court System. Hearing no objection SB 123 was MOVED FROM COMMITTEE. CS FOR SENATE BILL NO. 193(L&C) "An Act relating to the payment of wages and claims for the payment of wages." KRISTOPHER KNAUSS, Legislative Assistant, Senator Pearce, testified that SB 193 was brought to the attention of Senator Pearce by a constituent named Margaret Bowman. He noted that Ms. Bowman obtained employment with the Alaska Business and Industry Newspaper, a publishing company out of Anchorage. He continued that she was hired in the fall of 1998 under a contractual agreement. He added that during a year and one half time period, arrears of her wages reached in excess of $10,000. He added, that at this time, the employment relationship ceased. He then noted that the bill before the Committee increases the amount allowed in small claims court from $7500 to $20,000. He offered that by increasing this cap, legal representation would be available to the aggrieved and added that this bill had a zero fiscal note. Co-Chair Parnell asked about the original bill and the elimination of Section 3, dealing with the elimination of the court's discretion regarding penalties for late payment of wages. He asked Mr. Knauss to address this concern and asked for an explanation of what this current version undertakes. Mr. Knauss responded that the original version of this bill stated that an employer could be liable to pay back wages for a 90-day period. He continued that this was changed to a straight time, eight hour work day so that the employer would not be penalized for this entire 90-day period, if in fact the payment was three days late. Co-Chair Parnell asked if this clause changed existing law. Mr. Knauss [inaudible.] CHRISTINE MCGARVIN testified via teleconference from Fairbanks. She stated that she was a Human Resource Manager for a mid-size, non-profit organization. She noted that her biggest concern regarding this legislation was the language dealing with penalties and felt as though allowing for penalties would be an unfair burden to employers. She felt as though most employers, especially non-profit organizations are anxious to comply with state and federal regulations, but noted that these laws are very confusing. She added that when the Department of Labor interprets certain aspects of these, the interpretations could be opposite to what the law generally states. She added that there are many complex elements to consider, especially the salary basis test, which is problematic when trying to determine the criteria for whether an employee should be exempt, salaried or an hourly employee. She then pointed out how this bill's language relates to this concern. JAY SEYMOUR testified via teleconference from Anchorage. He stated that he was an employment law attorney with Perkins Coie. He noted that the Alaskan wage and hour laws are the most frustrating and aggravating for most employers since they are so confusing. He added that if an employer makes the wrong guess regarding an employee, the penalties could be harsh. He stated his support for the increase in the Department of Labor's jurisdiction as outlined in this present legislation, but he took exception with "waiting time penalties" on top of liquidated damages in any minimum wage or overtime claim. He added that there should be a deterrent to when an employer refuses to pay wages though. He explained why he takes offense to waiting time penalties, with a scenario of an employer required to make a $100,000 payment in penalties as a result of a good faith disagreement. Co-Chair Parnell asked Mr. Seymour that if the Committee took out Section 3 of this bill, leaving the present jurisdictional increases, whether or not this change would be acceptable. Mr. Seymour responded that Section 3 changes the "waiting time" penalties from discretionary to mandatory, by either a judge or the Department of Labor. He continued that this penalty could be accomplished by awarding "waiting time" on top of liquidated damages. He felt as though a prevailing party ought to get one or the other, but not both, deleting Section 3 does not accomplish this. Co-Chair Torgerson asked how many cases per year did the present draft legislation affect. RANDY CARR, Chief of Labor Standards & Safety, Department of Labor & Workforce Development testified via teleconference from Anchorage. He estimated this amount at 100 to 120 new cases yearly on top of a 1100 case load generally, with a settlement rate in excess of 90 percent, along with 10 to 15 percent of these that go to trial. Senator Phillips asked how this caseload compared to other states. Mr. Carr responded that he did not think this statistic was available. He felt as though Alaska was at an average compared to other states. Co-Chair Torgerson asked that the department address the penalty schedule of this legislation. He wondered why penalties should be included when they do not currently exist. Mr. Carr responded that the current statute does provide a "waiting time" penalty and noted that the present bill seeks to make these penalties mandatory rather than discretionary. Tape: SFC - 00 #34, Side B, 9:52 AM Mr. Carr continued to outline these penalties historically and outlined how the department is able to assess penalties within settlement discussions. He stated that penalties are necessary in order to discourage employers from violating the law at will. Co-Chair Torgerson responded that he agreed with this assessment, but wondered when a trigger is instituted to take a case to court. He noted a $7500 amount not inclusive of penalties with a proposed increase of $20,000 exclusive of penalties. He interpreted this to mean that a different trigger exists if the penalty is much higher and included in the $7500 claim. Mr. Carr responded that the intent of the bill was to raise the statute of limitations addressing the size of the case (in monetary terms) the department can hear, but it was not to tie the assessment of penalties to this dollar value in a particular case. He noted that presently, any case that the state takes to court, it may seek an award of "waiting time" penalties regardless of the size of the case, as long as it is within the jurisdictional limit of $7500. He continued that this would not change with the increase of this cap Co-Chair Torgerson stated that he understood this, but that the court can award whatever it feels like. He went on to explain his interpretation of what triggers the amount of money included in the $7500 or the $20,000 cap. He clarified that the $7500 amount is exclusive of costs, interest and attorney's fees only and this legislation would amend this present situation to a $20,000 cap exclusive of cost, interest, penalties and attorney's fees. He referred to line 10, the language, which states, "in an amount not to exceed $20,000, exclusive of costs, interest, penalties, and attorney fees." He stressed that this allows for an exclusion, which did not presently exist in law and that this could force the outside amount for penalties to become inflated. Mr. Knauss responded to a subsequent discussion between Co- Chair Torgerson and Senator Donley regarding the scope of small claims court generally and the amount of penalties assessed for these types of claims. He noted that on line 26, page two, the word "shall" was changed to "maybe," in the following: "In an action brought by the department under this section, an employer found liable for failing to pay wages within three working days of termination shall be required to pay the penalty set out in (d) of this section." Senator Donley stated that this change seemed reasonable but suggested that mandatory penalties be assessed when the department is the litigant. He was concerned with the sentence following the above referenced Section as follows: "The amount of the penalty shall be calculated based on the employee's straight time rate of pay for an eight-hour day." He felt as though this placed a greater limit on what could be awarded by setting a specific dollar amount. He thought that the amount of the penalty should be at least equal to a calculated amount based on an employee's work hours. He offered that this would give the court discretion to award a larger amount if they thought it was warranted. AL DWYER, Director, Division of Labor Standards & Safety, Department of Labor & Workforce Development responded that he would like to see a provision such as this one included, but asked that the word "maybe" be put back in this Section based on prior discussions. Mr. Carr stated that the bill does not reflect the current language that exists in AS 23.05.140(d) which establishes a "waiting time" penalty as discretionary. He noted that a modification to this language exists in Section 3. He continued with noting a related subsection (e) that says, in cases brought by the department a "waiting time" penalty shall be mandatory, including a corresponding formula for how this penalty should be calculated. Senator Wilken stated that he remained concerned about the word "shall." He hoped that either Section 3 was deleted or amended. Co-Chair Torgerson asked Mr. Carr to explain penalties as outlined in subsection (d). Mr. Carr responded that subsection (d) of the current law provides for up to 90 working days of penalty, but it does not address or define in any manner, what a working day is or how that value is to be calculated. He stated that, the suggested language of Section 3 in the bill before the Committee, allowing for a 90 working day penalty is mirrored as a maximum potential penalty. He added that it sets forth a suggested method of calculating the "working day" value to be used as the multiplier for however many days of penalty is assessed. Co-Chair Torgerson referred to subsection (b), which states: "employment is terminated regardless of cause of termination, all wage and salary compensation are due in three days." He noted how this language went to the heart of Section 3 and then referred to subsection (d), which states that if compensation is not paid in three days, a 90-day time frame is allowed for a maximum penalty. He added that Section 3 then states that an employer shall pay the penalty, using an eight-hour day as a benchmark calculation. He wondered if most of these exceptions were from an employer terminating due to an employee theft or the like. Mr. Carr responded that this was not the genesis for most of the cases, which deal with "waiting time" penalties. He continued that the largest number of cases, which the department deals with, are situations where an employee is simply not paid. He noted that it seemed odd that anyone would continue to work for an employer and accrue a debt of wages totaling $10,000 or more, but the department sees this type of thing on a weekly basis. He added that there are exceptions to the present law dealing with these situations and pointed out that these employers who have a legitimate dispute with an employee, as to the amount of wages due, can make a case as to why the wages should not be paid. Co-Chair Torgerson asked if conflicting statutes existed now, with the existence of Section 3 in the Committee Substitute, which notes an employer "shall" pay and AS 23.05.180 where an employer will pay under certain circumstances. Mr. Carr responded that there was potential for conflict. Senator Wilken referred to employee terminations and asked if the same rules applied for voluntary quit situations. Mr. Carr responded affirmatively and gave the existing section of law covering this situation. He generally noted that an employee must be paid back wages within three working days regardless of termination cause. Co-Chair Torgerson stated that SB 193 would be HELD in Committee. Adjournment Co-Chair Torgerson adjourned the meeting at 10:20 AM. SFC-00 (12) 02/22/00