Legislature(2003 - 2004)

03/14/2003 03:16 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 155-PUBLIC CONSTRUCTION PROJECT REQUIREMENTS                                                                               
Number 0075                                                                                                                     
CHAIR ANDERSON announced  that the first order  of business would                                                               
be HOUSE  BILL NO.  155, "An  Act relating  to the  submission of                                                               
payroll information by  contractors and subcontractors performing                                                               
work  on a  public construction  contract; and  providing for  an                                                               
effective date."                                                                                                                
Number 0102                                                                                                                     
GREG  O'CLARAY, Commissioner,  Department  of  Labor &  Workforce                                                               
Development,  presented HB  155,  legislation  introduced at  the                                                               
request of  the governor.   He  described how  the Wage  and Hour                                                               
section of the Division of  Labor Standards & Safety enforces the                                                               
prevailing wage  law [AS 36.05, Wages  and Hours of Labor].   The                                                               
office   investigates   complaints   of   noncompliance   against                                                               
contractors  on  public  projects by  examining  their  certified                                                               
payroll reports.  He explained  that budget cuts have reduced the                                                               
clerical staff  who examine the  thousands of  certified payrolls                                                               
submitted  by  contractors.    At   one  time,  there  were  five                                                               
employees doing this work; now there is one person, he said.                                                                    
Number 0358                                                                                                                     
COMMISSIONER  O'CLARAY displayed  a certified  payroll form;  the                                                               
back of  the form includes  a statement of compliance  with Title                                                               
36 [Public  Contracts] which  must be  signed by  the contractor.                                                               
During  the height  of the  construction  season, the  department                                                               
receives 24,000 of these forms a  week, he noted.  The lone clerk                                                               
who receives  the forms barely has  time to file the  forms, much                                                               
less check for  errors, he said.  Organized  labor and individual                                                               
citizens "police" the accuracy of  these payroll forms and notify                                                               
the department if  a contractor appears to be  out of compliance.                                                               
An investigator is  assigned to the complaint,  scheduling a site                                                               
visit  to review  payroll records.    Commissioner O'Claray  said                                                               
that the  department's head investigator  estimates that  only 20                                                               
percent of the payroll errors are caught.                                                                                       
Number 0602                                                                                                                     
COMMISSIONER O'CLARAY  said HB  155 does two  things.   First, it                                                               
sets up a  user fee that will support the  cost of the Division's                                                               
staff.   Second, the bill  follows the Washington state  law that                                                               
requires  the   various  contracting  agencies  to   receive  the                                                               
certified weekly payrolls.  He  said his department does not have                                                               
the staff  to go through  these volumes  of reports to  catch and                                                               
correct contractors  who are  not in compliance.   He  noted that                                                               
last   year   the   Wage   and   Hour   section   conducted   540                                                               
investigations:     491  under  Title  23   [Labor  and  Workers'                                                               
Compensation] and 49 under Title 36.                                                                                            
Number 0723                                                                                                                     
REPRESENTATIVE CRAWFORD  noted from his personal  experience that                                                               
many complaints  don't get to  the investigation stage.   He said                                                               
that if  a payroll  certification is  lacking certain  classes of                                                               
workers on  a job,  the clerk will  request the  information from                                                               
the  contractor who  usually corrects  the payroll  certification                                                               
right away.  He said the  department is able to recover thousands                                                               
of  dollars  of  back  or incorrectly  reported  wages  before  a                                                               
complaint reaches the investigation stage.                                                                                      
COMMISSIONER  O'CLARAY  asked  whether  these  corrections  occur                                                               
because the clerk discovered the errors.                                                                                        
REPRESENTATIVE  CRAWFORD explained  that  a labor  representative                                                               
gets lists of  jobs by contractors and  compares that information                                                               
with  the  payroll  reports.    The  union  person  notifies  the                                                               
department  clerk; she  will call  the  contractor directly,  and                                                               
many  times that  will  result  in a  correction.    He said  the                                                               
majority of  contractors are not  trying to cheat; once  they are                                                               
made  aware or  an error,  they correct  it.   He said  that this                                                               
process is much preferred to a full-fledged investigation.                                                                      
COMMISSIONER  O'CLARAY  stated that  this  bill  is a  means  for                                                               
making the department more effective  in enforcement.  He said he                                                               
welcomes suggested improvements by  the committee, labor, and the                                                               
Number 1002                                                                                                                     
COMMISSIONER O'CLARAY noted that HB  155 would produce $1 million                                                               
in  revenue a  year  by charging  contractors and  subcontractors                                                               
$100 fees  at the  start and  finish of  each job.   He  said the                                                               
administration is seeking sustainable  revenue for the division's                                                               
work to protect it from future cuts.   The bill does not set up a                                                               
particular fund  for these  fees; the money  would flow  into the                                                               
state's general fund.   The contractors would  send the certified                                                               
payrolls to  the contracting  agencies.   He predicted  that this                                                               
change would improve compliance by contractors.                                                                                 
Number 1149                                                                                                                     
REPRESENTATIVE  GUTTENBERG asked  if the  low rate  of compliance                                                               
would improve with  additional investigators.  He  asked if there                                                               
would there be increased revenue [from fines].                                                                                  
COMMISSIONER  O'CLARAY said  enforcement staff  were cut  several                                                               
years ago,  and the  administration is  trimming the  budget, not                                                               
adding more positions.                                                                                                          
Number 1219                                                                                                                     
REPRESENTATIVE   CRAWFORD   expressed   strong   concerns   about                                                               
dispersing  the  certified   payrolls  to  different  contracting                                                               
agencies.  He  explained that federal contracts  use that system.                                                               
He  said it  has taken  him as  long as  a year  to track  down a                                                               
federal  contracting agent  and to  get the  payroll information.                                                               
He said it  is so much more convenient to  call the Department of                                                               
Labor &  Workforce Development offices  in Juneau,  Anchorage, or                                                               
Fairbanks,   where  the   payroll  reports   are  in   a  central                                                               
repository.   He asked if  the department eliminates  this single                                                               
position,  who   would  [do  this  function]   in  the  different                                                               
contracting agencies.   Who will  make sure that  the contractors                                                               
are paying the correct wages, he queried.                                                                                       
Number 1313                                                                                                                     
COMMISSIONER  O'CLARAY  replied   that  each  contracting  agency                                                               
receives a percentage  of the contract funds  to monitor contract                                                               
compliance  to   meet  Title  36   requirements.    He   said  he                                                               
understands that it's  more convenient to have  the documents all                                                               
filed  in the  Department of  Labor &  Workforce Development  but                                                               
indicated that the clerk has no  time to find errors.  He invited                                                               
the committee  to find a  solution and funding for  this problem.                                                               
He suggested that  HB 155 could require the  contracting agent to                                                               
assign a  person to  review payroll compliance.   He  agreed that                                                               
it's a  cost shift from the  general fund [Department of  Labor &                                                               
Workforce Development] to the [contracting agencies].                                                                           
REPRESENTATIVE  CRAWFORD commented  that it's  important to  make                                                               
the payroll compliance as streamlined  as possible.  He suggested                                                               
requiring  a bi-weekly  or  monthly-certified  payroll report  --                                                               
instead of a weekly report --  or an on-line filing for those who                                                               
have  computer  capability.    He  said he  spoke  to  his  union                                                               
counterparts in Washington state and  was told that the certified                                                               
payroll reports  are accessible  in the Seattle  area but  not in                                                               
the  remote areas.    He said  that he  is  very concerned  about                                                               
tracking down certified payrolls in  rural Alaska, for example, a                                                               
Department of  Transportation and  Public Facilities  contract in                                                               
Bethel.  He said that the  best part of Alaska's system is having                                                               
[the payroll  reports] in a  centralized place.   He said  he has                                                               
watched the office shrink from three  clerks to one person who is                                                               
very overworked.   He said she saves people  thousands of dollars                                                               
per month.                                                                                                                      
Number 1605                                                                                                                     
REPRESENTATIVE DAHLSTROM asked  about the amount of  the fees and                                                               
why they  are being charged:   $100 at  the beginning and  end of                                                               
the project.   She  also noted  on page 2,  line 19-20,  that the                                                               
contractor  must get  approval  from the  Department  of Labor  &                                                               
Workforce Development to  pay the subcontractor.   Payment can be                                                               
withheld  if the  contractor hasn't  paid the  $200 fees  and for                                                               
several other reasons, including subcontractor violations.                                                                      
COMMISSIONER O'CLARAY said the intent  is that the violator would                                                               
not  be paid.   Withholding  of payment  is used  to enforce  the                                                               
current law.   The department  has to wait  until the end  of the                                                               
job  to withhold  final payment;  however the  contracting agency                                                               
can stop payment immediately upon proof of a violation.                                                                         
Number 1734                                                                                                                     
REPRESENTATIVE CRAWFORD  said he received many  faxes and letters                                                               
opposing  HB 155.   He  referenced a  [March 14,  2003 fax]  from                                                               
Alaska  Concrete Sawing  [in Anchorage],  which illustrates  what                                                               
the $100  fee means to  a small  contractor who spends  less than                                                               
four  hours total  on a  job.   Representative  Crawford said  he                                                               
often does welding jobs that take only  a day or two.  If the fee                                                               
is $100 in  and $100 out of  a job, contractors won't  be able to                                                               
pass that  along to the contracting  agency.  He suggested  a fee                                                               
break  on the  size of  job.   He said  for a  general contractor                                                               
building a job  the size of the Houston high  school, $100 is not                                                               
an issue, but for a business like Alaska Concrete Sawing, it is.                                                                
COMMISSIONER O'CLARAY said he agreed  and suggested that the bill                                                               
use a graduated fee based on the amount of the contracts.                                                                       
Number 1816                                                                                                                     
JOHN BITNEY,  Lobbyist for Alaska State  Homebuilders Association                                                               
["Homebuilders"],  asked for  additional  time for  his group  to                                                               
review the  bill.  For the  most part, he said,  homebuilders are                                                               
small  family-owned  operations.   If  they're  going to  bid  on                                                               
prevailing wage jobs, they prefer  a level playing field that has                                                               
a consistent compliance  system.  He said  the Homebuilders would                                                               
like to  work with  the department  to make this  bill work.   In                                                               
response to  a question from  Chair Anderson, he stated  that the                                                               
$100  in   and  out  fee  would   severely  impact  homebuilders.                                                               
Homebuilders are  doing very small,  one- or two-day jobs  at the                                                               
request  of numerous  agencies;  they augment  their normal  work                                                               
with  these small  jobs.   He agreed  to bring  in correspondence                                                               
next week from the Homebuilders group.                                                                                          
Number 1936                                                                                                                     
DON ETHERIDGE,  Lobbyist, Alaska  State AFL-CIO, stated  that his                                                               
group opposes  HB 155 as  drafted.  He  said his main  concern is                                                               
who gets the certified payrolls.   This bill increases revenue to                                                               
the department but  shifts work away from it.   He said he agrees                                                               
that the fees  should be increased on a graduated  scale, but the                                                               
funds should be dedicated to the  department so it can do the job                                                               
MR. ETHERIDGE  said he  wants to  see a  level playing  field and                                                               
everybody paid  at the proper  rate.   Most of his  union members                                                               
are  informed  about their  rate  of  pay;  if they're  not  paid                                                               
correctly,  they  call  the union  office,  which  addresses  the                                                               
problem  with  the department.    However,  he expressed  concern                                                               
about the  nonunion workers who  are not  paid properly.   If the                                                               
department stays on  the contractor, the employees  will get paid                                                               
the  proper rate.   He  said that  having the  contracting agency                                                               
monitor the worker's  wages is like sending the dog  to watch the                                                               
hamburger.   In most cases,  the contracting agency  would prefer                                                               
to pay workers a lower wage because  it can get more work done at                                                               
a lower price.                                                                                                                  
MR.  ETHERIDGE expressed  concern that  the contracting  agencies                                                               
would set  aside and forget  [the payroll  reports].  He  said in                                                               
some areas, the mandatory worker  training is not happening.  The                                                               
contracting agencies are supposed  to be monitoring the training,                                                               
and they're not doing it.                                                                                                       
Number 2070                                                                                                                     
JOHN   BROWN,  President,   Fairbanks   Central  Labor   Council;                                                               
Operating  Engineers,  said  that   the  Department  of  Labor  &                                                               
Workforce  Development needs  the  certified  payroll reports  to                                                               
continuing enforcing  the prevailing wage.   He said in  his work                                                               
he needs that information easily  available.  Sending the payroll                                                               
reports to various  agencies would hinder the  unions' ability to                                                               
help  the  department  enforce  the prevailing  wage  law.    Any                                                               
increased revenue should be given  to the department, which needs                                                               
it to enforce the law as written.                                                                                               
Number 2140                                                                                                                     
DON  SHIESL,  Public  Works  Director,  City  of  Wasilla,  asked                                                               
Commissioner  O'Claray   if  a   $100  fee  must   accompany  the                                                               
submission of every payroll.                                                                                                    
COMMISSIONER O'CLARAY explained  that the $100 fee  would be paid                                                               
at the  initial registration and then  again at the close  of the                                                               
MR. SHIESL  testified that in  larger contracts, these  fees will                                                               
be passed on to the contracting  agency.  An agency like the City                                                               
of  Wasilla will  ultimately be  paying these  fees out  of their                                                               
contracts.    He said  his  bigger  concern  is in  the  contract                                                               
compliance part of  HB 155.  He said he  has neither the manpower                                                               
nor the training  to monitor certified payroll  reports.  Wasilla                                                               
and other small  cities do not receive a percentage  of funds for                                                               
contract compliance.   He said he  is concerned about a  new type                                                               
of compliance  whose cost  will be  shifted to  local government.                                                               
He also  said the committee  should look at  increasing penalties                                                               
to force contractors to submit these certified payrolls.                                                                        
Number 2255                                                                                                                     
RON  TRUINI,  Ironworkers  Local  751, testified  that  his  main                                                               
concern with HB  155 is enforcement.  He said  that penalties are                                                               
not  severe   enough;  he  said   they  are  currently   Class  A                                                               
misdemeanors.    He said  ignorance  of  the law  [requiring  the                                                               
payment of prevailing  wages] is no excuse for  contractors.  His                                                               
other  concern involves  the contracting  officer  [who would  be                                                               
receiving the  certified payroll reports].   Organized labor will                                                               
be monitoring  the contracting officers  rather than  focusing on                                                               
the real problem  of watching that contractors  comply with state                                                               
wage and hour laws.                                                                                                             
TAPE 03-21, SIDE B                                                                                                            
Number 2367                                                                                                                     
BLAKE  JOHNSON, Laborers  International  Union  of North  America                                                               
Local 341,  said that contractors  will have a hard  time keeping                                                               
track of where to send their  certified payrolls if they are sent                                                               
to other  agencies besides  the Department  of Labor  & Workforce                                                               
Development.    He  used  the example  of  the  Anchorage  School                                                               
District,  which  wouldn't  have   the  personnel  to  deal  with                                                               
certified payroll  reports.   He said the  state won't  save much                                                               
money  eliminating the  two positions  that handle  the certified                                                               
payroll reports.  If the reports  are in one location, the unions                                                               
can  [continue  to]  come  in  and  look  at  the  reports.    He                                                               
recommended increasing  the fines of  contractors who are  not in                                                               
compliance,  and  then  the  state  would  have  more  money  for                                                               
Number 2294                                                                                                                     
REPRESENTATIVE CRAWFORD commented  that [paying prevailing wages]                                                               
is  not just  a union  issue.   He said  there are  many nonunion                                                               
firms that check the payroll  reports to see if their competitors                                                               
are paying the  correct prevailing wages, making  sure that there                                                               
is a level playing field.   He said that one of his constituents,                                                               
Consolidated  Enterprises,  [Anchorage]  submitted a  [March  13,                                                               
2003] letter  contained in  the members' packets.   He  said this                                                               
company  is   a  nonunion  company  that   regularly  checks  its                                                               
competitors' wage records                                                                                                       
Number 2220                                                                                                                     
SCOTT BRIDGES,  Business Representative, General  Teamsters Local                                                               
959  Alaska,  said  he represents  workers  in  the  construction                                                               
industry and  favors a graduated  approach to  the user fee.   He                                                               
proposed  having  the contractor  on  the  larger project  pay  a                                                               
larger fee.   He said this is  an enforcement issue as  well.  He                                                               
said investigators  at the  Wage and Hour  section take  far more                                                               
[wage complaints] than  they can respond to adequately.   He said                                                               
he didn't  think department investigators can  pursue claims that                                                               
don't  come  with all  the  facts  in hand.    He  said from  his                                                               
experience with the division, unprosecuted  claims reach into the                                                               
hundreds of thousands of dollars  annually.  The dispersal of the                                                               
department's  responsibilities  to   these  contracting  agencies                                                               
would further dilute the wage  earner's [opportunity to receive a                                                               
fair wage].   The contract compliance money  given to contracting                                                               
agencies might  cover technical  issues but  it does  not include                                                               
monitoring  wage and  hour issues.   Contractors  could send  two                                                               
copies  by  email to  the  department,  which could  forward  the                                                               
second copy to the contracting agency.                                                                                          
Number 2081                                                                                                                     
VINCE BELTRAMI,  President, Anchorage  Western Alaska  Building &                                                               
Trades  Council, Anchorage,  opposed  HB  155.   He  said if  the                                                               
department  lets the  certified payroll  go out  the door  to the                                                               
contracting agencies, department employees  will be chasing after                                                               
the information instead of having  it at their fingertips as they                                                               
presently  do; they  need it  in  hand to  efficiently process  a                                                               
payroll violation  claim.   He citied  the bill's  briefing paper                                                               
that  states  that contractors  are  required  to file  duplicate                                                               
reports with both  the contractor and the  department, but that's                                                               
true  only  under  limited  circumstances.    He  disagreed  that                                                               
eliminating a range 12 position,  which costs the state less than                                                               
$40,000 a year,  would save the state money.   He opined that the                                                               
absence of  that position  would create  additional work  for the                                                               
wage and  hour investigators  and cost the  state much  more than                                                               
$40,000.  The  department has the authority under  the statute to                                                               
do enforcement and impose fines and  penalties.  The user fee has                                                               
some  merit  if  it  could  be applied  to  enforcement  of  this                                                               
Number 1926                                                                                                                     
REPRESENTATIVE LYNN asked  if he preferred a graduated  or a flat                                                               
fee, if a fee were imposed.                                                                                                     
MR.  BELTRAMI replied  that a  graduated fee  would be  fairer to                                                               
smaller contractors.   He said he wants any fee  funneled back to                                                               
the department  to make  this a viable  program.   The prevailing                                                               
wage program falls a little short of being highly effective.                                                                    
Number 1882                                                                                                                     
TIM  ROGERS,  Legislative  Program Coordinator,  Municipality  of                                                               
Anchorage, noted  that HB  155 makes the  city the  record keeper                                                               
for the Department of Labor  & Workforce Development.  There's no                                                               
instruction  on how  to  handle the  forms  nor compensation  for                                                               
staffing the work.   The state would collect  $200 per contractor                                                               
but  pass the  work on  to the  contracting agency.   There's  no                                                               
provision for  emergency work, for example,  the recent windstorm                                                               
[in  Anchorage].   The city  cannot approve  final payment  until                                                               
authorized by the  state, but the city has no  idea how long that                                                               
will take, and it has to pay  high interest on the monies owed to                                                               
the  contractors.    If every  contractor  and  subcontractor  is                                                               
assessed the  $200 fees,  either small  contractors won't  bid on                                                               
the projects, thus driving up the  cost of projects, or they will                                                               
pass the  expense on to  the municipality.   One way  or another,                                                               
the municipality  will end up doing  more work and will  pay more                                                               
money on  the contracts.   He  said Mayor  George Wuerch  will be                                                               
sending in a letter [detailing these concerns].                                                                                 
Number 1786                                                                                                                     
RAYMOND SMITH, Business Manager,  International Union of Painters                                                               
and  Allied Trades  Local 1140,  said he  has no  problem with  a                                                               
graduated user fee, which would  be passed on [to the contracting                                                               
agency] anyway.   He  said it  would be a  real detriment  if the                                                               
department gave  up [this  monitoring] on  behalf of  the worker.                                                               
He  said he  has just  sent a  letter today  to the  commissioner                                                               
about a  contractor with  violations in  two locations.   Because                                                               
the person filing  the reports doesn't have time  to review them,                                                               
everybody has to be watching  for payroll abuses, including union                                                               
and nonunion contractors.  If  the department is looking for more                                                               
revenue, he said, the state  should nail the violators with large                                                               
fines.   He said he  couldn't stress  enough the state's  need to                                                               
enforce the  laws on  the books  and to return  user fees  to the                                                               
Department  of Labor  & Workforce  Development.   The  prevailing                                                               
wage  program  is viable  and  needs  to  stay  where it  is,  he                                                               
Number 1656                                                                                                                     
CHAIR  ANDERSON  summarized  that  HB 155  needs  some  revision.                                                               
People have testified that there's merit  in the fees if they are                                                               
graduated.   He  said the  committee  will consider  the idea  of                                                               
having   contractors   file   certified  payroll   reports   with                                                               
contracting  agencies  instead  of  the  Department  of  Labor  &                                                               
Workforce Development.   He said he will hold  testimony open and                                                               
keep the bill in committee.                                                                                                     
Number 1613                                                                                                                     
REPRESENTATIVE LYNN commented on  the consistent testimony of the                                                               
public  favoring  graduated  fees   for  this  program,  for  the                                                               
business license, and for other programs.                                                                                       
CHAIR ANDERSON said  that the starting point for  an amendment to                                                               
HB 155 will be a graduated fee.  [HB 155 was held in committee.]                                                                

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