Legislature(2003 - 2004)

04/14/2003 03:22 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 255-WAGES:TRAINING/FLEX-TIME/DEFINITIONS                                                                                   
Number 700                                                                                                                      
CHAIR ANDERSON announced  that the final order  of business would                                                               
be HOUSE BILL NO. 255, "An  Act amending the Alaska Wage and Hour                                                               
Act as it  relates to flexible work hour plans,  the provision of                                                               
training  wages,  and  the  definitions  of  certain  terms;  and                                                               
repealing the  exemption in the  Act from the payment  of minimum                                                               
wages for learners."                                                                                                            
Number 0845                                                                                                                     
REPRESENTATIVE  ROKEBERG, as  sponsor of  HB 255,  testified that                                                               
the bill  covers three sections of  the Alaska Wage and  Hour Act                                                               
[AS 23.10.050-150] and  the related regulations.  He  said HB 255                                                               
adjusts the definitions  of who is management,  looks at flexible                                                               
work  hour provisions,  and revises  the provisions  for training                                                               
wages [for workers less than 20 years of age].                                                                                  
Number 0900                                                                                                                     
FRANK  ROSE, President,  Alaska  Hotel  and Lodging  Association;                                                               
Owner, Alaska  Lodging Management,  spoke in  support of  HB 255.                                                               
He  testified that  Sections 1  and 2  of the  bill realistically                                                               
define executive,  administrative, and professional  positions as                                                               
they relate  to exempt  employees and overtime  status.   He said                                                               
the bill also makes the  definitions consistent with federal law.                                                               
He  said  that is  a  very  important  [factor] in  his  business                                                               
operations.   Section  3 of  the bill  provides for  long-overdue                                                               
changes  to  the  voluntary flexible  work  hour  plan,  allowing                                                               
flexible  work  hours  [simply]  upon  agreement  [after]  filing                                                               
[paperwork with  the Department of  Labor] for the  flexible work                                                               
hour [plan];  approval usually  involves a  rubber stamp  [by the                                                               
department].    The  [law]  assures that  the  employer  and  the                                                               
employee agree  on the  terms of a  40-hour work  week, [usually]                                                               
with four  10-hour days.   And lastly, he noted,  the hospitality                                                               
industry supports  changes to the training  wage legislation that                                                               
give employers  more opportunities to  train young people  in new                                                               
work environments.   He said that  businesses need to be  able to                                                               
employ  young people  for full  work weeks  so that  they can  be                                                               
given the  training.  [Current  regulations limit youth  on lower                                                               
wages  to  30  hours  per  week.]   This  provision  provides  an                                                               
incentive to  hire [young] people  who don't have  experience and                                                               
who wouldn't otherwise be hired, he said.                                                                                       
Number 1024                                                                                                                     
REPRESENTATIVE ROKEBERG asked  Mr. Rose to explain  what he meant                                                               
by getting the voluntary flexible work hour plan rubber-stamped.                                                                
MR.  ROSE  explained  that  two  of  his  companies  have  needed                                                               
flexible work  hour plans.   They filled  out the forms  and sent                                                               
them to  the Department of Labor;  and two weeks later  they came                                                               
back approved.   He confirmed  that they were for  4-day, 10-hour                                                               
work weeks.                                                                                                                     
REPRESENTATIVE ROKEBERG  commented that  the Department  of Labor                                                               
will  approve 4-day,  10-hour work  weeks but  nothing else.   He                                                               
noted  that working  parents are  demanding  more flexibility  in                                                               
their schedules so they can look  after their children.  He asked                                                               
if that worked for his industry.                                                                                                
MR.  ROSE replied  yes, and  that it's  a real  incentive for  an                                                               
employee if  they can  [get these  flexible hours].   He  said it                                                               
benefits the employer as well.                                                                                                  
Number 1085                                                                                                                     
CHAIR ANDERSON  asked his thought  about AS  23.10.055(11), which                                                               
exempts from  Alaska's minimum wage  youth who are under  the age                                                               
of 18  and work less than  30 hours a  week; they can be  paid at                                                               
the lower  rate of  $5.15 per  hour.   He asked  Mr. Rose  how he                                                               
would  respond to  folks who  protest  being hired  at the  lower                                                               
Number 1140                                                                                                                     
MR. ROSE  said that businesses  are providing a service  to young                                                               
people;  training  that  individual  to  do  the  job  is  pretty                                                               
intensive.  He  said that many employers would prefer  to hire an                                                               
experienced person to do the job.   The question is whether these                                                               
hires are just to save money.   He assured the committee that the                                                               
[employer's] effort  to train  a 17-year-old  to be  a productive                                                               
worker is a public service.                                                                                                     
Number 1169                                                                                                                     
JON  FAULKNER, Owner/operator,  Land's  End  Resort; Van  Guilder                                                               
Hotel, explained that  he has run these hotels for  14 years.  He                                                               
said he  employs 125 people in  the summertime and roughly  75 in                                                               
the  winter.   Land's End  Resort is  the largest  private sector                                                               
employer  in Homer;  Homer is  perennially  one of  the areas  of                                                               
highest unemployment  in the  state.   He said  he knows  what it                                                               
means to put people to work and  the effort it takes to stay open                                                               
in the wintertime.                                                                                                              
MR.  FAULKNER said  he  supports  HB 255,  Sections  1  and 2  in                                                               
particular.   He  stressed that  it  is critical  to clarify  and                                                               
define  what is  supervisory,  professional, and  executive.   He                                                               
said he  has been sued  [over the definition of  supervisory] and                                                               
lost  and came  close to  filing  bankruptcy [to  pay the  court-                                                               
ordered damages]  in the case,  Land's End  v. Chase.   He stated                                                             
that  when  these  cases  are settled,  they  cost  the  industry                                                               
millions of dollars  every year and are a lawyer's  delight.  The                                                               
current Alaska law [AS 23.10.055.  Exemptions] varies so far from                                                               
the  federal  law  that  employers   [are  handicapped  by]  very                                                               
ambiguous  definitions of  supervisory.   His  case involved  his                                                               
restaurant manager  who operated a year-round  restaurant with 65                                                               
employees,  who hired  and fired  staff, and  negotiated $200,000                                                               
purchase contracts  with vendors.   Yet  in the  wintertime, when                                                               
the business  fell down to  15 dinners  a night, she  managed the                                                               
floor and kitchen from the  hostess station.  This manager proved                                                               
that she  spent more than  20 percent of  her time standing  in a                                                               
hostess station, so the court  determined that she did line level                                                               
work  and was  not  exempt from  overtime pay.    The result  was                                                               
treble  damages and  her  lawyer's  fees; he  wrote  a check  for                                                               
$100,000 that took  him to the edge of bankruptcy.   As a result,                                                               
he  placed every  employee  on  hourly pay  and  refuses to  hire                                                               
anyone  on salary.   Mr.  Faulkner  said that  this policy  hurts                                                               
employees because  they don't qualify  for certain  benefits, and                                                               
it  restricts  them in  other  ways.    He  said HB  255  affects                                                               
independent,  Alaskan-owned, and  -operated  businesses that  are                                                               
the backbone of rural economic development.                                                                                     
REPRESENTATIVE  ROKEBERG asked  if  he deals  with the  voluntary                                                               
flex time issue.                                                                                                                
Number 1491                                                                                                                     
MR. FAULKNER  replied that he  uses flex time in  his maintenance                                                               
department, which  has seasonal  work.  He  said it  helps people                                                               
who  have to  work two  jobs.   He said  the Department  of Labor                                                               
approval is very cumbersome.  There  is often a two-week delay in                                                               
getting the paperwork  back.  He said he only  uses the 4-10 work                                                               
week,   usually  with   maintenance,   sometimes  with   security                                                               
CHAIR ANDERSON  asked about  the training  wages as  described in                                                               
Section 4, page 5.                                                                                                              
MR.  FAULKNER said  he  supported the  concept,  but pointed  out                                                               
troublesome language [lines 6-9] which read,                                                                                    
     An  employer may  not  take an  action  to displace  an                                                                    
     employee,  including  partial   displacements  such  as                                                                    
     reduction in hours, wages,  or employment benefits, for                                                                    
     purposes of  hiring individuals at the  wage authorized                                                                    
     in this subsection.                                                                                                        
MR. FAULKNER  explained his  point with the  example of  hiring a                                                               
maintenance  or server  trainee.   Two months  later, he  reduces                                                               
hours,  because [in  the hospitality  industry, the  employer] is                                                               
always changing  the staff levels.   A disgruntled  employee will                                                               
point out  that his hours  were reduced so that  another employee                                                               
could  be hired  at  the training  wages.   He  warned that  this                                                               
language will create  exposure for the employer.   Ninety days is                                                               
not very long  to have someone at a training  wage.  He suggested                                                               
making certain positions eligible for training wages.                                                                           
Number 1609                                                                                                                     
REPRESENTATIVE GUTTENBERG asked two  questions about the benefits                                                               
Mr. Faulkner offers to his hourly and salaried employees.                                                                       
Number 1642                                                                                                                     
MR. FAULKNER said he used to  expect more of a salaried employee.                                                               
When he stopped  paying salaries, he no longer  paid the benefits                                                               
associated  with  salary positions.    He  confirmed that  paying                                                               
benefits is discretionary; the law  does not require the employer                                                               
to pay benefits.   He said he had offered  his salaried employees                                                               
health benefits of a reimbursable type.                                                                                         
KAREN  ROGINA, Alaska  Hospitality Alliance,  explained that  her                                                               
organization includes  the Alaska Hotel and  Lodging Association,                                                               
the Alaska  Restaurant and Beverage  Association, and  the Alaska                                                               
Hospitality  Alliance Education  Foundation.    She testified  in                                                               
favor  of HB  255.   She  said her  membership  includes over  80                                                               
percent of the  lodging rooms in the state and  over 100 food and                                                               
beverage  operations   in  the   state,  employing   over  20,000                                                               
Alaskans.  She said that  employees in the industry gain valuable                                                               
work  experience  that  readily transfers  to  other  industries.                                                               
According to the National Restaurant  Association, over one third                                                               
of the  labor force today in  the United States got  its start in                                                               
the  hospitality  industry.    "We are  the  training  ground  of                                                               
America's work force," she said.                                                                                                
MS.  ROGINA  said  she  supports HB  255  because  it  encourages                                                               
employment and the  development of workers in  the industry while                                                               
protecting the  slim profit margins  of the  members' operations.                                                               
She  testified that  the current  statute discourages  employment                                                               
growth and development while eroding  bottom-line profits.  Given                                                               
the recent changes in the wage  and hour law [mandating an annual                                                               
cost  of living  adjustment  in the  minimum  wage], the  current                                                               
economic downturn has  also been very hard on the  industry.  She                                                               
noted  that  the  alliance  recently   commissioned  a  study  to                                                               
quantify the  impacts of  the economic  downturn and  the minimum                                                               
wage  law.   She  added  that  anecdotal information  shows  that                                                               
employees are  being laid off,  employee benefits are  being cut,                                                               
vacation packages are being cut,  and fewer workers under the age                                                               
of 21 are being hired because  of these factors.  She stated that                                                               
HB 255  encourages the  development of  employees, and  she urged                                                               
the committee to pass HB 255 out of committee.                                                                                  
Number 1845                                                                                                                     
REPRESENTATIVE  ROKEBERG   asked  her  opinion  of   the  current                                                               
training  wage provision  that  allows young  people  to work  30                                                               
hours a week.                                                                                                                   
MS. ROGINA replied  that the current statute  allows young people                                                               
[up to age 18]  to be paid $5.15 an hour, up to  30 hours a week.                                                               
She cautioned  that if they  work beyond  30 hours a  week, there                                                               
isn't a  mechanism in place to  track those hours and  send up an                                                               
alert.   This [bill] changes that  to 40 hours a  week, and every                                                               
employer  has  that  mechanism  in  place  to  identify  when  an                                                               
employee  hits  the  40-hour limit  [for  purposes  of  computing                                                               
overtime].   So, administratively,  this is a  lot easier  to put                                                               
into place, she said.  The increase  [in the age limit from 18 to                                                               
20]  years  opens  up  a  pool of  young  people  who  need  that                                                               
experience in  the workforce and  the opportunity to  ascend [the                                                               
job ladder].                                                                                                                    
CHAIR ANDERSON  asked about a  17-year old working at  Wendy's 20                                                               
hours a week.  He asked her to explain how that works.                                                                          
Number 1915                                                                                                                     
MS.  ROGINA said  that currently  they can  be paid  the training                                                               
wage  only if  they work  less  than 30  hours ongoing.   In  the                                                               
summertime, they  might work  more hours.   It's so  difficult to                                                               
track [the 30 hours] that people just don't do it.                                                                              
CHAIR  ANDERSON confirmed  that if  young person  works one  hour                                                               
more than the 30  hour [limit], all 31 hours must  be paid at the                                                               
higher  [minimum] wage.   He  asked what  happens when  the young                                                               
worker turns 20 if this bill passes.                                                                                            
MS. ROGINA explained that if  a 19-year-old works at the training                                                               
wage for a  month, when she turns  20, she would have  to be paid                                                               
at the  higher wage.   She  confirmed that HB  255 allows  for 40                                                               
hours a week for the first 90 days.                                                                                             
Number 1972                                                                                                                     
REPRESENTATIVE GUTTENBERG asked what  percentage of employees fit                                                               
into these definitions  of summer or seasonal hires  and would be                                                               
eligible for the training wage.                                                                                                 
MS. ROGINA said that information  is not currently available, but                                                               
the Alaska  Hotel and  Lodging Association  recently commissioned                                                               
the McDowell  Group to do  a study  that quantifies that  kind of                                                               
REPRESENTATIVE  GUTTENBERG asked  how  many of  the young  people                                                               
hired in this industry are non-Alaskan, summer travelers.                                                                       
MS.  ROGINA replied  that she  didn't  know but  would find  that                                                               
information and send it to him.                                                                                                 
Number 2024                                                                                                                     
REPRESENTATIVE ROKEBERG noted  that he didn't want  to be accused                                                               
of running a child sweatshop.   He asked Ms. Rogina if she thinks                                                               
this wage can  be used properly to train young  people for a job.                                                               
Is there anything in the bill  that prevents paying a teenager at                                                               
the higher wages, he asked.                                                                                                     
MS.  ROGINA said  HB 255  allows the  market to  [determine] what                                                               
young people are  paid.  Within 90 days, the  employer has a good                                                               
sense  of the  value of  that employee.   She  said there's  high                                                               
turnover in the beginning.                                                                                                      
Number 2079                                                                                                                     
REPRESENTATIVE ROKEBERG  said that if  an employer hires  a young                                                               
person at the lower wage who  proves of value, the employer might                                                               
raise the wage immediately to the $7.15  or above to hang on to a                                                               
good employee.   He also  asked whether the  flex-time provisions                                                               
will  help her  member employers  hire working  parents who  need                                                               
schedule flexibility.                                                                                                           
MS. ROGINA said  absolutely, especially on the  hotel side, which                                                               
is a [round the clock] industry  as is the case in restaurants as                                                               
well.   The  industry  hires a  lot of  people  that have  unique                                                               
scheduling requirements.   Offering employees  flexible schedules                                                               
allows them to fit into the workforce more readily.                                                                             
REPRESENTATIVE ROKEBERG confirmed that  some of her larger hotels                                                               
and restaurants have union employees,  and that some of the union                                                               
contracts allow  for split shifts.   He asked if they  are exempt                                                               
from  the  Wage  and  Hour   Act  because  they  have  collective                                                               
MS. ROGINA  said that union  contracts often negotiate  this kind                                                               
of flex time.   But nonunion employers are also  able to, so this                                                               
levels the playing field.                                                                                                       
CHAIR  ANDERSON  noted  that  the  rest  of  the  people  in  the                                                               
committee room  were willing  to wait until  the next  meeting to                                                               
testify.  He noted that HB 255 will be held over.                                                                               

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