Legislature(2009 - 2010)

02/16/2009 03:17 PM L&C

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 22-WORKERS' COMPENSATION: SUBCONTRACTORS                                                                                   
4:49:15 PM                                                                                                                    
CHAIR OLSON announced that the final order of business would be                                                                 
HOUSE BILL  NO. 22, "An Act  relating to requiring  subcontractors                                                              
who  do not  have  employees and  who  are acting  as  independent                                                              
contractors to  secure payment for  workers' compensation,  and to                                                              
requiring subcontractors  who fail  to secure payment  of workers'                                                              
compensation to  pay additional  premiums incurred by  contractors                                                              
because of that failure."                                                                                                       
4:49:20 PM                                                                                                                    
PAUL GROSSI,  Staff, Representative  Harry Crawford,  Alaska State                                                              
Legislature,  speaking on behalf  of a joint  prime sponsor  of HB
22,  Representative Harry  Crawford,  stated that  the bill  would                                                              
require  sole   proprietors  that  are  subcontractors   to  carry                                                              
workers' compensation  on themselves.   He offered that  this bill                                                              
would  address a  long-standing  issue that  identifies whether  a                                                              
subcontractor  is actually  a subcontractor  or an  employee.   He                                                              
stated  that in  the worst  case, a  worker is  injured, does  not                                                              
have workers'  compensation insurance,  and files a  claim against                                                              
the  contractor.   He  explained  those  claims  would go  to  the                                                              
Workers'  Compensation  Board  to determine  whether  the  injured                                                              
worker is  an employee or a  subcontractor.  He indicated  that if                                                              
the injured  worker is found to  be an employee that  the employer                                                              
must  cover the  Workers'  Compensation claim.    However, if  the                                                              
Workers'  Compensation  board finds  that  the injured  person  is                                                              
determined to be  a subcontractor, he/she is personally  liable or                                                              
their insurance company must pay the claim.                                                                                     
4:51:34 PM                                                                                                                    
MR. GROSSI  related that  the more common  instance arises  when a                                                              
contractor wins  a bid,  begins the job,  and during  an insurance                                                              
audit,  the  insurance  company  requires the  contractor  to  pay                                                              
additional premiums,  which reduces the contractor's  profit.  The                                                              
most  common  complaint  is  that  some  contractors  cover  their                                                              
employees,    but   other   contractors    call   their    workers                                                              
subcontractors  when  in  reality  they  are  employees  to  avoid                                                              
paying  Workers' Compensation  premiums  and to  obtain a  bidding                                                              
advantage.    Additionally,  the  employee affected  work  in  the                                                              
construction industry,  which poses higher  risks for injury.   In                                                              
the  event the  worker  is injured  and  not  covered by  workers'                                                              
compensation,  the  potential  exists  to  shift  the  cost  to  a                                                              
hospital.   He  opined  that in  many  instances  the workers  are                                                              
truly  subcontractors.   He stressed  that this  bill removes  the                                                              
uncertainty and removes the doubt of liability and coverage.                                                                    
4:54:06 PM                                                                                                                    
REPRESENTATIVE   HARRY   CRAWFORD,   Alaska   State   Legislature,                                                              
speaking  as joint  prime sponsor  of HB  22, stated  that he  has                                                              
worked on this issue  since he has served in the  legislature.  He                                                              
explained that  this issue relates  to liability.  He  stated that                                                              
many   general   contractors   hire    subcontractors   with   the                                                              
expectation  that the  subcontractors  hold workers'  compensation                                                              
insurance,  and   often  the   subcontractors  provide   proof  of                                                              
coverage.   He  pointed  out when  a subcontractor  drops  his/her                                                              
insurance   and  someone   is  subsequently   injured,  that   the                                                              
liability falls  on the general  contractor.  However,  he opined,                                                              
the  liability should  rest  with the  subcontractor.   This  bill                                                              
requires  that the  right person  has the liability.   He  offered                                                              
that  it is  not imposing  a requirement  that  a sole  proprietor                                                              
acquire insurance  for himself/herself.   He described  a scenario                                                              
in which a person  is building a home and hires  a sole proprietor                                                              
to build a deck.   He indicated that the person  building the deck                                                              
is  not   required  to   hold  workers'  compensation   insurance.                                                              
However,  if a  general contractor  builds  the home  and hires  a                                                              
subcontractor  to   build  a  deck   that  under  this   bill  the                                                              
subcontractor  must  hold  workers'   compensation  insurance,  he                                                              
stated.  He  emphasized that HB 22  erases all doubt as  to who is                                                              
liable.   Representative  Crawford  opined  that  this bill  helps                                                              
ensure  a fair  and level  playing field  for general  contractors                                                              
and subcontractors.                                                                                                             
4:56:49 PM                                                                                                                    
CHAIR OLSON  announced that HB 22  would be held over  for further                                                              

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