Legislature(2017 - 2018)BARNES 124

03/22/2017 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
-- Public Testimony --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HJR 14 Out of Committee
Moved HB 157 Out of Committee
-- Public Testimony --
Moved HB 119 Out of Committee
-- Public Testimony --
Moved CSHB 79(L&C) Out of Committee
              HB  79-OMNIBUS WORKERS' COMPENSATION                                                                          
4:04:46 PM                                                                                                                    
CHAIR KITO  announced that  the next order  of business  would be                                                               
HOUSE BILL  NO. 79,  "An Act  relating to  workers' compensation;                                                               
repealing  the second  injury fund  upon satisfaction  of claims;                                                               
relating to  service fees  and civil  penalties for  the workers'                                                               
safety programs  and the workers' compensation  program; relating                                                               
to the liability  of specified officers and  members of specified                                                               
business entities  for payment of workers'  compensation benefits                                                               
and   civil   penalties;   relating  to   civil   penalties   for                                                               
underinsuring  or  failing  to insure  or  provide  security  for                                                               
workers'  compensation  liability; relating  to  preauthorization                                                               
and timely  payment for medical  treatment and  services provided                                                               
to  injured employees;  relating  to  incorporation of  reference                                                               
materials  in  workers'  compensation  regulations;  relating  to                                                               
proceedings  before the  Workers'  Compensation Board;  providing                                                               
for  methods  of  payment  for  workers'  compensation  benefits;                                                               
relating  to the  workers'  compensation  benefits guaranty  fund                                                               
authority  to claim  a  lien;  excluding independent  contractors                                                               
from   workers'    compensation   coverage;    establishing   the                                                               
circumstances   under   which   certain   nonemployee   executive                                                               
corporate  officers and  members of  limited liability  companies                                                               
may  obtain  workers'  compensation  coverage;  relating  to  the                                                               
duties of  injured employees to  report income or  work; relating                                                               
to   misclassification  of   employees  and   deceptive  leasing;                                                               
defining  'employee';  relating   to  the  Workers'  Compensation                                                               
Board's approval of attorney fees  in a settlement agreement; and                                                               
providing  for an  effective date."   [Before  the committee  was                                                               
CSHB 79, Version 30-GH1789\O.]                                                                                                  
4:05:19 PM                                                                                                                    
The committee took an at-ease from 4:05 p.m. to 4:06 p.m.                                                                       
4:06:07 PM                                                                                                                    
MARIE   MARX,  Director,   Division   of  Workers   Compensation,                                                               
Department  of  Labor  &  Workforce  Development,  said  she  was                                                               
available for questions.                                                                                                        
4:06:19 PM                                                                                                                    
REPRESENTATIVE   BIRCH  asked,   "whether  we've   achieved  some                                                               
recognition that it's  gonna be necessary to  modify that without                                                               
-- so we don't  entangle a bunch of folks that  we would not have                                                               
otherwise intended to entangle in this bill?"                                                                                   
MS. MARX  answered that  the division  has continuously  met with                                                               
stakeholder  groups  over  the  past two  months  to  define  the                                                               
definition in  a manner allowing true  independent contractors to                                                               
operate, while  at the same  time ensuring those  individuals who                                                               
are employees are covered under  the Alaska Workers' Compensation                                                               
Act,  and the  department and  stakeholders are  comfortable with                                                               
the  current language.   Recently,  she said,  a request  was put                                                               
forth  to the  department  "that  to be  frank"  were issues  not                                                               
previously raised  with the department.   The  department advised                                                               
the stakeholder  groups that the department  will always continue                                                               
discussions as part  of the process, and noted  that the majority                                                               
of the great work  had been completed.  This bill  is a good bill                                                               
for  employers,  injured  workers,  increased  efficiencies,  and                                                               
offers  more  than  the independent  contractor  definition,  she                                                               
described.   To  the extent  new issues  were recently  raised by                                                               
stakeholder  groups, the  department  advised it  is, of  course,                                                               
open to discussions, she explained.                                                                                             
REPRESENTATIVE BIRCH advised  that he wanted to  be certain those                                                               
stakeholder groups  were comfortable  with that  provision before                                                               
he supported moving the bill out of this committee.                                                                             
MS.  MARX reiterated  her understanding  that stakeholder  groups                                                               
were comfortable  [with the  language], at  least one  week prior                                                               
[to this hearing].                                                                                                              
4:09:12 PM                                                                                                                    
REPRESENTATIVE KNOPP related  there may be "a whole  new group of                                                               
stakeholders  out there  this  week."   He  advised  he does  not                                                               
particularly care  for Secs. 8 and  9, and asked why  "we want to                                                               
take them away from the board  and leave them with the division,"                                                               
and why this is a better process.                                                                                               
MS.  MARX  offered  her  belief  that  Representative  Knopp  was                                                               
referring  to the  division's  investigations  where an  employer                                                               
does not  have insurance.   Currently, she advised,  the division                                                               
investigates,  and  if  it  finds  on  a  substantial  basis  the                                                               
employer should have insurance but  does not, it files a petition                                                               
before the  Alaska Workers' Compensation  Board.  The  board then                                                               
holds a  formal due process hearing  and issues a decision  as to                                                               
whether or  not the employer  should have had insurance,  and the                                                               
penalty  amount.   The division  has found  that those  penalties                                                               
assessed by the board are  astronomically high, and the penalties                                                               
have not  withstood review on  appeal.  Recently,  she explained,                                                               
the department  was ordered  to pay a  huge attorneys'  fees bill                                                               
when an  employer appealed the  board's assessment of  a penalty,                                                               
and  on appeal,  the department  was  ordered to  pay some  money                                                               
because the employer did not  have insurance.  Except, the amount                                                               
was dropped  down for  various reasons,  the employer  was deemed                                                               
the   prevailing  party,   and   the   department  was   assessed                                                               
approximately $50,000 in  attorneys' fees.  She  pointed out that                                                               
the  process is  long  with  intense litigation,  and  it is  not                                                               
efficient; and CSHB  79 would change it to a  process wherein the                                                               
department's investigators  will investigate  as they  always do,                                                               
and assess a  penalty based upon statute and regulation.   In the                                                               
event an  employer disputes  the assessment,  they can  request a                                                               
hearing before the  board, but the penalties will  be reduced, in                                                               
most cases, under the new  calculation.  The division anticipates                                                               
that  fewer  assessments  will  go  to  board  hearings,  thereby                                                               
reducing attorneys' fee and litigation costs, she noted.                                                                        
4:11:59 PM                                                                                                                    
REPRESENTATIVE  KNOPP commented  that his  dislike for  Secs. 8-9                                                               
stems   from  prior   conversations   regarding  OCC   licensing,                                                               
investigative costs, and  spreading those costs out.   He related                                                               
his belief  that they are better  managed by the boards  that can                                                               
determine the depth of an  investigation, and he would not second                                                               
guess  Ms. Marx  if  she believes  this is  more  efficient.   He                                                               
referred to Ms.  Marx statement that the  department would assess                                                               
fees within  the statute.   He asked  whether the board  does not                                                               
assess fees  currently, whether there  are statutes  defining the                                                               
limitations of  the fees  and exceeding them,  and why  there are                                                               
"astronomically high assessments."                                                                                              
MS. MARX responded that currently,  the maximum penalty is $1,000                                                               
per employee, per workday, which  leads to high penalties because                                                               
an employer  can have  many employees and  be uninsured  for many                                                               
days.   Governor  Bill  Walker's bill  would  change the  penalty                                                               
calculation and  instead would tie  it to  the risk of  the work,                                                               
size  of the  employer, the  employer's financial  gain from  not                                                               
having  workers' compensation  insurance,  and set  a maximum  of                                                               
three times  the premium  the employer would  have paid  had they                                                               
had insurance.                                                                                                                  
4:13:53 PM                                                                                                                    
REPRESENTATIVE  KNOPP commented  that if  the issue  is excessive                                                               
fees,  why not  just  leave it  with  the board  if  the new  fee                                                               
schedule is put in place.                                                                                                       
MS. MARX  likened the fines  to a  traffic ticket: she  said that                                                               
when  an officer  issues a  citation, there  is a  simple process                                                               
wherein the person can agree with  the citation and pay it, or go                                                               
to court.  For efficiency  purposes, the division's investigators                                                               
investigate  [the case],  which  is a  current  process, and  the                                                               
investigators  petition  the board  with  the  amount.   In  most                                                               
cases,  she explained,  the employer  can just  pay the  assessed                                                               
penalty  if they  prefer,  or  in the  event  of  an appeal,  the                                                               
employer  can  go  to  a  formal  board  hearing  which  involves                                                               
litigation  and attorneys'  fees.   She reiterated  that CSHB  79                                                               
would just simplify and make the process more efficient.                                                                        
4:15:17 PM                                                                                                                    
REPRESENTATIVE  KNOPP  moved  to adopt  Conceptual  Amendment  1,                                                               
which read as follows [original punctuation provided]:                                                                          
     Eliminate Section 28(11) beginning on page 15 line 29                                                                      
     through page 17 line 13.                                                                                                   
       (For definition refer to AS 23.20.525 - Employment                                                                       
CHAIR KITO objected for purposes of discussion.                                                                                 
4:15:38 PM                                                                                                                    
REPRESENTATIVE KNOPP explained  that he has heard  concern from a                                                               
number of industries around  defining independent contractors and                                                               
the  unintentional consequences  of  this legislation.   He  said                                                               
there  are   "a  whole  bunch  of   definitions"  of  independent                                                               
contractor found in  many state statutes and this  bill would add                                                               
another definition.                                                                                                             
He referred  to Amendment  1 and noted  that the  amendment would                                                               
use  the definition  of independent  contractor in  AS 23.20.525,                                                               
the Alaska  Employment Security Act  and not under  AS 23.30.230.                                                               
He said  the conceptual amendment  would give the  legislature an                                                               
opportunity to  address the independent contractor  definition in                                                               
a separate  bill consistent with  unemployment insurance  and the                                                               
workers'  compensation  provision because  he  does  not want  to                                                               
start creating definitions in every statute in the book.                                                                        
MS.  MARX  asked  whether Representative  Knopp  had  a  specific                                                               
question for her, or was asking for her thoughts.                                                                               
REPRESENTATIVE  KNOPP   stated  that  the  issue   had  not  been                                                               
addressed well  enough and he was  not willing to move  this bill                                                               
out of  the committee, "not  that I'd be  on the winning  side of                                                               
that argument," until this issue  is resolved.  More importantly,                                                               
he  said, is  addressing  it through  the workers'  compensation,                                                               
unemployment  insurance  and  fair   labor  standards,  which  is                                                               
everything  that  defines   it  now.    He   reiterated  that  if                                                               
necessary, a  bill could  be brought  forward that  would discuss                                                               
independent  contractors under  the current  statute "that  it is                                                               
defined in."                                                                                                                    
CHAIR KITO suggested  that the question to Ms. Marx  could be for                                                               
her  to  explain  the  process   in  developing  the  independent                                                               
contractor language and, what if  anything, "you are aware of" in                                                               
relation  to  the definition  for  independent  contractor in  AS                                                               
4:18:51 PM                                                                                                                    
MS.  MARX  commented  that  there are  two  important  issues  to                                                               
consider  with the  definition of  independent  contractor.   The                                                               
first  is that  it  is needed,  misclassification  is an  ongoing                                                               
nationwide issue especially  over the last 1-2  years that states                                                               
are addressing.  This state  is not unique, and misclassification                                                               
needs to be addressed.  The  second issue is that this discussion                                                               
began approximately  one year ago  when the  misclassification of                                                               
independent  contractor  was  raised   in  a  bill  sponsored  by                                                               
Representative  Gabrielle LeDoux,  which  did  not move  forward.                                                               
The definition  of independent  contractor has  been a  long time                                                               
coming   and,   she   advised,   the   definition   proposed   in                                                               
Representative   LeDoux's   bill    was   different   than   this                                                               
legislation.   The  department took  the comments  it then  began                                                               
receiving,  especially  from   the  Alaska  Trucking  Association                                                               
(ATA),  about issues  that  may arise  from  that definition  and                                                               
incorporated  it  into  HB  79.    The  language  arose  from  an                                                               
evaluation  of not  only the  Division of  Workers' Compensation,                                                               
but many  stakeholder groups,  and different  agencies in  all 50                                                               
states involved  in misclassification issues.   She remarked that                                                               
the division  has read the  laws of all  50 states over  and over                                                               
again, as  to specific  provisions, weighing  the benefit  of one                                                               
language use  and the wording  versus another, and  initially put                                                               
together  a good  starting point  when the  bill was  introduced.                                                               
Since  that time,  she offered,  the division  met with  numerous                                                               
stakeholder groups,  including ATA, which have  expressed support                                                               
in principle  for the ideas  here because most employers  want to                                                               
operate  on  a  level  playing field  with  other  employers  and                                                               
support an  independent contractor  definition.  She  agreed that                                                               
concerns were  expressed, and over  the last two months  they all                                                               
have worked hard  to get to a  version that is good.   That said,                                                               
she  acknowledged that  some stakeholder  groups still  have some                                                               
issues to  be addressed and the  division is always open  to that                                                               
4:21:57 PM                                                                                                                    
REPRESENTATIVE KNOPP  offered that the groups  just mentioned are                                                               
in the  room because they are  still not good with  the language,                                                               
and  he does  not see  the need  to draft  another definition  of                                                               
independent  contractor  when  the definition  under  "the  other                                                               
title" is where  it needs to be and where  it exists.  Conceptual                                                               
Amendment  1 requests  more time  to  work on  the definition  of                                                               
independent  contractor,   and  in  the  event   this  conceptual                                                               
amendment  fails,  Conceptual  Amendment  2 is  larger  and  more                                                               
detailed, he said.                                                                                                              
4:23:54 PM                                                                                                                    
REPRESENTATIVE BIRCH  agreed with  Representative Knopp  and said                                                               
he  has  a stack  of  letters  from  the National  Federation  of                                                               
Independent  Businesses (NFIB)  and their  concerns have  not yet                                                               
been accommodated; the  concerns regard real people  trying to do                                                               
a job and maintain  a lifestyle.  In the event  the bill needs to                                                               
be  moved  forward, he  suggested  applying  a carve-out  of  the                                                               
definition  or  utilizing  a  different  definition.    He  asked                                                               
whether Ms. Marx had recently spoken with the NFIB.                                                                             
MS.  MARX,  in  response  to  Representative  Knopp's  statements                                                               
regarding the  ATA, answered  that roughly one  week ago  ATA was                                                               
comfortable with the  bill.  She noted she had  received an email                                                               
advising that  "with this  one change  that the  department would                                                               
make," involving changing  a mandatory item to  an optional item,                                                               
ATA would support  the bill.  The issues were  addressed, and the                                                               
statement was made  that ATA would be supportive  with the issues                                                               
they worked  out.  While  she understands that people  can change                                                               
their minds  as part of  the process, she  said she wanted  to be                                                               
certain  the  impression  was  not  that  the  division  was  not                                                               
listening or that there are major issues with this bill.                                                                        
MS. MARX,  in response to  Representative Birch's  NFIB question,                                                               
responded that she met with  Dennis DeWitt, NFIB, and opined that                                                               
his comments  were "the  current bill  as written  -- he  -- they                                                               
could  meet that.   They  actually could  meet this  definition."                                                               
She expressed  that there  seems to be  the feeling  that perhaps                                                               
NFIB should  not have to meet  the definition and whether  or not                                                               
to have an  independent contractor definition at all  is a policy                                                               
call.  She remarked that a comment  made to her was that the NFIB                                                               
could go  out and advertise  but did not  feel the need,  or NFIB                                                               
could have a  bank account in the business name  but did not want                                                               
to.   That is  a different argument  and different  position than                                                               
saying the test  in CSHB 79 does not work,  and she remarked that                                                               
this  test works  for  NFIB.   Whether  NFIB  wants  to meet  the                                                               
qualifications is a different issue,  and she said she was unsure                                                               
whether that could be addressed in this legislation.                                                                            
4:27:06 PM                                                                                                                    
REPRESENTATIVE    STUTES   noted    that   within    [Sec.   28],                                                               
Representative Knopp  would like  to eliminate the  definition of                                                               
independent  contractor, and  yet  the definition  Representative                                                               
Knopp referred to  is a definition of employment.   She commented                                                               
there  may  be a  difference  there,  and  she  did not  see  the                                                               
definition in the statute for independent contractor.                                                                           
REPRESENTATIVE  KNOPP [audio  difficulties]  it  should be  right                                                               
there under AS 23.25. [audio difficulties] ...                                                                                  
4:27:57 PM                                                                                                                    
The committee took an at-ease from 4:27 p.m. to 4:30 p.m.                                                                       
4:30:35 PM                                                                                                                    
MS. MARX advised  that Amendment 1 refers to  AS 23.20.525, which                                                               
is not  a statute  in the Alaska  Workers' Compensation  Act, the                                                               
Alaska Workers' Compensation  Act is AS 23.30, and so  forth.  To                                                               
be  clear, she  explained, the  Alaska Workers'  Compensation Act                                                               
applies its  statutes, it does  not use statutory  definitions or                                                               
regulations  of  other  agencies,  such   as  wage  and  hour  or                                                               
unemployment  insurance.     The  statutes  and  interpretational                                                               
statutes are developed under the Workers' Compensation case law.                                                                
REPRESENTATIVE  KNOPP acknowledged  that he  did not  realize the                                                               
distinction because  he thought  definitions in statute  would be                                                               
applicable  across  the  board,  yet  the  Division  of  Workers'                                                               
Compensation operates under its statutes.                                                                                       
MS. MARX responded that Representative Knopp was correct.                                                                       
4:31:53 PM                                                                                                                    
REPRESENTATIVE KNOPP withdrew Conceptual Amendment 1.                                                                           
4:32:00 PM                                                                                                                    
REPRESENTATIVE KNOPP  moved to adopt  Conceptual Amendment  2, as                                                               
follows [original punctuation provided]:                                                                                        
     Section 28                                                                                                                 
         Page 16, line 4, following "results", delete,                                                                          
     "completion schedule, or range of work hours ..."                                                                          
     Page 16, line 6, following "or", add, "to comply with"                                                                     
        Page 16, line 7, following "incurs" add, "or is                                                                         
     ultimately responsible for"                                                                                                
         Page 16, line 17, insert before "follows" "is                                                                          
     responsible pursuant to contract to"                                                                                       
     Page 16, line 17, change "follows" to "follow"                                                                             
     Page  17,   line  1,  delete,  "maintains   a  business                                                                    
     location separate  from the location of  the individual                                                                    
     for whom the entity for the services are performed"                                                                        
     Page 17,  line 1, insert before,  "the person", "except                                                                    
     for  an  agreement  with  other  individual  or  entity                                                                    
     relating to  the completion schedule  or range  of work                                                                    
     hours," insert,  after "the person", "has  control over                                                                    
     the time the work is performed"                                                                                            
     Page  17,   line  4,   delete,  "engages   in  business                                                                    
     advertising, solicitation,  or other  marketing efforts                                                                    
     reasonably  calculated   to  obtain  new   contract  to                                                                    
     provide  similar   service;"  insert   following,  "the                                                                    
     person", "is  not required to  work exclusively  for on                                                                    
     principal unless:                                                                                                          
          (a) a law, regulation, regulation, or ordinance                                                                       
     prohibits the person form providing service to    more                                                                     
     than on principal; or                                                                                                      
          (b) The person has entered into a written                                                                             
     contract to provide services to  only one principal for                                                                    
     a limited period;                                                                                                          
CHAIR KITO objected for discussion purposes.                                                                                    
4:32:10 PM                                                                                                                    
REPRESENTATIVE  KNOPP  explained   that  Conceptual  Amendment  2                                                               
addresses  recommendations from  the Alaska  Trucking Association                                                               
(ATA)  by deleting  the completion  schedule  and arrangement  of                                                               
work hours,  which means complying  with federal "stuff,  but you                                                               
can't mandate they  go over the federal hours."   For example, he                                                               
said,  should a  customer advise  an item  must arrive  by Monday                                                               
morning, it is the customer's  request and is not "our direction"                                                               
so it  alleviates that "type of  stuff" in contracting.   He said                                                               
that   when   the   discussion  is   under   the   direction   of                                                               
employer/employee  type relationship,  that  is  not an  employer                                                               
mandate.  He explained that "It was  -- it was just some words in                                                               
there that  -- 'add or  ultimately responsible for' that  type of                                                               
language  that kinda  clears up  some of  the grey  areas in  the                                                               
proposed  area  there.    'That  maintains  a  business  location                                                               
separate  from  location  individual  whom  the  entity  for  the                                                               
services are performed' delete that line."                                                                                      
4:34:23 PM                                                                                                                    
CHAIR KITO  ask Representative Knopp  to read the  Version number                                                               
of the amendment for the record.                                                                                                
REPRESENTATIVE  KNOPP responded  Conceptual Amendment  2, Version                                                               
CHAIR KITO asked whether there  were other substantive components                                                               
of the conceptual amendment he would like to present.                                                                           
REPRESENTATIVE KNOPP  advised that  representatives from  ATA are                                                               
available to  speak to the  conceptual amendment because  most of                                                               
it is  ATA's language.   He referred  to the changes  proposed in                                                               
Conceptual  Amendment 2  on  [page  16, CSHB  79,  lines 1-6]  AS                                                               
23.30.205(a)(11)(B) direction  and control, and read  as follows:                                                               
"Is  free from  direction  over the  means  and manner  providing                                                               
services subject only to the right  of the individual for who, or                                                               
entity  for which,  the services  are provided  to specify."   He                                                               
explained  that deleting  the  language  "completion schedule  or                                                               
arrange  of   work  hours,"  is   simply  to  clarify   that  the                                                               
independent  contractor/owner operator  is free  to direct  their                                                               
own work  subject to the desired  results, or to comply  with the                                                               
contract plans, or comply with governmental laws.                                                                               
REPRESENTATIVE   KNOPP  turned   to  the   changes  proposed   in                                                               
Conceptual Amendment  2, on  page 16  of SCHB  79, lines  7-9] AS                                                               
23.30.205(a)(11)(C),  which  would  add  "ultimately  responsible                                                               
for, incurs  (indisc.) ultimately responsible for  after incurs."                                                               
The second  amendment would apply  when someone or an  entity may                                                               
incur  the initial  expense, such  as a  bank, truck,  dealer, or                                                               
equipment supplier,  in a loan  or other  financing arrangements,                                                               
he said.                                                                                                                        
REPRESENTATIVE KNOPP  turned to [CSHB  79, page 16,  lines 14-16]                                                               
AS 23.30.205(a)(11)(F), and said subparagraph (F) was good.                                                                     
4:36:04 PM                                                                                                                    
REPRESENTATIVE SULLIVAN-LEONARD  [and Representative  Knopp spoke                                                               
over themselves and the conversation was undecipherable].                                                                       
REPRESENTATIVE  KNOPP   referred  to  the  changes   proposed  in                                                               
Conceptual Amendment  2, which would clarify  that an independent                                                               
contractor/owner  operator is  not  required by  the contract  to                                                               
have a license not required by law.                                                                                             
REPRESENTATIVE KNOPP stated  that paragraph (G) on  CSHB 79, page                                                               
16,  lines 17-27  "is  responsible pursuant  to  the contract  to                                                               
follow, and  that limits responsibilities  of the parties  to the                                                               
contract at hand."                                                                                                              
REPRESENTATIVE   KNOPP  turned   to  the   changes  proposed   in                                                               
Conceptual Amendment 2  [page 16, lines 28-31 and  page 17, lines                                                               
1-13]  AS 23.30.205(a)(11)(H)  regarding business  locations, and                                                               
he  said,  "Except for  an  agreement  with other  individual  or                                                               
entity  relating to  the  completion schedule  or  range of  work                                                               
hours, delete  the rest of that."   He said, "What  constitutes a                                                               
business location  is in question.   Is a truck sufficient,  is a                                                               
dedicated home  office needed?   So, it clarifies  that language.                                                               
Any  mobile vendor  who provides  onsite services,  mobile carpet                                                               
cleaning, van  or even a  Snap-On tool vendor will  have concerns                                                               
with  this section.   Particularly  if an  independent contractor                                                               
provides regular  frequent services  to the  same customer."   An                                                               
independent contractor  may also share  space with the  person or                                                               
entity  with  whom  they are  contracted  while  still  providing                                                               
purely independent contractor services.                                                                                         
4:38:16 PM                                                                                                                    
MS.  MARX responded  to Chair  Kito  that she  did have  comments                                                               
regarding proposed  Conceptual Amendment 2, and  advised that the                                                               
conceptual amendment  contains changes  raised in a  recent email                                                               
sent to  the committee  and the department,  and the  changes are                                                               
mainly grammatical  issues.   Version O,  she explained,  is more                                                               
flexible  than Conceptual  Amendment 2,  meets the  same purpose,                                                               
the existing  language should remain,  and ultimately, it  is the                                                               
committee's   decision.      Conceptual   Amendment   2   contain                                                               
grammatical  issues,  such  as "ultimately  responsible  for"  is                                                               
ambiguous and would  open the door to litigation and  it does not                                                               
add  value to  the language  in Version  O, she  explained.   She                                                               
advised  that "maintain  a separate  business location,  separate                                                               
from the location  of the individual," is  a mandatory provision.                                                               
She said, after noting some  concern from stakeholder groups, the                                                               
provision was moved  from an 11 or 12 factor  mandatory test to a                                                               
test with  optional factors, recognizing that  possibly some true                                                               
independent contractors  could not meet  a factor.   The language                                                               
in  Version O  would  require a  person meet  three  of the  five                                                               
optional  factors,  such  as  advertise,   bank  account  in  the                                                               
business name,  some insurance  on a  truck or  office equipment,                                                               
some sort  of an insurance  policy.  The factor  besides business                                                               
location is,  "not work as part  in the same trade  or occupation                                                               
as the contractor."  She related  that that was the answer to the                                                               
business location  prong not being applicable  to all independent                                                               
contractors, which is why it is an optional item.                                                                               
4:41:27 PM                                                                                                                    
CHAIR KITO maintained his objection.                                                                                            
4:41:31 PM                                                                                                                    
A roll  call vote was  taken.  Representatives Birch,  Knopp, and                                                               
Sullivan-Leonard  voted in  favor of  the adoption  of Conceptual                                                               
Amendment 2.   Representatives Wool, Stutes,  Josephson, and Kito                                                               
voted against it.  Therefore,  Conceptual Amendment 2 failed by a                                                               
vote of 3-4.                                                                                                                    
4:42:10 PM                                                                                                                    
REPRESENTATIVE  SULLIVAN-LEONARD  asked  Ms. Marx  to  present  a                                                               
comparison  of the  statute prior  to  Version O,  Sec. 28,  with                                                               
regard to  independent contractor.  Secondly,  she asked, whether                                                               
the "second  version" assists  in the goal  of bringing  down the                                                               
premium costs.                                                                                                                  
MS.  MARX explained  that  currently there  is  no definition  of                                                               
independent  contractor in  statute.   The Workers'  Compensation                                                               
Board has,  in regulation, a balancing  test wherein it is  up to                                                               
the board,  on a  case-by-case basis,  to review  the facts  of a                                                               
case and  decide a test  of employee status, except,  states have                                                               
found that balancing  tests do not work.  Thus,  over the past 10                                                               
years   there  has   been  a   movement  to   define  independent                                                               
contractor, as  in this  legislation.  In  the event  an employer                                                               
has  an  insurance  policy  covering some  workers  but  not  all                                                               
workers,  and  an  injured  worker  is  found  to  have  been  an                                                               
employee,  the insurance  company will  raise its  rates for  all                                                               
policyholders,   causing    fewer   people    purchase   workers'                                                               
compensation insurance.   The fact  that insurance  companies are                                                               
covering   unanticipated   uninsured   losses   causes   workers'                                                               
compensation  costs to  be high,  especially in  Alaska, and  the                                                               
average medical cost  on a time loss claim is  $66,000.  Defining                                                               
independent contractor is part of  the overall comprehensive plan                                                               
to  lower  Alaska's  high  workers'  compensation  premiums,  she                                                               
4:44:58 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  surmised  that  an  insurance  company                                                               
cannot argue it  was not advised that Jim Smith  should have been                                                               
classified  as  an  employee.    Therefore,  it  must  rely  upon                                                               
arguments  as  to  whether  Jim Smith  really  should  have  been                                                               
classified as  an employee according  to common law  and statute.                                                               
He  asked whether  that was  what Ms.  Marx was  saying, that  an                                                               
insurance company cannot rely on the employer's opinion.                                                                        
MS.  MARX stated  that  Representative  Josephson was  absolutely                                                               
correct, ultimately  employee status is determined  by the Alaska                                                               
Workers' Compensation Board.   In the event it is  found that the                                                               
injured  worker was  an  employee under  the  Act, the  insurance                                                               
company must cover that loss if  there was an insurance policy in                                                               
place, she said.                                                                                                                
4:44:52 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  commented that  if he was  an insurance                                                               
company,  that   would  be  his  greatest   concern  because  the                                                               
insurance  company has  no control  and  does not  even know  the                                                               
facts  or who  is  at the  job  site, which  is  an argument  for                                                               
insurance  companies  to get  behind  this  bill.   Suddenly  the                                                               
numbers are 30 percent greater  because the insurance company did                                                               
not know these people existed, he noted.                                                                                        
MS. MARX agreed that that was  absolutely what she is saying, and                                                               
she stressed  that there  are letters  of support,  including one                                                               
letter signed by three insurance  companies.  She reiterated that                                                               
there are  many letters of support  here, and that she  wanted to                                                               
bring this  to the  committee's attention  because the  focus has                                                               
been on the independent contractor's  definition and refining it.                                                               
There is absolute  support by employers who want  a level playing                                                               
field, insurance  companies for Representative  Josephson's exact                                                               
reason,  and injured  workers who  want  their injuries  covered,                                                               
there is broad support for this legislation.                                                                                    
4:47:13 PM                                                                                                                    
REPRESENTATIVE KNOPP  referred to [AS 23.30.230(a)(11)]  page 15,                                                               
lines 29-30, which read as follows:                                                                                             
            (11) a person employed as an independent                                                                        
     contractor; a person is an independent contractor for                                                                  
     the purposes of this chapter only if the person                                                                        
REPRESENTATIVE  KNOPP  then   referred  to  [AS  23.30.230(a)(11)                                                               
(H)(v)] page 17, lines 10-13, which read as follows:                                                                            
               (v) the person engages in a trade,                                                                           
     occupation,   profession,   or  business   to   provide                                                                
     services that are outside the  usual course of business                                                                
     for the individual  for whom, or the  entity for which,                                                                
     the services are performed.                                                                                            
4:48:03 PM                                                                                                                    
REPRESENTATIVE KNOPP  opined that in  order to be  an independent                                                               
contractor,  the  person  must   be  performing  services.    For                                                               
example, he  said, if  an employer  is Home  Depot" and  needs an                                                               
electrician,  the employer  would hire  an electrician  and would                                                               
have an independent contractor.                                                                                                 
MS.  MARX  responded that  if  the  employer  is the  Home  Depot                                                               
business and wants electrical work  performed on his/her business                                                               
location without  electricians on staff,  this is where  a person                                                               
meets three  of the five  optional factors.  She  reiterated that                                                               
it  is optional  because there  are some  cases where  legitimate                                                               
true independent  contractors may  work for  a contractor  in the                                                               
same line of business.                                                                                                          
4:49:54 PM                                                                                                                    
AVES  THOMPSON, Executive  Director, Alaska  Trucking Association                                                               
(ATA), reiterated his testimony from  the 3/20/17 hearing on CSHB
79,  and  related  that the  Alaska  Trucking  Association  (ATA)                                                               
believes this  bill in principal  is good,  although difficulties                                                               
lay in  the definition  of independent contractor.   The  ATA has                                                               
been working  with the department  and he, again,  apologized for                                                               
the miscommunication  with the department.   He then  referred to                                                               
his  previous testimony  and  listed six  items  of concern,  and                                                               
advised that  four concerns are merely  grammatic clarifications.                                                               
Two concerns  deal with  advertising and  marketing and  ATA does                                                               
not believe it is necessary in an  ATA type of business.  The ATA                                                               
owner/operators simply  use word of  mouth when looking  for work                                                               
and soon have a job.   Therefore, advertising or marketing is not                                                               
a necessary component to be  an independent contractor. Secondly,                                                               
as to  the business  location, ATA  wants to be  sure there  is a                                                               
clarification that defines what is  a business location; he asked                                                               
whether  a business  location is  a  truck.   The department  has                                                               
advised that a  truck can qualify as a  business location, except                                                               
it does  not say that anywhere.   He related that  there needs to                                                               
be clarification on the issue  of business location, and ATA will                                                               
continue to meet with the department to sort out these issues.                                                                  
4:53:40 PM                                                                                                                    
CHAIR  KITO commented  that Mr.  Thompson would  understand Chair                                                               
Kito's frustration.   He referred to  an email sent to  his staff                                                               
on March  9, 2017,  suggesting two  changes to  paragraph (11)(F)                                                               
and (11)(H), and  that "ATA supports CSHB 79 with  the changes we                                                               
have  suggested," and  yet, between  March 9th  and Monday,  more                                                               
changes were recommended.   He expressed that  the department has                                                               
done  an  admirable  job  of   putting  together  and  trying  to                                                               
accommodate the  situation with the  independent contractor.   He                                                               
said  that "efforts  to  try to  delay the  bill  really are  not                                                               
appreciated."    Chair  Kito  encouraged  Mr.  Thompson  to  work                                                               
constructively  and productively,  and  "provide statements  that                                                               
don't misstate  the position  of the  truckers, because  on March                                                               
9th, it seemed to be everything was okay, now it's not."                                                                        
4:55:02 PM                                                                                                                    
REPRESENTATIVE  BIRCH referred  to the  concerns of  the National                                                               
Federation of  Independent Business  (NFIB) with  the independent                                                               
contractor "program,"  and opined that  its concerns are  not yet                                                               
CHAIR KITO answered that the  department has made every effort to                                                               
try to  work with  industry, as well  as protecting  the workers,                                                               
and its work is admirable.                                                                                                      
4:55:38 PM                                                                                                                    
REPRESENTATIVE SULLIVAN-LEONARD offered that  she has issues with                                                               
the bill and asked to hold the bill until Friday.                                                                               
CHAIR KITO  explained that there  are opportunities  for comments                                                               
and changes  in the  House Judiciary  Standing Committee  and the                                                               
House   Finance   Committee,   the   floor  of   the   House   of                                                               
Representatives,  as well  as  getting through  the  Senate.   He                                                               
reminded  the  committee  that  his is  the  first  committee  of                                                               
referral for the bill.                                                                                                          
REPRESENTATIVE SULLIVAN-LEONARD  interjected that  she is  not on                                                               
those  other committees  and House  Labor  and Commerce  Standing                                                               
Committee  is the  committee to  hammer out  a majority  of those                                                               
particular issues.                                                                                                              
CHAIR  KITO answered  that he  is interested  in moving  the bill                                                               
4:56:34 PM                                                                                                                    
REPRESENTATIVE BIRCH  commented that  he does not  support moving                                                               
the bill because the independent  contractor questions need to be                                                               
addressed, and requested  that the committee make  the bill right                                                               
before moving it from committee.                                                                                                
REPRESENTATIVE STUTES offered that  she appreciates the concerns,                                                               
although she has  only been a legislator for three  years and has                                                               
yet to see the perfect bill.                                                                                                    
CHAIR KITO closed public testimony on HB 79.                                                                                    
4:57:39 PM                                                                                                                    
REPRESENTATIVE WOOL moved to report CSHB 79, Version 30-                                                                        
GH1789\O, out  of committee  with individual  recommendations and                                                               
the accompanying fiscal notes.                                                                                                  
REPRESENTATIVE BIRCH objected.                                                                                                  
4:57:56 PM                                                                                                                    
A  roll  call vote  was  taken.   Representatives  Wool,  Stutes,                                                               
Josephson,  and Kito  voted in  favor of  moving CSHB  79 out  of                                                               
committee.   Representatives  Birch, Knopp,  and Sullivan-Leonard                                                               
voted against  it.  Therefore,  CSHB 79(L&C) was reported  out of                                                               
the House Labor  and Commerce Standing Committee by a  vote of 4-                                                               

Document Name Date/Time Subjects
CS HB132 ver R Work Draft 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
CS HB132 ver R Work Draft Sectional Analysis 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
CS HB132 ver R Work Draft Explanation of Changes 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HJR014 Fiscal Note-HLAC 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HJR 14
HB132 Supporting Documents - Letters of Opposition 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB132 Supporting Documents Index 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB132 Supporting Documents - Letters of Support 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB144 Legislative Audit 3.14.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 144
HB144 Sponsor Statement 3.14.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 144
HB144 Fiscal Note DCCED-DCBPL 3.17.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 144
HB086 Supporting Document - ACPE Loan Default Consequences 3.2.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 86
HB086 Supporting Document - NPR Article-States Review 3.2.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 86
HB086 Supporting Document - Letter of Support ANA 3.21.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 86
HB086 Fiscal Note DEED-APEC 3.2.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 86
HB086 Sponsor Statement 3.2.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 86
HB079 Sectional Analysis Version O 3.22.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 79
HB132 Version J Amendment 1 3.22.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB132 Version R Amendment 1 3.22.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB132 Version R Amendment 2 3.22.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB132 Version R Amendment 3 3.22.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132
HB132 Version R Amendment 4 3.22.17.pdf HL&C 3/22/2017 3:15:00 PM
HB 132