Legislature(2003 - 2004)

04/26/2004 09:01 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR SENATE BILL NO. 311(JUD)                                                                                            
     "An  Act   providing  for  a   special  deposit  for   workers'                                                            
     compensation  insurers; relating  to the board of governors  of                                                            
     the Alaska  Insurance Guaranty Association; stating  the intent                                                            
     of  the legislature,  and setting out  limitations,  concerning                                                            
     the  interpretation,   construction,   and  implementation   of                                                            
     workers'  compensation  laws;  relating  to  restructuring  the                                                            
     Alaska  workers' compensation  system;  eliminating the  Alaska                                                            
     Workers'   Compensation  Board;  establishing   a  division  of                                                            
     workers'  compensation  within  the  Department  of  Labor  and                                                            
     Workforce  Development  and assigning  certain Alaska  Workers'                                                            
     Compensation   Board   functions  to   the  division  and   the                                                            
     Department  of Labor and Workforce Development;  establishing a                                                            
     Workers'  Compensation  Appeals Commission;  assigning  certain                                                            
     functions  of the  Alaska Workers'  Compensation  Board to  the                                                            
     Workers'  Compensation  Appeals  Commission  and  the  Workers'                                                            
     Compensation   Hearings  Board;  relating  to  agreements  that                                                            
     discharge   workers'  compensation  liability;   providing  for                                                            
     hearing examiners  and hearing panels in workers'  compensation                                                            
     proceedings;   relating   to  workers'   compensation   awards;                                                            
     relating  to an employer's failure  to insure and keep  insured                                                            
     or provide  security; providing  for appeals from compensation                                                             
     orders;   relating   to  workers'   compensation  proceedings;                                                             
     providing  for supreme court  jurisdiction of appeals  from the                                                            
     Workers'  Compensation  Appeals  Commission;  providing  for  a                                                            
     maximum amount  for the cost-of-living adjustment  for workers'                                                            
     compensation  benefits; providing for administrative  penalties                                                            
     for  employers  uninsured  or  without  adequate  security  for                                                            
     workers'  compensation;  relating  to assigned  risk pools  and                                                            
     insurers; and providing for an effective date."                                                                            
                                                                                                                                
                                                                                                                                
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated  this bill,  sponsored by  the Senate  Rules                                                            
Committee  at  the  request  of  the  Governor,   "changes  the  way                                                            
workmans'  compensation  disputes and  appeals  are resolved.  Under                                                            
Senate Bill  311, appeals [would be]  reviewed by the newly  created                                                            
workmans' comp commission."                                                                                                     
                                                                                                                                
Amendment #1: This amendment  deletes "Workers' Compensation Appeals                                                            
Commission" and  inserts "workers' compensation hearings  office" on                                                            
page  1, lines  9, 10 and  11, and  deletes "providing  for  supreme                                                            
court  jurisdiction  of  appeals  from  the  Workers'  Compensation                                                             
Appeals Commission;" on  page 2, lines 4-6. The amended title of the                                                            
bill reads as follows.                                                                                                          
                                                                                                                                
     An   Act  providing   for  a  special   deposit  for   workers'                                                            
     compensation  insurers; relating  to the board of governors  of                                                            
     the Alaska  Insurance Guaranty Association; stating  the intent                                                            
     of  the legislature,  and setting out  limitations,  concerning                                                            
     the  interpretation,   construction,   and  implementation   of                                                            
     workers'  compensation  laws;  relating  to  restructuring  the                                                            
     Alaska  workers' compensation  system;  eliminating the  Alaska                                                            
     Workers'   Compensation  Board;  establishing   a  division  of                                                            
     workers'  compensation  within  the  Department  of  Labor  and                                                            
     Workforce  Development  and assigning  certain Alaska  Workers'                                                            
     Compensation   Board   functions  to   the  division  and   the                                                            
     Department  of Labor and Workforce Development;  establishing a                                                            
     workers'  compensation   hearings  office;  assigning   certain                                                            
     functions  of the  Alaska Workers'  Compensation  Board to  the                                                            
     workers'   compensation  hearings   office  and  the   Workers'                                                            
     Compensation   Hearings  Board;  relating  to  agreements  that                                                            
     discharge   workers'  compensation  liability;   providing  for                                                            
     hearing examiners  and hearing panels in workers'  compensation                                                            
     proceedings;   relating   to  workers'   compensation   awards;                                                            
     relating  to an employer's failure  to insure and keep  insured                                                            
     or provide  security; providing  for appeals from compensation                                                             
     orders;   relating   to  workers'   compensation  proceedings;                                                             
     providing   for  a  maximum   amount  for  the  cost-of-living                                                             
     adjustment  for workers' compensation  benefits; providing  for                                                            
     administrative  penalties  for employers  uninsured or  without                                                            
     adequate  security  for  workers'  compensation;   relating  to                                                            
     assigned  risk  pools   and insurers;   and  providing  for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
This  amendment   also   deletes  "Workers'   Compensation   Appeals                                                            
Commission" and  inserts "workers' compensation hearings  office" on                                                            
page 4, line 27,  29 & 30, page 5, line 6, and page  6, lines 20-21,                                                            
and deletes  "chair of  the commission" and  inserts "chief  hearing                                                            
officer"  on  page   7,  line  14.  This  amendment  also   replaces                                                            
references to  the "office of the commission" and  "commission" with                                                            
"hearings  office" and  replaces  references to  "commission  clerk"                                                            
with "chief hearing officer" where they appear in the bill.                                                                     
                                                                                                                                
This  amendment   also  deletes  from  Section  10,  new   sections:                                                            
23.30.007, 23.30.008, and 23.30.009, on page 8 line 16 through page                                                             
11, line 30 and inserts new language to read as follows.                                                                        
                                                                                                                                
          Sec. 23.30.007. Workers' compensation hearings office.                                                                
     (a)  There  is  established  in the  Department  of  Labor  and                                                            
     Workforce Development  a workers' compensation hearings office.                                                            
     The  hearing   examiners  and   hearing  panel  hear   original                                                            
     petitions  when a claim  is filed under  this chapter  and have                                                            
     jurisdiction  to hear appeals from decisions  and orders of the                                                            
     director.                                                                                                                  
          (b) The commissioner shall appoint a chief hearing                                                                    
     officer and hearing examiners.                                                                                             
          (c) The chief hearing officer may                                                                                     
                (1) employ and supervise hearing office staff,                                                                  
     hearing  examiners, and hearing  panels and appoint  a hearings                                                            
     office clerk;                                                                                                              
                (2) establish and implement a time management system                                                            
      for the hearings office, staff, and hearing examiners;                                                                    
                (3) assign the work of the hearing examiners,                                                                   
     hearing  panels, and  staff so  that hearings  and appeals  are                                                            
     resolved   as  expeditiously   and  competently  as   possible,                                                            
     including  designating  hearing examiners  to hear preliminary                                                             
     matters; and                                                                                                               
                (4) prepare and annual budget of the hearings office                                                            
     and hearing panels.                                                                                                        
          (d) The hearings office, in its administrative capacity,                                                              
     shall   maintain,  index,   and  make   available  for   public                                                            
     inspection  the final  administrative  decisions and orders  of                                                            
     the   hearing  examiners   and  hearing   panels.  To   promote                                                            
     consistency  among  legal  determinations,  the  chief  hearing                                                            
     officer  may  review  and circulate  among  the  other  hearing                                                            
     examiners  the  drafts  of  formal  decisions,  decisions  upon                                                            
     reconsideration, and  other legal opinions of the other hearing                                                            
     examiners  of the hearings office. The drafts  are confidential                                                            
     documents and are not subject to disclosure.                                                                               
          (e) The hearings office, in its administrative capacity,                                                              
     may  adopt regulations  implementing its  authority and  duties                                                            
     under this  chapter, including rules of procedure  and evidence                                                            
     for proceedings before  hearing examiners and hearing panels in                                                            
     workers'  compensation   proceedings  under  AS  23.30.090  and                                                            
     23.30.110 and for  the adjudication of all claims and petitions                                                            
     under this chapter.  The provisions of AS 44.62 (Administrative                                                            
     Procedure  Act) apply  to the  adoption of  regulations by  the                                                            
     hearings office.                                                                                                           
          (f) The hearings office, in its administrative capacity,                                                              
     may  adopt  and  alter  an official  seal  and  do  all  things                                                            
     necessary,  convenient,  or desirable to  carry out the  powers                                                            
     expressly granted or necessarily implied in this chapter.                                                                  
                                                                                                                                
This amendment also deletes all language on page 32, line 3 through                                                             
line 16, following "defense" in Section 55, amending Sec.                                                                       
23.30.108(c).                                                                                                                   
                                                                                                                                
This amendment also deletes ", but is not a public employee for                                                                 
purposes of AS 23.40" from page 35, line 16, in Section 58 that                                                                 
adds a new Sec. 23.30.112. Hearing examiners.                                                                                   
                                                                                                                                
This amendment also deletes Section 63 and Section 64 on page 38,                                                               
line 14, through page 43, line 1 and inserts new bill sections to                                                               
read as follows.                                                                                                                
                                                                                                                                
     Sec. 63. AS 23.30.125(a) is amended to read:                                                                               
          (a) A compensation order becomes effective when filed                                                                 
     with the  director [IN THE OFFICE OF THE BOARD]  as provided in                                                          
     AS 23.30.110,  and, unless proceedings to suspend  it or set it                                                          
     aside  are instituted  as provided in  (c) of this section,  it                                                            
     becomes final on the 31st day after it is filed.                                                                           
                                                                                                                                
     Sec. 64. AS 23.30.125(c) is amended to read:                                                                               
          (c) If not in accordance with law, a compensation order                                                               
     filed  by a hearing  examiner or hearing  panel as provided  in                                                          
     (a) of  this section may be suspended  or set aside,  in whole,                                                          
     or  in part,  through injunction  proceedings  in the  superior                                                            
     court  brought  by a  party in  interest against  the  division                                                          
     [BOARD]  and all other parties  to the proceedings [BEFORE  THE                                                            
     BOARD].  The payment of  the amounts required  by an award  may                                                            
     not be stayed  pending final decision in the  proceeding unless                                                            
     upon application  for an interlocutory injunction  the court on                                                            
     hearing, after not  less than three days' notice to the parties                                                            
     in  interest  and the  director  [BOARD],  allows  the stay  of                                                          
     payment,  in whole or in part,  where irreparable damage  would                                                            
     otherwise  ensue  to  the  employer.  The order  of  the  court                                                            
     allowing a stay must  [SHALL] contain a specific finding, based                                                          
     upon  evidence   submitted  to  the  court  an  identified   by                                                            
     reference  to it, that irreparable  damage would result  to the                                                            
     employer, and specifying the nature of the damage.                                                                         
                                                                                                                                
     Sec. 65. AS 23.30.125(d) is amended to read:                                                                               
          (d) If an employer fails to comply with a compensation                                                                
     order making  an award that has become final,  a beneficiary of                                                            
     the  award   or  the  director   [BOARD]  may  apply   for  the                                                          
     enforcement  of the order to  the superior court. If  the court                                                            
     determines  that the  order was made  and served in  accordance                                                            
     with law,  and that the employer  or the officers or  agents of                                                            
     the  employer have failed  to comply with  it, the court  shall                                                            
     enforce  obedience to  the order  by writ of  injunction  or by                                                            
     other  proper  process  to enjoin  upon  the employer  and  the                                                            
     officers and agents  of the employer compliance with the order.                                                            
                                                                                                                                
     Sec. 66. AS 23.30.125(f) is amended to read:                                                                               
          (f) Subject to an employer's or employee's burden of                                                                  
     proof,  a finding  of  fact made  by  the hearing  examiner  or                                                          
     hearing  panel [BOARD]  as a  part of a  compensation order  is                                                          
     conclusive   unless  the  court   specifically  finds   that  a                                                            
     reasonable  person could not  have reached the conclusion  made                                                            
     by the hearing examiner or hearing panel [BOARD].                                                                        
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
This amendment  also deletes Section 75 amending AS  23.30.155(f) on                                                            
page 47, lines 13-20.                                                                                                           
                                                                                                                                
Senator Hoffman moved for adoption.                                                                                             
                                                                                                                                
Co-Chair Green and Co-Chair Wilken objected.                                                                                    
                                                                                                                                
Senator  Hoffman recalled  an equal amount  of testimony  supporting                                                            
and  opposing  this   amendment.  He  stated  that  most   testimony                                                            
recognized the benefits  of some provisions of the bill. However, he                                                            
was  not convinced  from  the testimony  that  the creation  of  the                                                            
appeals commission  would save money  and result in lower  insurance                                                            
premiums.  He  referenced  page  two  of fiscal  note  #3  from  the                                                            
Department  of Labor and Workforce  Development projecting  the cost                                                            
of the appeals commission  at $1.2 million. He commented that it was                                                            
unfortunate  that all  Members were  not present  to hear  testimony                                                            
from three  individuals  who have  worked in the  field of  workers'                                                            
compensation  for a  combined period  of over 50  years. He  relayed                                                            
this testimony  expressing  concern with the  proposal to replace  a                                                            
judge with three commissioners.                                                                                                 
                                                                                                                                
Senator  Hoffman   told  of  the  approximate  35   to  50  workers'                                                            
compensation  cases  heard  in superior  court.  He  calculated  the                                                            
number  of cases the  three member  commission would  hear to  be "a                                                            
fraction"  of  the  approximately  600  cases heard  annually  by  a                                                            
superior  court judge. He  also pointed out  the proposed salary  of                                                            
the  three   commissioners,  one   at  a  Range  30F  salary   would                                                            
significantly exceed the salary paid to one judge.                                                                              
                                                                                                                                
Senator  Hoffman  also  was  unconvinced  that less  time  would  be                                                            
required for workers'  compensation claims with the  creation of the                                                            
commission.  Since the system is unproven,  he informed that  he had                                                            
suggested the  legislation should  have a lapse date, at  which time                                                            
the  process would  be  evaluated.  He stated  this  suggestion  was                                                            
rebuffed.                                                                                                                       
                                                                                                                                
Senator  Hoffman  supported  Sections  1  through  7  of  the  bill.                                                            
However, he asserted that  with the major deficits facing the State,                                                            
the additional  $1.2 million expense of the proposed  commission are                                                            
unwarranted since no savings has been proven.                                                                                   
                                                                                                                                
Co-Chair Wilken questioned the $1.2 million amount.                                                                             
                                                                                                                                
Senator Hoffman  cited page  two of page four  of the Department  of                                                            
Labor and  Workforce Development  fiscal noted  dated 2/9/04,  which                                                            
projects personal  services costs at $1,183,900 associated  with the                                                            
new positions.                                                                                                                  
                                                                                                                                
Co-Chair Wilken  informed of an updated fiscal noted  4/20/04, which                                                            
projects the amount to be $627,000.                                                                                             
                                                                                                                                
Senator  Hoffman pointed  out the personal  services amount  remains                                                            
listed as  $1,183,900, as  shown on page two  of the updated  fiscal                                                            
note.                                                                                                                           
                                                                                                                                
Co-Chair Wilken  clarified the existing  $938,000 allocated  for the                                                            
workers' compensation  appeals process  must be deducted.  He listed                                                            
two cost  components in the  updated fiscal  note: $627,000  for new                                                            
workforce and $198,000 for appellate courts.                                                                                    
                                                                                                                                
Senator  Hoffman   agreed;  however  was  not  convinced   from  the                                                            
testimony  that  this  legislation  would  streamline  the  workers'                                                            
compensation process.  He noted that experts in this  matter predict                                                            
the changes  would  add time  and expense  to the  process. He  also                                                            
remarked  that  the  Alaska  Supreme Court  has  no  flexibility  in                                                            
determining  which cases it would  hear, and as testified  to by the                                                            
Alaska  Court System,  costs  for that  branch of  government  would                                                            
likely increase.                                                                                                                
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
                                                                                                                                
OPPOSED: Senator Dyson,  Senator B. Stevens, Senator Bunde, Co-Chair                                                            
Green and Co-Chair Wilken                                                                                                       
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Amendment  #2: This amendment  deletes language  from Section  64 on                                                            
page 40, lines  28-31 and inserts  new language to read as  follows.                                                            
                                                                                                                                
     Sec.  23.30.128.  Commission  proceedings. (a)  The  commission                                                            
     shall review all discretionary  actions and findings of fact by                                                            
     a hearing  examiner, hearing  panel, or the director  under the                                                            
     substantial  evidence standard of review. The  commission shall                                                            
     review  the conclusions of law  by a hearing examiner,  hearing                                                            
     panel,  or  the director  using  the commission's  independent                                                             
     judgment. A hearing  panel's findings regarding the credibility                                                            
     of testimony  of a witness are  binding on the commission.  The                                                            
     findings  of  the  hearing  panel,  if  not set  aside  by  the                                                            
     commission, are conclusive.                                                                                                
                                                                                                                                
Senator Olson moved for adoption.                                                                                               
                                                                                                                                
Co-Chair Green objected.                                                                                                        
                                                                                                                                
Senator  Olson  commented  this legislation  is  the result  of  the                                                            
financial burden  that workers' compensation insurance  has incurred                                                            
for  businesses,  particularly  small businesses.  He  stressed  the                                                            
worker's compensation system  must be reviewed and revised to become                                                            
more efficient.  He outlined  the current  practice of due  process,                                                            
notably that the appellate  court does not consider new evidence but                                                            
rather whether  the lower court operated  correctly. He pointed  out                                                            
that  this  legislation  would  allow  the  proposed  commission  to                                                            
consider  new evidence,  resulting  in  essentially  two trials.  He                                                            
agreed with the intent  that the workers' compensation system should                                                            
be streamlined  and argued that the  proposed process would  instead                                                            
"clog up the  system". He questioned  the ability of the  commission                                                            
to  preserve  the  "standard  of review"  and  operate  under  these                                                            
circumstances.  He  asserted  the  proposed   commission  would  add                                                            
"another layer of government."                                                                                                  
                                                                                                                                
Co-Chair  Green  reviewed  testimony   from  an assistant   attorney                                                            
general  with the  Department  of Law,  who disagreed  with  Senator                                                            
Olson on this  matter, in that the  role of the proposed  commission                                                            
would not establish new precedent in the appeal process.                                                                        
                                                                                                                                
Senator  Olson  acquiesced  that  Kristin   Knudsen,  affirmed  that                                                            
currently  the  superior court  could  hear  new testimony,  but  he                                                            
pointed  out that  in  actuality only  five  percent  of cases  have                                                            
allowed new evidence to be introduced.                                                                                          
                                                                                                                                
Co-Chair  Wilken noted  Ms.  Knudsen was  available  to testify  via                                                            
teleconference.                                                                                                                 
                                                                                                                                
Senator  Bunde  compared  the appeals  process  to  the legislative                                                             
committee process with  himself as the chair of the Senate Labor and                                                            
Commerce Committee and  Co-Chair Wilken, chair of the Senate Finance                                                            
Committee, hearing much of the same testimony.                                                                                  
                                                                                                                                
Senator  Dyson appreciated  the  efforts of  Senator  Olson to  save                                                            
money  and streamline  the workers'  compensation  process.  Senator                                                            
Dyson relayed that many  friends who incurred workplace injuries and                                                            
became   involved  in   the  workers'   compensation   system   were                                                            
unsatisfied  with  the  appeals  process.  He  commented  that  many                                                            
injuries  worsen  over  time  and  that   he favored   allowing  new                                                            
information  about  the  worsening  injuries  to be  considered.  He                                                            
therefore did not support adoption of the amendment.                                                                            
                                                                                                                                
Senator Hoffman  stated that Senator  Bunde is correct in  comparing                                                            
the  workers'  compensation  appeals   process  to  the legislative                                                             
committee process,  but stressed the processes are  long and costly.                                                            
He opined  this legislation  would not streamline  the process,  but                                                            
rather delay proceedings.                                                                                                       
                                                                                                                                
Senator  Hoffman requested  demonstration of  the savings  testified                                                            
to. He cited that data  shows 50 percent of cases are awarded to the                                                            
employer and  50 percent are awarded  to the employee. He  therefore                                                            
concluded  that savings  would  only be  realized  with fewer  cases                                                            
awarded to employees.                                                                                                           
                                                                                                                                
Senator Olson  stressed the entire  appellate system is intended  to                                                            
review  decisions made  at lower  levels  to ensure  laws have  been                                                            
followed,  etc. He agreed  that new evidence  would be helpful,  but                                                            
reiterated it would "bog down the system".                                                                                      
                                                                                                                                
LINDA  HALL,   Director,  Division   of  Insurance,  Department   of                                                            
Community and  Economic Development,  cited language in Section  64,                                                            
adding Sec. 23.30.128(b),  on page 41, lines 6 & 7  of bill, "Except                                                            
as provided in  (c) of this section, new or additional  evidence may                                                            
not be received with respect to the appeal."                                                                                    
                                                                                                                                
Senator  Olson  acknowledged  this  point;   however,  remarked  his                                                            
amendment addresses language  in Sec. 23.30.128(a) on page 40, lines                                                            
28 and  29, "The  commission may  review de  novo all discretionary                                                             
actions,  findings of fact,  and conclusions  of law by the  hearing                                                            
examiner, hearing  panel, or the director  in hearing, determining,                                                             
or otherwise acting on any compensation claim or petition."                                                                     
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
                                                                                                                                
OPPOSED: Senator B. Stevens,  Senator Bunde, Senator Dyson, Co-Chair                                                            
Green and Co-Chair Wilken                                                                                                       
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Senator   Dyson  expressed   his   conflicting   support  for   this                                                            
legislation,  commenting  that most  of the provisions  would  be an                                                            
improvement  over the current system,  although he remained  concern                                                            
about "other contentious  areas." He relayed a discussion  he had in                                                            
which he learned  that the law and structure of either  system would                                                            
be adequate depending  on the quality, experience  and commitment of                                                            
the  people  entrusted  to  implement   it.  He  remarked  that  the                                                            
Administration  must employ  fair and qualified  staff. He  surmised                                                            
that if operated correctly,  the new provisions would streamline the                                                            
system. He charged the  Murkowski Administration with recruiting and                                                            
employing the best possible staff.                                                                                              
                                                                                                                                
Senator   Hoffman  informed   he  would  be   voting  against   this                                                            
legislation.  He  stressed  that  as  an  employer,  he  must  "make                                                            
payroll" and  that he failed to recognize  any savings created  from                                                            
these changes.  Rather, he  asserted this  legislation would  create                                                            
"bigger government and not even better government."                                                                             
                                                                                                                                
Co-Chair  Green stated that  the current  system is inefficient  and                                                            
cumbersome,  noting that  some cases  are pending  for over a  year,                                                            
with no superior court hearing scheduled.                                                                                       
                                                                                                                                
Senator  Olson commented  that workers'  compensation  is a  "sticky                                                            
quagmire" that as an employer,  he must pay into. He assured that he                                                            
has  the welfare  of his  employees  at heart  but that  there is  a                                                            
better way to address the issue.                                                                                                
                                                                                                                                
Co-Chair Green  offered a motion to  report the bill from  Committee                                                            
with individual  recommendations,  accompanying  fiscal notes  and a                                                            
new fiscal note.                                                                                                                
                                                                                                                                
There was  no objection  and CS  SB 311 (JUD)  MOVED from  Committee                                                            
with zero fiscal  notes #1 and #2  from the Department of  Community                                                            
and  Economic  Development  and  Department  of  Law, respectively,                                                             
indeterminate fiscal note  #4 from the Department of Administration,                                                            
fiscal note #5  for $198,800 from the Alaska Court  System and a new                                                            
fiscal note for $627,000  dated 4/20/04 from the Department of Labor                                                            
and Workforce Development.                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects