Legislature(2003 - 2004)
04/26/2004 09:01 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.