Can your truck be considered a place of business if you’re an independent truck driver? Is your truck cab your office? Maybe or maybe not, says Gov. Walker.
If you don’t shell out cash to advertise for new customers, will the State decide you’re not really a contractor? Probably. At the very least, you’re going to have to prove you are an independent contractor to the Alaska Department of Labor. If Walker’s legislation passes, they’ll fine you first, ask questions later.
“Investigators will investigate as they always do and they will assess a penalty,” said Department of Labor Director of the Division of Workers Compensation Marie Marx to the House Labor and Commerce Committee on Wednesday. And if you don’t like the assessment, you can ask for a hearing, she said, calling it a more efficient way of doing business.
“We anticipate that fewer assessments will go toward hearings,” said Marx. She may be right — after all, independent contractors are awfully busy just trying to make a living.
Independent contractors in Alaska would be defined so narrowly by the Walker Administration that many would be relabeled as employees of other contractors, and would be required to be covered by the prime contractor’s workers compensation insurance. This is a move that is hostile to small businesses.
It’s all part of HB 79, a job-killing bill that passed out of House Labor and Commerce Committee yesterday over the objections of pro-business Republicans.
The bill, offered up by the Department of Labor Commissioner Heidi Drygas, impacts tens of thousands of Alaska workers who are trying to make a living in a state that has a rapidly shrinking economy. Over 7,500 jobs are forecasted to be lost this year in a state that already has the highest unemployment rate in the nation.
HB 79 says that if you are a contractor who uses independent subcontractors in your business, in all-too-many cases you would be forced to consider them employees and cover them by your insurance. But, that is not the half of it. Other benefits and payroll taxes would also be due, once the employer-employee relationship is established.
It’s a move that will sharply increase the cost of doing business and limit the free market.
In small Alaska communities, which is most of them, people work at various jobs to patch together a living. They may have a contractor’s license, but may do frequent work for a larger contractor who comes into town to do a job. They may have various contract arrangements. This is how Alaskans manage to keep going in small economies from Tok to Togiak, from Ketchikan to Kaktovik. It’s the way it’s been done in Alaska since, well, forever. And it favors the worker and the entrepreneur.
TRUCKERS HIT, BUT CONSULTANTS TOO
In House Labor and Commerce Committee, Aves Thompson, who represents the Alaska Truckers Association, explained to the committee that many truckers in Alaska get work by word of mouth. When they need a job, they don’t advertise, which is one of the check-box requirements of the Department of Labor as it evaluates whether you are truly a contractor.
“We dealt with this issue last year in a piece of legislation that was in fact introduced by Rep. [Gabrielle] LeDoux,” said Thompson. “We think this bill in principle is good — we just have a few difficulties with it in this independent contractor paragraph.”
Thompson said the bill was sprung on the business community this year. “We didn’t hear anything about it from anybody until the bill popped up in February, and they said ‘Here it is and here are the definitions.’
“We made contact with the department and started talking about it, and we give them credit, they made significant progress from original bill to the committee substitute.
“We felt that was progress,” he continued. “We again said we supported the bill in principle and there was some misunderstanding about what our level of support by our association was for this bill. I believe I tried to express my apology for that last Monday, for whatever part I played in making that error.”
Thompson was apologizing to the committee for the second time in a week.
But his apology wasn’t enough for Committee Chairman Sam Kito, a Juneau Democrat, who took after Thompson in front of the entire committee and dressed him down at length.
“I do think the department [of Labor] has done an admirable job of putting together and trying to accommodate the situation with the independent contractors. And I do think that efforts to try to delay the bill really are not appreciated,” Kito lectured Thompson.
Kito has been romantically linked to Commissioner Drygas, but sources in Juneau say that liaison is not current. He has never acknowledged the conflict of interest.
“So I would encourage you to work productively and constructively and provide statements that don’t misstate the position of the truckers, because on March 9 it seemed to be everything was OK, and now it’s not,” Kito said, jabbing at the air toward Thompson, who maintained a diplomatic silence during the rather unusual dressing-down.
The truckers aren’t the only ones who have trouble with the bill.
“It’s part of the broad theme of the Dept. of Labor being punitive toward employers,” said Rebecca Logan, president of the Alaska Support Industry Alliance.
“They are impacting wage payers. Instead of growing the pie of jobs, they’re trying to shrink the pie. They’re being punitive to employers by creating more policies so they can catch employers doing something wrong and fine them.” she said.
The business community — especially small business owners — use independent contractors and consultants (including professional consultants) to allow them to compete for jobs that are limited in time or that are very specific in scope. Many sole proprietors can only stay in business with the plug-and–play help of professional consultants who allow them to scale up their businesses as needed. This is especially the case in rural areas, but also relates to the North Slope oil patch. The independent subcontractors that these prime contractors use have their own business licenses and are fully accounted for in their transactions.
Colleen Sullivan-Leonard, a Republican from Wasilla, said she wanted the bill to be held until the identified problems were addressed.
But Chairman Kito refused: “I am interested in moving the bill today,” he said.
Rep. Louise Stutes, a Kodiak Republican who has thrown in her lot with the Democrat majority, agreed with Kito and said she was fine with the bill going forward, even though the business community objects: “This is year number three for me,” she said, of her years of experience. “And I’ve yet to see a perfect bill.”
Democrats Kito, Andy Josephson of Anchorage, Adam Wool of Fairbanks, and Democrat caucus member Stutes voted for HB 79, which now heads to the House Judiciary Committee, chaired by Democrat Matt Claman of Anchorage.
Rep. Chris Birch, R-Anchorage, Rep. Gary Knopp, R-Kenai, and Rep. Sullivan-Leonard, R-Wasilla were in the minority, voting against it. Their objections related to the punitive effect on small businesses and restricting economic freedoms.