Approved: 3-14-07
Date
MINUTES OF THE SENATE COMMERCE COMMITTEE
The meeting was called to order by Chairperson Karin Brownlee at 8:00 A.M. on February 13, 2007 in Room 123-S of the Capitol.
All members were present except:
Roger Reitz- excused
Committee staff present:
Amy Deckard, Kansas Legislative Research Department
Kathie Sparks, Kansas Legislative Research Department
Norm Furse, Revisor of Statutes
Jackie Lunn, Committee Assistant
Conferees appearing before the committee:
Bob Totten, Public Affairs Director, Kansas Contractors Association
Corey Peterson, AGC
Allie Devine, Kansas Livestock Association
Chris Wilson, Kansas Building Industry Association
Dan Morgan, Builders Association & KC Chapter AGC
Tom Whitaker, Kansas Motor Carriers
Wayne Maichel, Department of Labor
Others attending:
See attached list.
SB 260-Prohibitions on employing or contracting with illegal aliens as part of a public contract for services
SB 292-Employment security law contractor liability for subcontractor payments
SB 235-Employment security law exclusions from definition of employment
Chairperson Brownlee introduced Kathie Sparks, Legislative Services to explain SB 260. Ms. Sparks presented written copy. (Attachment 1) Ms. Sparks stated SB 260 is based on a Colorado law which was passed last session. The bill would prohibit a state agency, a political subdivision, or a quasi-municipal or public corporation from entering into or renewing a public contract for services with a contractor who knowingly employs or contracts with an illegal alien to perform work under the contract or who contracts with a subcontractor who knowingly employs or contracts with an illegal alien to perform work under the contract.
Ms. Sparks then explained the contractor’s responsibilities and the Kansas Department of Labor’s responsibilities.
Questions from the Committee followed.
Chairperson Brownlee recognized Norm Furse, Revisor, to explain a balloon adding Section 3 to the bill regarding the collecting of any dues in the state from an illegal alien. (Attachment 2)
Chairperson Brownlee opened the hearing on SB 260 and announced there are not proponents for the bill. She introduced Bob Totten, Public Affairs director, Kansas Contractors Association to give his testimony as an opponent of SB 260. Mr. Totten presented written copy. (Attachment 3) Mr. Totten stated the Kansas Contractors Association has concerns with the bill and reviewed those concerns for the Committee. In closing he stated that they had a coalition of businesses working on language to be introduced in the House that addresses some of their concerns with the bill.
Chairperson Brownlee introduced Corey Peterson representing AGC to give his testimony as an opponent of SB 260. Mr. Peterson presented written copy. (Attachment 4) Mr. Peterson stated that AGC of Kansas finds many of the provisions of the bill to be unclear and based on how the bill may be interpreted, they are opposed. They do not condone the knowingly hiring of illegal immigrants, but SB 260 unfairly places a burden on employers to verify legal status of employees. In closing, Mr. Peterson stated that AGC is part of a coalition comprised of business-related associations and organizations that are currently working on alternative immigration language and they respectfully request that any action on the bill be delayed until the proposed language can be presented.
Chairperson Brownlee called the Committee’s attention to the written testimony of Marlee Carpenter, KCCI as an opponent of SB 260 (Attachment 5) and Melinda Lewis, El Centro, Inc., as a neutral party on SB 260. (Attachment 6)
Questions and discussion followed. Chairperson Brownlee recognized Allie Devine representing the Kansas Livestock Association to join the discussion. Ms. Devine presented the Committee with written documentation, “Employment Verification Systems–Where Are We and Where Are We Going?” (Attachment 7) Ms. Devine stated she is a member of the coalition drafting new language that would be fair for businesses and help address this problem. The discussion continued regarding I-9 forms and the rules and regulations to be followed by the employer. There was also discussion on the coalition working on this issue and their time frame.
Chairperson Brownlee closed the hearing on SB 260 and introduced Kathie Sparks to explain SB 292. Ms. Sparks stated the bill is an act concerning collections of employer payments under the employment security law; amending K.S.A. 2006 Supp. 44-717 and repealing the existing section.
Chairperson Brownlee opened the hearing on SB 292 and introduced Chris Wilson, Kansas Building Industry Association, to give her testimony as a proponent of SB 292. Ms. Wilson presented written testimony. (Attachment 8) Ms. Wilson stated a company should be liable for their own unemployment contributions, and another company should not be liable for them. It would be impossible for a general contractor to be knowledgeable about what employees a subcontractor had on his job, what hours they had worked, what the liability for unemployment taxes are for that company. In closing, she asked the Committee to pass the bill out favorably.
Chairperson Brownlee introduced Dan Morgan, Builders Association & Kansas City Chapter of AGC to give his testimony as a proponent of SB 292. Mr. Morgan presented written copy. (Attachment 9) Mr. Morgan stated that SB 292 would strike language from current law that holds a general or prime contractor directly liable for any unpaid unemployment contributions, penalties and interest due from subcontractors. They believe that it is unfair to hold one party liable because another party has failed to meet its own responsibilities and that all parties to a construction contract should be expected to meet their own responsibilities and each should be held liable if they fail to meet those responsibilities. In closing, he urged the Committee to support the bill.
Chairperson Brownlee introduced Corey Peterson representing AGC to give his testimony as a proponent of SB 292. Mr. Peterson presented written copy. (Attachment 10) Mr. Peterson stated the current law makes one company liable for actions of another company over which it has no control. A payment bond purchased by the subcontractor will relieve the contractor of this liability, but many subcontractors can not obtain such coverage. For those that can, the additional cost of construction will be passed along to the owner. In closing, he stated if this law has indeed proved to be an effective way of collecting unpaid unemployment taxes, AGC of Kansas questions why construction is being singled out and why this law does not apply to every contractor-subcontractor relationship.
Questions and discussion followed. Chairperson Brownlee called the Department of Labor into the discussion regarding the use of the existing law in collecting delinquent taxes.
Chairperson Brownlee called the Committee’s attention to the written only testimony of Martha Neu Smith representing the Kansas Manufactured Housing Association as a proponent of SB 292. (Attachment 11)
Chairperson Brownlee introduced Wayne Maichel, Director of Employment Security, Kansas Depart of Labor, to give his testimony as an opponent of SB 292. Mr. Maichel presented written copy. (Attachment 12)
Mr. Maichel stated the bill strikes language in the Employment Security Laws that provided the general contractors may be held responsible for the unpaid unemployment taxes for subcontractors. This statutory language has been a very effective tool of assuring that subcontractors operating in Kansas pay unemployment taxes owed by them. The agency rarely has to use this provision, but its mere existence provides a good insurance that the taxes are paid. In closing, he stated removing this language will make it easier for unscrupulous subcontractors to avoid paying their fair share of UI taxes.
Questions and discussion followed. The Department of Labor was asked if they had other tools to secure payment from subcontractors, the answer was “yes”.
Chairperson Brownlee closed the hearing on SB 292 and introduced Kathie Sparks, Legislative Services to explain SB 235. Ms. Sparks stated the bill clarifies that an owner-operator leased to a licensed motor carrier is not considered an employee under the provisions of the Employment Security Act.
Chairperson Brownlee opened the hearing on SB 235 and introduced Tom Whitaker representing the Kansas Motor Carriers Association, to give his testimony as a proponent of SB 235. Mr. Whitaker presented written copy. (Attachment 13) Mr. Whitaker stated that for more than 60 years, motor carriers have used independent owner-operators of trucks to supplement their fleets and this provides a source of revenue for these independent businesses. An owner-operator is an individual who owns and operates a truck and chooses to lease to a licensed motor carrier in return for a percentage of the revenue generated by the truck. These owner-operators are independent contractors. SB 235 narrowly defines that a motor carrier/owner-operator relationship is not an employer/employee relationship and continues the decades long practice of the trucking industry. He stated the Kansas Motor Carriers Association strongly supports the bill and would suggest an amendment. On Page 13, line 4, delete the words “any individual who is” and insert “service performed by”
Questions followed.
Chairperson Brownlee closed the hearing on SB 235.
Senator Jordan made a motion to add the amendment from the Kansas Motor Carriers Association to SB 235. Senator Schodorf seconded. Motion carried.
Senator Schodorf made a motion to pass SB 235 out favorably as amended. Senator Emler seconded. Motion carried.
Chairperson Brownlee called on Allie Devine, Kansas Livestock Association and requested a copy of the new language the coalition was working on regarding SB 260 as soon as it was available.
Chairperson Brownlee adjourned the meeting at 9:22 a.m. with the next scheduled meeting February 14th at 8:00 a.m. in room 123 S.