HOUSE SPECIAL SESSION COMMITTEE ON

ECONOMIC GROWTH AND JOB DEVELOPMENT

 

September 5, 2002   Hearing Room 357

1:30 pm Tapes  5 - 6

 

MEMBERS PRESENT:             Rep. Jeff  Kropf, Chair

Rep. Alan Brown

Rep. Elaine Hopson

Rep. Al King

Rep. Kathy Lowe

 

MEMBER EXCUSED:

Rep. Tim Knopp

Rep. Greg Smith

 

STAFF PRESENT:                  Ray Kelly, Administrator

Nancy Massee, Administrative Support

 

 

MEASURE/ISSUES HEARD:         Paul Warner, Legislative Revenue Officer

                                                 Public Hearing HB 4072

 

These minutes are in compliance with Senate and House Rules.  Only text enclosed in quotation marks reports a speaker’s exact words.  For complete contents, please refer to the tapes.

 

TAPE/#

Speaker

Comments

TAPE 05, A

008

Chair Kropf

Opens meeting and explains the drafts of the bill won’t be ready until 2:30 p.m.  Recesses until then.

011

Chair Kropf

Reconvenes at 2:40 p.m.  Introduces informational testimony.  HB 4072 will not be heard today.

024

Rep. Alan Brown

Presents a business, LRI, that succeeded in a small Oregon town, Blachly, between Junction City and Florence.  Introduces Mr. Allen to describe his business.  (EXHIBIT A)

078

David Allen

President of L.R.I., Blachly, Oregon. Photon Micro-Light inventor.  Describes his product as the flashlight of the future.  Explains how his business grew. Describes how the construction of the lights was subcontracted to workers who were paid by the piece to work in their homes. Explains how the operation works well in their rural area. Says he considers them subcontractors. Explains that the Oregon Employment Department ruled that LRI was in violation of the law with the use of independent contractors.  They said that an employee cannot legally manufacture at home. (EXHIBIT B)

174

Chair Kropf

Oregon law precludes an employee from working in their home on behalf of their employer?

200

Chair Kropf

Asks where the complaints came from in 1999.

208

Allen

We were led to believe that an employee complained but it was later clarified that the complaint came from the Employment Department.

211

Rep. Hopson

Asks if the rules were in place prior to beginning of business.  Asks if there is a threshold of gross manufacturing earnings that cause new rules to be in force.

230

Allen

Responds yes. Says he is not aware that a new threshold of earnings put them in a different bracket.

230

Rep. King

Asks about patents.

240

Allen

Responds a design patent on the photon light and application patent on two new products.

243

Rep. King

Asks if the workers assemble products for other companies. Describes personal experience of a contractor defined as an employee because they did not work for anybody else.

255

Allen

Responds some do and some do not.  Discusses the workers’ choice of working for only one employer.

300

Rep. King

Explains how he informs his subcontractors that they need to work for more than one employer to comply with the law.

341

Fran Olson

Blachly resident. Describes subcontracting work from David Allen.

400

Alona Hartwig

Triangle Lake resident.  Describes work with David Allen’s business.

TAPE 6, A

060

Hartwig

Continues explaining loss of work in her home and how it affected her life.

115

Chair Kropf

Supports working in the home.

132

Renee Bryant

Employment Department attorney. Explains that someone violated a claim for unemployment benefits which initiated this action against LRI. Explains an audit was conducted and determined that the person was an employee rather than independent contractors.  The employment department requires that those working for LRI are subject to payroll tax. (EXHIBIT C)

229

Bryant

Describes the criteria in the statutes which describes independent contractors.  Describes independently established business.  In this case no individuals were found to be in that category.

 256

Chair Kropf

Reiterates.  Asks if the interpretation of the statute allows other kinds of assembly work from other employers.

292

Jayne Martin

Employment Department.  Discusses working for more than one employer.  Describes eight criteria.

194

Bryant

Clarifies Employment Department’s position. 

210

Bryant

There are a number of criteria in the statutes that describe independent contractors versus employees. 

241

Chair Kropf

Asks if the interpretation of the statute by the Employment Department is inflexible

300

Rep. Hopson

Asks about the eight criteria in statute and asks for a list of those not met by the business.

320

Bryant

Describes the hearing officer’s determination of LRI’s meeting of criteria.  Offers to get the hearing decision for Rep. Hopson.

320

Rep. King

Asks if the person was fired from LRI and would they be eligible for unemployment benefits.

345

Bryant

Answers she did not have knowledge of that.  It would depend on a number of factors.

390

Martin

Adds that an assembler who does other assembly work there are three more statutory criteria to meet.  Many of these assemblers did not meet any Section 8 criteria.

402

Bryant

Reads statute ORS 670.600 Direction and Control.

TAPE 5,B

042

Bryant

LRI failed to prove the legal requirements of subcontractors and the association was classified as an employer-employee relationship. The Employment Department does not distinguish between assembly and manufacturing processes. 

054

Chair Kropf

Asks if there are other issues such as OSHA issues. 

075

Bryant

Answers to her knowledge there were not.

109

Rep. Lowe

Asks for the statutory references in writing to which this case is referred.

130

Bryant

Responds that the department would have to refer to the Department of Justice.

142

Chair Kropf

Refers to Lars Larson newspaper article relating to this case. (EXHIBIT  )

240

David Allen

Discusses some of the rules that are too restrictive in his operation.

259

Rep. King

Asks if Workers Compensation has said that manufacturing cannot be done in the home.

308

Allen

Responds they were not told that.

310

Jim Welch

Oregon State Grange.  Supports David Allen in his business venture.  States that the statute is not relevant to today’s business in the rural area.  Asks to change statutes regarding independent contractor standards.  Statutes appear to be biased against special conditions.  Geographic location and the number of people needing this kind of work needs to be allowed.

390

Rep. Lowe

Asks what is public policy for listing criteria in the statute.  Asks if there were fines.

435

Allen

Responds that they have paid all fines but sent a letter saying they disagreed with the charges.

TAPE 6,B

010

Allen

Discusses differences in defining independent contractors. Emphasizes that he wishes to employ rural Oregonians rather than go to China for labor.

054

Bryant

Describes exclusions permitted by the federal government.  Public policy has to do with should there be more exclusions or fewer exclusions. 

094

Chair Kropf

Asks why the exclusions are there.

103

Bryant

Answers the Legislature determined the exclusions.

107

Welch

Discusses the employer-employee relationship chosen by the LRI workers as an independent contractor association.  Says it is up to the Legislature to make changes in the statute to be compatible with present workers opportunities.

127

Chair Kropf

Agrees there needs to be change.

140

Rep. Brown

Comments that the Employment Department is carrying out the statutes as created.  Suggests there is a need for change.

161

Rep. King

Discusses exceptions in the statutes. 

188

Chair Kropf

Asks the Employment Department if they have information to furnish subcontractors to assist in clarification.

210

Bryant

Responds they are working on this.

237

Martin

Discusses state law has to be in compliance with federal laws of employment and also with their definition of employee.

254

Jeff Osanka

Linn Community College (LCC) instructor, Eugene, Oregon.  Suggests public policy issues to be considered include certification of an independent contractor who applied for unemployment compensation and was denied. Suggests a certification process in place.

300

Chair Kropf

Reiterates that a carpenter was injured and when he made a workers compensation claim, he was asked to list his previous employment as an independent contractor with LRI. This caused his claim to be suspect. 

324

Rep. King

Says the employer is not in a position to determine an independent contractor. 

350

Rep. Lowe

Comments that there are many independent contractors in Oregon and suggests further exploring of the issues.

378

Chair Kropf

Adjourns at 4:25 p.m.

 

Submitted By,                        Reviewed By,

 

 

 

Nancy Massee                        Ray Kelly

Committee Asssistant                        Committee Administrator

 

 

EXHIBITS:

A – “Brainstorm NW” Article, Rep. Alan Brown, 1 p

B – Argument, Summary, Brochure, David Allen, 25 pp

C – Tax Hearing Decision, Staff, 15 pp