Workers' compensation is essential for Alaska's business climate and for safe working conditions. We are working on updating Alaska's workers' compensation system to make it more efficient, improving conditions for both workers and Alaska businesses.
It is important to remember that workers' compensation was created to treat on-the-job injuries quickly, fairly, and to help workers return to the workforce. Workers' compensation replaced a chaotic system in which some injured workers might sue their employers and win big payouts, while other injured workers got nothing. From both businesses' and workers' perspectives, it is far more efficient and economically productive to have a fair, transparent system that minimizes lawsuits and ensures on-the-job injuries are treated. Equally important, our workers' compensation system helps workers get back to work and support themselves after being injured on the job. It is always cheaper to help someone return to work or find other work than to provide public assistance the rest of their life.
Alaska businesses and policymakers have supported an updated workers' compensation system for many years, on a bipartisan basis. For example, under the leadership of former Rep. Kurt Olson, the state passed bipartisan legislation to empower the Medical Services Review Committee to reduce workers' compensation medical costs. It may sound tedious, but it is imperative to reduce medical costs for employers while preserving essential health care for injured workers.
This year, we are working to continue modernizing workers' compensation with House Bill 79. House Bill 79 reduces the maximum penalties employers pay for failing to maintain workers' compensation insurance, and also strives to ensure that penalties are more consistent. Unpredictability and lack of transparency is never good policy. House Bill 79 reduces business uncertainty while maintaining a strong disincentive for unsafe working conditions and uninsured occupational injuries.
House Bill 79 also provides important legal clarity about the definition of an "independent contractor." For decades, the distinction between "employees" and "independent contractors" has been decided by the Workers' Compensation Board and by the court system, based on complicated multifactor tests. House Bill 79 provides businesses and employees much-needed guidance about the definition of an independent contractor. Alaska has many bona fide independent contractors, and they play an important role in Alaska's workforce. However, the practice of misclassifying employees as independent contractors in an effort to evade workers' compensation costs should be discouraged through clear laws because it leaves workers exposed to on-the-job injuries without medical treatment and exposes businesses to financial devastation from responsibility for uninsured injuries. Finally, defining independent contractor status and reducing misclassification will contribute to lower workers' compensation premiums, saving money for Alaska businesses.
We have worked with businesses in crafting the definition of independent contractor, and multiple business organizations have expressed support for this legislation. One reason for this support is that it helps meet the governor's Alaska Hire goals. Too often, Alaska contractors have lost bids to Lower 48 companies who submit low bids on projects by misclassifying their construction employees as independent contractors. It is time for the state to support our law-abiding Alaska contractors, and provide a level playing field that discourages cheating by outside firms.
I am proud we are strengthening Alaska's workers' compensation system, and maintaining medical treatment for workers while improving our business climate. As our economy changes, we must modernize our laws as well. House Bill 79 is good for business and good for workers, and I look forward to continued collaboration with legislators on this bill.
Heidi Drygas is commissioner of the Alaska Department of Labor and Workforce Development. The department supports House Bill 79, Gov. Bill Walker's measure revising worker's compensation.
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