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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
AMENDED
wage rates; technical correction
(NOW:
labor organizations; fiduciary guidelines; definitions)
(NOW: labor benefits organizations; damages; definitions)
As passed the Senate, S.B. 1278 defined labor organization relating to prescribed fiduciary guidelines.
The House of Representatives adopted a strike-everything amendment that does the following:
Purpose
Allows an employee or employer that has suffered prescribed calculated damages to recover three times the calculated damages from a third-party benefits organization, with exceptions.
Background
Statute subjects a labor organization that collects benefit monies or union dues to similar fiduciary guidelines as required by employers or third-party administrators providing benefits to employees of Arizona, including all of the following: 1) the annual disclosure of certain information to its members and its members' employers under prescribed conditions; 2) the use of generally accepted accounting principles for a benefit plan; 3) the allowance of a member of the labor organization to obtain health and welfare, pension, vacation, sick or holiday benefits of the member's choosing instead of the benefits offered by the labor organization; 4) the requirement that any fringe benefit contribution that a union receives and that is in excess of the costs that the union incurs with respect to that fringe benefit to either be refunded to the employee or deposited into a defined contribution plan on the employee's behalf within 75 days after the end of the year; 5) the prohibition on accepting dues or benefits contributions for employees that have not voluntarily joined the labor organization; and 6) the prohibition on considering an individual to be a member of a labor organization without the individual's affirmative consent.
The prescribed fiduciary guidelines apply to any labor organization that is collecting benefit monies or union dues on behalf of residents of Arizona or an employer that is domiciled within Arizona. The fiduciary guidelines do not apply to labor organizations for employees working for the state, a political subdivision or the federal government (A.R.S. § 23-1421).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Repeals the outlined requirements relating to fiduciary guidelines for labor organizations.
2. Allows an employee who has suffered calculated damages to recover three times the calculated damages from a third-party benefits organization for the cost of benefits paid by the employee.
3. Allows an employer that has suffered calculated damages to recover three times the calculated damages from a third-party benefits organization that paid for the cost of employee benefits.
4. Prescribes the calculated damages to be:
a) for health, pension or vacation or sick leave benefits, any monies paid by or for the employee during a 12-month period that is more than 120 percent of the cost of equivalent health, pension or vacation or sick leave benefits;
b) for training benefits, any monies paid by the employer or employee in excess of 120 percent of any reasonable training costs incurred during a 12-month period for the specific benefit of the employee's job skill; and
c) for any other benefit, any monies paid by the employer or employee in excess of $1,000 during a 12-month period where no direct benefit can be attributed to the employee.
5. Allows a plaintiff to show equivalency for health, pension or vacation or sick leave benefits by to submitting a mathematical or actuarial data analysis that demonstrates that the employee would have received at least 95 percent of the same value from a product available through the employer or on the general marker.
6. Allows an employee to recover calculated damages attributable to monies paid by the employee's employer for that employee if:
a) the employee sends a certified letter to the employer's statutory agent in Arizona that advises the employer that the employee intends to pursue such a claim unless the employer objects within 90 days; and
b) the employer does not object.
7. Specifies that an employer's failure to object in writing within 90 days constitutes a waiver of the employer's right to recover calculated damages to the extent of the employee's recovery.
8. States
that a third-party benefits organization is not liable for calculated damages
if the
third-party benefits organization satisfies all of the following:
a) provides a reconciliation to its member employees through U.S. mail or email that would reasonably allow an employee to determine the costs and expenses of the benefits;
b) allows an employee to opt out of any health, pension or vacation or sick leave benefits and choose benefits from the employee's employer, if the employer agrees and withholds payment to the third-party benefits organization for that particular benefits category, or benefits outside the employment relationship, if the employer withholds payment to the third-party benefits organization for that particular benefit category and forwards the monies to the employee; and
c) eliminates any penalty for an employee or employer to terminate the relationship with the third-party benefits organization, including liability for any benefits that are actuarily underfunded.
9. Requires the reconciliation to be listed by benefit for a 12-month period and provide the following:
a) the specific rates charged to the employee and employer;
b) the direct expense rates charged to the plan by third-party insurers and plan providers;
c) the total number of employees, including hours and revenue collected in Arizona and nationally;
d) the total direct claims expenses or payments to beneficiaries, if any, in Arizona and nationally;
e) a list of total payments made to any third-party insurers or plan providers in Arizona and nationally;
f) a list of all administrative or other expenses not listed incurred in Arizona and nationally; and
g) a list that summarizes the difference between all of the listed revenues and expenses in Arizona and nationally in total dollars and as a percentage of revenue.
10. Allows a claim for calculated damages to be brought against a third-party benefits organization in superior court or any other appropriate venue.
11. Requires the court to award a plaintiff any calculated damages that the plaintiff has suffered along with any other relief to which the plaintiff may be entitled.
12. Specifies that the requirements relating to recovery of calculated damages:
a) provides the exclusive remedy for a violation relating to calculated damages; and
b) does not create a cause of action between the employee and employer.
13. Applies the requirements relating to recovery of calculated damages to any third-party benefits organization that establishes or negotiates the rates or collects monies for employee benefits on behalf of an Arizona resident or an employer that is located in Arizona.
14. Specifies that actions for calculated damages must be brought within four years after the cause of action accrues.
15. Specifies that the requirements relating to recovery of calculated damages do not apply to any of the following:
a) an insurer, insurance agent or investment management firm;
b) a third-party administrator performing a purely administrative role; and
c) an employee who is employed by the federal government or a political subdivision of Arizona.
16. Defines benefits as monies paid by an employee or employer to a third-party benefits organization for the benefit of the employee and to include health, pension, training or vacation or sick leave benefits or other benefits.
17. Excludes, from the definition of benefits, labor organization membership dues.
18. Defines third-party benefits organization as:
a) any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment or other conditions of employment; and
b) any Taft-Hartley Trust, other fund or entity used to administer any benefit required by a labor agreement adopted by a third-party benefits organization.
19. Contains a severability clause.
20. Becomes effective on the general effective date.
Amendments Adopted by the House of Representatives
· Adopted the strike-everything amendment relating to labor benefits organizations and recovery of calculated damages.
House Action
COM 3/22/22 DPA/SE 6-3-0-1
3rd Read 4/27/22 31-27-2
Prepared by Senate Research
April 27, 2022
JT/sr