[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
H.R. 1329, RECREATIONAL MARINE EMPLOYMENT ACT OF 2003
=======================================================================
HEARING
before the
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
of the
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
July 15, 2004
__________
Serial No. 108-69
__________
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
or
Committee address: http://edworkforce.house.gov
________
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COMMITTEE ON EDUCATION AND THE WORKFORCE
JOHN A. BOEHNER, Ohio, Chairman
Thomas E. Petri, Wisconsin, Vice George Miller, California
Chairman Dale E. Kildee, Michigan
Cass Ballenger, North Carolina Major R. Owens, New York
Peter Hoekstra, Michigan Donald M. Payne, New Jersey
Howard P. ``Buck'' McKeon, Robert E. Andrews, New Jersey
California Lynn C. Woolsey, California
Michael N. Castle, Delaware Ruben Hinojosa, Texas
Sam Johnson, Texas Carolyn McCarthy, New York
James C. Greenwood, Pennsylvania John F. Tierney, Massachusetts
Charlie Norwood, Georgia Ron Kind, Wisconsin
Fred Upton, Michigan Dennis J. Kucinich, Ohio
Vernon J. Ehlers, Michigan David Wu, Oregon
Jim DeMint, South Carolina Rush D. Holt, New Jersey
Johnny Isakson, Georgia Susan A. Davis, California
Judy Biggert, Illinois Betty McCollum, Minnesota
Todd Russell Platts, Pennsylvania Danny K. Davis, Illinois
Patrick J. Tiberi, Ohio Ed Case, Hawaii
Ric Keller, Florida Raul M. Grijalva, Arizona
Tom Osborne, Nebraska Denise L. Majette, Georgia
Joe Wilson, South Carolina Chris Van Hollen, Maryland
Tom Cole, Oklahoma Tim Ryan, Ohio
Jon C. Porter, Nevada Timothy H. Bishop, New York
John Kline, Minnesota
John R. Carter, Texas
Marilyn N. Musgrave, Colorado
Marsha Blackburn, Tennessee
Phil Gingrey, Georgia
Max Burns, Georgia
Paula Nowakowski, Staff Director
John Lawrence, Minority Staff Director
------
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
CHARLIE NORWOOD, Georgia, Chairman
Judy Biggert, Illinois, Vice Major R. Owens, New York
Chairman Dennis J. Kucinich, Ohio
Cass Ballenger, North Carolina Lynn C. Woolsey, California
Peter Hoekstra, Michigan Denise L. Majette, Georgia
Johnny Isakson, Georgia Donald M. Payne, New Jersey
Ric Keller, Florida Timothy H. Bishop, New York
John Kline, Minnesota George Miller, California, ex
Marsha Blackburn, Tennessee officio
John A. Boehner, Ohio, ex officio
C O N T E N T S
----------
Page
Hearing held on July 15, 2004.................................... 1
Statement of Members:
Biggert, Hon. Judy, Vice-Chairman, Subcommittee on Workforce
Protections, Committee on Education and the Workforce...... 2
Prepared statement of.................................... 2
Keller, Hon. Ric, a Representative in Congress from the State
of Florida................................................. 3
Prepared statement of.................................... 4
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio, prepared statement of................... 33
Owens, Hon. Major R., Ranking Member, Subcommittee on
Workforce Protections, Committee on Education and the
Workforce.................................................. 6
Statement of Witnesses:
Greenway, Ian R., LIG Managers, Inc., St. Petersburg, FL,.... 21
Prepared statement of.................................... 22
Hebert, Kristina, Vice President of Operations, Ward's Marine
Electric, Inc., Ft. Lauderdale, FL......................... 7
Prepared statement of.................................... 10
McGarrah, Robert E., Jr., Coordinator for Workers'
Compensation, AFL-CIO, Washington, DC...................... 16
Prepared statement of.................................... 17
Nelson, Larry, Vice President, Administration, Westport
Shipyard, Inc., Westport, WA............................... 12
Prepared statement of.................................... 13
H.R. 1329, RECREATIONAL MARINE EMPLOYMENT ACT OF 2003
----------
Thursday, July 15, 2004
U.S. House of Representatives
Subcommittee on Workforce Protections
Committee on Education and the Workforce
Washington, DC
----------
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room 2175, Rayburn House Office Building, Hon. Judy Biggert
[Vice-Chairman of the Subcommittee] presiding.
Present: Representatives Biggert, Keller, Kline, Owens, and
Payne.
Ex officio present: Representative Miller.
Staff Present: Stacey Dion, Professional Staff Member;
Kevin Frank, Professional Staff Member; Danielle English,
Professional Staff Member; Ed Gilroy, Director of Workforce
Policy; Richard Hoar, Staff Assistant; Don McIntosh, Staff
Assistant; Molly McLaughlin Salmi, Deputy Director of Workforce
Policy; Deborah L. Samantar, Committee Clerk/Intern
Coordinator; Kevin Smith, Communications Advisor; Jo-Marie St.
Martin, General Counsel; Jody Calemine, Minority Counsel
Employer-Employee Relations; Margo Hennigan, Minority
Legislative Assistant; John Lawrence, Minority Staff Director;
Marsha Renwanz, Minority Legislative Associate; Peter Rutledge,
Minority Senior Legislative Associate/Labor; and Mark
Zuckerman, Minority General Counsel.
Vice-Chairman Biggert. Good morning. The Subcommittee on
Workforce Protections of the Committee on Education and the
Workforce will come to order.
We are meeting here today to hear testimony on H.R. 1329,
the Recreational Marine Employment Act of 2003. Under Committee
rule 12(b), opening statements are limited to the Chairman and
Ranking Minority Member of the Subcommittee. Therefore, if
other Members have statements they may be included in the
hearing record. I ask for unanimous consent for the hearing to
remain open for 14-days to allow Members statements and other
extraneous materials referenced during the hearing to be
submitted in the official hearing record. Without objection, so
ordered.
STATEMENT OF HON. JUDY BIGGERT, VICE-CHAIRMAN, SUBCOMMITTEE ON
WORKFORCE PROTECTIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE
The focus of today's hearing is H.R. 1329, the Recreational
Marine Employment Act of 2003, a bill introduced by our
colleague on the Subcommittee, Representative Keller. The bill
will amend the Longshore and Harbor Workers' Compensation Act
to exempt the Recreational Marine Industry from coverage under
the Act.
The last time Congress addressed Longshore and Harbor
Workers' Compensation was 1984. At that time, Congress
determined that the individuals who build and service vessels
65 feet and under should not be covered by Longshore coverage,
but protected under their State workers' compensation plan.
In the 20 years since Congress last addressed this issue,
the recreational industry has changed dramatically. Americans
want everything larger, from their vehicles to fast food and
boats are no exception. Today, we ask, what was the size
limitation that was placed in statute over 20 years ago, and
appropriate to continue to allow the recreational industry to
grow and compete.
The practical impact of this limitation has been for
thousands of jobs to be lost to other countries because of the
increased costs of doing business here at home.
Our witnesses today will share their perspectives on the
economic conditions of the industry today. I would like to
thank them for taking time out of their busy schedule to
provide the Subcommittee members with their expertise and
opinions on the legislation.
And I will yield the remainder of my time to my colleague
from Florida, and the sponsor of H.R. 1329, Mr. Keller.
[The prepared statement of Vice-Chairman Biggert follows:]
Statement of Hon. Judy Biggert, Vice-Chairman, Subcommittee on
Workforce Protections, Committee on Education and the Workforce
The focus of today's hearing is H.R. 1329, the ``Recreational
Marine Employment Act of 2003,'' a bill introduced by our colleague on
the Subcommittee, Representative Keller. The bill would amend the
Longshore and Harbor Workers' Compensation Act to exempt the
recreational marine industry from coverage under the Act.
The last time Congress addressed Longshore and Harbor Workers'
Compensation was 1984. At that time, Congress determined that the
individuals that build and service vessels 65 feet and under should not
be covered by Longshore coverage but protected under their state
workers' compensation plan. In the 20 years since Congress last
addressed this issue the recreational industry has changed
dramatically.
Americans want everything larger now--from their vehicles to fast
food, and boats are no exception. Today we ask, was the size limitation
that was placed in statute over 20 years ago an appropriate to continue
to allow the recreational industry to grow and compete? The practical
impact of this limitation has been for thousands of jobs to be lost to
other countries because of the increased cost of doing business here at
home.
Our witnesses here today will share their perspectives on the
economic condition of the industry today. I would like to thank them
for taking time out of their busy schedules to provide the Subcommittee
members with their expertise and opinions on the legislation.
At this time, I would like to turn over my remaining time to the
sponsor of the legislation and my good friend from Florida, Mr. Keller.
______
STATEMENT OF HON. RIC KELLER, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF FLORIDA
Mr. Keller. Well, thank you, Madam Chairman. And I want to
especially thank our witnesses for being here today, two of
whom, I see, are fellow Floridians. Welcome to all of you.
Let me begin by telling you the story of how I became
interested in creating thousands of jobs in the recreational
marine industry. A group of folks who work in the recreational
marine industry in Florida came to my Orlando office. One built
recreational boats. Another repaired recreational boats. And a
third ran a marina. They all had something in common. All of
them operated small, family owned businesses. All of them
wanted to hire more employees, and expand their businesses. And
all of them had one problem. That is, all of them were forced
to pay unnecessary and exorbitant insurance premiums under the
Longshore and Harbor Workers' Compensation Act.
Specifically, I learned that while workers in the
recreational marine industry should be covered under the State
workers' compensation laws, these employers, because of the
legal technicality, were being forced to pay for Longshore
insurance, which was three times more expensive than workers'
compensation insurance in Florida. They showed me a recent
survey, which indicated that employers in the recreational
marine industry would save an average of $99,000 per year if
they were exempt from the Longshore Act, and that 95 percent of
those employers said they would use the savings to create
additional jobs. They told me that many jobs were being
outsourced to the Bahamas, Canada and China, where their
competitors didn't have to pay the Longshore insurance.
I told them that this was unacceptable, and I decided to
file the Recreational Marine Employment Act. To put this
hearing in perspective, let me briefly walk-through history of
the Longshore Act. The Longshore Act was created by Congress in
1927 to cover workers in the commercial ship industry who
became injured while working upon navigable waters.
Specifically, it covered Longshoremen, that is people who load
and unload cargo from commercial ships, and it covered workers
who build or repaired ships.
In 1972, the Longshore Act was amended to extend coverage
beyond those folks working upon navigable waters, to also
include those individuals working on dry land, such as people
working on a pier, or a dry dock.
In 1984, the Longshore Act was once again amended so that
individuals who built or worked on boats that were under 65
feet long, would be covered by State workers' compensation
laws, and not Longshore insurance.
This amendment was a positive development. It had the
practical effect of exempting virtually all of the recreational
marine industry from Longshore insurance. How? Because back in
1984, recreational boats over 65 feet were almost unheard of.
Today, however, 20 years later, there are over 250,000
recreational boats that are 65 feet in length or longer. And my
bill will provide a common sense update that will create jobs,
and bring this law into the 21st-century. Now, and in the
interest of straight talk, let me squarely address questions I
have heard about this legislation.
First, will workers exempted from Longshore coverage be
worse off? No. The truth is that State workers' compensation
laws provide excellent coverage for workers in the recreational
marine industry. For example, under the Longshore Act, if you
are injured you would receive 66 2/3 percent of your salary.
Under State workers' compensation laws, you receive that much
or better in 48 out of 50 states. In fact, in many states, the
benefits are far more generous under State workers'
compensation. For example, in Iowa, if you were injured, under
workers' compensation, you would receive 80 percent of your
salary and a maximum weekly payment of $1,133. In contrast,
under the Longshore Act, you would receive a mere 66 two-thirds
percent of your salary and a maximum weekly amount of only
$1,030.
The second question I have heard is whether people who work
on recreational boats should have the same insurance as people
who work on commercial ships? The answer is ``no,'' because the
risks are dramatically different.
For example, commercial ships are built using plate steel
and welding, and assembly can be extremely dangerous. In
contrast, most recreational boats are made using fiberglass
shells and even OSHA recognized that the assembly process is
just as safe as the one used to built cars or light trucks.
Indeed, the OSHA statistics I've seen indicate that you were
three times more likely to be injured while building a
commercial ship than working on a recreational boat.
Moreover, with regard to recreational boats, the same OSHA
statistics showed that it's no more hazardous to build a
recreational boat of more than 65 feet, then it is to build one
less than 65 feet.
For these reasons, and many others, my bill has many
Democrat co-sponsors, including Martin Frost, Jim Davis, Rob
Andrews and Norm Dix.
In summary, the Recreational Marine Employment Act is the
first update of the Longshore Act in 20 years. It's about jobs.
It's about common sense. And it's about time.
Madam Chairman, I yield back the balance of my time.
[The prepared statement of Mr. Keller follows:]
Statement of Hon. Ric Keller, a Representative in Congress from the
State of Florida
Thank you, madam chairman. And I want to especially thank our
witnesses for being here today, two of whom are fellow Floridians.
Welcome to all of you.
Let me begin by telling you the story of how I became interested in
creating thousands of jobs in the recreational marine industry. A group
of folks who work in the recreational marine industry in Florida came
to my Orlando office. One built recreational boats. Another repaired
recreational boats. And a third ran a marina. They all had something in
common. All of them operated small, family owned businesses. All of
them wanted to hire more employees, and expand their businesses. And
all of them had one problem. That is, all of them were forced to pay
unnecessary and exorbitant insurance premiums under the Longshore and
Harbor Workers Compensation Act.
Specifically, I learned that while workers in the recreational
marine industry should be covered under the state workers compensation
laws, these employers, because of a legal technicality, were being
forced to pay for longshore insurance, which was three times more
expensive than workers compensation insurance in Florida.
They showed me a recent survey which indicated that employers in
the recreational marine industry would save an average of $99,000 per
year if they were exempt from the Longshore Act, and that 95% of those
employers said they would use the savings to create additional jobs.
They told me that many jobs were being outsourced to the Bahamas,
Canada and China, where their competitors didn't have to pay the
longshore insurance.
I told them that this was unacceptable, and I decided to file the
Recreational Marine Employment Act.
To put this hearing in perspective, let me briefly walk through a
history of the Longshore Act. The Longshore Act was created by Congress
in 1927 to cover workers in the commercial ship industry who became
injured while working upon navigable waters. Specifically, it covered
longshoreman, that is people who load and unload cargo from commercial
ships, and it covered workers who built or repaired ships.
In 1972, the Longshore Act was amended to extend coverage beyond
those folks working upon navigable waters, to also include those
individuals working on dry land, such as people working on a pier, or a
dry dock.
In 1984, the Longshore Act was once again amended so that
individuals who built or worked on boats that were under 65 feet long,
would be covered by state workers' compensation laws, and not longshore
insurance.
This amendment was a positive development. It had the practical
effect of exempting virtually all of the recreational marine industry
from longshore insurance. How? Because back in 1984, recreational boats
over 65 feet were almost unheard of. Today, however, twenty years
later, there are over 250,000 recreational boats that are 65 feet in
length or longer. And my bill will provide a commonsense update that
will create jobs, and bring this law into the 21st century.
Now, in the interest of straight talk, let me squarely address two
questions I've heard about this legislation.
First, will workers exempted from longshore coverage be worse off?
No. The truth is that state workers compensation laws provide excellent
coverage for workers in the recreational marine industry. For example,
under the Longshore Act, if you were injured you would receive 66 and
two-thirds percent of your salary. Under state workers compensation
laws, you would receive that much or better in 48 out of 50 states. In
fact, in many states, the benefits are far more generous under state
workers' compensation. For example, in Iowa, if you were injured, under
workers compensation, you would receive 80% of your salary and a
maximum weekly payment of $1,133. In contrast, under the Longshore Act,
you would receive a mere 66 and two-thirds percent of your salary and a
maximum weekly amount of only $1,030.
The second question I've heard is whether people who work on
recreational boats should have the same insurance as people who work on
commercial ships? The answer is ``no'', because the risks are
dramatically different.
For example, commercial ships are built using plate steel and
welding, and the assembly can be extremely dangerous. In contrast, most
recreational boats are made using fiberglass shells and even OSHA
recognized that the assembly process is just as safe as the one used to
build cars or light trucks. Indeed, the OSHA statistics I've seen
indicate that you were three times more likely to be injured while
building a commercial ship than working on a recreational boat.
Moreover, with regard to recreational boats, these same OSHA stats
show that it's no more hazardous to build a recreational boat of more
than 65 feet, than it is to build one less than 65 feet.
For these reasons, my bill has many Democrat co-sponsors, including
Martin Frost, Jim Davis and Rob Andrews.
In summary, the Recreational Marine Employment Act is the first
update of the Longshore Act in 20 years. It's about creating jobs. It's
about common sense. And it's about time.
I yield back the balance of my time.
______
Vice-Chairman Biggert. Thank you very much.
Before I proceed, I would like to extend a warm welcome to
the Ranking Member of the Full Committee, Congressman George
Miller, who has joined us today. Mr. Miller has had a long
interest, long-standing interest, in this program, and direct
involvement with the last amendments to the program in 1984. So
we're very pleased to have you with us today. Thank you.
And with that, I will yield to the distinguished Ranking
Minority Member from New York, Mr. Owens, for whatever opening
statement he may wish to make.
STATEMENT OF HON. MAJOR R. OWENS, RANKING MEMBER, SUBCOMMITTEE
ON WORKFORCE PROTECTIONS, COMMITTEE ON EDUCATION AND THE
WORKFORCE
Mr. Owens. Thank you very much.
Madam Chairman, I would like to note that my staff has
checked yachttraders.com on the Web, and found that used boats
of 70 feet and longer are being sold for $900,000 and much
more. This is not the ``Mom and Pop'' recreational scenario
which has just been presented by my colleague, Mr. Keller.
People are willing to pay more for boats, they want bigger
boats, why do they want cheaper insurance?
Madam Chairman, I understand that the purpose of today's
vital hearing is to examine the potential consequences of H.R.
1329, which has been introduced by Mr. Keller, to amend the
Longshore and Harbor Workers' Compensation Act.
Let me make it very clear, at the outset, this hearing
should also recognize the Longshore Act as a very important
public law. By providing essential medical benefits,
rehabilitation services, and compensation for lost wages, the
Act ensures a vital safety net for maritime workers, when
injured or killed on-the-job. The Longshore, Harbor, and other
maritime workers covered by this Act are carrying out difficult
and often very dangerous jobs. These workers and their families
have more than earned the right to these hard-won protections.
A brief legislative history of the Longshore and Harbor
Workers' Compensation Act is also important to note for the
record. When first enacted in 1927, this Act covered those
working on or in navigable waters, beyond the jurisdiction of
State workers' compensation laws. Amendments in 1972 extend
coverage to those working shore side to load, unload, repair,
and build vessels. As a result, marinas and boatyards were
required to buy Longshore insurance for their workers.
Subsequently in 1984, a compromise package of amendments was
ably crafted and enacted to exempt much of the marine
recreational industry from the Act.
Let me repeat that for the record. The 1984 amendments
exempted most of the marine recreational industry from the Act.
The benefits of those negotiations and the way in which
that compromise was worked out, is not available to us in a
brief hearing like this. We will not have a chance to look at
and examine the nature of that compromise today.
It is my understanding that the bill introduced by
Representative Keller seeks to undo the 1984 compromise. I
would be strongly opposed to any effort to use this hearing as
a mechanism for putting longshore and workers' compensation
benefits on the chopping block.
Madam Chairman, I look forward to hearing from the
witnesses.
Vice-Chairman Biggert. The gentleman yields back.
We don't usually have other Members make opening
statements, but if the ranking member would care to?
Mr. Miller. No.
Vice-Chairman Biggert. Fine. OK. Thank you.
With that, we will begin our panel of distinguished guests.
Our first witness today is Ms. Kristina Hebert?
Ms. Hebert. Hebert.
Vice-Chairman Biggert. Hebert. Ms. Hebert is Vice President
of Operations, Ward's Marine Electric Company, a family
business operating for over 54 years, with 42 employees that
provide mobile dockside service, engineering, engraving and
design services, and the distribution of marine electric
equipment.
Ms. Hebert is also Vice President of the Marine Industries
Association of South Florida representing over 800 marine-
related businesses, and over 180,000 jobs.
Next, is Mr. Larry Nelson. Mr. Nelson has worked for
Westport Shipyard for 22 years. Under his tenure the company
has grown from 38 employees who build boats for the salmon
industry to its current size of over 600 employees, who
construct large recreational motor yachts. Westport Shipyard is
recognized as the top builder in the U.S., and one of the top
15 worldwide.
Next on our panel is Mr. Robert McGarrah. Mr. McGarrah has
been Coordinator for Workers' Compensation for AFL-CIO since
2002, where he works on all national and state programs to
compensate injured workers, ranging from Homeland Security to
State Workers' Compensation. He previously worked for AFL-CIO's
President, John Sweeney, on health-care, contingent labor and
election reform issues.
Finally, we will hear from Mr. Ian Greenway. Mr. Greenway
is President and owner of LIG Marine Managers in St.
Petersburg, Florida. Prior to his starting his own company, Mr.
Greenway was a broker with Lloyd's of London for 25 years. He
is the author of several publications, including Navigating
Marine Insurance, and the second edition of Navigating Marine
Workers' Compensation 2000.
Before our witnesses begin their testimony, I would like to
remind the Members that we will ask questions after the entire
panel has testified. In addition, Committee Rule 2 imposes a 5-
minute limit on all questions.
And then, we will have lights for you, the witnesses, and
allocate 5 minutes. If you don't get to all of your testimony,
don't worry about it, I am sure that we will in the questions.
And so with that, we will begin with Ms. Hebert. You are
recognized for 5 minutes.
STATEMENT OF KRISTINA HEBERT, VICE PRESIDENT OF OPERATIONS,
WARD'S MARINE ELECTRIC, INC. FORT LAUDERDALE, FL
Ms. Hebert. Good morning. Madam Chairperson, and Ranking
Member Owens, thank you for giving me this opportunity. As
mentioned, my name is Kristina Hebert. I am Vice President of
Operations of my family's business, Ward's Marine Electric,
Inc. We have been in business for 54 years. My grandfather
started it and still comes to work about three times a week.
I stand before you today to ask that the recreational
marine industry be removed from the Longshore and Harbor
Workers' Compensation Act requirements, by extending the
current exceptions for boats under 65 feet to encompass the
entire universe of recreational boats.
Much of what I will describe for you today, regarding how
work is performed and the risks that our employees face each
today, is no different than what is faced by skilled craftsmen
performing work in similar non-marine highly skilled trades.
For example, most boats are hauled out of the water when repair
work is being done at a recreational marine facility. Travel
lifts are used to simply pick up the boat and move it inside a
shed, or further inland into a tent or shed. In some cases work
is performed on a boat behind an owners' house. And finally,
work is also performed at a marina where minor repairs and
estimates are given.
Because our workers are not subject to the kinds of hazards
found in commercial environments, such as a bustling commercial
port or shipyard, it is appropriate and necessary that the
recreational marine industry remain under the jurisdiction of
State workers' compensation and be excluded entirely from the
Longshore and Harbor Workers' Compensation Act.
This low risk environment can be further demonstrated by
the amount and severity of injuries faced by our workers. At
Ward's Marine Electric we have a claims/loss ratio for workers'
compensation injuries that have been averaging less than 2
percent for the last 5 years. We pride ourselves on providing
excellent training in a safe working environment for workers,
which is demonstrated by our low accident rate. We strongly
believe we can provide quality injury insurance for our
employees by only purchasing State workers' compensation. We
understand the necessity of Longshore insurance to protect
Longshoremen, harbor workers and stevedores, along with others
in the commercial shipbuilding and shipping repair segment of
the industry.
However, it is important to understand that workers in the
recreational marine industry are not exposed and do not
encounter the same hazardous environments or the severity of
injuries as those who work in commercial merchant ships and
ports and shipyard. State workers' compensation is sufficient
for industries, and as mentioned by Congressman Keller, in some
instances, is more financially beneficial to the worker. The
logic of removing the recreational marine employee from
mandatory Longshore coverage is demonstrated by the minimal
number of claims. For the recreational marine industry,
Longshore coverage is duplicative and unnecessary. Our
employees' claims can be adequately covered by state insurance
coverage.
It is also important to note that the recreational marine
industry is growing as the sizes of recreational vessels grow.
The trend in growth of the typical vessel size has continued
over the past 20 years. In 2003, the most stable segment of the
industry, with an astonishing 11 percent growth rate, was the
boats over 150 feet. For us at Ward's, where we choose to
follow the law and provide coverage--proof of coverage for our
workers, we must provide coverage for every marine facility in
the county.
This is not to say that only boats over 65 feet are our
community. It is just because boats over 65 feet have visited
our community and all of our facilities. Once a marina or
boatyard accommodates a boat over 65 feet, then all workers are
subject to longshore exposure and must purchase the coverage or
risk operating illegally. Unless the footage exemption was
large enough to encompass every recreational boat built in the
United States, these circumstances would not change.
Today the playing field is not level. We bill our skilled
workforce at $75 an hour, subtract an employees hourly pay, and
of the remainder, $54 is contributed per $100 of payroll, to
cover the Longshore premium. Given we cannot raise our labor
rate if we want to remain competitive in the marketplace, we
make very little profit on our workers who are engaged in
servicing boats over 65 feet.
Further, if a company works on these larger boats, it
cannot obtain State workers' compensation in the marine
industry without Longshore insurance. For many of then, the
choices is to purchase both State workers' compensation and
Longshore, or purchase neither. I am sorry to say that faced
with that choice, some are providing no coverage for their
workers. However, if they had the option of providing only
State workers' compensation, I would believe businesses would
rush to provide coverage for their workers.
Due to the high cost of purchasing Longshore insurance
premiums, businesses like ours have experienced negative
consequences in competing for business. Boat owners often like
to make one ``port-of-call`` and use one facility for all of
their repairs. According to recent study in Broward County,
Florida, 1400 boats not based in the county visit the area.
Thirteen hundred of those will have work done in a boatyard
with an average bill of$140,000. These ``out-of- town'' boaters
are important to the growth the recreational marine industry,
and the servicing of such boats is a critical revenue and
employment base for many states in the country.
Unfortunately, particularly in coastal states like Florida,
this business is rapidly going overseas. In the case of
Florida, and much of the Southeast, many boat owners are
choosing to have work done in the Bahamas or the Caribbean.
Service costs in the Caribbean and the Bahamas are lower. One
of the main reasons is that employers there do not have to pay
the extremely high cost of Longshore coverage and therefore can
outbid American businesses. As an international parts
distributor, Ward's Marine Electric is able to gauge the
workloads of all of the ports of call because of the parts
orders we receive.
While we are able to profit from the sale of equipment, the
boat in industry and community suffer as a whole. Like most
firms in the marine service industry, our company is a small
business. If we want to remain competitive in the recreational
marine industry, which includes a large percentage of boats
over 65 feet the law requires us to purchase the insurance. It
is a challenge of Ward's Marine Electric to compete due to the
inability to provide competitive labor rates for those who do
not purchase the coverage.
Let me conclude by saying that if the recreational marine
industry was removed from Longshore and Harbor Workers
Compensation Act requirements, employers like myself, Ward's
Marine Electric would save $200,000 a year. This money could
instead be used to expand our services, increase our employees'
wages, and hire more skilled workers. It would be a win-win for
employers and employees alike. In order for the industry to
prosper and grow, we ask for your support in expanding the
exception of boats under 65 feet to encompass the entire
universe of recreational boats. The recreational marine
industry needs relief from this burdensome, costly and
duplicative coverage.
Thank you, Members of the Committee, for bringing to this
public forum an issue that is critical to our industry.
[The prepared statement of Ms. Hebert follows:]
Statement of Kristina Hebert, Vice President of Operations, Ward's
Marine Electric, Inc., Ft. Lauderdale, FL
Introduction
Good morning, Chairman Norwood, ranking member Owens and Committee
Members. Thank you for providing me with the opportunity to represent
small recreational marine businesses and to testify before your
Committee. My name is Kristina Hebert and I am Vice President of
Operations and 3rd generation of my family's business--Ward's Marine
Electric, Inc. We have been in business for over 54 years and we have
42 employees, sixteen of whom are American Boat & Yacht Council-
certified marine electricians. Our company provides mobile dockside
service, engineering, engraving and design services as well as
distributes a complete line of marine electric equipment. Most of our
service work is performed in marinas and boatyards where we act as
subcontractors.
Aside from my work with Ward's Marine Electric, Inc., I am Vice
President of the Marine Industries Association of South Florida
(MIASF). Throughout the state of Florida, MIASF represents over 800
marine related businesses, such as builders, marinas and boat yards,
repairers, services, dealers, and yacht brokers. Our industry
represents over 180,000 jobs and generates over 14 billion dollars in
economic impact to the economy of Florida. Accordingly, my remarks
reflect the views of the Marine Industries Association of South Florida
as well.
I sit before you today to ask that the recreational marine industry
be removed from under Longshore and Harbors Workers' Compensation Act
requirements, by extending the current exception for boats under 65
feet to encompass the entire universe of recreational boats.
Low Risk Environment
Much of what I will describe for you today, regarding how work is
performed and the risks that our employees face each day, is no
different than what is faced by skilled craftsmen performing work in
similar non-marine highly skilled trades. For example, most boats are
hauled out of the water when repair work is being done at a
recreational marine facility. Travel lifts are used to simply pick up
the boat and move it further inland under a tent or shed. In some cases
work is performed on a boat behind an owners' house. Finally, work is
also performed at a marina where minor repairs and estimates are given.
Because our workers are not subject to the kinds of hazards found in
commercial environments, such as a bustling commercial port or
shipyard, it is appropriate and necessary that the recreational marine
industry remain under the jurisdiction of state workers' compensation
and be excluded entirely from the Longshore and Harbor Workers'
Compensation Act.
Low Injury Rates
This low risk environment can be further demonstrated by the amount
and severity of injuries faced by our workers. At Ward's Marine
Electric we have a claims/loss ratio for workers' compensation injuries
that has been averaging less than two percent for the last five years.
We pride ourselves on providing excellent training and a safe working
environment for our workers, which is demonstrated by our low accident
rate. We strongly believe we can provide quality injury insurance for
our employees by only purchasing state workers' compensation. We
understand the necessity of Longshore insurance to protect
longshoremen, harbor workers and stevedores, along with others in the
commercial shipbuilding and ship repair segment of the industry. It is
important to understand that workers in the recreational marine
industry do not encounter and are not exposed to the same hazardous
environments or the severity of injuries as the workers who work on
commercial merchant ships in ports and shipyards. State workers'
compensation is sufficient for our industry, and in many instances, is
more financially beneficial to the worker. The logic of removing the
recreational marine employee from mandatory Longshore coverage is
demonstrated by the minimal number of claims. In fact, at Ward's we
have never had a Longshore claim, yet we continue to pay the exorbitant
cost just because we work on recreational boats which happen to be over
65 feet long. For the recreational marine industry, Longshore coverage
is duplicative and unnecessary. Our employees' claims can be adequately
covered by state insurance coverage.
Mixed Use Facilities
It is also important to note that the recreational marine industry
is growing as the sizes of recreational vessels grow. The trend in
growth of the typical vessel size has continued over the past 20 years.
In 2003, the most stable segment of the industry, with an astounding
11% growth increase, was the over 150 foot market. For us at Ward's,
where we choose to follow the law, we must provide proof of coverage
for EVERY marine facility in the county. This is not to say that ONLY
boats over 65 feet visit our community. It is just because boats over
65 feet HAVE visited our community and all of our facilities. Once a
marina or boatyard accommodates a boat over 65 feet, then all workers
are subject to Longshore exposure and must purchase the coverage or
risk operating illegally. Unless the footage exemption was large enough
to encompass every recreational boat built in the United States, the
circumstances would not change.
High Cost of Longshore Coverage
Today the playing field is not level. We bill our skilled workforce
at $75 per hour, of that $54 is contributed to cover the Longshore
premium. Given that we cannot raise our labor rate if we want to remain
competitive in the marketplace, we make very little profit on our
workers who are engaged in servicing boats over 65 feet. Further, if a
company works on these larger boats, it cannot obtain state workers'
compensation in the marine industry without Longshore insurance. For
many then, the choice is to purchase both state workers' compensation
and Longshore, or purchase neither. I am sorry to say that faced with
that choice, some provide no coverage for their workers. However, if
they had the option of providing only state workers' compensation, I
believe businesses would rush to provide coverage to their workers.
Competitive Disadvantage - International
Due to the high costs of purchasing Longshore insurance premiums,
businesses like ours have experienced negative consequences in
competing for business. Boat owners often like to make one ``port-of-
call'' and use one facility for all of their repairs. According to a
recent study in Broward County, Florida, an average of 1400 boats not
based in the county visit the area annually. Of those, 1300 will have
work done in an area boatyard with an average bill of $140,000. These
``out of town'' boaters are important to the growth of the recreational
marine industry, and the servicing of such boats is a critical revenue
and employment base for many states in the country. Unfortunately,
particularly for coastal states like Florida, this business is rapidly
going overseas. In the case of Florida, many boat owners are choosing
to have work done in the Bahamas and Caribbean. Service costs in
Caribbean and the Bahamas are lower. One of the main reasons is that
employers there do not have to pay the extremely high cost of Longshore
coverage and can therefore outbid American businesses. As an
international parts distributor, Ward's Marine Electric is able to
gauge the workloads of other ports of call because of the parts orders
we receive. While we are able to profit from the sale of equipment, the
boating industry and community suffer as a whole.
Competitive Disadvantage - Domestic
Like most firms in the marine service industry, our company is a
small business. If we want to remain competitive in the recreational
marine industry, which includes a large percentage of boats over 65
feet, the law requires us to purchase Longshore insurance. Currently,
there are employers who choose not to obtain Longshore insurance
because they simply cannot afford the premiums. However, many
businesses, including ours, do purchase the coverage. Therefore we are
placed at a significant disadvantage to our domestic competitors who do
not comply with the law. This, coupled with the competition of foreign-
based repair centers, puts small businesses like mine in a very
difficult position. It is a challenge of Ward's Marine Electric to
compete due to the inability to provide competitive labor rates with
those who do not purchase Longshore coverage.
Conclusion
Let me conclude by saying that if the recreational marine industry
was removed from Longshore and Harbors Worker's Compensation Act
requirements, employers like Ward's Marine Electric would save
approximately $200,000 a year by not having to purchase the unnecessary
and duplicative Longshore insurance. This money could instead be used
to expand our services, increase our employees' wages, and hire more
skilled workers. It would be a win-win for employers and employees
alike. In order for the industry to prosper and grow, we ask for your
support in expanding the exception of boats under 65 feet to encompass
the entire universe of recreational boats. The recreational marine
industry needs relief from this burdensome, costly and duplicative
coverage.
Thank you, Mr. Chairman and other Members of the Committee, for
bringing to this public forum an issue that is critical to our
industry.
______
Vice-Chairman Biggert. Thank you very much.
Mr. Nelson, please proceed for 5 minutes.
STATEMENT OF LARRY NELSON, VICE PRESIDENT, ADMINISTRATION,
WESTPORT SHIPYARD, INC., WESTPORT, WA
Mr. Nelson. Thank you, Madam Chairman and Ranking Member
Owens, it's a pleasure to be here before the Committee today to
discuss Congressman Keller's legislation, H.R. 1329. I have
submitted written testimony for the record, but I would like to
take a few minutes now to summarize that testimony.
My name is Larry Nelson, I am Chairman and Vice President
and a principal in Westport Shipyard in Westport, Washington. I
have worked for Westport most of my 25 year career in
boatbuilding, and have work in every trade in the business. I
started in production in 1983, when we were a small company of
38 employees. We entered the recreational marine boat industry
just as the West Coast fishing industry was collapsing. Back
then a 50-foot fiberglass boat was considered a larger boat. A
boat over 65 feet was almost unheard of at that time.
We didn't have the technology we have now to build
fiberglass that big. The few boats that they were, there were
over 65 feet were actually built like ships, because that was
the best technology there was back then. Today, the smallest
boat we build is 98 feet.
Westport is located in an economically depressed area in
Grays Harbor County, we have over 600 employees at three
different locations in Washington state. We employ 700 more
working indirectly through small business as subcontractors. We
are also very proud of the fact that we are now--we have
second-generation employees with our company, and whole
families that work for Westport. And that is not uncommon in
this industry as a whole.
There really were four points in my testimony. The first
point, H.R. 1329, will continue to meet the intent of the 1984
amendment to the Longshore Act. No. 2, workers will be
adequately protected, benefits will not suffer.
No. 3, boatbuilding, specifically large boatbuilding, is
much safer than shipbuilding. And No. 4, jobs will be created,
and those existing jobs will be protected.
The purpose of H.R. 1329 is to protect workers who are
creating and sustaining jobs. The same rationale applies today
as did in 1984, when 65 was ruled a large boat. That was where
the demarcation was. Really nothing has changed, back then,
except for the size of the boats and the materials that we use.
We now apply small boatbuilding to large boats.
Costs versus the benefits. There has been some question
whether H.R. 1329 will result in a reduction of benefits. An
employee would have to earn $80,000 a year to obtain the
maximum Longshore benefit of $1,031. In Washington, any
employee earning less than $30 an hour will receive about the
same under the Longshore Act. That covers virtually every
employee in our industry. There is no difference in coverage.
And in some cases, Washington State Workers' Compensation is
better, actually exceeds Longshore.
Longshore coverage is two to four times more expensive than
State workers' compensation, bringing manufacturers, especially
small businesses, where in many instances use those savings to
expand their businesses, expand their work forces, update and
enhance their production processes.
There is a great difference between shipbuilding and
boatbuilding. Recreational boatbuilding is more closely related
to the housing industry and actually to recreational vehicle
construction. With its indoor construction, under control
conditions, we employee indoor trades like cabinet makers,
electricians, and so on, the same as you see in the housing
industry.
Work on large boats has been proven to be twice as safe as
work on smaller boats under 65 feet, and three times as safe as
shipbuilding in general. This is a safe industry. I build boats
between 48 feet and 164 feet, and there really is no
difference. In fact, the larger the boat, the safer it is to
work on, because the spaces are larger.
Finally, competition in jobs. Worldwide, the U.S. market
share is shrinking. In 1999, the U.S. was in first place and
held 29 percent of the world's market share. Just 3 years
later, in 2003, we had fallen to 15 percent of market share,
basically cut in half in a market that is growing.
Thousands of jobs have already been lost, they have gone
offshore due to recreational boatbuilders going out of
business. I'm sure a $10 million boat, maybe a $10 million boat
here is a $7 million boat in China. So what's the difference?
If you look an American boat and look in a boat from China, the
materials are the same, the cost are the same, it's in labor
costs.
We have to be able to compete in a worldwide market. To do
that we had to find other ways to compete. We need to build and
reinvest back into our businesses, back into technology, back
into workforce training, so that we can remain competitive.
In conclusion, Longshore coverage is important to workers
who work in the Longshore and stevedore industry, but it has no
place in the recreational boatbuilding industry. Workers in the
recreational boatbuilding industry do not face the dangers that
Longshoremen and stevedores face, and the costs of Longshore
insurance outweighs the benefits.
The purpose of the 1984 exemption will continue to be
served under H.R. 1329. There will be no decrease in safety,
competition will be enhanced, jobs protected, without a loss of
benefits to employees. H.R. 1329 is good for industry, is good
for our employees, and is good for this country.
Thank you, Madam Chairman, and Members of the Committee.
[The prepared statement of Mr. Nelson follows:]
Statement of Larry Nelson, Vice President, Administration, Westport
Shipyard, Inc., Westport, WA
Mr. Chairman and Ranking Member Owens, it is a pleasure to appear
before the Subcommittee on Workforce Protections to discuss Congressman
Ric Keller's legislation, H.R. 1329, which, in my opinion, would
fulfill the intentions of Congress when in 1984 it provided an
exemption for coverage from Longshore and Harbor Workers' Compensation
Act Insurance (``Longshore'') for recreational vessels under 65 feet in
length.
My name is Larry Nelson, I am Chairman and Vice President and a
principle in Westport Shipyard in Westport Washington. Throughout my 25
year career in boat building, as with most of our executive management,
I have been involved in every aspect of our business including working
in each of the various trades that we employee. I started at the
shipyard, in production, in 1983 when we were a small company of 38
employees building boats for the salmon industry. We entered the
recreational industry in the early 1980's just as the west coast
fishing industry was collapsing. Back then a 50'' vessel was considered
a large yacht and one over 65'' was almost unheard of in the Northwest.
Over the years the yachts have grown until now the smallest we build is
98''.
As the yachts have grown and our employment level has increased,
our working conditions and our safety record have steadily improved.
Like many in our industry we are located in an economically depressed
area where the local economy was once fishing and timber based. We have
been instrumental in maintaining the integrity of many local economies.
We currently employee over 600 employees at three different locations
in Washington state, and 388 of our employees live in Westport. We just
invested well over 10 million dollars in a brand new facility in Port
Angeles Washington, another economically depressed area where we
employee over 100 new employees and hope to grow to 200 by this time
next year. We are in active partnerships with the community colleges at
all of our locations to develop training programs for our growing
industry.
This is an incredibly competitive business. Fortunately each of the
US builders has carved out a different product niche so we are not
competing with each other. Our real competition is off shore and they
are becoming stronger every year. As a result, I need financial
resources to reinvest in technology and production efficiencies and new
products.
Today, there are more than 250,000 recreational vessels longer than
65 feet. These are built by the more than two dozen boat builders in
the United States, many of which are small businesses. If any
recreational boat builder plans to build a recreational vessel longer
than 65 feet, that builder would have to purchase Longshore coverage
for his/her workers. This requirement creates severe hardship for many
recreational vessel manufacturers, many of which only produce between
one and six boats each year. Longshore coverage is two, three or even
four times more expensive than state workers' compensation coverage,
which we believe is the more appropriate protection for workers in the
recreational marine industry.
As you know, H.R. 1329 would remove the recreational marine
industry from coverage under the Longshore and Harbor Workers'
Compensation Act and place the industry and its workers under state
workers' compensation.
The Longshore and Harbor Workers' Compensation Act was originally
enacted in 1927. Its purpose was to provide coverage to non-seamen and
maritime workers (i.e., longshoremen, ship builders, ship repairers and
stevedores) who work on or near navigable waters facilitates water-
borne commerce. Workers in these industries, then as now, faced
significant dangers and Congress, exercising its jurisdiction over our
nation's navigable waters, believed that a special form of national
protection was needed.
In the ensuing years, Longshore coverage was by practice mistakenly
extended to the recreational industry. In 1984, Congress recognized
this error by providing an exemption to Longshore protection for
recreational vessels over 65 feet. Today, Congress should finish, or,
if you will, update, the work that it began in 1984 by enacting H.R.
1329.
Few recreational vessels were constructed in 1984 that were longer
than 65 feet in length, and thus, the 1984 amendments had the practical
effect of fully implementing the intent of Congress by exempting
essentially the entire recreational industry from Longshore. But,
again, with the increase in the size of recreational vessels, H.R. 1329
is necessary now to fulfill fully the intent of the 1984 amendments.
There is a great difference between ship builders whose workers
have traditionally been covered by Longshore, and my segment of the
marine industry--recreational boat building. The Occupational Safety &
Health Administration (``OSHA'') defines ``ship building'' as ``the
construction of large commercial or naval vessels that are fabricated
in place, most often of steel, typically with the vessel afloat or in
drydock \1\ On the other hand, recreational boat building, according to
OSHA, is different:
---------------------------------------------------------------------------
\1\ OSHA Direction DIR 02-01 (CPL 2), January 23, 2002.
---------------------------------------------------------------------------
Based on a review of OSHA's compliance experience in boat
building facilities and a comparison of these two sets of
standards, it is OSHA's opinion that the general industry
standards of part 1910 [that is, OSHA's standards for general
manufacturing industries in workers are provided with state
workers' compensation protection] more closely address the
types of operations and hazards of recreational boat building
than do the shipyard standards of part 1915 [which establishes
OSHA's standards for employment of navigable waters and ship
building, ship repairing, ship breaking, and related
activities].\2\
---------------------------------------------------------------------------
\2\ Id.
---------------------------------------------------------------------------
It is evident to those of us in the recreational marine industry
that recreational boat building does not present its workers with the
dangers faced in ship building and in other industries that should be
protected by Longshore. I understand that there are those who are
concerned about whether there will be an adverse impact on workers if
H.R. 1329 were enacted. That could very well have been a question asked
in 1984 when the Subcommittee endorsed the current 65 feet exception to
the requirement for Longshore protection. I am unaware, however, of any
harmful impact to those workers who manufacture recreational vessels
less than 65 feet and who are not covered as the result of the 1984
amendments by state workers' compensation. I will contend that the
reason we have not seen an effort to roll back the 65 feet exception is
because there has not been any negative impact on workers. We, in the
industry, have conducted a survey among some of the major recreational
boat manufacturers to determine whether in fact there were a greater
number and more significant injuries experienced by workers who
manufactured vessels in excess of 65 feet. Allow me to provide two
significant examples.
Hatteras Yachts, is one of the major boat builders in the world.
Hatteras manufactures vessels both under and over 65 feet. Hatteras
reported that in 2001, workers manufacturing vessels under 65 feet
suffered 10.4 injuries per 100 workers; workers working on vessels
larger than 65 feet experienced 5.8 injuries per 100 workers. Total
injuries were 7.7 and total serious injuries were 3.1.
Another major boat manufacturer that manufactures under and over 65
feet, Sea Ray, reported the following: for vessels that they
manufactured under 65 feet in length there were 9.4 injuries per 100
workers; for workers on vessels larger than 65 feet, 5.2 injuries per
100 workers were experienced. The total number of injuries was 8.9 per
100 workers, with the total serious injuries only 1.6 per 100 workers.
By comparison, the average OSHA Recordable Incident Rates for ship
building (as opposed to boat building) in the year 2000 was a total of
22 injuries per 100 workers, with 11.7 of those classified as serious.
So, as you can see, recreational boat building both under and over
65 feet is significantly safer than the more dangerous ship building
industry. particularly in terms of those workers working in the
recreational marine industry on boats over 65 feet. Therefore, it is
clear to us that recreational marine workers building recreational
vessels of all sizes should be covered by state workers' compensation
rather than Longshore.
Additionally, the many small businesses that build recreational
vessels would greatly benefit if H.R. 1329 were enacted and they no
longer had to provide the vastly more expensive Longshore coverage for
its workers. By switching to state workers' compensation coverage,
which is two to four times less expensive as Longshore coverage, these
small businesses would in many instances use the savings to expand
their businesses, expand their workforces and update and enhance their
production processes.
In conclusion, Longshore coverage is important to workers who toil
in the longshore and stevedore industry, but it has no place in the
recreational vessel building industry. Workers in the recreational boat
building industry do not face the dangers that longshoremen and
stevedores face. Rather, they face no greater risks than those faced by
other land-based workers in the manufacturing industry. Further, the
resources spent on Longshore coverage could be better utilized by the
small businesses to strengthen their businesses and their livelihood.
Thus, recreational marine workers should be covered by state workers'
compensation. We ask you to expeditiously pass H.R. 1329
Thank you, Mr. Chairman and other members of the Committee for your
time and attention. I would be happy to answer any questions.
______
Vice-Chairman Biggert. Thank you, very much.
Mr. McGarrah.
STATEMENT OF ROBERT E. MCGARRAH, JR., COORDINATOR FOR WORKERS'
COMPENSATION, AFL-CIO, WASHINGTON, DC
Mr. McGarrah. Thank you very much, Madam Chairman and
Members of the Committee. I appreciate the invitation to be
here today. I want to make three basic points.
Vice-Chairman Biggert. Would you check you microphone, I
don't think that it's turned on. Or, pull it closer.
Mr. McGarrah. All right. I wanted to make three basic
points, Madam Chair.
First, this legislation would deprive thousands of working
families of the protections that Congress guaranteed them when
it amended the Longshore and Harbor Act in 1972 and 1984. It
would do this by excluding them from coverage, and forcing them
to apply for poverty level benefits under State Workers'
Compensation laws.
Before 1972, the benefits of the Longshore Act were $70 a
week, and State benefits were actually higher. Some injured
workers could file lawsuits against their employers, and that
was a needed and necessary reform that Congress took in the Act
in 1972. Including them under the Longshore Act, it created a
tort reform by putting people in workers' compensation under
Federal law, and it created a new benefits schedule.
The point that we have today, Madam Chair, is that we have
exactly the opposite situation, and marine industry is simply
seeking to push workers out of the Longshore Act and to poverty
level benefits under State workers' compensation laws.
A major study that will be coming out shortly from the
National Academy of Social Insurance makes it very clear that
the benefits under State laws are now 30 to 50 percent below
the benefits payable under the Longshore Act. For example, in
California, under the Longshore Act, the maximum payment for
total disability is $1031 compared to $728 in California, $662
in Ohio, $626 in Florida, and merely $400 a week in New York.
The State workers' compensation laws, as I said, are at or
near poverty in their payments. Only the District of Columbia
which follows the benefits under Longshoremen Act, are benefits
anywhere near above poverty. And I have a table that is
attached to my statement today.
Leading authorities on workers' compensation, like
Professor John Burton and Dean Emily Spieler of Northeastern
University Law School, have carefully documented how State
workers' compensation benefits have been slashed over the last
15 years. They were done so because large increases in
insurance forced businesses to look for solutions, and they
teamed up with insurers to demand cuts in benefits. This is not
the solution.
Longshore rates are subjected to the same market forces as
State workers' compensation rates. When the hard market began
in 2001, insurers began pricing their product and increasing
rates. And that is the reason why you're hearing the complaints
today. In fact, in today's Wall Street Journal, on the front
page of the Money and Investment section, makes it very clear
from the risk management survey that's presented, the rates are
now starting to decline, because we've had enormous rate
increases since 2001. And workmen's compensation insurance
rates and longshore rates will be going down as well. In fact,
in Florida it was recently reported that Longshore rates will
be cut by 50 percent.
But we will suggest, Madam Chairman, is that we look
instead to the recreational marine industry. Yes, it is true
that they are large numbers of yachts, and I believe the figure
was quoted as 250,000 are now well over 65 feet and more. And
it is also true, that China is injuring this luxury yacht
business, selling yachts at $7 million a year, instead of the
$10 million that's charged, and much more, by my colleagues
here on this panel.
I would suggest, Madam Chairman, that this is an industry
that has very good profit margins, and has customers that can
certainly afford to pay workers when they're injured rates that
are keeping them out of poverty. This is a wage insurance
program, not a poverty program. Workers' compensation needs to
be providing people with living wages so that they can get
healthy and get back to work.
Amending the Longshore Act by throwing workers and to
poverty would be a major mistake, and a travesty. Thank you.
[The prepared statement of Mr. McGarrah follows:]
Statement of Robert E. McGarrah, Jr., Coordinator for Workers'
Compensation, AFL-CIO, Washington, DC
Chairman Norwood, Ranking Member Owens and Members of the
Subcommittee, I am Robert E. McGarrah, Jr., Coordinator for Workers'
Compensation for the AFL-CIO and I thank you for the invitation to
appear before the Committee to present the views of working families on
H.R. 1329, the ``Recreational Marine Employment Act of 2003.''
This legislation would deprive thousands of working families of the
protections Congress guaranteed them when it amended the Longshore and
Harbor Workers Compensation Act in 1972 and 1984. It would do so by
excluding them from coverage under the Act and forcing them to apply
for poverty-level benefits under state workers' compensation laws.
Before Congress amended the Longshore Act in 1972, the benefits
paid to an injured worker were $70.00 per week. But some injured
workers could also sue their employers in tort under the doctrine laid
down by the Supreme Court in Ryan Stevedoring Co. v. Pan-Atlantic
Steamship Corp., 350 U.S. 124, 100 L. Ed. 133, 76 S. Ct. 232 (1956).
State workers' compensation benefits for the same injuries,
however, were much more generous than the $70 weekly Longshore
benefits. Maximum weekly benefits for permanent total disability, for
example, were higher in Alaska, Connecticut, Hawaii, Maine, Maryland,
Massachusetts, Michigan, New York, New Jersey, Rhode Island, and
Washington---all states with important recreational marine
industries.\1\
---------------------------------------------------------------------------
\1\ ``The inevitable result of this disparity was that, in the
conflict-of-laws picture, the traffic was made up mostly of claimants
trying to get out of the federal act and into a state act.'' Fn. 72, 9-
145 Larson's Workers' Compensation Law Sec. 145.02.
---------------------------------------------------------------------------
Employers complained to Congress that they faced both the threat of
litigation and efforts by injured workers to win higher compensation
benefits under state workers' compensation laws---exactly the opposite
of today's complaints from the recreational marine industry.
Carefully balancing the interests of business and labor, Congress
amended the Longshore Act in 1972 to provide an exclusive remedy,
protecting employers from costly and unpredictable litigation. It also
raised the $70 per week compensation to equal two-thirds of a worker's
pre-injury wages. Workers in the recreational marine industry were
covered under the Act if they worked on boats and yachts over sixty-
five feet, or in marina construction.
Now, the recreational marine industry asks Congress to exempt all
of its workers from coverage under the Longshore Act, dumping them into
state workers' compensation systems. This proposal, if enacted, would
significantly reduce compensation benefits for injured workers. Indeed,
in many states, this proposal would reduce benefits to below poverty
levels.
A review of benefits paid to injured workers for total disability
shows that in most states, workers' compensation benefits are 30- 50%
lower than the benefits payable under the Longshore Act. [Figure 5-5].
Under the Longshore Act, the maximum weekly payment for total
disability is $1031, compared to a maximum benefit of $728 in
California, $662 in Ohio, $626 in Florida, and $400 in New York.
Today, sadly, state workers' compensation benefits hover at or near
poverty in most states. According to a soon-to-be published study by
Dr. Allan Hunt for the National Academy of Social Insurance, \2\
[Figure 5-4] the average Temporary Total Disability benefits paid to
injured workers are below poverty in fifteen states. They are only
slightly above poverty in another twenty-two states. In fact, only in
the District of Columbia, which follows the benefit standards of the
Longshore Act, are benefits for this insurance program above 160% of
the poverty threshold for a family of four.
---------------------------------------------------------------------------
\2\ Hunt A. ``Adequacy of Earnings Replacement in Workers''
Compensation Programs,'' unpublished study of the National Academy of
Social Insurance (Washington, DC: 2004).
---------------------------------------------------------------------------
Leading authorities on workers' compensation, including Professor
John F. Burton, Jr., the former Chairman of the National Commission on
State Workers' Compensation Laws, and Northeastern University Law
School Dean Emily Spieler, have carefully documented the correlation
between rising workers' compensation insurance rates and the decline of
benefits paid to injured workers. \3\ Indeed, each time state workers'
compensation insurance rates rise---as they almost always do when the
stock and bond markets decline--- insurers tell their customers that
the only solution is to cut benefits.
---------------------------------------------------------------------------
\3\ Emily A. Spieler and John F. Burton, Jr, ``Compensation for
Disabled Workers: Workers' Compensation,'' in New Approaches to
Disability in the Workplace, Industrial Relation Research Association,
(Madison, WI, 1998), pp. 205-244.
---------------------------------------------------------------------------
Longshore rates are affected by the same market forces and
underwriting cycle as state workers' compensation rates. When the
recession began in 2001, insurers began pricing their product in what
they call a ``hard market.'' As a result, the price of workers'
compensation insurance rose during a recession, when businesses were
least able to afford a price increase. Now, as the economy is showing
signs of a recovery, prices are beginning to fall in some markets.
Longshore rates in Florida recently fell by 50%.
Insurance rates for workers' compensation are also affected by the
rates of injury in an industry or occupation. The Bureau of Labor
Statistics reports that the boat building and repairing industry is one
of the more hazardous industries in America, with an injury rate of
11.1 per 100 full-time workers, compared to a national average of
5.3.\4\ Normally these rates are priced into the premium set by
insurers for workers' compensation.
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\4\ BLS, Number and rate of nonfatal occupational injuries and
illnesses by selected industry, All United States, private industry,
2002.
---------------------------------------------------------------------------
Finally, Mr. Chairman, leading members of the recreational marine
industry have argued that today's recreational yachts and boats are
larger than they were in 1984, when the Longshore Act was last amended.
In 1984, workers on boats and yachts under 65-feet were excluded from
protection. Today, it is not uncommon to find yachts exceeding 90 feet.
This Tuesday, the New York Times carried a front-page story about
China's newest enterprise: luxury yachts.\5\ Commenting on China's
ability to produce any product at significant savings in labor costs,
Dean Leigh Smith, executive manager of Australia's Gold Coast City
Marina, said, ``What would normally be a $10 million boat is $7
million.''
---------------------------------------------------------------------------
\5\ New York Times, July 13, 2004, p. A1.
---------------------------------------------------------------------------
The issue before the Committee today should not be whether Congress
should enact an amendment that would consign more injured workers to
poverty-level benefits, but why the marine recreation industry,
producing and servicing $10 million yachts, isn't willing to provide
fair compensation to workers injured in this dangerous industry. Why
isn't it doing more to reduce high injury rates? If insurance prices
are too high, the first place to turn is the insurance industry itself,
not injured workers.
Congress deserves credit for preserving and protecting the
Longshore Harbor Workers Compensation Act. It is a model for the
Nation. It provides living wage compensation to injured workers at time
when poverty is all too common.
Thank you.
[Attachments to Mr. McGarrah's statement follow:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
------
Vice-Chairman Biggert. Thank you, very much.
Mr. Greenway, you're recognized for 5 minutes.
STATEMENT OF IAN R. GREENWAY, LIG MARINE MANAGERS, INC., ST.
PETERSBURG, FL
Mr. Greenway. Thank you.
Thank you for the opportunity to be here today. I think
everyone would agree that this is a vital part of insurance. It
will fully provide benefits to every stevedore, every shipyard,
and has been doing so for 80 years. But 80 years ago, it
started off in a very different fashion working with stevedores
and the harbor workers that were around at the time, and not in
the recreational marine industry.
It has been suggested that the move of recreational boat
builders, repairers and contractors to State workers'
compensation will put them on some form of poverty level. And
this simply isn't true. The numbers quoted have talked heavily
about the maximum level benefits.
Well, unfortunately, very few people in the recreational
marine field will ever hit those maximums. They're not the
people buying these boats. They cannot afford to buy the boats,
whether they be the employer or the employee.
They're working at levels where they will get two thirds of
their weekly wage, not hit the maximums, not hit any sort of
caps that are in the State benefits. Now the critical issues
with Longshore insurance, which I'm involved in every day, is
where a claim dollar goes. And in reality in the recreational
marine industry that claim dollar goes much more to the medical
community and to the legal community than it does to the
injured employee.
Sorry, it's distracting to hear the buzzer all the time. I
have also compared changes in Longshore rates in Florida. The
change in Longshore rates in Florida that occurred on July 1
was a reduction of 42 percent or 44 percent in the effective
rate only for a very narrow band of people. It had no effect on
boat builders and most boat repairers. It only hit a very
narrow band. It still leaves Florida among some 15 states with
Longshore costs that are more than double the cost of the State
act workers' compensation. And that's where this money is
going. It's going to the attorneys, and it is going to the
medical profession. It's not going to claimants, they're not
going to suffer from this.
We also have an inequity here. Why should the person who is
building the recreational boat of 60 feet be in a different
shape to a person who is building a 70 foot boat?
In 1984, the put the exemption for 65 foot, when there were
only a few 65 foot vessels in existence. The growth of that
means the growth of this footage needs to be addressed now.
But I think there's one other point that we have to address
here, and that is the huge number of employees who are out
there today without any coverage. It is estimated that some
one-third of marine businesses today, recreational marine
businesses, today have no benefits at all, because they are not
prepared to pay the exorbitant price for Longshore.
I think it is in everybody's interest to make sure that
every employee has benefits available. The states have a
workers' compensation system that works under 65 foot, why
shouldn't it work over 65 foot? They enforce it. They broadened
the coverage, so that everybody has that coverage. The
Longshore Act does not provide those teeth to ensure that
everybody has coverage until after the claim.
There are thousands of employers throughout this country
who provide no benefits to their employees today. They can't
afford them. That means there are tens, possibly hundreds of
thousands of uninsured employees out there today. I urge this
Committee to move the recreational marine industry back into
the State act workers' compensation, so that those people can
get coverage so that every employee can be covered.
Thank you, Madam Chairman.
[The prepared statement of Mr. Greenway follows:]
Statement of Ian R. Greenway, LIG Marine Managers, Inc., St.
Petersburg, FL
Good morning, Chairman Norwood and Ranking Member Owens. My name is
Ian Greenway and I am pleased to be here this morning to address the
need for a broader legislative exception for the recreational boating
industry from the Longshore and Harbors Workers' Compensation Act
(``Longshore Act'').
There is a great need to continue the efforts of this committee
when it last amended the Longshore Act in 1984. Enactment of a broader
legislative exception for the recreational boating industry will
greatly reduce an ill-placed economic burden on the many small
businesses of the recreational marine industry, with virtually no
significant impact on the highly skilled workforce in this sector of
the maritime industry. In fact, enactment of a broader exception will
result in a considerable expansion of available benefits and protection
to recreational marine workers across the nation.
I am president and owner of LIG Marine Managers (``LIG'') located
in St. Petersburg, Florida. LIG is a leading provider of commercial
marine insurance to independent insurance agencies throughout the
United States since 1989. I have the privilege of interacting regularly
with the marine industry and am a member of various trade associations.
I have not only underwritten Longshore policies for many years, but
have delivered hundreds of seminars in every corner of this country, to
both the insurance community and the marine industries, as well as
authoring a book dedicated to this topic. As such, I understand the
industry and its employers and workers, as well as the risks these
workers face in all aspects of the marine industry. Of particular
relevance to today's hearing, I deal extensively with the recreational
marine industry. With your permission I would like to address the
impact that the enactment of a broader legislative exception would
have, not only on the recreational marine industry, but also for the
vital protection of its employees.
As you know, the Longshore Act was initially passed in 1927 to
provide coverage to dockside workers, such as stevedores, shipyards and
harbor workers. Over the years, however, the universe of maritime
workers who were required to be covered by Longshore insurance grew to
include virtually all waterfront employees. In 1984 Congress provided
new exceptions for the coverage of Longshore insurance. Of those
exceptions, exclusion F exempted ``individuals employed to build,
repair or dismantle any recreational vessel under 65 feet in length.''
There is no difference in the risks associated with repairing the
plumbing, air conditioning or radio on a 75-foot recreational boat as
compared to a 65-foot recreational boat. In 1984, when this exemption
was enacted, recreational vessels over 65 feet were a rarity. However,
today a quarter of a million of the boats registered in the United
States are over 65 feet in length.
In fact, current insurance data demonstrates that claims for these
larger vessels are significantly lower. Claims for workers on vessels
of 65-150 feet are at least 38% lower than those on vessels under 65
feet. The reality is that the larger the boat, the more money is
involved and as such, more care is given to its manufacture,
maintenance and repair. Consider these vessels to be like hand crafted
luxury cars, which literally have white-glove treatment. We see not
only fewer injuries but also fewer serious injuries in larger
recreational boats than we do in their smaller counterparts.
There are significant consequences for the marine industry--for
both the employer and employee--by requiring Longshore insurance for
recreational marine industries. The most significant is the vastly
increased cost for employers of plumbers, electricians and other
specialty contractors when they are compelled to purchase Longshore
insurance rather than the alternative, state workers' compensation
protection. I have submitted for the record a chart that highlights the
difference in cost between Longshore insurance and state workers'
compensation insurance for these types of businesses in a number of
states with significant recreational marine workers. For example, in
states such as Florida, Alabama, Louisiana and Tennessee, as well as 11
other states, the cost of Longshore insurance is more than double the
cost of acquiring state workers compensation for workers. In another 19
states the cost is between 50% and 100% higher.
Not only does this result in a huge economic burden for the
employer, but it means that an estimated one-third or more of such
employers simply do not purchase any coverage, despite the legal
requirement to so do, leaving injured employees without any available
medical coverage, or lost wages and disability income. Transferring
these businesses to the state workers' compensation system will not
only make these policies more affordable, and provide a wider insurance
marketplace to the employer, but also the states will have jurisdiction
to enforce their own rules and ensure all businesses are carrying the
coverage required by law to protect their employees.
There seems to be some concern over how Longshore premiums are
allocated. Each sector of the marine industry has its own
classifications, for example ship repair is 6872F, and Stevedoring has
four classifications dependent on equipment used: 7317F, 7309F, 7327F
and 7350F. The premiums, payrolls and claims for each of these
classifications are segregated, and the rates for a particular
classification are calculated purely from that classification's
experience. Thus, there would be no effect on the rates and premiums of
traditional marine industries by any change implemented here.
I am convinced that transferring these businesses to the state
workers' compensation system and enforcing the State Workers'
Compensation Acts, as only the states have the power to do, will mean
that tens of thousands, and possibly hundreds of thousands of workers,
will acquire coverage where there is none today. In addition, it will
provide an economic boost to employers, allowing them to expand their
operations and hire new employees-all while leaving the traditional
Longshore employees unaffected.
In conclusion, I strongly encourage this committee to amend the
Longshore Act to further expand the 1984 amendments by removing the
recreational marine industry in its entirety from under LHWCA. If
enacted into law, this will rationalize the state workers' compensation
coverage in the recreational marine industry that Congress began in
1984.
Workers will not be harmed. Instead they will be benefited by more
universal coverage.
Thank you.
[An attachment to Mr. Greenway's statement follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
------
Vice-Chairman Biggert. Thank you, very much.I21We will now
move to the question-and-answer period, and I yield myself 5
minutes.
Mr. Greenway, you noted that there is no difference in the
risks associated with preparing the plumbing, air-
conditioning, or radio on a 75 foot recreational vessel as
compared to a 65 foot vessel. Can you compare the number and
degree of seriousness for injuries that you see occurring in
vessels over 65 feet with those that are less than 65 feet?
Mr. Greenway. The rating organization that monitors all
these statistics, keeps statistics for vessels under 65 feet,
and vessels between 65 foot and 150 feet. The claims on those
are shown to be at least 38 percent lower than vessels over 65
foot, 65 foot to 150 foot range.
As Mr. Nelson has already said, it is just easier to work
on a larger vessel. There's more space, there's more time,
there's more money involved, quite frankly, from the owner to
be that safe, and to take the more, higher degree of care
that's necessary.
Vice-Chairman Biggert. Thank you. Looking at the law, it
appears that the Longshoremen's insurance was put in to make
sure that there was no gap in coverage, that everyone that
would be working on some type of vessel would be provided with
insurance.
This won't happen, of course, but let's say we repealed the
Longshoremen's Act, and so that there was no insurance, looking
then at the vessels that are 65 feet and over, would there be
any gap in coverage? Ms. Hebert?
Ms. Hebert. Well, I mean, I can't speak for the insurance
industry. As far as my workers, maybe the question is, how I do
with it? Some days, I'm just wondering if there is anyone who
would not receive this State workers' compensation. You know, I
don't have the--maybe I can yield that to Ian, as far as, you
know, the State compensation.
As far as in Florida, the goal would be to have everyone
covered under State compensation. I think that we are equal to
our land-based partners. The work that we provide, for example,
I am sure Mr. McGarrah formerly with NCCI, which is the
National Council on Compensation Insurance, for a company like
mine, Marine Electric, there is no classification for Marine
Electric. We are electricians, and so we are classified the
exact same. For my company, no, they would all would be
covered, and in fact, the classification wouldn't change, they
would just fall right to the same classification, my insurance
numbers would not even change, other than this multiplier that
he mentioned, has dropped. All of our workers would be the same
and NCCI consider us in our risks equal to our land-based
partners.
Vice-Chairman Biggert. OK.
Mr. Nelson. May I also address the question?
Vice-Chairman Biggert. Sure.
Mr. Nelson. Yes, but we did our research, and looked into
this, one of the things that we discovered is that there are a
few states that don't necessarily require workers'
compensation.
And I think that one of the things that we would favor, is
that the bill were structured in a way, and maybe it could be
done during markup, is that an employer would have to provide
Longshore insurance if there was no State compensation
available, to keep people from falling through the cracks.
Vice-Chairman Biggert. I mean that was the intent of the
law.
Mr. Nelson. That was the intent of the law.
Vice-Chairman Biggert. Right.
Mr. Nelson. And that's our intent too.
Vice-Chairman Biggert. Mr. McGarrah.
Mr. McGarrah. Yes, Madam Chair.
The State of New Jersey specifically excludes workers in
the marine industry, so they would have no coverage, unless the
State amended state law. Historically, the United States has
always provided for Federal coverage for workers operating
airports and harbors. That goes way back to the early days of
the republic. And for Congress to throw workers back into the
State system, especially when the states are not providing any
coverage whatsoever, would be an historic reversal of Federal
maritime policy and would, frankly, as I had indicated,
contrary to what Mr. Greenway stated, would throw workers into
poverty.
The average temporary total disability payments, I'm
talking about average payments, this was a study by the
National Academy of Social Insurance, would put many workers
below poverty, in State workers' compensation systems and only
marginally above poverty. That's the major concern here.
And that's one of the major reasons in this very wealthy
industry, with multimillion dollar yachts being found in ports
everywhere, and we're all for multimillion dollar yachts, if we
can afford them--workers simply can't live in poverty, and get
better and get back to work. Thank you.
Vice-Chairman Biggert. Mr. Greenway.
Mr. Greenway. I think that, when we look at the original or
the Longshore Act as it stands today, it provides a beautiful
caveat to draw people back into Longshore if there is no State
compensation. Section 9023 says, if individuals described in
clauses (a) through (f), that's the exclusionary language, are
subject to coverage under--are subject to coverage under State
workers' compensation law.
It simply says there, that those exclusions disappear if
there is no State act coverage in force.
Vice-Chairman Biggert. Thank you.
Mr. Greenway.--coverage in force.
Vice-Chairman Biggert. Thank you.
My time is expired, and that would yield 5 minutes to the
gentleman from California, Mr. Miller.
Mr. Miller. OK.
Vice-Chairman Biggert. You're not used to sitting in that
position.
Mr. Miller. Thank you, very much, and thank you for your
testimony.
I must say, and this will come as a surprise to you, but
I'm not persuaded yet, that the answer is simply to do away
with the Longshore coverage.
You describe an industry you suggest is among the safest,
and that would suggest to me, as very often is the case we have
a rating problem here, where we have a cost problem, and the
insurance industry very often is not about insurance coverage,
it is about insurance investments, and the cycles that they go
through.
It appears that after the pounding that they took in the
beginning of this decade, in 2000, and rates escalated across
the country for many lines of insurance and are now starting
once again to come down. And I don't quite get that the answer
is that we would uncover these workers for what I think is, in
fact, in many instances and in many states, an inferior line of
coverage in terms of the benefits to those workers.
And I spent a lot of time in boat yards and in shipyards,
and I guess, you're saying that the statistics show that
somehow this is much safer. If it is so safe, I am not quite
sure why the rates are so high. Mr. Greenway has a theory on
that. And yet at the same time, when I walk around many of
these large yachts, and we certainly don't do the largest in my
area, the very, very large yachts, very expensive yachts, I
don't know, the distance to the ground is a lot further off the
bow of these yachts when they put up on the waves, than it is
from, you know, a small recreational boat or what we used to
think was even a larger recreational boat. It's a different
experience in terms of that.
And I just don't quite get that the answer here is to
retract this coverage from those individuals. And I appreciate
this Committee struggles all the time with both work and
manufacturing and jobs that are going overseas. But it is hard
for me to believe that differential is in the Longshore wage
here.
I realize that you have to add up all of your total costs.
But if the differential is $5 million a yacht, I don't think
that's about Longshore, and the suggestion is a cost of labor.
Well, if you look at the cost of labor, if you offer those
prices, you wouldn't get anybody to work in your yards, forget
whether they are covered are not. I mean, they are not going to
work for $160 month. They are not going to work for $400 a
month, you know, to get to the skill that you, I assume, you
need to keep your customers, and to add new ones.
I'm just struck that this is the focal point for a series
of problems, whether it is insurance rating, or whether it is
competition, that suggest that somehow this is the answer. I
would be happy to have you respond.
Mr. Nelson. I would love to. Thank you. I think that you
hit it right on the head. We can't get a worker to work for a
$160 a month. And we can't get our customers to spend----
Mr. Miller. I understand that. Most people in the United
States aren't going to live like people live in China working
in those industries.
Mr. Nelson. And we wouldn't want to.
Mr. Miller. That's my point.
Mr. Nelson. We're trying to maintain and grow our business,
pay family wage jobs, the overseas competition isn't doing
that. Our customers are not going to pay an additional $3
million to $4 million for a boat, so that they can buy from us.
Mr. Miller. Well, for now, there was a story on Tuesday
where they said nah, that's an interesting boat, but the
quality is not that much different to look at.
Mr. Nelson. And look where----
Mr. Miller. I understand, and I believe that is only a
matter of time, before the quality----
Mr. Nelson. Our market share has been cut in half. That
work is going elsewhere. And for a number of reasons. And
Longshore is not the only reason. The reason is that we pay
some of the highest wages and industry , in the world. And we
want to continue to do that.
Mr. Miller. And when those people are injured, they ought
to be compensated at a level that has something to do with
their standard of living they had while they were working
before they were injured.
Mr. Wilson. Absolutely. And workers----
Mr. Miller. And that's not what workers' compensation does,
in many, many, many, states. It just doesn't do that.
Ms. Hebert. If I could comment on that. As I mentioned, one
of my other capacities is that I am Vice President, actually
Chairman Biggert mentioned that, I am Vice President of the
Marine Industries Association of South Florida. I have been
Chair of the Longshore Taskforce. We didn't even call it a
committee for years.
And one thing that we did, and we went out, as you know
South Florida is the yachting capital the world. You know,
obviously that's what people imagine, people imagine lots of
wealthy people sitting around. But the reality is that our
industry generates more dollars in the state than the citrus,
and that we create more jobs, and generate more money.
This is about the small working families. We did a work-
study in South Florida, clearly one of the biggest places you
would want to go in the country to have work done on your boat.
We did a work survey--let's go to all the yards, let's go to
all the marinas, my company was included, what are the wages,
what are the wages and salaries of people.
We went from the deck hand to the boat washer, to the
service manager, on, on, and on. And what we found, and we have
this, what we found is that all positions fell well within the
salary caps of the state compensation system. We do not have
people making the salaries of the Longshore and stevedores. And
our employees are not working at the ports. We are working
inland. My company doesn't even work on the water, I mean, we
drive in vans, you know, to wherever it is. You know, our
facilities are not located at the port, they're down the river.
And the experiences and environments that are there are not the
hazardous, things you are imagining at the port.
So I would beg to differ. In Fort Lauderdale, which is not
one of the cheapest places to live in this country. If our
salaries can fall well within state compensation, which I'm
sure the industry--insurance industry would love to comment on
the Florida State workers' compensation policies, are not
exactly the most generous, they do fall well within, and
they're not going to be a poverty level.
Mr. McGarrah. Well, Mr. Miller, if I could just add two
points. One is, the injury rates in this industry are double
the average injury rates, according to the Bureau of Labor
Statistics. The average national injury is about 5.3 per 100
full-time workers. This boat building industry is 11.1 per 100
full-time workers. This is a booming industry, and a Nexis
search of just the companies represented here on this panel,
with my colleagues here, shows they're all going very well,
thank you and have expansion plans and doing well selling
yachts, and as I say are, upwards $10 million--some of them
even more into the $30 million range. That's why we find it
quite preposterous that there would be a suggestion that
Federal Longshore rates, which are paying living wage while
people are recovering from injuries, ought to be eliminated,
and put workers into rates in a states that a well below
poverty.
But what we think here, frankly, is in overreaching on the
part of this very competent industry. And perhaps, some
misinformation from the insurance companies that are servicing
them. Because the insurance industry, as we all know, and as
the Wall Street Journal documents in a front-page story today
in the Money and Investing section, the industry made many
major pricing decisions that came home to haunt it when the
market collapsed. And that is why rates had to go up across the
board for property, casualty insurance. Workers' compensation
is no exception.
A closer examination of rates, as they do in the
Commonwealth of Virginia, which show that the industry
frequently, as frankly many other financial services industries
have, have priced their products in ways that are less than
truthful, and less than candid. And the Commonwealth of
Virginia catches errors all the time in the pricing practices.
I would urge my colleagues to join with us, in labor, and
properly examining and calling for transparency among insurers
in the property-casualty insurance industry. It's a critically
important part of our economy. It's necessary for all of us to
do business. But we have got to have truth in the pricing of
the insurance product. We don't have that now.
Vice-Chairman Biggert. The gentleman's time has aspired.
The gentleman from Florida, Mr. Keller, is recognized for 5
minutes.
Mr. Keller. Thank you, Madam Chairman.
I want to briefly address a couple of things. The Ranking
Member, Honorable George Miller, said that he is not yet
persuaded. Well, perhaps it is because of my youth and
experience, but I am not giving up on him on this issue. I am
respectful of the fact that he was actually here in 1984 when
these amendments were adopted. Therefore, I haven't pretended
to tell him what his intent was. I have been respectful of the
that fact that you, and you alone, know what you intended.
I21But I looked it up, and you were the Subcommittee Chair,
and it passed by a voice vote. And because you put that 65 foot
rule in, you made a very positive difference for the
recreational marine industry that would not have happened.
I wanted to get the support of folks like you, Martin Frost
and Rob Andrews and Jim Davis, and so there is, specifically,
there is no union bashing in this bill. There's nothing to do
with collective bargaining, there is no tort reform stuff. I
wanted to have a common sense bill that would be
noncontroversial.
So in the interests of optimism, let me directly address
something that I hope would persuade you and some others. In
California, if you were injured and you were a Longshoreman,
and by the way let me point out, this bill does nothing to
impact the coverage for Longshoreman. They have the Longshore
insurance before, and they have the Longshore insurance after.
But if you, let's say are a recreational person, and you
are working on a boat and you were injured, under Longshore
insurance you get 66 and two-thirds percent. Under California
State workers' compensation, you get 66 and two- thirds
percent.
I would suspect the AFL-CIO witness would point out then do
you, yes, but under the total maximum amount, under Longshore,
you get $1030, and under California $728. And so, let me just
address that directly, show you why it doesn't really have the
hurt that you think it does.
If you look at a particularly high paid worker on a
recreational boat, a diesel mechanic who makes $20.38 an hour,
and that comes out to $815.20 a week. And in a 40 hour week,
the employer will be required in California, to pay 66 and two
thirds percent, just like in Florida. And that equals $543,
well within Florida's maximum cap, well within California's
maximum cap, the same amount.
So it's really no attempt to push workers out of coverage
or to give them inferior coverage, not at all. Now, one of the
things that came out from Mr. McGarrah's testimony was sort of
like this is just something to help rich folks, you know, and
they could help themselves.
So let me just, rather than leave that unanswered, let's
just address directly. Ms. Kristina Hebert, are you a
billionaire?
Ms. Hebert. No.
Mr. Keller. Do you spend your free time hanging out with
Donald Trump?
Ms. Hebert. No.
Mr. Keller. Do you own a 250 foot yacht?
Ms. Hebert. No.
Mr. Keller. OK, do you have a small family business?
Ms. Hebert. Yes.
Mr. Keller. OK, tell me how many people your company
employees?
Ms. Hebert. Forty-two.
Mr. Keller. Forty-two, and you say this company will save
about $200,000 a year, if we pass this legislation?
Ms. Hebert. Yes.
Mr. Keller. OK, just to address for cynics, are you going
to take this $250,000 a year and just upgrade, and buy a place
in Palm Beach. Or are you going to use this to hire more
employees?
Ms. Hebert. No, we would actually use it hire more
employees.
Mr. Keller. Now, we haven't sworn you in, but if you were
sworn in under oath, you would say the same thing, that you
were going to use this to hire more employees and create more
jobs?
Ms. Hebert. Yes.
Mr. Keller. One of the things that you said intrigued me,
you were talking about how expensive it was, essentially for a
skilled worker, workforce hour of $75 an hour, and most of the
money would actually go to pay for the Longshore insurance. And
you said something to the effect, that because of the high cost
of Longshore insurance, some of employers are just going bare.
Are you suggesting that if we didn't have the Longshore
requirement, for the recreational folks, that actually there
would be more workers with insurance coverage?
Ms. Hebert. That's exactly what I am suggesting in a way,
you know, I'm not an insurance professional. But we, as I
mentioned, are a parts distributor. And so, in addition to
providing service work, we provide parts for other contractors
that are out there doing work, that I know, that are
underbidding us.
And they are doing this because they cannot afford
Longshore coverage. When you're looking at a one or two man
show, that makes $30,000 a year, and you're asking them for
$25,000 up-front in insurance, they're going to say, sorry, I
can't do it, and they're going to work illegally.
But I would guarantee that they all would want to provide
coverage for their workers. That's what they want to do with
it.
Mr. Keller. OK, one final one. I want to question, Mr.
Greenway real quick.
Mr. McGarrah keeps talking about the injury rates for
workers, but I think he's blurred the recreational workers with
the ship workers. For example, he highlights the testimony of
the Bureau of Labor Statistics that the boat building and
repair industry has one of the most hazardous site injury rates
of 11.1 per 100 full-time workers. He doesn't state that these
rates are priced into the premiums set by issuers for workers'
compensation.
Are you familiar with this statistic, and is this statistic
for the entire boating industry, or does there need to be a
distinction between the commercial ships and the recreational
boating?
Mr. Greenway. I have not seen that number before, but there
clearly is a big difference between the shipbuilding industry
and the boatbuilding industry. And even within the boatbuilding
industry, between the under 65 and the over 65.
Shipbuilding and stevedores, are considered to be twice to
three times the numbers of claims the boat builder has. And
even within the boatbuilding category, you have a 38 percent
statistic from NCCI, which shows that it is 38 percent lower
for over 65 foot because of the space available.
I would also like to add though that the coverage issue, I
think, is very important. Most states, Florida, California,
right now, are doing huge clampdowns on businesses in the
states that are not providing workers' compensation insurance
because the way Longshore is written, the states have no power
to go in and enforce Longshore insurance.
So these employers that are going around without anything,
they are claiming that I can take a choice, I can only take the
risk of going bankrupt when the claims happen, or I can take
the risk for a certainty for going bankrupt now. That means
that nobody has a job. Nobody's got benefits. They get left out
there in the cold.
Mr. Keller. Thank you, Madam Chairman. My time has expired.
Vice-Chairman Biggert. Thank you, Mr. Keller. The gentleman
from New Jersey, Mr. Payne, is recognized.
Mr. Payne. Yes. Thank you, very much.
This is certainly a very important issue. I think some of
the issues go beyond your industry, and I don't know how we in
the U.S. are going to contend with the fact that China produces
things more cheaply. I guess, the answer is either reduce
wages, which of course is happening anyway, actually, which is
a bad trend, or, that we, I guess, move out of that industry,
which is not good for the American worker. However, we've seen
a number of industries totally decimated by the fact that
corporations seem not to--you're not a corporation, but
multinational corporations seem not to have any borders, that's
for sure. And the capital just flows with the push of a
computer button.
And so I think some of the problems that you're finding
here, really is going to be a dilemma, that we as a nation will
have to come to grips with it--I'm not running for President,
so I don't have to come up with the answer. But you're talking
about, of course, $10 million for a ship here and $7 million
for one built in China. I think we have to just take a look at
how we come up with technology to reduce our costs.
We have been able to--if we took that philosophy, we would
make more automobiles in the United States, because automobiles
are made in Brazil, they're made in China, they are made in
Namibia, as a matter of fact. And so if our philosophy is
simply going to be that we have to ratchet down hourly wages,
or our insurance coverage, or--then we are in trouble, because
you're not going to be able, you know, it first started with T-
shirts and underwear, you know, that was all right, and that
was sort of sweatshop stuff here anyway. And so we don't make
it any more, Fruit of the Loom's here.
But then it comes into other industries, and so I really
don't, you know, have an answer for this problem, this dilemma.
I think that what we're going to have to do is to make a better
product, somehow use the creativity of the American worker, who
I believe is the best worker in the world. And somehow,
perhaps, have corporations have some, some loyalty to the U.S.
I know that it might sound high-falutin', but you see there
was not too much concern about the loss of manufacturing jobs,
like it was--the apparel business, the clothing lines, that
sort of thing.
Of course, then it started to move to automobiles, and we
kind of fought back. As a matter of fact, there was a
lackadaisical attitude on the part of the workers in the
corporations in the U.S. until the foreign cars went longer and
lasted longer, got better efficiency, and so the companies
decided, well, we got to compete. And so, the American car now
is almost, nearly as efficient and fuel as Japanese cars. It's
just that the corporations were lazy. We just had it made. We
didn't have to come up, the profits were great, so let's just
sit down and make the profits.
Now, we've got to put money into research and development.
I think that we can do that in all industries. The fact now,
though, that others are getting concerned, we didn't bother
higher income people because like we said they didn't work in
making T-shirts and those kinds of apparel and dungarees.
But now I do hear my colleagues and friends who are the
architects, who are little concerned now because what they're
doing and some major cities is that they're sending to India or
China perhaps even, or other places some kind of a description
of a building that they would like to be built, and you know,
these architects in India are sending back the building design.
And so now it's actually starting to impact on the upper
income, the professionals. Now we're starting to hear the
concern.
We hear that physicians are plugged into medical devices in
India somewhere, or in the Bahamas, and as that person goes
through the CT scan, someone over there that is making half the
price, is coming up with the, who has the same kind of
education, and knows what the CT-scan says, is coming back with
the diagnosis for the illness.
So this is going to be something that is not about
sweatshirts anymore, it's about all kinds of industries. The
old philosophy was that as the Third World kind of starts to
manufacture low-priced things that we'll be able to sell them
more high-tech. Well, the problem is now that the high-tech
stuff is being over there too.
So we've got some very substantial problems. I don't have
any questions. But I would hope that we're not trying to
ratchet ourselves down to compete on that level, but make a
better mousetrap as they say, and people will make a beaten
path to your doorway.
Vice-Chairman Biggert. And with that, the gentleman's time
has expired. The gentleman from Minnesota, Mr. Kline.
Mr. Kline. Thank you, Madam Chair.
Thank you all, witnesses, for being here today, your
excellent testimony, your patience in answering our questions,
just a couple of comments.
I certainly want to thank my colleague to my immediate
right here for authoring this bill. I think it's the right
thing to do. It seems to me, incredibly arbitrary that we have
picked a foot length of 65 feet. It could have been 60, or 20,
or 80, or 90. What we have here is the difference between
making recreational boats and building ships. And that seems to
be perfectly clear to me.
I'm very much in support of the bill, and I think it's the
right thing to do. I especially want to thank Ms. Hebert and
Mr. Nelson. You're doing exactly what we love to see in this
country. You're creating jobs, good jobs, high- paying jobs.
You're expanding opportunities for Americans, and they're
taking advantage of it. I am pleased with you, and I'm pleased
with the industry. This is an American industry that is doing
very well, and we don't want to penalize that industry, and see
those jobs move elsewhere. We want good jobs for Americans with
good pay, and you're just doing one heck of a job.
So thank you very much. Thank all of you for being here to
testify today. And with that, I yield back, Madam Chair.
Vice-Chairman Biggert. The gentleman yields back. I wish to
thank the witnesses for their valuable time and excellent
testimony and the Members for their participation.
If there is no further business, the Subcommittee stands
adjourned. Thank you.
[Whereupon, at 11:18 a.m., the Subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Statement of Hon. Dennis J. Kucinich, a Representative in Congress from
the State of Ohio
The Recreational Marine Employment Act of 2003 will have a negative
impact on many workers in the state of Ohio. Removing recreational
workers from the protection provided by the Longshoremen and Harbor
Workers' Compensation Act (LHWCA) would leave them at a disadvantage. A
worker in Ohio, for example, would receive $315.00 less for a temporary
disability under the maximum weekly payment allowed in the state
compensation program. Similar disparities between LHWCA and state
compensation benefits exist for both permanent disabilities and death
benefits as well.
Ohio is not alone in this inequality. Many other states also have
state compensation laws that would provide fewer benefits for workers
than the LHWCA would. In fact, the temporary disability benefits in
fifteen states are below the poverty threshold. It is completely
unacceptable for a family to be forced into poverty due to a temporary
injury.
Proponents of this legislation argue that it will be a catalyst for
developing more jobs and helping small businesses. We cannot develop
businesses interest on the backs of workers. It is our duty to protect
workers and ensure that if an on the job injury occurs, they will
receive the necessary compensation. The Recreational Marine Employment
Act of 2003 places an unnecessary burden on workers.