MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session March 16, 1995 The Committee on Labor and Management was called to order at 3:30 p.m., on Thursday, March 16, 1995, Chairman Dennis Nolan presiding in Room 321 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Ms. Saundra (Sandi) Krenzer, Chairman Mr. Dennis Nolan, Chairman Mr. David Goldwater, Vice Chairman Mr. Bernie Anderson Mr. Douglas A. Bache Mr. John C. Carpenter Mr. Pete Ernaut Mr. Mark Manendo Mr. Brian Sandoval COMMITTEE MEMBERS EXCUSED: Mr. Lynn Hettrick, Vice Chairman GUEST LEGISLATORS PRESENT: Assemblyman Barbara Buckley, District No. 8 STAFF MEMBERS PRESENT: Mr. Vance A. Hughey, Senior Research Analyst Mr. Fred W. Welden, Chief Deputy Research Director OTHERS PRESENT: Mr. Harvey Whittemore, Nevada Resort Association Mr. Bob Ostrovsky, Nevada Resort Association Mr. Louis Ling, Deputy Attorney General, Labor Commission Chairman Nolan stated there were two bills on today's agenda, A.B. 172 and A.B. 284. He pointed out a letter he had received from the Nevada Casino Dealers Association who would not be able to attend the meeting today. See (Exhibit C). Mr. Nolan stated he would not read the letter however it would be entered into the record and a copy would be made available to any person who would like one. To accommodate Assemblyman Barbara Buckley, District No. 8, who would testify in support of A.B. 284, it would be the first order of business. ASSEMBLY BILL NO. 284 - Prohibits employer from requiring employee to share tips or gratuities with certain other employees. Ms. Barbara Buckley stated A.B. 284 was requested by one of her constituents. Her constituent was unable to be here today but had relayed her story to Assemblyman Buckley so that she may relay it to the committee. Ms. Buckley began by stating her constituent was a black jack dealer at a Las Vegas casino. At this casino, the tips were collected from each shift on a 24 hour basis. At the end of the day, the tips were divided among each dealer, an equal share being given to the floor and box people. In addition to the floor and box people, dealers who had been pulled from their position to do soft count received a portion of the tips. Ms. Buckley explained most dealers are paid minimum wage but also receive tips. Supervisory employees, floor and box people, receive a salary ranging from $100 - $180 a night. Her constituent's concern is tips are being taken away from tipped employees and given to supervisors. The tips are given for services provided and should be retained by those giving the service. Ms. Buckley clarified her constituent is not opposed to tip pooling nor is she opposed to tips being collected and distributed in a paycheck. Ms. Buckley pointed out she had been contacted by the Nevada Resorts Association who have some concerns with this bill but feel a compromise can be made, protecting her constituent but not hurting the industry. She stated her willingness in attempting to strike this compromise and would bring back any amended language to the committee. Concluding, Assemblyman Buckley stated she received a request to clarify subsection 2 of A.B. 284 would not prevent an employer from establishing a tip sharing plan nor would employees be prevented from voluntarily pooling their tips. Assemblyman Goldwater inquired if the issue of having to share tips with supervisory employees was regulated by the Nevada Gaming Control Board. Ms. Buckley responded her constituent had voiced her concern with the Nevada Gaming Control Board. There was some discussion that this was not protected and that is how she got involved. Assemblyman Ernaut queried would the effect of this bill standardize that all supervisory personnel must be salaried. Ms. Buckley answered yes. Mr. Ernaut expressed his concern of revoking this decision from management based on the fact that some employees are hired, especially in the smaller casinos, in a supervisory position as a tipped employee under agreement with the management. Ms. Buckley recognized his concern and stated at her constituent's place of employment, dealers were being pulled to fill in as box people rather than paying them salary or hiring more employees. They were told this was a temporary situation and they would continue to receive tips. Ms. Buckley commented A.B. 284 would be a positive step in helping to prevent employees from being frustrated and surprised as was her constituent. Mr. Ernaut reiterated his concern in regards to standardizing all supervisory personnel be salaried when it may be more difficult for the smaller properties and suggested this be kept in mind if the bill language is to be amended. Assemblyman Manendo inquired about the difference in wages between salaried personnel and those receiving minimum wage in addition to tips. Ms. Buckley commented it would depend on the casino, but many times the dealers have the opportunity to earn more than their supervisors. She noted that those who pursue supervisory positions rarely do it for the money instead they are attracted by a different challenge including the benefits of having a regular salary, being able to sit down and not having to wear a uniform. The key point is everyone knows the rules and procedures when they are hired avoiding any resentment . Chairman Nolan thanked Ms. Buckley for her testimony and invited those opposed to A.B. 284 to come forward. Harvey Whittemore, Nevada Resort Association, testified. He thanked Ms. Buckley for her approach to this bill in trying to accommodate the industry's interest as well. However, he stated the Nevada Resort Association could not support the legislation as currently written. Mr. Whittemore expressed his main concerns. He stated his first concern was with respect to sharing tips. He cautioned the committee any changes made in regards to tipped employees causes heightened interest by the I.R.S. Presently, many hotels can provide standardized information avoiding auditing of back taxes, failure to withhold and other similar situations but changes might result in the I.R.S. attempting to develop an audit system on an individual basis. Mr. Whittemore introduced Bob Ostrovsky, also with the Nevada Resort Association. Mr. Ostrovsky pointed out three types of tips: a direct tip, such as one would give a waitress; group tips, as one would see in restaurants with larger parties; contract tips, involved in collective bargaining. He defined the many departments affected by the different types of tips, urging the committee to look beyond the proposed legislation's effect on an individual basis, instead focusing on the effects on everyone in the industry. In response to Mr. Goldwater's earlier inquiry, Mr. Whittemore interjected recently, at a Nevada Gaming Control Board hearing the question was raised in regards to an owner, being also an employee, receiving a share of the total tips. This situation arose from their internal control system, "a reg 6", and was not necessarily regulated by the Gaming Control Board regulations. Mr. Whittemore emphasized this is a complex issue due to many different relationships that exist in the industry making it difficult to regulate with a standardized approach. Mr. Carpenter asked if there are many establishments that require their employees to share their tips with salaried personnel. Mr. Ostrovsky remarked to his knowledge this happens infrequently and the situation explained today by Ms. Buckley is unusual. Mr. Whittemore, responding to Mr. Carpenter, reiterated his opinion that it is difficult to regulate all potential circumstances for every different operation with one piece of legislation. He suggested the management does a good job keeping their employees happy with respect to this issue. There being no further testimony, Chairman Nolan closed the hearing on A.B. 284 and invited those witnesses to return with any compromises they can reach. He then opened the hearing on A.B. 172. ASSEMBLY BILL NO. 172 - Prohibits employer from applying tips or gratuities bestowed upon employee as credit toward payment of wages to another employee. Mr. Nolan asked if there was anyone who would like to testify on behalf of or in opposition to A.B. 172 since no one had signed in or presented themselves. Having no witnesses present to testify on this bill, when asked if he would accept a motion, Chairman Nolan responded yes. ASSEMBLYMAN ERNAUT MOVED TO INDEFINITELY POSTPONE A.B. 172. ASSEMBLYMAN KRENZER SECONDED THE MOTION. Before the motion was voted on Mr. Anderson wanted a chance to voice his opinion. He believed this to be important legislation and stated his concern of no one being present to testify in support of this bill. He stated his intention of voting against indefinitely postponing A.B. 172. Mr. Carpenter asked for the circumstances that generated this legislation and for further clarification between A.B. 284 and A.B. 172 as they appear to be almost identical. Chairman Nolan offered to read the letter submitted by the Nevada Casino Dealers Association for the record in an effort to provide Mr. Carpenter an answer to his question. See (Exhibit C). The committee supported this suggestion. "Good afternoon Madam Chair, Mr. Chairman and Committee members. My name is Tony Badillo, I am the President of the NCDA. The NCDA strongly supports passage of a combined A.B. 172 and A.B. 284. I'd like to briefly discuss the "Catch 22" problem you face as Legislators when you make policy. If you make bad policy you take all kinds of heat. You hear it from lobbyists and the special interests not to mention your constituents and the media. If you make good policy you get no credit. If the policy works it just sits there doing its job and no one pays any attention to it. It's not fair but it's the way things are. NRS 608.160 is good policy. It has been good policy for almost 25 years. Consider for a moment how useful this policy has been to the Nevada Legislature through the years. By keeping management's hands off tips you have protected Nevada's low wage tip earners and allowed them to be productive contributors to society, not a drain on society. How many fewer welfare, AFDC and food stamp cases has this Legislature had to deal with over the years because tip income has permitted thousands of low wage workers to maintain their economic independence? There is absolutely no way to know. Why? Because the policy works. You and your predecessors never had to deal with them. I'm making this point because I know that there is always some group that will see any protection for Nevada's most vulnerable workers as an impediment to their profits. One example: In the last session a bill was introduced in the Senate (SB 549) that would have gutted 608.160. Literally turned it on its ear. If passed, management would have been permitted to take tip income and apply it to one-half the minimum wage - leaving thousands of workers earning two dollars and change an hour. Fortunately, the Senate saw this assault on NRS 608.160 for the affront and insult it was and killed it in Committee. Make no mistake, the forces seeking to destroy this policy are lurking in the halls..." Chairman Nolan stated he would stop at this point and read ahead because he did not see any information that specifically pertained to the bills before the committee nor did it appear to provide any benefit to the committee's request for clarification. Ms. Krenzer asked for copies to be made of the letter. The Chair recognized Mr. Carpenter's question had not been answered by this letter and in response to Ms. Krenzer, stated he felt this would be unnecessary as the letter was more of an emotional plea to support A.B. 172 and A.B. 284. He asked if the committee desired a recess in order for copies to be made, pointing out a motion had been made and he felt it would be more appropriate to move forward. Responding to Mr. Nolan's earlier comment in regards to no one being present to testify, Mr. Anderson expressed his concern that the letter was submitted by the Nevada Casino Dealers Association in support of both bills. He recited his experiences working in the casino industry recalling employees' checks are often dramatically reduced in order to cover federal income tax requirements. Mr. Anderson stated this usually occurs in the smaller casinos where they use this as an offset for the minimum wage requirement. It would be a credit towards any payment of wage for any other employee who is doing adjacent work and this is what A.B. 172 addresses. Ms. Krenzer pointed out section 1, subsection c, "Apply any tips or gratuities bestowed upon an employee as a credit toward the payment of any wages of any other employee", seems to be prohibited in existing statutes. Mr. Ernaut stated line 1 shrinks the threshold of those to be held accountable by changing "person" to "employer" and lines 7 and 8 make it apply to those who make above minimum wage. Supporting Ms. Krenzer's observation, he stated since 1967, in both state and federal statutes, this has been prohibited therefore making this bill unnecessary. A discussion ensued among the members of the committee regarding the merits of reading the submitted letter and the worthiness of A.B. 172, resulting in Ms. Krenzer withdrawing her second of the motion requesting a need for more information. Mr. Anderson asked for a one minute recess which Chairman Nolan acknowledged. Mr. Anderson and Mr. Nolan held a short discussion between themselves at the front desk. Mr. Nolan re-opened the hearing on A.B. 172 after clarifying his intent in regards to fair treatment of every bill heard in committee. He apologized for any misunderstandings and stated Mr. Louis Ling would now testify on A.B. 172. Mr. Ling, Deputy Attorney General representing the Labor Commissioner, stated he does enforce NRS 608 and would be willing to answer any questions. Mr. Ernaut asked if the issue of tip credit is covered adequately in the statutes. Mr. Ling responded the statute is clear, you cannot apply tips towards the payment of the minimum wage. He added this is not the issue of this bill as he understands it. While the labor commissioner does not want to take a position on this bill he does welcome clarification of this law. Mr. Whittemore explained his and Mr. Ostrovsky's earlier testimony in opposition to A.B. 284 also applied to A.B. 172. He elucidated on the tip issue pointing out the main issue in A.B. 172 is whether management can develop its conditions of employment subject to the law in existence. It states it may not take all or part of the tips and apply them as a credit. He concluded there is no reason to enter into or pass legislation which creates more controversy and does nothing to clarify. Mr. Carpenter, Mr. Whittemore, Mr. Ostrovsky, and Mr. Ling engaged in a discussion regarding the genesis of the bill, the applicability of this provision and the meaning of "addition" in comparison to "credit". Mr. Whittemore maintained there have been no complaints concerning an employer taking a tip and applying it as a credit against the payment of minimum wage. The bill is designed simply to preclude salaried employees from sharing in tips. He unequivocally opposes this proposal. Ms. Krenzer reiterated her concern this testimony applies to tip pooling and is not related to A.B. 172. She also disclosed her husband works for Gold Coast. He does receive tips but would not benefit more or less than any other employee. She would be voting on this bill. Mr. Anderson thanked the Chair for distributing the letter allowing the committee members to see the concerns of the individuals. Concurring with Mr. Carpenter he asked for further clarification of the intent of the legislation and stated he looks forward to Ms. Buckley presenting her compromise. Assemblyman Bache stated he had two questions: 1) Under the new part c), lines 7 and 8, other than tip pooling, are there any other circumstances where a person making more than minimum wage would have tips or gratuities applied as a credit. 2) Being A.B. 284 and A.B. 172 identify the same statute, could this issue be addressed by Ms. Buckley under A.B. 284. Mr. Ostrovsky responded no, he is not aware of any other circumstances where this has occurred and in response to Mr. Bache's second question, Mr. Whittemore stated that was their point. Mr. Ernaut expressed his shock of this issue becoming so convoluted. He re-stated his understanding of tip credit noting any unresolved issues can be addressed in A.B. 284. Chairman Nolan explained the original motion to indefinitely postpone A.B. 172 is alive and asked for a second. ASSEMBLYMAN ERNAUT MOVED TO INDEFINITELY POSTPONE A.B. 172. ASSEMBLYMAN KRENZER SECONDED THE MOTION. THE MOTION PASSED. ASSEMBLYMAN ANDERSON AND BACHE VOTED NO. ASSEMBLYMAN HETTRICK WAS EXCUSED. There being no further business before the committee Chairman Nolan adjourned the meeting at 4:58 p.m. RESPECTFULLY SUBMITTED: Jennifer Carnahan, Committee Secretary APPROVED BY: Assemblyman Saundra Krenzer, Chairman Assemblyman Dennis Nolan, Chairman Assembly Committee on Labor and Management March 16, 1995 Page