MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session March 21, 1995 The Committee on Labor and Management was called to order at 3:30 p.m., on Tuesday, March 21, 1995, Chairman Saundra Krenzer 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. Lynn Hettrick, Vice Chairman Mr. Bernie Anderson Mr. Douglas A. Bache Mr. John C. Carpenter Mr. Pete Ernaut Mr. Mark Manendo Mr. Brian Sandoval GUEST LEGISLATORS PRESENT: Assemblyman Bob Price, District No. 17 STAFF MEMBERS PRESENT: Mr. Vance A. Hughey, Senior Research Analyst Mr. Fred W. Welden, Chief Deputy Research Director OTHERS PRESENT: Mr. Knight Allen, Nevada Casino Dealers Association Mr. Harvey Whittemore, Nevada Resort Association Mr. Bob Ostrovsky, Nevada Resort Association Mr. Sam McMullen, Nevada Self-Insurers Association Ms. Punam Mathur, Las Vegas Chamber of Commerce Ms. Sharon Powers, Las Vegas Chamber of Commerce Mr. Allen Kaercher, Kaercher Insurance Agency and Las Vegas Chamber of Commerce Mr. Jim Schober, CEO, Kaercher Insurance Agency Mr. Larry Osborne, Carson City Chamber of Commerce Mr. Rick Johnson, Nevada Association of Employers Mr. David Howard, Reno-Sparks Chamber of Commerce Ms. Mary Santina, Executive Director, Retail Association of Nevada Mr. Danny Thompson, Nevada State AFL-CIO Mr. Tony Badillo, Nevada Casino Dealers Association After roll was called, Chairman Krenzer opened the hearing on A.B. 260. She invited Assemblyman Bob Price and Mr. Knight Allen to come forward and stated she would allow each side approximately one hour for their testimony. She would also allow 15 minutes at the end for rebuttal per Mr. Price's and Mr. Allen's request. ASSEMBLY BILL NO. 260 - Requires good cause for termination of employment. Assemblyman Bob Price, District No. 17, stated Nevada is currently referred to as an "at will" state meaning the employer, unless the employee is covered by either a personal contract, union contract or other oral agreement, is legally free to dismiss an employee without any cause. He introduced Mr. Knight Allen, Nevada Casino Dealers Association, who has requested this legislation. Mr. Allen stated the Nevada Casino Dealers Association strongly supports A.B. 260. He stressed the doctrine of "at will" employment is felt by many to be a legal outrage. Referring to an 1884 Tennessee case, he defined the "at will" doctrine, an employer "may dismiss their employees at will for good cause, for no cause or for cause morally wrong." Mr. Allen pointed out arguments offered in opposition to A.B. 260 include leaving in place a legal doctrine that allows one group of Nevadans to act morally wrong against another group of Nevadans and to do so with impunity. He referred to proposed amended legislation presented to the Assembly Committee on Government Affairs which would allow the Clark County Commission to fire their planning commissioners "at will". He pointed out a vote was not taken but Assemblyman Krenzer and Assemblyman Bache both spoke against this. In fact, no other member or witness supported this plan. Mr. Allen expressed his hope this logic be applied not only to the public sector but now the private sector as well. After three years of work, the Uniform Law Commission presented the Model Employment Termination Act (META) presented here to the committee as A.B. 260. He justified some known concerns of the business community pointing out small businesses are protected by this act as well as the employee. Briefly, META provides for a time window before the employee is even eligible to file, places the burden of proof on the employee and places caps on damages. He also addressed the concern of costs, arising from claims by employees who feel they have been terminated unfairly. Mr. Allen explained that META revolves around the concepts of arbitration and mediation rather than the more expensive court cases. He expounded on this issue stating the employee would be responsible for an $85 filing fee and the possibility of having to pay the employer's attorney's fee if it is determined to be a frivolous claim. These potential out of pocket expenses for the employee as well as strict and low caps on damages would deter the number of claims filed. This is in comparison to the present system, under the Employment Security Department, which is cost and risk free inviting all kinds of frivolous claims to be filed. In conclusion, Mr. Allen stressed A.B. 260 is the end product of a lot of hard work not a starting point allowing for amendments. Mr. Anderson inquired how many states have adopted this uniform code and its age. Mr. Price stated META was adopted by the commissioners in August of 1991. Mr. Allen interjected Maryland and Montana have variations of this act but A.B. 260 offers it word for word, in its original form. Assemblyman Price explained the Uniform Law Commission is one of the oldest legislative organizations, founded in 1891. Each state appoints members to the commission and they analyze problems found throughout the United States. The law commissioners draft these bills and they are available to every state. Chairman Krenzer asked if there were any others wishing to testify in favor of A.B. 260. Being there were none, Ms. Krenzer invited those who wished to testify in opposition to the bill to come forward. Mr. Harvey Whittemore, partner of the law firm, Lionel, Sawyer and Collins, appearing on behalf of the Nevada Resort Association, testified. He stated this has been an issue which has been raised in some form, with some modification for a number of years. The general rule, as the proponents of A.B. 260 have admitted, is in the United States most jurisdictions have adopted a rule that an employer may dismiss an employee hired for an indefinite period of time, at any time, for any reason or no reason without incurring any liability to the employee. The only state he is aware of which has adopted some part of the Model Act is Maryland and the only state which has adopted a wrongful discharge statute is Montana. He reiterated the "at will" doctrine means that both the employer and employee may terminate the employment relationship without restriction, for any reason or no reason without incurring any liability to the other party. This reciprocity of rights is all too often overlooked or ignored by the proponents of this legislation in the rush to consider just cause standards. He stressed A.B. 260 would create one- sided rights without establishing mutuality of obligations. Mr. Whittemore questioned where the balance is when an employee does not suffer for simply leaving. State and federal legislation already protects particular groups from arbitrary dismissal and expressly prohibits discharge for particular reasons. Courts have recognized exceptions to this "at will" rule. The two basic judicially imposed exceptions are decisions that an employer may not terminate an employee at will if the termination will violate public policy such as filing a workers' compensation claim, something which is protected activity. That is a cause of action which generally sounds in tort, i.e., you have violated a right or those which sound in contract, i.e., you have violated an implied or expressed contract of employment. Mr. Whittemore pointed out in a recent survey, Nevada finished third in measuring pro-business attitude. He remarked Nevada is indeed a unique state because we balance things appropriately. We provide encouragement for businesses to come to this state. It is a result we can be proud of and which has greatly contributed to the historic growth of our state. He stressed the proposed legislation would not only threaten the state's economic vitality but serve as an anti-business incentive to further growth and relocation into the state. Mr. Whittemore emphasized at this point, the employment "at will" doctrine is not abused by employers and most recognize good employees are difficult to recruit and train. In addition, a large number of employees are already covered by personnel policies, employee handbooks, employment contracts, implied contracts, and collective bargaining agreements that govern termination criteria. Therefore, he opined, the proposed legislation would appear to be aimed only at the apparitional, minimal abuse of the "at will" doctrine. Mr. Whittemore continued the cost of arbitration detailed in the legislation would prove extremely burdensome. The processing of post-termination arbitration claims would be an administrative nightmare and financially devastating. He feels the "good faith" of an employer would be second-guessed months later by an arbitrator without adequate knowledge, experience or understanding of a company's business which would be especially significant given the unique employment considerations within the gaming industry. Potentially, the legislation could also conflict with existing federal and state statutes. Mr. Whittemore gave a hypothetical factual circumstance where an employee alleges he/she was terminated due to gender or race. He insisted these are protected concerted activities and the employee could potentially file charges with the Nevada Equal Rights Commission, Equal Employment Opportunity Commission, National Labor Relations Board and the Labor Commissioner. The cost to the employer for defending these charges as well as the potential for disparate results renders the proposed framework unworkable. Civil litigation of employment disputes would not be avoided in the event that the legislation were passed instead it would only become more expensive and time consuming. In conclusion, Mr. Whittemore stated arguably, though well intentioned, the legislation simply will not achieve the desired results. Rather, the definitional quagmires, administrative delays and arbitration costs would only serve to persuade companies to relocate elsewhere and not resolve an issue that is neither widespread or abused. Again, the Nevada Resort Association opposes this legislation. Mr. Bob Ostrovsky, Nevada Resort Association, testified. He reiterated many of Mr. Whittemore's concerns pointing out terminating an employee is a time consuming process and an employer has to be careful about what steps he takes. An employer has to be well aware of the many laws that exist protecting an employee. These include age discrimination acts, veteran's rights acts, equal rights, union grievance procedures, and the potential for wrongful termination lawsuits. He stated every time an employer gives a handbook to an employee it creates a contract and the employer has to be able to live by those rules and procedures. Mr. Ostrovsky then expounded on his concerns within the text of the bill: 1) page 1, line 7: Under the definition of an employee it includes managerial or confidential positions. Management staff and executive staff have rights under this bill as well as hourly employees. 2) page 1, line 22: Definition of "good cause" requires you have a reasonable basis related to an individual employee for termination. The question of "reasonable basis" becomes an issue for the arbitrator to decide whether or not it was reasonable. 3) page 2, line 3: It requires employer exercise business judgement in good faith. Good faith is defined on line 14 as "honesty in fact". This will be an issue before the arbitrator as to whether the employer exercised "good faith" and whether or not the facts surrounding the termination support that "good faith" decision. 4) page 2, line 21: "The dismissal of an employee by an employer, including that resulting from an elimination of a position" is subject to the rights under this act. If an employer decides to discontinue a product line and lay off all of the employees in that department or only one, that employee would have rights under this act to come in and determine whether or not that was in good faith on part of the employer. He has seen cases in other states where the question arose whether or not the employer should have discontinued that product line. He stated he would not accept this issue as an employer. 5) page 2, line 22: Includes lay offs and suspensions. 6) page 2, line 24: Mr. Ostrovsky referred to what he calls "constructive discharge". That is a case where an employee quits for what is apparently no reason but then later under this act could file for arbitration saying "Well, the reason I quit is x. I didn't really want to quit but I found it intolerable to work there for x, y and z reasons." He stated even a quitting employee becomes an employee subject to the rights of this act. He disagrees with this. 7) page 3, line 3: This section talks about the employee's rights in other forums: labor organizations and expressed or written agreements relating to employment. This act would allow an employee to ask for arbitration and regardless of the outcome he could still proceed with a union grievance and sue his employer in civil court for wrongful discharge. Mr. Ostrovsky feels this only adds another layer. It is not an exclusive remedy for an employee. 8) page 3, line 31: "Those standards or prohibitions are effective only if they have been consistently enforced and they have not been applied to a particular employee in a disparate manner without justification." This means an employer can have a written agreement with an employee and choose to fire that employee under that written agreement but the employee can still ask for arbitration in regards to whether you, as employer, did that in a disparate manner and whether you consistently enforced the language. A written agreement does not protect the employer either. Mr. Whittemore interjected, " Only in circumstances whereby in an express written agreement you say that you are going to not require good cause, you have to agree to a certain severance pay requirement in subsection 3 of section 12 rather than one which the parties may find more suitably covers their individual desires. Again, you are mandating by state law what a severance program is going to be which again removes the entire ability of employees to negotiate a different and/or employers to impose a different severance package." 9) page 4, line 26: States "imposes a duty of good faith in its formation, performance and enforcement" of all of these clauses. The opposite of good faith is bad faith and this opens up a whole other section of the law for which an employer can be sued. Mr. Ostrovsky stated under this bill, you could propose that an employer used bad faith in implying sections 2 through 20 again, exposing the employer to further law suits. 10) page 4, line 41: Time limits. It states an employee can file a complaint with the labor commissioner not later than 180 days after the termination. He feels this is entirely too long a period and clearly there are other hooks in this act that say, "Oh, by the way, if you do not send to the employee a written statement (page 5, line 4) for the reasons of the termination that date goes on forever." Under current law, the only obligation an employer has to give a written statement to the employee is under law pertaining to employment security. It says if an employee asks for a written statement of the reasons for termination, the employer has an obligation to provide a true statement. This act turns this around and states it must be given in every case. 11) As the proponents referred to there is an $85 filing fee with the labor commissioner which can be waived on behalf of the labor commissioner if he feels the individual filing the claim cannot come up with the $85 and the employee then has a right to demand a hearing. It is not a question of any screening device, if the employee says he wants this arbitration, he gets it. Mr. Ostrovsky expounded on the employee being held financially responsible for filing a frivolous claim. He remarked it is illogical to assume an employer could recover money from someone who has just been terminated. 12) In regards to following civil procedure including all forms of discovery, this act does nothing to promote a faster solution. The claims could go on for a very long time. 13) page 6, line 3: "If an employee establishes that a termination was motivated in part by impermissible grounds, the employer, to avoid liability, must establish by a preponderance of the evidence that it would have terminated the employment even in the absence of the impermissible grounds." The burden of proof which began with the employee has now shifted to become the employer's burden. 14) Mr. Ostrovsky stated, in response to the argument concerning covering costs with filing fees, there is a blank fiscal note with this bill, the exact cost is unknown. He raised the question of who will pay the arbitrators. Referring to ESD statistics, he recited in 1994 there were 9,396 appeal hearings and from that 1,702 board of reviews, pointing out this is the highest level outside of district court. In the labor and management area the cost of an arbitration case in a union contract averages about $5000. The arbitrator costs $800 for the day of the hearing, another $1600 for two days in order to write the decision. This does not include the employer's legal costs and the employee's legal cost. Based on $5000 per claim, the sum would be $46.9 million. If the cost applied only to the 1,702 cases that went to the board of review, the total would be $8.5 million. The $85 filing fee would raise $798,000. He maintained there is a $7 million short fall. He also does not know where these hearings will be held or who will be the court reporter. He stated a judge could be hired rather than an arbitrator for $800 a day, 90 judges at $35,000 a year would total $3.6 million. He summarized there is a substantial sum of money to operate this kind of provision and it cannot be avoided under any circumstances. Mr. Ostrovsky emphasized the "kicker" for employers is in section 20, page 7, the punitive damage provision. He recited it calls for punitive damage against any employer for taking any adverse reaction against anybody giving testimony, not even truthful testimony, just testimony. He suggested to the committee it opens yet another area of litigation which employers do not need. In conclusion, Mr. Ostrovsky reiterated his opposition to this bill and clarified he has no willingness to change or modify the sections he has referred to. He feels it is a bad idea and bad timing. Chairman Krenzer asked if there were any questions for Mr. Whittemore or Mr. Ostrovsky. Being there were none, she invited those witnesses from the Las Vegas Chamber of Commerce to come forward. Mr. Sam McMullen, with the Las Vegas Chamber of Commerce, introduced Punam Mathur, Allen Kaercher and Sharon Powers, who would all be testifying in opposition to A.B. 260. Ms. Punam Mathur, Senior Vice President of Government Affairs for the Las Vegas Chamber of Commerce, testified. She read prepared testimony, (Exhibit C), from Nina Drake, Vice President Human Resources, into the record. She then referred the committee to a memo from the Las Vegas Chamber of Commerce which focused on their concerns and observations of A.B. 260. See (Exhibit D). Briefly, Ms. Mathur pointed out the relationship between an employer and an employee is a private sector issue and in the circumstance of a dispute arising between the two, there are many laws available to both parties as a resolution. She further remarked on the divisive tone, loose language, "severance pay" provision and the requirement of documentation for termination found in this bill. Summarizing, she opined "at will" employment works. "It works because it acknowledges and respects the privacy of the employer-employee relationship. A.B. 260 appears to attempt to repair something which isn't broken." Assemblyman Anderson observed in the past, the National Chamber of Commerce has played an active role in the deliberations coming from the Uniform Law Commission. Generally, the Uniform Law Commission has put forth legislation that has been important in terms of business practices from state to state. Being there exists a great trend of people relocating to Nevada, Mr. Anderson inquired would they not expect to have a level of protection on a uniform basis from state to state. He drew attention to the inconsistency of the Chamber of Commerce being unsupportive of legislation affecting state to state business issues. Mr. McMullen responded each state utilizes the provision in different ways. If Nevada was not doing well in terms of economic diversification and drawing business into the state, there would be a need to address it but the facts speak otherwise. Mr. Anderson replied there must be a group of people within the state who are concerned about the condition of their employment and this issue otherwise it would not reappear every session. Referring to an earlier comment of Mr. Allen's, Assemblyman Nolan questioned if any members of the Chamber of Commerce were involved in the negotiating process or drafting of this bill. Ms. Mathur stated she has only been with the Chamber for four and a half years and the government affairs position for seven months but in that time she has not been aware of any conversations addressing this bill. Ms. Sharon Powers, Vice President of Human Resources for the Las Vegas Chamber of Commerce, testified. She explained whether a company has an "at will" clause in their policy manuals or their employees are represented by unions, they still must adhere to the same state and federal labor laws. Currently, many protective procedures and remedies exist for both the employer and employee. In opposition to A.B. 260, she reiterated Ms. Mathur's concerns. Mr. Allen Kaercher, President of Kaercher Insurance Agency, told the committee being involved in small business, his number one asset is his employees. He voiced his hesitancy to terminate any employee is only magnified by the complexity of this bill. The language used permits for many interpretations which is scary for a small businessman. This should be given serious consideration being small business is responsible for the majority of growth on the state and federal level. Mr. Kaercher, referring to section 4, line 9, stated, "`Employer' means a person, excluding this state, a political subdivision, a municipal corporation or any other governmental subdivision, agency..." He drew attention to the fact this excludes the government and stressed his discomfort at not being on "the same realm". He thanked the committee for allowing him the chance to speak and stressed his employees are his family working as a team. Mr. Anderson thanked Mr. Kaercher for his enthusiastic testimony. He stated how important it is for him and the committee to hear from people like Mr. Kaercher, who can speak about the effects of a bill on a practical level. Assemblyman Manendo reiterated Mr. Anderson's feelings and noted he is also sympathetic towards the small business with the many rules and complex issues they must understand and follow. He asked what Mr. Kaercher's procedures are before letting an employee go. Mr. Kaercher responded they first speak verbally with the employee, then put it in writing. He emphasized terminating an employee is not a pleasurable thing. He feels very close to his employees and referred to the CEO of his company, Mr. Jim Schober for further comments. Chairman Krenzer reminded the witnesses of the lack of time and asked they speak directly on the merits of the bill. Mr. Jim Schober explained to the committee he has created a "skill-based team" system. Disciplinary actions are done in a team environment relying on communication between the team members. This is done in order to eliminate any private agendas of any one individual. The teams are developed with goals and objectives and are either rewarded or penalized based on their progress as a team. The problems which existed within his company have sufficiently decreased. Mr. Schober emphasized this result was attained by working through the problems with his employees, not relying on bills such as A.B. 260. Mr. Kaercher reiterated his concerns and expressed his desire the government not burden the small business with any further regulations. Chairman Krenzer thanked those who had just testified and asked Larry Osborne to come forward. Mr. Larry Osborne, Executive Vice President of the Carson City Chamber of Commerce, echoed all previous statements made in opposition to A.B. 260. He called attention to the many notices businesses are required to post by state and federal law. See (Exhibit E). Mr. Osborne expressed employees and their rights are adequately protected. This bill is an unnecessary intrusion and further unwanted government interference into small business. Mr. Rick Johnson, representing the Nevada Association of Employers, stressed his opposition to A.B. 260. He summarized this bill would change the employee- employer relationship that has traditionally existed in this country for over 200 years. The "at will" option of the employer would be removed, leaving the employee free to continue working "at will". He reiterated the employer has a lot invested in his employees in terms of training, hiring costs and enhancement of job skills. He queried where is the balance that would require an employee to have "good cause" before leaving his or her employment. He explained he had discussed A.B. 260 with many of the larger employers and they all expressed strong reservations to this concept. Mr. David Howard, Reno-Sparks Chamber of Commerce, testified. He stated businesses are moving to Nevada for a reason and he wants this to continue. Reiterating previous testimony, the Chamber is in opposition to government regulations on the employer-employee relationship and therefore it opposes A.B. 260. Ms. Mary Santina, Executive Director of the Retail Association of Nevada, concurred with the testimony given, also being in opposition to A.B. 260. Mr. Danny Thompson, Nevada State AFL-CIO, testified. He clarified they did not request this bill. He stated philosophically, an employer should have a reason for terminating an employee. Due to collective bargaining agreements, "just cause" is required before terminating any employee. Chairman Krenzer inquired if there were any others wishing to testify in opposition to A.B. 260. Being there were none, she informed the committee she would allow the proponents 15 minutes for rebuttal. Mr. Tony Badillo, President of the Nevada Casino Dealers Association, expressed his surprise at the number of people against this bill. He stressed there are over 40,000 casino dealers at the will of the employers. He agreed this is a tough bill but stated being unemployed, with a family to feed and bills to pay is even tougher. With over 37 years of experience in the casino industry he has seen many injustices on the part of management. Mr. Badillo pointed out Germany, France, Spain, even Mexico have a similar law prohibiting "at will" termination. Other than the labor department trying to recover back pay or wages due, he feels there is no protection for an employee not in a union. He emphasized A.B. 260 would provide that security which does not presently exist. Mr. Allen came forward again, stating his appreciation for the testimony opposing this bill and stated he would try to address a few of their concerns. He remarked his main disagreement is with the accusation of hyperbole and "cause morally wrong". He stated this was not his creation repeating it originated in an 1884 Tennessee case. META exists primarily to eliminate this "morally wrong" concept within the idea of "at will" employment. In terms of economic conditions and other reasons to fire, an employer still maintains a good deal of leeway. Mr. Allen expounded in regards to the reciprocity or balance of the employer-employee relationship this requires "a tremendous leap of faith". Being a capitalist he understands the system and feels by no means is the relationship between labor and management one of equality. META is an attempt to establish a balance. An organization with 100 years of history would not be addressing this issue if problems did not exist. To say it is an apparition is wrong. No record exists because currently the employees do not have a voice. Addressing the statements made by the Chambers of Commerce, he asked if "at will" works so well why are there so many protections in the public sector including statutes on behalf of the non-unionized public employees. All he is asking for is equal protection for private employees. Mr. Allen further addressed the concerns of small business. He emphasized this bill will have no effect on any employer who treats his employees with decency or respect. In conclusion, META represents the acknowledgment of the Uniform Law Commission. It was supported with reservations by the National Chamber of Commerce, the AFL-CIO and the National Association of Manufacturers. He declared the United States is the last country in the world that does not have generalized legal protections for its workers against arbitrary dismissal. Sixty countries including the whole of the European community, Scandinavia, Japan, Canada and most of South America have seen fit to put these minimal protections into their statutes and to eliminate "at will" in that respect. He is asking for that same thing for American workers and for Nevada. Chairman Krenzer asked if anyone would like to rebut in opposition to A.B. 260. Being there was no one she closed the hearing. As there was no further business before the committee she 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 21, 1995 Page