MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session April 25, 1995 The Committee on Labor and Management was called to order at 3:30 p.m., on Tuesday, April 25, 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: Ms. Barbara Buckley, Assembly District No. 8 STAFF MEMBERS PRESENT: Mr. Vance A. Hughey, Senior Research Analyst Mr. Fred W. Welden, Chief Deputy Research Director OTHERS PRESENT: Mr. Ross Whitacre, Assistant Chief of Benefits, Employment Security Department Mr. Marvin Gross, King, Gross & Sutcliffe, Ltd. Ms. Barbara Gruenewald, Nevada Trial Lawyers Association Mr. Sam McMullen, Nevada Self-Insurers Association Chairman Krenzer she would start the meeting with Assembly Bill 284. ASSEMBLY BILL NO. 284 - Prohibits employer from requiring employee to share tips or gratuities with certain other employees. Assemblyman Barbara Buckley, District No. 8, thanked the chair for allowing her to testify out of order. She reminded the committee the intent of this bill is to prohibit an employer from taking tips away from their employees and giving them to individuals who did not them, namely supervisors. Instead of being paid a salary, these individuals were paid minimum wage and the wage was then subsidized by the tips being taken away from the casino dealers, such as Ms. Buckley's constituent. At the first hearing the Nevada Resort Association testified they had some concerns about the language of the bill. Ms. Buckley stated since that time she has come up with an amendment. See (Exhibit C). The first sentence of the amendment is existing law. The second sentence which is new provides, "It is unlawful for an employer to identify those eligible to receive an allocation of tips from a tip pooling agreement or to require certain employees receive an allocation of those tips." She informed the committee this language was agreed upon by herself and the Resort Association in order to address their concern about other industry practices being effected. Basically, this would allow the employees to decide how those tips would be allocated which is in place in most casinos. Additionally, the employees could vote not to give their supervisors a part of their tips and may indicate that is the employer's responsibility. Ms. Buckley explained the third sentence of the amendment is also new language which says this section would not apply to employees operating under a collective bargaining agreement. This was suggested by the Nevada Resort Association. Mr. Bob Ostrovsky's reasoning was if the union was able to negotiate how the tips were distributed this would be a matter under their agreement. Assemblyman Buckley stressed this is a good amendment which would insure fairness for both employers and employees. Chairman Krenzer drew attention to a packet of letters received from the San Remo dealers, stating every member of the committee received a copy of them and they would be entered into the record of today's meeting. See (Exhibit D). She thanked these individuals for their input. For clarification, Assemblyman Bache stated Ms. Buckley was returning to the original language of the statute and ignoring the initially proposed language of A.B. 284. The amendment she is presenting today would then replace the existing section 2. Ms. Buckley replied this is correct. Assemblyman Ernaut inquired if inserting the word "employer" for "person" actually restricts the number of people this would apply to. He explained, for example, if the general manager of a property wanted to engage in taking tips, there would be no law precluding him from doing that because he is not the employer. Ms. Buckley responded this change in language came out of bill draft and she assumed this was a clean up effort. She further assumed they meant the actual corporate entity as well as anyone charged with making a decision for that employer. She offered to verify that with bill draft recognizing it was a good point. Chairman Krenzer asked if there were any further questions for Ms. Buckley. There were none. She then asked if anyone else wished to testify on A.B. 284. Mr. Tony Badillo, President of Nevada Casino Dealers Association, testified in favor of A.B. 284. He explained he has been in the gaming industry for 37 years. He has spent the last seven years attempting to stop the injustices he has experienced by the employers. He has received many letters reiterating the concerns of Ms. Buckley's constituent in regards to the distribution of tips to supervisors and floor managers. He emphasized "the house" is the one benefitting from this type of situation because then they do not have to pay full salaries. He stressed the tips belong to those employees who have earned them. Assemblyman Anderson inquired if there is a tip pooling process in place, does the casino property withhold from those employee's regular salaries to pay their federal income tax, noting this would result in a loss of wages. Mr. Badillo answered yes. Chairman Krenzer thanked Mr. Badillo for his testimony. Being there were no more questions or people wishing to testify on A.B. 284 she stated her willingness to consider a motion. ASSEMBLYMAN BACHE MOVED TO AMEND AND DO PASS ON A.B. 284. ASSEMBLYMAN MANENDO SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. Chairman Krenzer closed the hearing on A.B. 284 and opened the hearing on A.B. 448. ASSEMBLY BILL NO. 448 - Requires that federal individual income tax be deducted and withheld from unemployment compensation benefits upon request of recipient of benefits. Mr. Ross Whitacre, Assistant Chief of Benefits, Employment Security Department, testified. See (Exhibit E). He explained this bill was originally passed as part of the general agreement on tariffs and trades by Congress last year as P.L. 103-465. A.B. 448 was an amendment attached to that bill making it the responsibility of all states to collect income tax from recipients of unemployment insurance benefits. If it is the desire of an individual to have income tax withheld from their medicare or unemployment benefits, the federal law mandates a rate of 15% of whatever amount of benefit that individual is receiving. He stressed the fact it is an individual's choice. Mr. Whitacre also explained the federal government is providing money to the state for implementation which will primarily be programming. He does not know exactly how much money will be available being it will be in the 1996 federal budget which will go into effect October 1, 1995. After implementation, his best guess is it will take them eight to twelve hours a week to administer this program. He emphasized the fact this is a new program and therefore does not know how many people will actually participate. Mr. Ernaut voiced his surprise this bill does not have a fiscal note. The federal government has made promises before in regards to regulations coming attached with money and yet the promise has turned into an unfunded mandate. Mr. Whitacre replied they know they will be getting some money up-front for implementation purposes, but is unsure if the government will provide them with ongoing funds. Mr. Ernaut further commented it is a good thing the effective date is not until 1997. This will allow them some time to see if they can make good on their promise. Mr. Bache, referring to section 2, questioned if there was any particular reason why the effective date is January 1, 1997. Mr. Whitacre replied this was passed by Congress and he would not be able to address their intent. Assemblyman Carpenter, following the same line of questioning as Mr. Ernaut, asked what happens if the promise of money falls through. Mr. Whitacre answered he does not know if they would have any choice other than as if a state they decided they would not do this and challenge the law being they did not receive any implementation funds. Otherwise, it would just become another unfunded mandate. Mr. Carpenter further asked about Mr. Whitacre's knowledge of potential interest in the program. Mr. Whitacre responded he really has no way of knowing. He does not believe it will be a great number but there will be some and regardless of the number he will need a program to accommodate them. The benefits are taxable and a 1099 is sent out each year. Each recipient is required to figure that into their income tax when they are filling out their 1040. If they are a secondary wage earner there will be taxes due. If they are a primary wage earner there will be little or no tax due and they probably would not enroll in this program. Referring to Mr. Bache's question, Mr. Ernaut commented it his understanding the reason for the effective date is due to the funding not coming about until 1996. Mr. Whitacre interjected it will take them up to six months of programming hours for implementation. Chairman Krenzer inquired if there was anyone else wishing to testify in favor or in opposition to A.B. 448. Being there were none, Ms. Krenzer said she would accept a motion. ASSEMBLYMAN ANDERSON MOVED DO PASS ON A.B. 448. ASSEMBLYMAN BACHE SECONDED THE MOTION. Before the vote, Mr. Carpenter expressed his concern of this program being a waste of time and money. Mr. Whitacre stated he does not know why or who submitted this amendment to the bill passed by Congress. He reiterated it is optional but he is being told that they need to provide people the opportunity to have this done if they desire to do so. Mr. Anderson pointed out some people do not recognize the other alternative available which is individuals can pay their taxes on a quarterly basis. For those who are not familiar with the tax code, this provides a convenience whereby the state does their bookkeeping for them. Mr. Ernaut informed the committee he would be voting in abstention because he feels this will ultimately end up being an unfunded mandate. He would support the program if he was sure the government would pay for it but if it turns out they do not he does not want to be on record supporting another unfunded mandate. Responding to Ms. Krenzer's question regarding funding, Mr. Whitacre reiterated he spoke with the regional office yesterday and they told him it is their understanding funding will be available on October 1, 1995, for implementation. Mr. Carpenter again stressed his concerns. Mr. Whitacre explained how the unemployment insurance program works. Although they are federally funded, all the laws that govern the unemployment insurance program are state laws. All states, by and large, have different laws which govern their program under the Social Security Act. This would include different formulas to calculate the weekly benefit amount or different statutes on work search. Even though the money comes from Washington, D.C., state law controls the program. In this case it has been mandated by Washington that each state will offer this program but on the other hand, the Department of Labor is asking for each state's approval. Ms. Krenzer questioned if the committee does not pass this bill and then the government does come up with the money would he be able to do anything. Mr. Whitacre replied he would not. He would have to wait until the next legislative session and they would be out of conformity with federal law. Assemblyman Hettrick suggested they place an amendment in the bill stating if they get the funds from the government they will proceed and if they do not they will not proceed. Ms. Krenzer asked if they were to amend section 2 to state, " This act becomes effective on January 1, 1997, upon receipt of federal funding." Mr. Whitacre stated this would be acceptable. ASSEMBLYMAN ANDERSON MOVED TO AMEND HIS PREVIOUS MOTION OF DO PASS. ASSEMBLYMAN BACHE SECONDED THE MOTION. THE MOTION PASSES. Chairman Krenzer clarified the committee will now vote on the motion to amend and do pass. ASSEMBLYMAN ANDERSON MOVED TO AMEND AND DO PASS ON A.B. 448. ASSEMBLYMAN BACHE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. Chairman Krenzer closed the hearing on A.B. 448 and opened the hearing on A.B. 360. ASSEMBLY BILL NO. 360 - Requires evaluation of psychological impairment of certain injured employees to calculate entitlement to compensation for permanent partial disability. Assemblyman David Goldwater, Assembly District No. 10, testified. He pointed out this bill asks one question, "Do you believe that permanent psychological damage can occur to an individual who is subject to violence in the workplace?" If the answer to this question is yes, then you should vote yes on A.B. 360. Mr. Goldwater introduced Marvin Gross, Esq., who would be supplying some anecdotal evidence. In addition, he submitted for the record a copy of Maxwell vs. SIIS, 1993. See (Exhibit F). It precludes State Industrial Insurance from paying any permanent partial disability for any kind of psychological problems. Mr. Goldwater then pointed out the fiscal note attached to this bill which under the current language would be $400,000 a year. He believes, given an amendment to tighten the language covering only acts of violence in the workplace would reduce the fiscal note even more. Mr. Marvin Gross, an attorney practicing exclusively in the area of workers' compensation since 1979, testified. He explained it was important for the committee to understand the history behind why A.B. 360 was being presented to them. Prior to March, 1993, any person who had an injury which resulted in a psychological component of their particular claim and who was later found to have a permanent psychiatric impairment would be entitled to receive an award for permanent impairment if the evaluating physician found that they had permanent psychiatric residuals resulting from their industrial accident. In March of 1993, the Nevada Supreme Court rendered a decision in a case called Maxwell vs. SIIS. In that case, they decided no individual would be allowed to receive a permanent impairment award for permanent psychiatric residuals resulting from an industrial insurance claim. That represented a major change in the practice of both SIIS and of self-insured employers prior to that time. Since 1993 no person, irrespective of the date of their industrial injury, has received an impairment evaluation for psychiatric residuals because of this decision. A.B. 360 is an attempt to restore for a very limited class of individuals the right to receive an award for permanent psychiatric impairment. Mr. Gross felt it important to note that enacted as part of S.B. 316 was a provision limiting those individuals who could even file a claim for psychiatric or psychological problems resulting from an industrial injury to those people who in fact had been injured in times of stress and danger. An individual can not at this time file a claim because of some alleged or perceived harassment on part of a supervisor and if they were to do so that claim would be denied. Only those people who have suffered a psychiatric trauma as a result from something that occurred during times of stress and danger can even file a claim. This goes one step further and says if that person after treatment and evaluation by an appropriate and designated evaluating physician is found to have permanent psychiatric residuals then that individual only if the injury arose out of a violent act, would be entitled to a permanent impairment award. He stressed the narrow class of individuals that he is seeking to have covered again by A.B. 360. He also commented on the fiscal note explaining it is misleading in the sense that it makes reference to claims that occurred not solely limited to those under the new definition of what would be a compensable psychiatric claim and not necessarily limited to those who had sustained an injury resulting in psychiatric trauma because of a violent act. He also suggests that the fiscal impact of this bill would be even less than suggested in the fiscal note. To summarize the issue addressed by A.B. 360 he told of a meeting he had with an individual who was employed at a movie theater. Her employer had received numerous complaints of people making loud outbursts and disturbances during the movies. The employer hired security to be present. After a short period of time the employer discontinued using security because of the costs. One Wednesday afternoon there was a disturbance in one of the theaters. This employee confronted those making the noise and asked them to leave the theater. She was assaulted and severely beaten and at this time she is receiving appropriate psychiatric care. Whether she will have a permanent psychiatric residual or not is unknown but if she was she would not be entitled to any form of permanent compensation under the law as it currently stands. This bill would restore rights to that class of victims and that class of individuals only. Mr. Gross pointed out it is appropriate to consider this bill this week because it is Victim's Rights Week. Assemblyman Nolan commented experiencing a violent act can produce psychological effects which many times involves long-term and detailed treatment. He questioned when looking at providing a permanent partial disability, PPD, or a permanent total disability settlement, at what point is a psychological process: one, stable and two, how would you ever rate a psychological disorder. Mr. Gross stated he would answer the second part of his question first. Nevada uses the second edition of the American Medical Association Guide for the evaluation of permanent impairment. In the preface of that book, it specifically states to the evaluating physician that no evaluation is to be conducted unless in fact the patient is medically stable. SIIS's approach in the past was to have a psychologist on the designated list of rating physicians in Reno and one in Las Vegas. The AMA Guide's lists eight particular classes of sequela that the evaluating doctor would look at in order to determine impairment; intelligence, thinking, perception, judgement, affect, behavior, ability and potential. Based upon the physician's classification in each one of those areas he would then ascertain a numerical value for their impairment. He stated the first part of Mr. Nolan's question is very difficult to answer. Mr. Carpenter pointed out SIIS already accepts responsibility for psychological trauma suffered when an injured worker is subjected to violence in the workplace. Assemblyman Goldwater interjected SIIS does provide medical treatment and temporary assistance but they do not recognize the permanency of a psychological impairment. A.B. 360 seeks the potential for a permanent partial award which referring to Mr. Gross's experiences is necessary because sometimes the scars are so deep that they are precluded from working. Mr. Ernaut inquired if psychological victims are awarded a PPD what would be your intent if there were subsequent harms. Clarifying, he reiterated because of the psychological trauma they have suffered, an individual inflicts physical harm upon themself. Are they allowed to return to the system to re-open a claim for the physical injury being a result of the psychological disorder. Mr. Goldwater responded that is an interesting point and if he was to judge a claim and a link could be found between the two he would consider that a fair claim. He has to wonder if this is a significant enough concern to limit access to a permanent award to people who really need it. Mr. Ernaut explained he has serious concerns about opening the door to an immense amount of frivolous claims especially because of the subjectiveness of psychological disorders and the looseness of the language. Mr. Goldwater interjected he shares those same concerns. He wants the language as tight as possible. He pointed out though this is still a matter of fairness. He does not believe people should be told no when they rightly deserve compensation because somebody else in the future might take advantage of it. He does not believe this is right and that is not what the SIIS is about. Mr. Goldwater stressed he is very willing to work on developing tight language. Chairman Krenzer reminded him that the committee is not opposed to working with him but it is his responsibility to develop some amended language and then bring it back to the committee. Ms. Krenzer queried when was it statute that psychological impairment was deemed legal as part of a PPD. Mr. Gross replied subject to interpretation by the Supreme Court, there was nothing one way or the other until 1993 in March when the Supreme Court rendered its decision. There are two possible interpretations of what used to be NRS 616.607, subsection 3, and NRS 616.605, subsection 2. Basically, it focused upon whether or not one looks at the language that says a valuation be conducted under the AMA guides, which included a chapter on psychiatric impairment. This was essentially what had been done up to that time or if you focused on the provision in subsection 3 which dealt with the term physical. The court adopted the later interpretation. Ms. Krenzer wanted to clarify that because previous to 1991 it had not been included. Mr. Gross explained the language in the statute was the same. The interpretation was that they would pay awards after this decision they have followed the Supreme Court's interpretation of the statute. Mr. Hettrick pointed out if we are truly talking about a worker that is injured by an unprovoked act of physical violence he does not see why they are attempting to punish the employer. Unless the employer was the perpetrator he does not see why compensation should come at the expense of the employer. He further pointed out people with these type of claims would have criminal rights, civil rights, victim's rights, many rights. In addition, they are already being paid for expenses and TTD since this has occurred. Mr. Hettrick stated the employer can not write a safety plan which would stop this. There is nothing he can do to stop acts of physical violence. Mr. Goldwater explained he disagrees, being he believes the employer can do things to make the worker safer. In regards to the increase in premium for the employer, he believes it would be almost negligible for this benefit. An increased mod factor and perhaps some points against the employer will occur but if he is having excessive claims that is what those things are designed to do. Mr. Hettrick recognized the point Mr. Goldwater is trying to make but stressed you can go so far but you can not protect against all of these things. Referring to Mr. Gross's anecdote, he stated if the employer had not discontinued safety precautions because of financial reasons, the employees would not have had jobs. "Somewhere we have to strike a balance here. That is what this is about." Mr. Hettrick further proposed they incorporate the language currently in NRS 616.5019 which essentially says it has to be proved by clear and convincing medical or psychiatric evidence that this indeed was what caused the psychological impairment. He stated that language was very carefully crafted and is reasonable for both sides. He drew attention to the explosion in Ohklahoma stating there could be hundreds of claims of psychological impairment. This might be a policy decision but there could be a very gigantic loss, very significant in terms of a fiscal note along with the actual physical injuries that went with it as well. Mr. Hettrrick questioned if this would even be work related, a SIIS claim. Yes, employees were injured but there were many others who were not employees. Mr. Hettrick stated this is a very big policy decision that needs to be looked at in detail. Chairman Krenzer drew attention to page 2, lines 11 and 12, "unless the evaluation is conducted to determine the percentage of an injured employee's permanent physical impairment pursuant to NRS 616.5173 or 616.51735" and asked for clarification in regards to the usage of the word "unless". Mr. Gross explained the language was drafted that way so the effect of granting an impairment would only be for purposes of paying the award itself and not to then bootstrap someone's eligibility for vocational rehabilitation. She further pointed out the purpose for rehabilitation would be for the person who was too psychologically disabled to return to their previous employment. Mr. Gross stated currently, statutory step increments are built in so that an individual has to have a certain percentage of impairment in order to allow a certain level of vocational rehab. Mr. Gross referring to the statement of "opening the door", stated historically, there has not been a large onslaught of psychiatric claims in this state in regards to disasters. Based upon the two fires which occurred in Las Vegas, there were not large numbers of psychiatric claims at least not that he saw. Ms. Krenzer agreed there are circumstances when a person could be permanently disabled psychologically at work but reiterated Mr. Goldwater needs to bring back an amendment which takes into consideration some of the things mentioned today. Briefly, Mr. Hettrick made one last statement. "Had this language been in statute, I think you might have seen a lot more claims at the time of those major disasters because what you testified to earlier is that the language was not there. It was an interpretation." Ms. Barbara Gruenewald, Nevada Trial Lawyers Association, stated she would like to testify but would wait until Mr. Goldwater returned with amended language. Chairman Krenzer asked if there was anyone else wishing to speak in favor or in opposition to A.B. 360. Mr. Sam McMullen, Nevada Self-Insurers Association, came forward. He reiterated the previous concerns raised, particularly by Assemblyman Hettrick in terms of NRS 616.5019. He stated there are a couple conditions in 616.5019 including primary cause in addition to the clear and convincing level of evidence that were seriously debated and discussed last time. Those are the types of things which needed to be there as some sort of predicate. Mr. McMullen stated he thinks he knows the problem Mr. Goldwater is trying to solve but there needs to be some additional qualifiers added so that everyone will feel comfortable. In issues like this, he also believes there needs to be some sort of continuing obligation to evaluate because again, there is a question mark about how permanent the psychological impairment may be. It is not something that has been actively thought out or decided in any other situation. Mr. McMullen further expressed he is interested in looking at thresholds on issues that relate to things as arguably subjective or sometimes variable as these kind of issues are. There needs to be some sort of impairment above whatever threshold level they may try to decide. He stated these issues have been discussed when it comes to neurological disabilities but he does not know that they are inappropriate for this discussion. A brief discussion engaged between Mr. Carpenter and Mr. McMullen in regards to stress provisions and attempting to define what and when incidences are compensatory. There were no further questions for Mr. McMullen and no others wishing to testify. Chairman Krenzer closed the hearing on A.B. 360. The committee reviewed the amendments for A.B. 383, A.B. 57 and A.C.R. 20. Finding no opposition, Chairman Krenzer stated these would be brought to the floor. Being there was no further business to come before the committee, the meeting was adjourned at 5:08 p.m. RESPECTFULLY SUBMITTED: Jennifer Carnahan, Committee Secretary APPROVED BY: Assemblyman Saundra Krenzer, Chairman Assemblyman Dennis Nolan, Chairman Assembly Committee on Labor and Management April 25, 1995 Page