MINUTES OF THE ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT Sixty-eighth Session June 22, 1995 The Committee on Labor and Management was called to order at 5:15 p.m., on Thursday, June 22, 1995, Chairman Dennis Nolan presiding in Room 119 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. Douglas A. Bache Mr. John C. Carpenter Mr. Pete Ernaut Mr. Mark Manendo COMMITTEE MEMBERS EXCUSED: Mr. Bernie Anderson Mr. Brian Sandoval 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. Ray Bacon, Nevada Manufacturers Association Mr. Mark Smith, President, Las Vegas Chamber of Commerce Ms. Alice Molasky, Commissioner of Insurance Mr. Jack Jeffrey, Southern Nevada Building and Construction Trades Council Mr. Doug Dirks, General Manager, State Industrial Insurance System (SIIS) Mr. John Taylor, Southern Nevada Injured Workers Chairman Nolan began the meeting in the form of a subcommittee due to other members still participating in other Assembly committees. The first order of business the subcommittee would address would be Senate Bill 128. SENATE BILL NO. 128 - Authorizes agreement that prohibits former employee from pursuing certain competitive activities. Harvey Whittemore, Nevada Resort Association, testified. He introduced Mr. Bob Ostrovsky, also representing Nevada Resort Association. Mr. Whittemore stated they are here to lend their unqualified support to S.B. 128. This bill codifies the existing common law in the state of Nevada. It deals with confidentiality agreements, as well as non-competition agreements. Mr. Whittemore explained the bill's purpose is simply to restate non-competition agreements, when entered into by both parties, are appropriate. He expounded another provision of this bill states, the documentation an individual acquires when he is with a particular company is confidential and can be subject to a trade secret's agreement. The bill is necessary due to an unfortunate series of events having to do with a misinterpretation of the effect of the applicable statute. He reiterated it was requested in order to clarify the common law is appropriate. Assemblyman Krenzer asked for clarification concerning if an individual enters into a contract, the agreement is binding. Mr. Whittemore replied that is correct. He pointed out the applicable, qualifying factors can be found at the bottom of the bill. Ms. Krenzer called attention to section 2a, "Pursuing a similar vocation in competition with or becoming employed by a competitor of the person, association, company or corporation". She noted this is quite broad, however, it is up to the person signing the agreement. Bob Ostrovsky explained every employee thinking of entering into one of these agreements is encouraged to consult with their private counsel and to give it some serious consideration. They are making a binding agreement with the company. Chairman Nolan inquired why if this is common law does it need to be placed in statute. More specifically, he asked what loopholes existed allowing for the difficulty in enforcing those type of covenants. Mr. Whittemore responded up until a very recent, local, court case which was challenged by the deputy attorney general with respect to the enforcement of these provisions, it has been the consistent practice of the courts of this state to enforce these agreements as long as they are reasonable in both scope and time. He reiterated it is a traditional practice, used in Nevada for over 100 years. Ray Bacon, Nevada Manufacturers Association, testified the court case involved one of his members. The company consisted of about 25 people who spent, effectively, approximately $40,000 defending themselves against the state. There was discussion about taking the case to the Supreme Court. He urged support for S.B. 128, stating it does a good job of clarifying something which needed to be clarified. Chairman Nolan thanked the witnesses. He asked if there were any more witnesses wishing to testify or if any of the subcommittee members had further questions. There were none. ASSEMBLYMAN KRENZER MOVED THE SUBCOMMITTEE RECOMMEND DO PASS ON S.B. 128. ASSEMBLYMAN ERNAUT SECONDED THE MOTION. THE MOTION PASSED. Chairman Nolan clarified the subcommittee will recommend to the committee of the whole do pass on S.B. 128. Being he was still waiting on more members to arrive, Mr. Nolan stated he would take this opportunity to allow Mr. Smith to address some concerns which had arisen in regards to A.B. 498. Mark Smith, President of the Las Vegas Chamber of Commerce, testified in the last couple of days something called the Las Vegas Chamber Fund was brought to his attention. He explained a gentleman approached his executive committee proposing they form a self-insured group through his company. At that time, the Las Vegas Chamber of Commerce declined. Calling attention to (Exhibit C), he declared it does not represent the Las Vegas Chamber nor do they have anything to do with this program in any way. In fact, the executive committee is looking into taking some action in regards to the name because it is confusing. Chairman Nolan thanked Mr. Smith for clarifying this. He stated there had been numerous complaints and concerns about the document, (Exhibit C). Assemblyman Ernaut opined the chairmen of this committee might want to ask for an investigation of the Nevada Chamber Fund. He stressed this document is outside the breach of what the committee has decided on with regard to group self- insurance. It is very close to fraud and is something that should be looked into by not only the system but the attorney general's office. Chairman Nolan concurred with Mr. Ernaut. Alice Molasky, Commissioner of Insurance, explained she has just received this document but it appears to be a transaction of an unauthorized insurer which is prohibited under NRS 685B. She stated she would need more time to review this particular document, but she does have a similar document where there is an ongoing investigation occurring with a different organization. Chairman Nolan explained being more members have arrived, the meeting would now continue as a committee of the whole. He would like to address any remaining portions of S.B. 458. Jack Jeffrey, Southern Nevada Building and Construction Trades Council, testified. He wanted to clarify it has been agreed on that in regard to the pre-S.B. 316 claims or any of the retroactive claims, medical benefits would be retroactive. If the injured worker had a treating physician they would be entitled to keep that physician. If they were on a panel they would operate as they would on a managed care organization (MCO) panel, generally. If they were not on a panel, then the injured worker could still keep his treating physician. He introduced Mr. Dirks, who has a few problems with this issue if this is what is going to happen. Doug Dirks, general manager of SIIS, testified if this language was to be adopted, he would like to add two provisions. See (Exhibit D). One would be, if the physician was not a member of a MCO and the case did not transfer into that environment, the treatment would follow protocols to be adopted by the system. The medical provider would be required to follow protocols for the pre-316 cases that were not covered by managed care. The second item he recommended was the standards, as to which pre-316 cases are required to go into managed care, would be in accordance with standards to be adopted by the general manager. He believes this to have been in the original language. His concern is there are some pre-316 cases that do not require managed care, they do not have ongoing medical care occurring in the claim. To move those cases into managed care and to pay a MCO to manage them would be throwing money away. He reiterated the system would like to have those cases that would be referred into managed care be done so in accordance with standards to be adopted by the general manager. Assemblyman Goldwater asked what would be the rate of reimbursement for the doctors. Mr. Dirks replied if they are not otherwise on a panel of physicians which the system is under contract with through a MCO, they would be subject to the existing fee schedule. SIIS would have no contractual relationship to alter that. Mr. Goldwater clarified because of this law, physicians might get paid less to treat somebody because they signed on to a panel. Mr. Dirks replied the claim would not be subject to the rules of the MCO. He pointed out under the language he has suggested, it would be subject to protocols. There would be utilization review occurring by the system but the fees would still be subject to the caps of the medical fee schedule. There would, probably, not be a discount from the fee schedule. Mr. Ernaut called attention to the fact there will most probably be some technical problems with this bill and it is anticipated it will go to a conference committee. He suggested if there are concerns with the smaller details the committee make a list and be prepared to cover them in conference. Mr. Jeffrey expressed his concern with changes being done in conference. He desires the committee to work out as many issues as possible while the bill is still in committee. Mr. Jeffrey pointed out new language drafted by Barbara Gruenewald, Nevada Trial Lawyers Association. It would follow the first amendment suggested by Doug Dirks. See (Exhibit D). He supports this as well as Mr. Dirks' language. In regard to proposed language submitted by Barbara Gruenewald, Mr. Dirks stated the language is acceptable to the system, subject to the additions to the requirement that the non-MCO physician follow protocols adopted by the system and the general manager is able to develop the standards to determine which pre- 316 cases will be referred to managed care and which ones will not. Mr. Hettrick commented he would like to add, "if that physician refuses to do so then you could require they change physicians". Mr. Hettrick stated Mr. Dirk's language might already cover this. Mr. Dirks stated DIR could develop a protocol for this particular case. These would only be the pre-316. The protocols could be developed and adopted by regulation by the system. Mr. Hettrick and Mr. Dirks agreed they would feel more comfortable having this language in the statute. Mr. Hettrick's suggestion would be added to Ms. Gruenewald's sentence. Mr. Hettrick expressed another of his concerns is in regard to those living in rural areas where they do not have managed care. Mr. Dirks responded if managed care is not otherwise available, you should not then compel it under this provision. Mr. Hettrick clarified the intent would not be to force them to go any significant distance if it were not available. If it becomes available, he has no problem with them going into managed care. The intent is simply to make sure they do not put an undue burden on people for a relatively small number of cases. Mr. Dirks interjected the other area this might be addressed in is the standards to be adopted by the general manager as to who is covered. Chairman Nolan recognized Mr. Taylor wishing to testify from Las Vegas. John Taylor, Southern Nevada Association for Injured Workers, questioned Mr. Dirks' proposed language. He inquired how will this affect the 1800 workers currently in the system who are permanently totally disabled. Mr. Dirks replied he believes this is the language the general manager will need to adopt the standards for. He explained if the worker has significant ongoing medical expenses, under this language, they would be moved into a managed care setting. If the worker does not have significant ongoing medical expenses and the claim would not be benefitted from this type of setting, he would choose not to put it into managed care. Chairman Nolan said he would entertain a motion. ASSEMBLYMAN ERNAUT MOVED TO ADOPT THE DISCUSSED AMENDMENTS. Mr. Hettrick clarified the motion includes the amendments to section 105, submitted by Mr. Dirks', and Ms. Gruenewald's language. Chairman Nolan replied this is correct. ASSEMBLYMAN HETTRICK SECONDED THE MOTION. Ms. Krenzer disclosed she works for Sierra Health Care Options which is a managed care organization. She stressed she will not be voting on this amendment. Mr. Goldwater made the same disclosure but asked Mr. Dirks to clarify the intent of his proposed amendment. Mr. Dirks clarified, "if you have a pre-316 claim and it goes into managed care and the physician was the pre-316 and post-316 physician, you would be subject to the terms of your contract. If your contract provided for discounts from fee schedule the case would then get the discount from the fee schedule. Those cases which remain outside of managed care will be subject to protocols but would not be subject to any contractual fee schedule discounts." Mr. Goldwater reiterated he will be abstaining from this vote but encouraged committee members to look into this. He still has some reservations about these provisions. There was some discussion among the committee concerning the procedure for voting on amendments. Upon everyone concurring, a vote was taken on the previous motion. THE MOTION CARRIED. ASSEMBLYMAN KRENZER AND ASSEMBLYMAN GOLDWATER ABSTAINED. Chairman Nolan asked Mr. Ernaut for his report on the subcommittee meeting on employee leasing. Mr. Ernaut noted this developed into a heavily negotiated portion of this bill. He stressed the result is to accept the language which currently exists in S.B. 458 with the deletion of section 16. He emphasized this is consensus language for all people involved. ASSEMBLYMAN ERNAUT MOVED TO ADOPT AMENDMENT. ASSEMBLYMAN HETTRICK SECONDED THE MOTION. THE MOTION CARRIED. Chairman Nolan clarified it will be the intent of the committee to include all of these amendments in a floor amendment. Mr. Nolan explained he would like the committee to now review amendment 1189 which includes the adopted language relevant to S.B. 458. See (Exhibit E). He asked Mr. Hughey to review the technicalities of the amendment. Vance Hughey, Senior Research Analyst, stated amendment 1189 replaces amendment 1097. This amendment includes all of the recommendations made by the committee with the exception of the recommendations regarding confidentiality, sections 8 and 47. See (Exhibit F). These recommendations will be incorporated into the final version of this amendment, due back tomorrow morning. After a brief recess, Chairman Nolan called the meeting back to order. He said he would take a motion on S.B. 458, which would include amendment 1189 and the subcommittee report on confidentiality, to S.B. 458. ASSEMBLYMAN ERNAUT SO MOVED. ASSEMBLYMAN HETTRICK SECONDED THE MOTION. Ms. Krenzer disclosed she will not be voting on the bill as a whole. Mr. Ernaut expressed his appreciation to the committee members and all other parties involved for all of their hard work. He explained it was a difficult issue and yet it was handled very judiciously and responsibly. Chairman Nolan and Chairman Krenzer reiterated Mr. Ernaut's sentiments. Mr. Goldwater commended the chairmen for their hard work. THE MOTION PASSED. ASSEMBLYMAN BACHE VOTED NO. ASSEMBLYMAN KRENZER ABSTAINED. Chairman Nolan stated the last order of business was to report the subcommittee's recommendation of do pass back to the full committee on S.B. 128. ASSEMBLYMAN ERNAUT MOVED DO PASS. ASSEMBLYMAN KRENZER SECONDED THE MOTION. THE MOTION CARRIED. Being there was no further business before the committee, Chairman Nolan adjourned the meeting at 6:07 p.m. RESPECTFULLY SUBMITTED: Jennifer Carnahan, Committee Secretary Assembly Committee on Labor and Management June 22, 1995 Page