MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session March 14, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:45 a.m., on Tuesday, March 14, 1995, in Room 119 of the Legislative Building, Carson City, Nevada, and teleconferenced from the Grant Sawyer State Office Building at 555 East Washington Avenue, Room 4401 in Las Vegas. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Randolph J. Townsend, Chairman Senator Ann O'Connell, Vice Chairman Senator Sue Lowden Senator Kathy M. Augustine Senator Raymond C. Shaffer Senator John B. (Jack) Regan Senator Joseph M. Neal, Jr. STAFF MEMBERS PRESENT: Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst Molly Dondero, Committee Secretary OTHERS PRESENT: Joan Lundeen, District Loss Prevention Supervisor, Ledcor Industries, Associated Builders and Contractors Mark Haversack, Workman's Compensation Coordinator, Occupational Safety and Health Administration (OSHA) Compliance Officer, Harrah's Danny Thompson, Political Director, Nevada State American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) Jack Jeffrey, Secretary-Treasurer, Southern Nevada Building and Construction Trades Council Lynn Grandlund, President, Grandlund Watson Clark and Associates, Vice President, Employers of Nevada Douglas Dirks, General Manager, State Industrial Insurance System Larry Harvey, Unified Business Coalition Ron Swerzick, Administrator, Department of Business and Industry, Division of Industrial Relations (DIR) Arthur J. Busby Jr., Benefits Administrator, Horseshoe Hotel and Casino, Las Vegas Eloise Koenig, Self-Insurance Coordinator, Workers' Compensation Section, State Industrial Insurance System (SIIS) Kay Armstrong, Attorney, Nevada Trial Lawyers Association Larry Zimmerman, President, CDS of Nevada Bob Ostrovsky, Lobbyist, Nevada Resort Association Scott Edwards, Deputy Attorney General, Workers' Compensation Fraud Unit Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Samuel P. McMullen, Lobbyist, Nevada Self-Insurers Association Charles Nort, President, Nevada Alternative Solutions Tom Waters, Granite Construction Company Michael J. Busick, Business Manager and Financial Secretary, Painters and Allied Trades Local No. 567 Ernest Gresham, Concerned Citizen Mario Pucci, Lobbyist, Citizens of Nevada Discussion began on Proposal 7 of Exhibit C (Workers' Compensation Reform Proposals.) Exhibit D was presented for information. Joan Lundeen, District Loss Prevention Supervisor, Ledcor Industries, Associated Builders and Contractors, indicated her support of Proposal 7. She indicated having a board to oversee the actions of the State Industrial Insurance System (SIIS) is best for both the worker and for the employer who pays into the system. Senator O'Connell asked why Ms. Lundeen feels strongly about having the self-insured employer represented on the board. Ms. Lundeen stated often the same rules apply to the self-insured employer that apply to SIIS. She stated most of the administrative regulations are the same. Mark Haversack, Workman's Compensation Coordinator, Occupational Safety and Health Administration (OSHA) Compliance Officer, Harrah's, spoke from Las Vegas. He stated if a self-insured employer is on the board, that member would be able to share positive experiences of the self-insureds. He indicated this would benefit the entire system. Danny Thompson, Political Director, Nevada State American Federation of Labor and Congress of Industrial Organization (AFL-CIO), stated they are not opposed to a board of directors, but indicated they are concerned about the makeup of the board. He stated he does not feel it is representative enough of injured workers. Jack Jeffrey, Secretary-Treasurer, Southern Nevada Building and Construction Trades Council, stated though he has no objection to the board, he feels it should be the same makeup as it was previously. Senator Neal asked what the makeup of the board should be. Mr. Thompson stated the board should be the same as it used to be. He indicated it was 3/3/1. Lynn Grandlund, President, Grandlund Watson Clark and Associates, Vice President, Employers of Nevada, testified from Las Vegas and expressed her support for reinstituting the board. She indicated since the removal of the board, the employers have no idea what is occurring with their investment portfolios. She commented the changes made within the State Industrial Insurance System (SIIS) have been made without any input from policy holders. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), requested the decision to reinstitute the board be held for 2 years allowing the Governor to retain control over SIIS. He indicated SIIS is able to move more quickly in response to problems with the Governer controlling the system, than it can with a board overseeing its actions. Larry Harvey, Unified Business Coalition, explained when the Governor took over control of SIIS 2 years ago, it was promised there would be an advisory group formed consisting of people from the small business community which would meet to keep the business informed of changes being made in SIIS. He stated this has not happened. He stressed the Unified Business Coalition requests the board be reinstated. Senator Townsend suggested there should be at least quarterly meetings to keep the business community involved in the process. He suggested this be a policy decision. Mr. Dirks indicated this is possible and conceded there is a need to do a better job in communicating with the businesses involved with SIIS. He stated the way the law is currently written, the general manager of SIIS takes over the powers the Governor currently has over SIIS on July 1, 1997. Senator Regan asked what Mr. Dirks thinks the word "oversee" indicates in Proposal 7. Mr. Dirks explained he views "oversight" as being used in the same way it is with an insurance company. There is a board of directors consisting of either policyholders, or stockholders, or a labor-management mixture. He indicated the statutes allow "oversight" as approving independent certified public accountants, approving the appointment of an actuary, and approving investment managers. The day-to-day management would rest with the officers of the corporation, but their appointment and removal is subject to the board of directors. Mr. Haversack testified that some self-insureds still have claims in SIIS and would like to be considered if a board is established. SENATOR O'CONNELL MOVED TO INCLUDE PROPOSAL 7. SENATOR LOWDEN SECONDED THE MOTION. ***** Senator Neal discussed Proposal 7 and expressed his desire to add an amendment to the proposal. He stated; The full faith and credit of the state is placed behind the system, because it is a public system, and when it goes under, it will be all of the people of the state of Nevada who will be responsible for bringing this back to make the system whole... the person who receives the benefit is the reason we have SIIS and therefore I would offer an amendment to the motion that the board be 3/3/1. SENATOR NEAL MOVED TO AMEND PROPOSAL 7. SENATOR SHAFFER SECONDED THE MOTION. ***** Senator Shaffer asked how the members of the board will be chosen. Senator Townsend stated he assumed it would be the Governor. THE MOTION TO AMEND FAILED. (SENATORS TOWNSEND, O'CONNELL, LOWDEN, AUGUSTINE AND REGAN VOTED NO.) ***** A vote was taken on the first motion. THE MOTION TO INCLUDE PROPOSAL 7 CARRIED. (SENATOR SHAFFER AND SENATOR NEAL VOTED NO.) ***** Discussion was held on Proposal 9a. Senator Townsend asked Mr. Dirks if the Department of Insurance (DIR) should have greater control over certain items of confidentiality. Mr. Dirks stated all information on policyholders is confidential. Because SIIS is a public entity they are required to disclose virtually everything they do in a public forum. The exceptions to that is information relating to policy holders and their accounts and information relating to claimants. Ron Swerzick, Administrator, Department of Business and Industry, Division of Industrial Relations (DIR), stated the financial information for the self-insured employer is retained by DIR. Arthur J. Busby Jr., Benefits Administrator, Horseshoe Hotel and Casino, Las Vegas, testified from Las Vegas and expressed his support of Proposal 9a. He indicated since the Horseshoe Club is a family-owned business, all their financial records are confidential under every state agency except for DIR. Eloise Koenig, Self-Insurance Coordinator, Workers' Compensation Section (SIIS), stated there is a "glitch" in the law, and changes need to be made through the statutes. She stated Proposal 9 has to do with the Division of Insurance. She indicated Proposal 9a is new. She indicated there is no impact to the injured worker under Proposal 9 or 9a. She stated financial records not protected by statute are available to any competitor who wants to see them. She stressed this proposal would protect the individual self-insured business, not the associations. Senator Townsend asked if Mr. Busby and Mr. Swerzick are comfortable with Proposal 9. Mr. Swerzick stated Proposal 9 protects confidentiality of financial records. No action was taken on Proposal 9a. Discussion was held on Proposal 10. Mr. Dirks expressed his opposition to Proposal 10. He indicated the law still must address what will happen when the law expires in 2 years. He stated: The question is do you have to go back and recoup the 2 year period of time that was lost and increase the benefit to that, or do you do a fresh start effective whenever the freeze comes off. Senator O'Connell asked if there would be a $2.5 million in savings if the freeze remains in effect. Mr. Dirks stated it would be approximately that large a savings. Senator Townsend commented the total savings over a 2-year period would be $8.6 million. Senator Neal asked what the effect would be on the injured worker. Mr. Dirks responded the worker would not receive as much money each month. He indicated if the benefit were indexed, the worker would not receive the benefit of the index. Per worker for 1995, there would be a $19 per week difference between an indexed average monthly wage, and a frozen average monthly wage. If the reduction were to continue through 1997, there would be a cumulative effect of a $76 reduction on a bi- weekly basis. Senator Townsend asked what stand the Governor is taking on the freeze. Mr. Dirks indicated "the Governor's general view is that he is opposed to further reductions in benefits." Senator Lowden asked if SIIS is healthy enough to not have a freeze. Mr. Dirks indicated Proposal 10 will not make the difference between solvency and insolvency for the system. He stated reducing the cost of the benefit structure is in the financial interest of the system. Senator Regan indicated by removing the freeze there would be a benefit to the worker. SENATOR REGAN MOVED TO REMOVE THE FREEZE ON JULY 1, 1995 AND TO START FRESH FROM THERE. SENATOR SHAFFER SECONDED THE MOTION. ***** Senator Neal discussed the state of recovery SIIS was experiencing and asked what methods besides the freeze could be used to continue the recovery . Mr. Dirks indicated SIIS will have to decrease their operating costs. He stated, 1) if the operating costs are decreased, additional money can be used for benefits, 2) they can affect the benefit levels set by statute, and 3) SIIS can increase premiums to offset the operating costs. Senator Neal asked if Mr. Dirks would consider using the per claim system for the Managed Care Organizations (MCOs). Mr. Dirks stated he will consider anything which will make the MCO program as cost efficient as possible. Senator Lowden expressed her concern for the solvency of SIIS. She indicated she would like to see the injured worker receive more benefits, but is not convinced SIIS can absorb the expense. She expressed her sadness at not being able to vote for elimination of the freeze. THE MOTION TO REMOVE THE FREEZE FAILED. (SENATORS TOWNSEND, LOWDEN, O'CONNELL, AND AUGUSTINE VOTED NO.) ***** Senator Townsend indicated Proposal 10 will be discussed again. Senator O'Connell opened the discussion on Proposal 11 by asking if there is one formula for determining the average wage. Senator Townsend asked if there is a simple way to do the computation. Mr. Dirks stated the calculations are extremely complex. The calculations are based on regulations by DIR. He stressed SIIS is trying to simplify the methods, but SIIS, to date, has been unable to change the methods used to calculate. Senator Townsend asked for a policy stating how SIIS will communicate with the claimant and the policy holder on the average wage. Mr. Dirks stated there is information provided at this time, though, it may not be as detailed as the Nevada Trial Lawyers want it to be. Senator Neal asked if the calculation of the average monthly wage is equal to cutting benefits. Mr. Dirks stated it is not. The freeze reduces the amount given as benefits. Kay Armstrong, Attorney, Nevada Trial Lawyers Association, explained Proposal 11. She commented she is requesting a statement showing 12 weeks of wage history for a client. This statement will allow a claimant to compare their own wage stubs to those provided by the employer. Mr. Dirks explained the information is already available. He asked if it should be required for every case even though there may be no need for it. He suggested the report would raise operating costs. Larry Zimmerman, President, CDS of Nevada, stated DIR regulations cover this request. He pointed out there is already a form used listing the 1 year's wages calculation. He stated the calculations are very complicated and the work required to send it out on each lost-time claim will be considerable and unnecessary. He suggested DIR can add to the current form the wording, "if the exact calculation is desired then it may be requested from the insurer." Bob Ostrovsky, Lobbyist, Nevada Resort Association, stated the calculations are available and to send them out automatically with each claim would not be cost efficient. He said a regulator may make these decisions as needed and it does not need to be in the statutes. Mr. Thompson stated he feels the formula is simple and the request is not excessive. He does not feel there is too much paperwork involved. Senator Augustine asked if there is a standard form for the calculations. Mr. Thompson said he is not aware of one. Senator Townsend emphasized he does not want the committee micro-managing the day-to-day management of SIIS. He said he does not want anything in statute on how to calculate the average monthly wage. He said he does not think it is too much to ask of SIIS to provide one sheet of paper with the necessary information on it to help the injured worker. He suggested SIIS think of a way to make the information available. There was no action on Proposal 11. Proposal 12 was discussed. Senator Shaffer asked if a person has been dealing drugs and stops that activity, is he then eligible for benefits. Scott Edwards, Deputy Attorney General, Workers' Compensation Fraud Unit, stated this regulation will help determination of claims based upon false statements to SIIS about earned income. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), explained there was a case where a person had earnings from drug sales and was still collecting benefits. Benefits were discontinued. SENATOR REGAN MOVED TO INCLUDE PROPOSAL 12. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Proposal 15 and Proposal 15a were discussed. Samuel P. McMullen, Lobbyist, Nevada Self-Insurers Association, requested the report be filed at the end of the work shift with a safety valve for those workers who discover later they have been injured. He suggested quick intervention on the part of the insurer is important to the needs of the worker. Senator Shaffer asked if this regulation will increase the number of claims filed. Mr. McMullen stated there is a difference between filing a claim for medical treatment, and filing a note of incident. Senator Shaffer asked if there is a way of filing a notice to assure there may be a claim at a later date. Mr. McMullen stated there is. Senator Neal asked what is the burden to the self-insured if they do not have the immediate notification of the injury at the end of a shift. Mr. McMullen explained "the quickest notification possible of a potential injury or potential claim would be there so that they could be aware so that the process could start...there would be appropriate safeguards for those that are discoverable later." Senator Neal asked what happens to the injured worker if they do not file a report of injury at the end of the shift. Mr. McMullen stressed there has to be a safety valve for the worker. If there is a reason it is not discoverable as an injury at the end of the shift, the worker would still be able to file a claim. Senator Neal stressed the human body is not a machine and a person does not always know when it is damaged. Senator Augustine suggested the language be "report of accident" instead of "report of injury." Mr. McMullen agreed. Mr. Jeffrey stated there are different types of employers whose employees work under different circumstances. He pointed out that many employees do not work in a supervised environment and have no one to report to at the end of the shift. He suggested Proposal 15 is a way for the employer to deny a claim. Senator Shaffer expressed his dislike of the wording in Proposal 15 because it requires a written report of injury. Mr. Thompson pointed out that many construction workers may be at a different location each day and may not return to the main business shop for weeks at a time. Reporting at the end of the shift is extremely difficult. He stated this is "just another hoop for the injured worker who is legitimately injured, to jump through." Senator Townsend clarified the wording should say "notice" not "claim," so as not to preclude the injured worker from later filing a claim. Mr. Dirks explained the form C-1 which is an incident report. If the incident matures into a claim, then a C-3 is filed, which is the notice of injury. He expressed the C-1 is retained by the employer and if no further action is necessary, SIIS never sees the form. He stated the C-1 must be filed within 30 days. Ms. Grandlund stated the language should say "written report of accident." She said it is important to the employers to have knowledge of the accident. Senator Lowden pointed out there are times when a person does not realize they have an incident to report. Ms. Grandlund responded she thinks most people have an awareness when they have pulled a muscle and should report that when it occurs. Senator Townsend stated these proposals, 15 and 15a, should be a report of incident, and should not preclude someone who did not file an initial report, to file one when they become aware of the injury at a later date. Charles Nort, President, Nevada Alternative Solutions, stated there are two requisite components to a claim, the C-1 (the report of accident), and the initial report of treatment for the injury which can be filed within 90 days. The C-4 form is sent when a person is treated. The two forms complete the filing of the claim. He stated he does not feel it an unreasonable request to ask that notice be given if there is an accident. Mr. McMullen stated either filling out a C-1 or C-3 should accelerate the notification period of the documents. He said if there is a "notice of an incident, make sure there is something there... with appropriate safeguards." Senator Townsend asked for clarification. He commented: If it is a C-1, if it is a notice of an incident and the worker does not file it by the end of the shift, this does not preclude them from somewhere down the line, filing a report of injury. Is that what you are saying. Mr. McMullen answered, "It is how I understand it." Senator Townsend stressed it would not preclude someone who did not know he was hurt from filing a injury report. Mr. McMullen stressed the proposal is not to there to play games with the claims process, it is to accelerate notification. Senator Neal asked why the period to file the report needs to be shortened. He asked if it was for defensive purposes on the part of the employer, or is it for administrative purposes. Mr. Nort responded it is for both purposes. He illustrated that when notice is given, the stage is set for investigation. Witnesses can be gathered and safety can be analyzed so another accident may be prevented in the future. He stated if weeks go by before an accident is reported other problems may arise. He stressed, currently, people are allowed to wait 30 days before they need to report an injury. Senator Townsend asked how often do people wait before making a claim. Mr. Nort responded it happens frequently. Senator Townsend wanted to clarify that the failure to file a C-1 does not preclude an individual from later filing a C-3. Mr. Nort assured him it would not prevent someone from filing. Senator Townsend stressed it is his understanding that the C-1 is to give someone the opportunity for early care if needed by making certain the employer or the supervisor is aware there is an incident. He stressed it is not to bar a worker from filing a claim 30 days later, if they did not file the C-1. Mr. Jeffrey explained the proposal is not practical in the construction industry because the workers often work alone, and they often do not return to the shop for days or weeks, going from job location to job location. Senator O'Connell pointed out that if a worker receives treatment early, then their treatment may be more successful and the worker will suffer less pain. If the worker waits 30 days, then treatment is often not as successful. She stressed it is the worker's responsibility, for their own good, to report an injury when it happens. Senator Shaffer asked if the statute stated a worker is required to file a C-1 form by the end of the day, then the worker would file the form, and in doing so, strengthen his claim should a C- 3 need to be filed. Mr. Jeffrey stressed he feels everyone will have to file a C-1 form for anything that happens, or they will not be able to file a C-3 if it is needed. Senator Neal stated once a requirement is placed into statute, then every requirement has to be met to receive the benefit due. He expressed his feeling that if a person does not file a C-1 then the person will not receive any benefits. Ms. Lundeen expressed her company's commitment to its employees. She stated they want to know immediately if someone is injured, whether they need treatment or not. They have a 1-800 number for reporting any problems. She stressed the need to have the notice of incident immediately, so that corrective measures may be taken. She suggested it be part of statute: An employee is responsible to report an incident on the end of his shift, and an injury within 7 days, then you can work together as a team to get him physically recovered and to get us to be able to give him that help plus do corrective action. Senator Lowden questioned how many other companies are as concerned for their employees. Mr. Thompson stated the world is not perfect. People do cheat, and not all employers have a 1-800 number. Reporting accidents may affect a supervisor's pay. Tom Waters, Granite Construction Company, reiterated the need for an employer to know of an incident, no matter how insignificant it may seem at the time. The cause of that incident could lead to a larger accident if not addressed immediately. He suggested a notice within 24 hours is adequate. Mr. Ostrovsky stated under current law, the employee must file the C-1 within 30 days. He, then, has 90 days from the date of the injury to make a claim for compensation which is a C-4 from the doctor. Both forms are, then, put together and a C-3 is filed. He stated he does not believe 30 days is appropriate. He suggested 7 days for the notification time. He suggested he feels employers will use the time period as a requirement for the employee to file. He stated: Would employers use whatever that cutoff date is to stop a claim? Absolutely. If they do not make that C-1, the incident report, in the given statutory time, whatever number of days it is, I think employers will say, "you do not have a claim." The law currently in [Nevada Revised Statutes] 616.511 lists reasons that there are for not filing a claim in a timely manner and still [maintaining] a claim...All of these things go to hearing. It shifts the burden to the employee to say, one of these things happened to me which meant I could not file within 30 days. He stated 30 days is too many days, and end of the shift is a burden. He suggested 7 days be used as the requirement. Michael J. Busick, Business Manager and Financial Secretary, Painters and Allied Trades Local No. 567, stated the end-of- shift requirement is a heavy burden on the employee. He suggested the end-of-shift reporting requirement would cause people to leave job sites during the shift for something as simple as a cut finger. Senator Shaffer asked how Mr. Busick feels about a 3-day requirement. Mr. Busick responded 24 hours, or 3 days will be fine for an incident report. He stipulated the delayed reporting should not preclude anyone from filing an injury claim and expressed his concern that an employer might use this to deny a claim. Senator Townsend expressed his appreciation of Mr. Busick's requests which were submitted earlier and placed into Exhibit C. Ernest Gresham, Concerned Citizen, stressed that in construction, if a person is off work a week, then returns to work, the worker experiences many stresses and strains to the body which may mask an injury. He expressed his concern that a worker would have to file a daily form so as to be covered in case one of the strains turns into an injury. Senator Townsend stated the filing time is a requirement to improve communication between the employer and the employee and to make the process run smoother if there is an injury. Mario Pucci, Lobbyist, Citizens of Nevada, suggested a worker who does heavy, manual labor, hurts every day on the job. Their muscles are always strained because of heavy labor. He stressed that many people ignore their aches and pains until the pain becomes too severe. By then, it might be too late to file a claim. Mr. Zimmerman stated Proposal 15 states a 7-day reporting period which would bar recovery of compensation if the report is not filed. Senator Townsend stated the committee is trying to redefine the goal of the C-1 and to make certain a person is not barred from compensation. Senator O'Connell requested Mr. Zimmerman read the exceptions to filing within the required time period. Mr. Zimmerman read Nevada Revised Statutes (NRS) 616.5011: Subsection 2 says an insurer may excuse the failure to file a notice of injury of or a claim for compensation pursuant to the provisions of this section if, a) the injury to the employee or another cause beyond his control prevented him from providing notice or claim, b) the failure was caused by the employees or the dependants mistake or ignorance of fact or law, c) the failure was caused by the physical or mental inability of the employee or the dependant or, d) the failure was caused by fraud, misrepresentation or deceit. Mr. Zimmerman stated the burden is on the employee to file a timely notice. Senator Townsend closed the hearing on Exhibit C and introduced three bill draft requests (BDRs). BILL DRAFT REQUEST 46-410: Revise policy of legislature regarding energy. SENATOR O'CONNELL MOVED TO DO PASS BDR 46-410. SENATOR REGAN SECONDED THE MOTION. THE MOTION PASSED UNANIMOUSLY. ***** BILL DRAFT REQUEST 58-416: Requires consideration of economic and environmental impacts of plan to increase supply of or decrease demand for electricity. SENATOR O'CONNELL MOVED TO DO PASS BDR 58-416. SENATOR REGAN SECONDED THE MOTION. THE MOTION PASSED UNANIMOUSLY. ***** BILL DRAFT REQUEST 32-418: Reduce tax on alternative fuels. SENATOR O'CONNELL MOVED TO DO PASS BDR 32-418. SENATOR REGAN SECONDED THE MOTION. THE MOTION PASSED UNANIMOUSLY. ***** With no further business the hearing was closed at 11:50 a.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor March 14, 1995 Page