MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session March 15, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:30 a.m., on Wednesday, March 15, 1995, in Room 119 of the Legislative Building, Carson City, Nevada. 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. (Testifying from Las Vegas) STAFF MEMBERS PRESENT: Beverly Willis, Committee Secretary Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst OTHERS PRESENT: Larry Harvey, Nevada Workers' Compensation Coalition Steven Matles, Corporate Safety Officer, Saint Mary's Health Network Jay Betz, M.D., Medical Director, Nevada Occupational Health Clinic Bob Sinnett, Outreach Coordinator, Saint Mary's Regional Medical Center Ron Swirczek, Administrator, Department of Business and Industry, Division of Industrial Relations (DIR) Karlin Dunlop, Chief Administrative Officer, Industrial Insurance Regulation Section, Division of Industrial Relations (DIR) Charles Harrall, Client Service Representative, Nations Personnel of Nevada, Inc. Kevin S. Morley, President, National Contract Staffing Richard J. Peters, President, AdvanStaff, Inc. Larry Zimmerman, President, CDS of Nevada Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Arleen Henton, Management Analyst II, State Industrial Insurance System (SIIS) Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Michael Busick, Business Manager and Financial Secretary, Painters & Allied Trades, Local No. 56 Peggy Newman, President, Paymasters Alice A. Molasky, Commissioner, Insurance Division, Department of Business & Industry, Bob Ostrovsky, Lobbyist, Nevada Resort Association Danny Thompson, Political Action Director, Nevada State American Federation of Labor/Congress of Industrial Organizations (AFL/CIO) Barbara Gruenwald, Attorney, Nevada Trial Lawyers Association Brian Nix, Senior Appeals Officer, Department of Administration Mike McGroarty, Attorney, Associated General Contractors Barbara Scarsborough, Manager of Workers' Compensation, Mirage Today's meeting was video conferenced to the Grant Sawyer State Office Building at 555 East Washington Avenue, Room 4401. Senator Townsend noted the meeting, today, will be on Exhibit C Workers' Compensation Reform Proposals. The first proposals to be addressed will be Proposals 51 and 52. First to testify, Larry Harvey, Nevada Workers' Compensation Coalition, stated his group will present a small change in the language. Mr. Harvey introduced Steven Matles, Corporate Safety Officer, Saint Mary's Health Network and Jay Betz, M.D., Medical Director, Nevada Occupational Health Clinic. Before any testimony Senator Townsend noted the committee is not trying to take new testimony, they are creating a bill and asked Mr. Matles and Dr. Betz to direct their testimony to proposals 51 and 52. He went on to state a bill still needs to be drafted. First to testify, Mr. Matles asserted language in these proposals is inadequate and suggested new language for these proposals will be forthcoming. Mr. Matles gave several examples to emphasize his reasoning. Jay Betz, M.D., Medical Director, Nevada Occupational Health Clinic, stated he would introduce Exhibit D, proposed new language for proposal 52. Senator Townsend requested an opinion from Dr. Betz regarding language in proposal 51. Dr. Betz gave his recommendation. Senator Townsend and Dr. Betz discussed various ways this might be accomplished. Senator Neal spoke, from Las Vegas, noting his concerns with any proposed new language. At this time, Senator Townsend read the proposed language (Exhibit D) to Senator Neal. Senator Townsend expressed his belief this portion of the proposals will be better served if a decision is generated upon Senator Neal's return. Senator Townsend continued, stating perhaps Dr. Betz and Scott Young, Senior Research Analyst, could combine their efforts to acquire specific language so there is something on which the committee can vote. Senator Townsend noted Dr. Betz recommends under Proposal 52C, that .04 be the level of definition of intoxication and rather than use Proposal 52D, the concept would be substituted if not necessarily the language. Senator Lowden questioned the disparity in intoxication levels if .04 level was used in the proposed language as opposed to the limit of .1 in force now for the purposes of drunk driving. Senator Lowden reiterated her concerns. Mr. Young replied: You are correct, senator. If you and the committee and the legislature decide that you want to specify a lower level for purposes of workers' compensation, you can do that. The .10 standard is used for driving offenses and the state; if it chooses as I believe some states have, to lower it to a .08 or .05 you can do that as well. So you actually can adopt any standard that you feel is reasonable for the purposes of workers' compensation and it will not affect the standard for the driving offenses. Bob Sinnett, Outreach Coordinator, Saint Mary's Regional Medical Center, explained the rationale behind the original level for intoxication and stated his concerns regarding the ability in not being able to remove an employee from a job site if using current state standards for intoxication. He stated he feels it is crucial to go to a lower .04 alcohol level so an employer has the ability to protect the work environment. Mr. Young, Senator Lowden, Senator O'Connell and Senator Regan had further discussion regarding this issue. Senator Neal stated he feels this is a personnel problem to be handled through a company's personnel policy. He feels it should not be written into statute. Senator Augustine concurred with Dr. Betz and Mr. Matles. Mr. Matles stressed his point by stating: We are not trying to deny an individual's liberty. We are not here as a court of law to establish certain facts - we are trying to decide whether or not we are going to compensate an injury. Ron Swirczek, Administrator, Department of Business and Industry, Division of Industrial Relations (DIR), gave an overview on a hearing conducted recently, the essence being to look at fines that make sense insofar as violations of the workers' compensation provisions are concerned. Mr. Swirczek stated of prime importance is defining what constitutes a violation for purposes of a monetary fine. He stated he feels this can be accomplished without legislative changes. Mr. Swirczek introduced Karlin Dunlop, Chief Administrative Officer, Industrial Insurance Regulation, Division of Industrial Relations. Ms. Dunlop summarized the meeting, noting an agreement has been made to work together with industry and with SIIS and anyone else who might care to become involved to come to a solution to doing business with respect to workers' compensation regulation. Senator Townsend noted there should be an effort to coordinate meetings to avoid overlapping on meetings that deal with workers' compensation so all who are interested are able to attend. Charles Harrall, Client Service Representative, Nations Personnel of Nevada, Inc., spoke next, presenting Exhibit E. Mr. Harrall referred to the fourth paragraph of Exhibit E and Exhibit C, Proposal 19. Mr. Harrall stated he feels anyone in the personnel business in Nevada needs to be certified and regulated by SIIS. Next to speak, Kevin S. Morley, President, National Contract Staffing, gave background on his employee leasing business. Mr. Morley stated for the record, "Our company strongly supports the laws that have been passed recently and we would like to see they are not changed." Richard J. Peters, President, AdvanStaff, Inc., testified next, stating his company is a professional employer for employee leasing. Mr. Peters went on to state for the record: " We, as AdvanStaff, do oppose the change and the definition that is being presented (Proposal 19) to this committee." Mr. Peters went on to state his company is not in favor of self-funded insurance or allowing an employee leasing firm to be self- funded. I am also a member of the National Association of Professional Employer Organizations (NAPEO). NAPEO is not supporting the position of self-funded workers' compensation programs. Mr. Peters stated NAPEO favors legislation for the following reasons; helps protect the business and the community business person; protects NAPEO and its members and gives their industry legitimacy. Mr. Peters noted his organization supports rules and regulations SIIS wants to present. Mr. Peters reiterated his opposition regarding a self-funded workers' compensation program. Next to testify, Larry Zimmerman, President, CDS of Nevada, noted he is the sponsor of Proposal 19. Mr. Zimmerman gave his reasons for supporting this proposal. Mr. Harrell, referring to Exhibit E, gave further testimony. Mr. Harrell noted the law states if a company is an employee leasing it cannot be self-insured. Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), stated there are two issues being reviewed. Whether or not it is appropriate to have a self-insured employee leasing firm. Secondly, the problem deals specifically with how SIIS is able to enforce the law. Senator Neal inquired how employees are protected by the employee leasing companies as far as SIIS insurance is concerned. Mr. Dirks noted if it is an employee leasing company they are not allowed to be self-insured under current law. Mr. Peters gave further comments on his viewpoint. Senator Townsend noted the committee's concern is that anyone working in Nevada has workers' compensation coverage of some sort. Arleen Henton, Management Analyst II, State Industrial Insurance System (SIIS), came forward to testify stating SIIS is opposed to Proposal 19 and gave her reasons. Ms. Henton presented Exhibit F, stating it is alternative wording for Proposal 19. Senator Townsend commented on the length of Exhibit F, requesting a modified version. Ms. Henton stated "I really believe there needs to be a prohibition on self-insured workers' compensation programs for leased employees." She went on to state "we need definitions that define clearly what that employee leasing process is." Mr. Harrell concurred with Ms. Henton. Mr. Dirks addressed further problems with this situation, noting clarification is needed in the law. Mr. Dirks stated SIIS is opposed to Proposal 19. Senator Townsend asked "Is it is possible if we are to place in statute the prohibition against self-insurance for leasing companies.....we place that in the statute and then give you (SIIS) a one line authorization to draft appropriate regulations to deal with problems within the leasing companies." Senator Townsend asked if SIIS can accomplish this with a regulation. Mr. Dirks noted SIIS has difficulty enforcing a regulation. Ms. Henton noted SIIS is not an enforcing agency and might have problems enforcing regulations. Answering Senator Townsend's question regarding jurisdiction, Mr. Swirczek noted the certification process to become self-insured is under the insurance division. Mr. Swirczek stated the insurance division has the ability to revoke certification, however, his agency can help in an investigatory capacity. Senator Townsend stated Senator Augustine will be in charge of employee leasing people. Senator Augustine replied she might have a conflict since she purchased SIIS from Mr. Peters and AdvanStaff. Senator Townsend then noted Senator Shaffer will be in charge. Senator Neal and Ms. Henton discussed the issue regarding employee leasing agreements as well as arrangements for workers' compensation insurance. Senator Neal questioned problems connected with enforcing the law in connection with the certificate of insurance. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), stated companies call themselves temporary services or management companies when they are actually acting like a leasing company. This makes it difficult for SIIS to obtain records to prove differently. Ms. Colling gave further clarification. Michael Busick, Business Manager and Financial Secretary, Painters & Allied Trades Local No. 56, testified he supports the language in Exhibit F, giving his reasons. Speaking from Las Vegas, Peggy Newman, President, Paymasters, a payroll leasing company, noted her company is in total compliance with previous legislation. Ms. Newman stated she feels Proposal 19 loosens the definition of the present law. According to Ms. Newman, loosening the definition, at this point, is not the thing to do. Alice A. Molasky, Commissioner, Insurance Division, Department of Business & Industry, spoke in opposition to Proposal 19, as it is now written. Ms. Molasky stated the insurance division cannot give an insurance certificate if companies are an employer leasing company. Ms. Molasky went on with further observations. Answering a question from Senator Shaffer, Ms. Molasky stated SIIS is responsible for certifying the employee leasing companies. She went on to state the insurance division will not certify an employee leasing company as a self-insured employer. In answer to a question from Senator Townsend regarding whether or not there is a list of those employee leasing companies who try to self-insure, Ms. Colling noted there is not a list. Senator Townsend asked Senator Shaffer and Mr. Young to draft a letter from the committee, for those suspected of not complying with the law. Mr. Zimmerman expressed additional concerns and observations. Mr. Zimmerman stated he would like to see the employee leasing definition clarified for all parties concerned. Senator Townsend then opened the hearing on Proposal 15. Senator Townsend gave an explanation of Proposal 15 and Proposal 15a. Senator Neal and Senator Shaffer expressed further concerns and asked for explanation. Bob Ostrovsky, Lobbyist, Nevada Resort Association, came forward to give his views on Proposal 15. Next to testify, Danny Thompson, Political Action Director, Nevada State American Federation of Labor/Congress of Industrial Organizations (AFL/CIO), stated he feels all parties concerned should be able to resolve this issue before presentation to the committee. Barbara Gruenwald, Attorney, Nevada Trial Lawyers Association, came forward to testify on Proposal 20. Ms. Gruenwald gave background on a case involving Mr. Falline, the case referred to in the proposal. Ms. Gruenwald noted in the Falline case there was an intentional refusal to pay benefits. That is what bad faith is. That is why her organization feels bad faith should be left out of the exclusive remedy, referring to Proposal 20. She went on to state " If you allow it to be part of the exclusive remedy, then you are giving a license to the insurers to commit fraud and there will be no remedy for the claimant." Ms. Gruenwald went on with her explanation, reiterating concerns regarding claims and length of time for claims to be settled. Mr. Swirczek came forward to give further explanation. At the request of Ms. Gruenwald, Mr. Swirczek stated he will issue an advisory to clarify the issue regarding time limits for claims to be settled in Proposal 20. Mr. Zimmerman gave further comments. Brian Nix, Senior Appeals Officer, Department of Administration, testified, noting hearing or appeals officers have no enforcement powers. Senator Townsend noted the advisory to be written by Mr. Swirczek should assist the hearings officers. Testifying from Las Vegas, Mike McGroarty, Attorney, Associated General Contractors stated, "The issue here is whether there should be an exception to the exclusive remedy for bad faith lawsuits." Mr. McGroarty continued, "The exclusive remedy prevents the employee from suing the employer also it prevents the employer from suing the employee for his negligence, also for gross negligence for taking safety devices off." Mr. McGroarty went on with further explanations. Next to testify, Barbara Scarsborough, Manager of Workers' Compensation, Mirage, gave further information regarding the Falline case, which prompted Proposal 20. Ms. Gruenwald, Senator Townsend, and Senator Neal had further discussion. Mr. Thompson contributed his thoughts, noting most operate under good faith and Proposal 20 is a remedy to someone who is operating in bad faith. Mr. Zimmerman came forth with further opinions on Proposal 20. Exhibit G was presented to the committee, however, there was no testimony. Senator Townsend gave the schedule for the next few committee meetings. There being no further business, the meeting was adjourned at 10.50 a.m. RESPECTFULLY SUBMITTED: Beverly Willis, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor March 15, 1995 Page