MINUTES OF THE SENATE COMMITTEE ON COMMERCE AND LABOR Sixty-eighth Session April 28, 1995 The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Friday, April 28, 1995, in Room 227 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. STAFF MEMBERS PRESENT: Scott Young, Senior Research Analyst Vance Hughey, Senior Research Analyst Molly Dondero, Committee Secretary OTHERS PRESENT: Douglas Dirks, General Manager, State Industrial Insurance System (SIIS) Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS) Bob Gagnier, Executive Director, State of Nevada Employees Association Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS) Jan Meyers, Northern District Manager, Division of Industrial Relations, Industrial Insurance Regulation Section Jan Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau Karlin Dunlop, Chief Administrative Officer, Division of Industrial Relations, Industrial Insurance Regulation Section (IIRS) Bob Ostrovsky, Lobbyist, Nevada Resort Association Donna Sweger, Supervising Attorney, Nevada Attorney for Injured Workers J. Randy Stephenson, Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau Marsha Berkbigler, Lobbyist, Nevada State Medical Association Kevin Higgins, Director, Workers' Compensation Fraud Unit, Supervising Deputy Attorney General, Office of the Attorney General Nancyanne Leeder, Attorney, Nevada Attorney for Injured Workers Gayle Sherman, Chief of Benefit Services, State Industrial Insurance System Ron Swerczek, Administrator, Division of Industrial Relations Sam McMullen, Lobbyist, Nevada Self Insurers Association Scott Cragie, Lobbyist, Nevada Resort Association Two bill draft requests (BDRs) were introduced. BILL DRAFT REQUEST 53-1955: Revises definition of "police officer" for purposes relating to eligibility for benefits for occupational diseases. SENATOR NEAL MOVED TO INTRODUCE BDR 53-1955. No second was made on the motion. BILL DRAFT REQUEST 54-832: Requires registration of corporations, partnerships and other entities providing professional engineering services in state. SENATOR O'CONNELL MOVED TO INTRODUCE BDR 54-832. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Douglas Dirks, General Manager, State Industrial Insurance System (SIIS), explained the declassification of SIIS employees. He proposed that effective July 1, 1995, all SIIS employees will be eligible for the layoff list. He explained they can transfer to other agencies within state government if they choose. As of April 1, 1996, all remaining SIIS employees will be unclassified. He stated 60 days prior to that all positions at SIIS will be opened for rehiring. Senator Augustine asked how many employees will be affected. Mr. Dirks explained there are about 1,100 employees. Senator Neal asked how the mission of SIIS is being affected by employees being in the classified services. Mr. Dirks explained some of the restrictions of the classified personnel system make it difficult to compete against the private sector on the salary level. Senator Neal suggested the problem could be solved through legislation to allow SIIS to reclassify certain positions. Mr. Dirks explained he would like the flexibility to make decisions quickly. He stated some of the key positions in SIIS such as an actuary or an internal auditor do not even attract applicants because the pay is so far below average salary for the specific job. He stated an actuary averages $120,000 per year. The state only pays $60,000. He stated they have had the state make adjustments, but the adjustments are made to keep state agencies at parity with each other, not with the private sector. Senator Neal asked if the employees will be protected under exclusive remedy. Lenard Ormsby, General Counsel, State Industrial Insurance System (SIIS), commented the employees will still be protected under the exclusive remedy law. Mr. Dirks stated if the goal is to make SIIS operate like a private company, even though it will remain a quasi-governmental agency, personnel should reflect private standards. At-will employment is a standard in the private sector. Senator Shaffer asked if it is possible to create appointed positions for those positions which Mr. Dirks feels should be competitive with the private sector. Mr. Dirks stated he can do that with five positions and if he wishes to change their purpose, then he has to have permission of the personnel commission to do that. He stated he has no flexibility to change any positions. He stated only gaming control allows unclassified positions. Mr. Dirks pointed out that SIIS is a constitutional trust fund and all money is funded by premiums. Senator Neal commented that once a position is unclassified it becomes more susceptible to political pressure. Mr. Dirks expressed his commitment to make the system solvent and to make it work for the injured workers and the employers who pay into it. Senator Lowden expressed her concern that so many employees have contacted her and stated they are unhappy with their jobs and are uncertain about the unclassification of their positions. Mr. Dirks explained the SIIS employees will be given priority if they wish to find other jobs within the state. SENATOR O'CONNELL MOVED FOR ADOPTION OF THE PROPOSED LANGUAGE BY MR. DIRKS. SENATOR LOWDEN SECONDED THE MOTION. Bob Gagnier, Executive Director, State of Nevada Employees Association, spoke against the proposal. He stated many of the jobs within SIIS are unique and the people who work in the system will not find any other jobs in state government. He stated there are other ways to resolve the issue of jobs that need to be more competitive. He stated the system will be devastated if the motion passes. THE MOTION FAILED. (SENATORS REGAN, AUGUSTINE, NEAL, AND SHAFFER VOTED NO.) ***** Senator Townsend stated what is in the bill at this time, stays in the bill. Senator Neal stated he wished to amend the bill to remove section 45 of Exhibit C, (Original is on file in the Research Library.) BDR 53-1292. BILL DRAFT REQUEST (BDR) 53-1292: Makes various changes to provisions relating to industrial insurance. Mr. Dirks explained the Permanent Partial Disability (PPD) category contained on page 100 of Exhibit C. He stated SIIS will remove the vocational rehabilitation dollars and place them into the PPD category. He explained it is a dollar-per-dollar exchange from one category to the other. He explained there must be a medical stability for the case to be closed. He stated there are some injured workers who because of limited education, or learning disabilities, are unable to return to a job similar to what they were doing because of the severity of their injury. He stated they could remain forever on Temporary Total Disability (TTD) the way the statute is currently drafted. He explained those people need some type of vocational rehabilitation. Senator Townsend discussed the problem with Mr. Ormsby. Senator Townsend explained it is the goal of the committee not to supply someone with a lifetime TTD. He explained the committee wishes to help the injured worker to get on with his or her life. He stressed to Mr. Ormsby the need to have the language reflect the intent of the committee. Mr. Dirks stated there needs to be an exception if the language stays as it is written. Senator Neal discussed page 87 of Exhibit C. Cecilia Colling, Assistant General Manager, State Industrial Insurance System (SIIS), explained the calculation procedure. Jan Meyers, Northern District Manager, Division of Industrial Relations, Industrial Insurance Regulation Section, explained the .64 percent which is used in the calculation of the award. She stated the actual monthly wage, or the state's average maximum wage is used in the calculation times the factor, depending on the date of injury, times the percentage of disability, to arrive at the monthly amount for PPD. Then that total is divided to give the daily, monthly, and annual rate of PPD payment. Senator Townsend stated the entire statute must be read to find the formula. He suggested including the formula in a specific place in the statute to make it as easy to figure out as possible. Jan Needham, Principal Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, agreed that could be done for the PPD award. Senator Townsend read page 67 and page 68 of Exhibit C. Mr. Ormsby agreed with the provisions listed on those pages. Senator Townsend discussed page 69, section 89 of Exhibit C. Mr. Ormsby suggested new language to read, "must, within 14 days of the decision and . . ." in the original subsection 2. Senator Regan asked to insert the word "original" into the language under the new subsection 2 before decision at the end of the sentence. Mr. Ormsby requested the words "or chiropractor" be added to line 3 of the new language on page 69 of Exhibit C. Karlin Dunlop, Chief Administrative Officer, Division of Industrial Relations, Industrial Insurance Regulation Section (IIRS) addressed the new language in subsection 8 on page 73 of Exhibit C. She pointed out the language for 10 days is inconsistent with the language for 30 days. Senator Neal stated the determination is open. He commented there is no limitation on it. Mr. Ormsby confirmed there is no limitation in the proposed lanugage on when the hearings officer must render a decision on the "application for stay." Bob Ostrovsky, Lobbyist, Nevada Resort Association, commented the appeal process goes forward, but the decision on whether to pay the TTD or not depends upon the action on the stay. He stated the 30-day language is inconsistent with the 10-day language which was put into Nevada Revised Statutes (NRS) 616.647. Donna Sweger, Supervising Attorney, Nevada Attorney for Injured Workers, commented on line 2, page 73 and stated there are instances when an employee can request a stay. J. Randy Stephenson, Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, agreed it does leave out all persons who are able to appeal. The employee is left out of the language. Marsha Berkbigler, Lobbyist, Nevada State Medical Association, presented Exhibit D and asked it be included in the language of the bill. Ms. Needham stated a general statement including the language can be included in the section dealing with managed care organizations (MCOs). Senator Augustine asked the word "age" be added. Mr. Ormsby suggested adding "disability" to the language. The committee agreed with the suggestions. Kevin Higgins, Director, Workers' Compensation Fraud Unit, Supervising Deputy Attorney General, Office of the Attorney General, discussed Exhibit E and requested it be added to page 5 of Exhibit C. Senator Lowden commented she is in favor of keeping the fines in an agency to help fund the agency. Senator Augustine asked how much money will stay within the attorney general's office. She stated the requested budget is expansive. Mr. Higgins explained the money is paid back slowly. He explained the amounts are inconsistent and not enough to offset anything listed in the budget. Senator Townsend read page 79, the new language in subsection 3. Mr. Higgins explained it is difficult to obtain reimbursement from a claimant who has been convicted of filing a fraudulent claim, after the money has been paid out. He stated if someone is criminally charged, the language in this section will stay the payment until the issue is resolved. He stressed if there has been no crime and the claimant is acquitted, then they are issued the money owed plus interest. Senator Neal suggested the language is the same as finding a person guilty without benefit of a trial. Mr. Higgins disagreed. He stated it clarifies the existing language. Mr. Higgins stated a probable cause determination must be made before a trial may occur. He stated a judge makes the decision that there is probable cause. Senator Lowden asked if there have been problems in the past where there has been a guilty verdict against someone and the money has not been returned by the injured worker. Mr. Higgins stated it has happened before. He said there are administrative time difficulties. He said there is a case in Las Vegas which has been waiting for trial for 2 years. Senator Neal suggested there are many processes for the claimant to go through before the money is given out by SIIS. He commented if a person is not guilty, then they have been denied benefits for the time the case was in court. Mr. Higgins stated they have not had a case where the person was found not guilty. Senator Lowden stated the fraud unit only prosecutes the cases they know they will win. Mr. Ormsby stated the claimant has the right to go through the appeals process on a suspension of payment. Senator Neal stated the state should pursue anyone who is receiving benefits illegally, and stressed he hoped the same tenacity will apply to pursuing an employer and an MCO if they are doing something wrong. Senator O'Connell asked for a report on the costs incurred by the fraud unit to gain convictions on each case they have prosecuted during the past 2 years. Mr. Higgins stated he can give the budget breakdown, but is uncertain if he can break down each case. He will try to estimate the total hours spent on each case. He stated they bill $75 per hour for their investigators' time and $120 per hour for the prosecutors' time, plus mileage. Senator Townsend referred to page 83, section 99. Ms. Needham stated the term "significant amount of money" is vague and requested clarification. Mr. Ormsby suggested there is a constitutional problem, and an enforceability problem with paragraph 2, subsection (a) of Exhibit C. He stated a conviction is not necessary according to the language, and "significant amount of money" is not articulated. Senator Townsend suggested removing this section and reworking the language to make it accomplish what is intended. Mr. Ostrovsky referred to page 85 of Exhibit C. He pointed out that if an injured worker goes to a doctor or chiropractor not on the list of an MCO, the insurer denies payment to that provider. He stated if the provider signs a disability statement, even if that provider is not on the MCO list, then the statement must be honored. He stated the appeals officers have taken the position that any licensed physician or chiropractor may sign a disability statement. He expressed his concern that the MCO doctors and chiropractors are not the only ones who may sign a disability statement. Mr. Ormsby discussed page 94, section 106 of Exhibit C. He explained the need for the section. Senator Neal pointed out that page 100, section 111 of Exhibit C is more punitive than page 5, section 9 of Exhibit C. Senator Townsend suggested the fines should be equal. Senator Regan commented he feels page 101, section 112, subsection 2 suggests self-incrimination. Mr. Higgins explained the Internal Revenue System can require people to turn over their records. It should be the same for other suspects of fraud. Senator Regan expressed his concern about the subsection. Senator Townsend discussed page 87. Mr. Dirks stated there is no statutory authority to remove the people from TTD. Ms. Meyers discussed page 86, subsection 4 and suggested removing the first sentence in subsection 4 through the word "loss." She suggested moving page 60, section 81, subsection 3 of Exhibit C to page 86, section 4. She stated section 81, subsection 3 references the subsequent injury fund and needs to be included in the PPD section. Mr. Dirks explained there are no figures available at the moment to show how many people are directly affected by the TTD award situation addressed on page 87 of Exhibit C. He explained the people affected by the legislation are those individuals who are unable to return to the workplace. Senator Townsend stated they must be given an option. SENATOR LOWDEN MOVED TO CHANGE THE PPD FACTOR TO 0.6. SENATOR O'CONNELL SECONDED THE MOTION. THE MOTION PASSED UNANIMOUSLY. ***** Senator Townsend directed Mr. Dirks, Mr. Ostrovsky, and Mr. McMullen to discuss that if someone is in the system, they must be treated no differently from someone who is a self-insured. He stressed everyone must be treated equally under workers' compensation law. Mr. Dirks discussed pages 17-18, section 41. He requested a change of wording from "contagious disease" to human imundeficiency virus (HIV), Hepatitis B, and Hepatitis C. Nancyanne Leeder, Attorney, Nevada Attorney for Injured Workers, testified from Las Vegas. She requested the inclusion of tuberculosis (TB). Mr. Ormsby explained the Office of Safety and Health Administration (OSHA) requirements for periodic testing for those who might be exposed to TB. He stated the employers will want the state to pay for the testing if it is a required to include TB in the list of diseases. He explained they would like to limit the requirement to the three listed previously. Senator Neal questioned if HIV is used as a definition, will the person who contracts a secondary disease such as TB and cancer due to the infection, be covered. Mr. Dirks stated the exposure to HIV is the compensable exposure. Mr. Ormsby stated if HIV is contracted in the scope of employment, and the person becomes HIV positive, the subsequent symptoms will be covered as well. Gayle Sherman, Chief of Benefit Services, State Industrial Insurance System, stated if a person has an HIV exposure, contracts HIV, then any disease stemming from that exposure is compensable. She stated an immune depression disease gives rise to other disorders which will be compensable disorders. Ms. Leeder stated prison guards and emergency room technicians are sometimes deliberately exposed to TB by inmates. Ms. Colling stated that in the prison system, OSHA requires the workers to be tested every 6 months for TB. She stated at the point it becomes positive, then it becomes a claim. She explained TB testing is paid for under OSHA. Ms. Leeder discussed section 98. Mr. Ormsby stated the original language voted on previously by the committee is going to be included in the bill, changing the language currently on page 81, section 98, subsection (b). SENATOR O'CONNELL MOVED TO ACCEPT SIIS' LANGUAGE ON CONTAGIOUS DISEASES TO READ "HIV, HEPATITIS B, AND HEPATITIS C. SENATOR REGAN SECONDED THE MOTION. THE MOTION CARRIED. (SENATORS AUGUSTINE AND LOWDEN WERE ABSENT FOR THE VOTE.) ***** Senator Townsend stated he is drafting a letter to address Ms. Leeder's budget concerns for her department based on the changes in the bill and how those changes affect that department. Ron Swerczek, Administrator, Division of Industrial Relations (DIR), discussed the subsequent injury fund and the formation of a board. He addressed page 16, and page 58, section 80. Mr. Swerczek stated that according to the new language, the newly created board will administer the subsequent injury fund and follow through by removing the language "administrator" from actually administering the fund. He cautioned a legislatively mandated public trust is being created by this language. He stated that any money which is authorized from this fund, meets the conditions of the trust. He stated there is little or no control over this fund. He stated there must be language incorporated into the bill, that records must be maintained in accordance with generally accepted accounting principles, and members of the board must understand their fiduciary responsibilities. He stated a process of assessments and collection must be established. He stated there are no provisions for establishing a staff to care for business. He said there is public money being kept with the state treasurer. He commented the state controller is bypassed with the issuance of a check. He stated the language drafted in the bill gives all the responsibility for the day-to-day administration to the appointed board. In response to Senator O'Connell, Mr. Swerczek indicated the board will be under the open meeting law regulation. Senator Townsend stated it is not public money. Mr. Swerczek pointed out it is mandated that every one must contribute. Sam McMullen, Lobbyist, Nevada Self-Insurers Association, commented the goal is for the board to be responsible for their own subsequent injury fund, and it would expedite the administration of it. He stated they have not requested any restriction from any fiduciary responsibility. He stated they will address all the concerns illustrated by Mr. Swerczek. Senator O'Connell asked how the fund will work with the preferred workers' program. Mr. McMullen stated the requirements on this fund are separate. There may be some indirect linkage with the issue. Mr. Swerczek stated there has been approximately $2.5 million in the fund. He stated there is a very detailed system for applying for reimbursement from the fund. Senator O'Connell discussed pages 6-12, sections 12-14. Mr. Dirks explained that the TTD awards have fallen. There has been a savings of about 25 percent. Senator O'Connell stated this section addresses the problem of an employer having light duty available for an injured worker. She stressed there often is no light-duty job available for that worker. Senator Neal asked how this will affect existing contracts an employee has with a union. Mr. Dirks responded he does not know. Vance Hughey, Senior Research Analyst, indicated the program is working well in Oregon. Senator Lowden commented that the self-insureds offer a job to the union- contracted employee. With the employee's agreement, that job will pay at the 80 percent rate of the union-contracted job the employee originally held. She stated they try to find a position that not only fits the employee, but that the employee likes. She stated that injured worker may be making more money than the others in the same job, because that person is earning their salary compensated off their original contract. Mr. Dirks stated when Oregon started their fund, they had a $40 million initial capitalization on it. He expressed his concern if $9 million, indicated as a start-up fund for Nevada, is enough. Senator O'Connell asked if Oregon used an up-front fund. Mr. Dirks stated he does not know. Senator Townsend requested someone from Oregon to come to the committee and present their program to the committee so that they might understand it better. Senator Lowden discussed a pool situation to offer light-duty work to injured workers. Mr. Dirks explained there is little incentive to bring people into light-duty work, because there is no change in the premiums if they do. He stated if there is a pool for people who choose to utilize the benefits of the preferred worker program, then there may be more incentive. Mr. Hughey indicated he has requested copies of the Texas program as soon as it is available. Senator Regan pointed out the inconsistency of the language on page 2, subsection 5. He suggested eliminating the language from the word "delays...administrator" at the end of section 2. Exhibit F was presented by Mr. McMullen. Senator Neal disagreed with the new language in Exhibit F. He stated a cause of action cannot be brought against an insurer or a third-party administrator who acted negligently or in bad faith. He stated the employee does not have any way to sue for bad faith. Mr. McMullen stated that is not the intent of the language in Exhibit F. He emphasized he does not think the language excludes an employee from suing. He commented the theory of workers' compensation is to do away with the need to go to court over injuries. He stated the theory is that the fining mechanism, the enforcement mechanisim, and all the requirements of chapter 616 of NRS and chapter 617 of NRS should preclude the need to go to court. He stated the words "cause of action" are not meant to restrict an administrative disciplinary process or any of the powers in chapter 616 of NRS and chapter 617 of NRS. Senator Neal disagreed and stated that the new language prevents a claimant from suing. He stated the law favors the employers position and referred to the Falline decision. Mr. McMullen stated there was never any complaint filed with the administrator in the Falline case. He stated there was no administrative process undertaken. Mr. McMullen stated it should be policy that the enforcement mechanisms in chapter 616 of NRS and chapter 617 of NRS should be the first resort for the injured worker, and those chapters should work. Senator Neal stated Exhibit F makes the language too broad. Mr. McMullen stated workers' compensation should take care of the workers with as much speed as possible within the system. Senator Neal asked if Mr. McMullen wants to eliminate "bad faith." Mr. McMullen responded he does not feel a case should be allowed to reach "bad faith." Senator Townsend stressed the reason behind the fine is preventative. He stated the substantial fine should prevent "bad faith" from happening. Senator Neal stated: There are entities in the state who have great interest and great influence upon the political establishment of the state who can force you to dance and do whatever, so if we do not have things put into the law where individuals can go to court and challenge and protect their rights, then they are subject to the inaction of some of the administrators who might just want to keep their jobs. Senator Neal stressed not all companies are honorable with their employees. Mr. McMullen stated those rights can be protected, but it is not necessary to litigate everything. He stated an administrative process which can work quickly and effectively, is better for the injured worker. He stated one telephone call, one complaint should do the work for them, not a lawyer. He said the mandatory penalty for delaying action by an employer will punish the employer who does not act in good faith toward an employee. He emphasized the fines will work and lengthy litigation will not be necessary. Mr. Stephenson stated the two paragraphs in Exhibit F are in conflict. He stated it will be best to take away the issue of intent from the statute. He stated in section 5, subsection 2, page 2, the exclusive remedy will be for any violation. Mr. McMullen stated that change will be acceptable. Mr. Swerczek agreed with the suggested language. He disagreed with portions of the language. He commented that administrative fines are not remedies. He stated remedies are a way to make a person whole, or an attempt to compensate for damages sustained by that person. He explained administrative fines have no relationship to compensation for damages. Ms. Dunlop stated the language contained in section 5, subsection 2, page 2 of Exhibit F says the administrative fine is the remedy, but the fine is what the insurer is supposed to pay. She explained that the language used in subsection 2 is not putting the money into the injured worker's pocket. She pointed out if the language in section 5, subsection 1 "who, acting negligently or in bad faith" is deleted, it will not allow a person to pursue legal remedy against an employer who willfully conducts outrageous conduct, emotional distress, or any act more than negligence to sue for damages. That person will only be allowed to obtain redress through the administrative fine process of DIR. This money will not go into the injured worker's pocket. Senator Townsend stated that is what is intended. He pointed out this is a no-fault system in which it is DIR's job to see that companies comply with the rules. Ms. Dunlop stated it had been her opinion that the intent is to give the fines to the employee. Senator Townsend stated the fine is supposed to go to the injured worker along with the benefit. Ms. Dunlop said that is not what the language as the bill is written instructs them to do with the fine. It does not go to the worker. Ms. Needham stated the portion which clarifies how the benefits will be paid is in Assembly Bill (A.B.) 61. She commented if this bill passes, and A.B. 61 does not pass, then the injured worker will not get the money collected through a fine. She stated there will be complete immunity for the insurer and third-party administrator from lawsuit. ASSEMBLY BILL 61: Expands authority of division of industrial relations of department of business and industry to impose administrative fine for violation of certain provisions relating to control of asbestos. Senator Townsend commented this bill will pass after A.B. 61 and if the assembly bill does not pass, then he will make certain the language is in another bill to cover this issue. Scott Cragie, Lobbyist, Nevada Resort Association, stated the entire purpose of SIIS is to guarantee immediate service to an injured worker making certain it is available at all times regardless of the financial health of the worker, or regardless of the extent of fault or involvement of any company. He indicated that is why protection is in the constitution, and it is a state responsibility to be certain the coverage exists. He stated the language is in the bill to make certain no company hesitates to give service where it is needed. He stated the focus is not what the punishment is. He emphasized the focus is on compliance. Mr. McMullen read NRS 616.012, section 3, to the committee. He stated what is in the statutes is supposed to be the sole and exclusive remedy, and it should work and work quickly. Exhibit G was presented for information. The hearing was closed at 11:45 a.m. RESPECTFULLY SUBMITTED: Molly Dondero, Committee Secretary APPROVED BY: Senator Randolph J. Townsend, Chairman DATE: Senate Committee on Commerce and Labor April 28, 1995 Page