MINUTES OF THE SENATE COMMITTEE ON JUDICIARY Sixty-eighth Session May 11, 1995 The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 8:30 a.m., on Thursday, May 11, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Mark A. James, Chairman Senator Jon C. Porter, Vice Chairman Senator Maurice Washington Senator Mike McGinness Senator Ernest E. Adler Senator Dina Titus Senator O. C. Lee STAFF MEMBERS PRESENT: Allison Combs, Senior Research Analyst Lori M. Story, Committee Secretary OTHERS PRESENT: Robert D. Faiss, Attorney, Lobbyist, Nevada Resort Association Mark Fiorentino, Attorney, Lionel Sawyer & Collins Ben Graham, Chief Deputy, Clark County District Attorney, Legislative Representative, Nevada District Attorneys Association Marc H. Rubinstein, Vice President, Caesars Palace Anthony J. Brolick, Senior Vice President, Chief Financial Officer, Caesars Palace Phillip L. Flaherty, Senior Vice President, Sheraton Desert Inn C. Brian Harris, Board Member, State Gaming Control Board Sydney H. Wickliffe, C.P.A., Deputy Chief, Audit Division, State Gaming Control Board Lawrence Samenza, Attorney, Assistant General Counsel, Circus Circus Sandra McHenry, Employment Manager, The Mirage Linda Bernstein, Manager, Regional Human Resources, Hilton Gaming Corporation Michelle Morrow, Citizen, Dealer Michael Langton, Attorney, Lobbyist, Nevada Trial Lawyers Association, Northern Nevada Building Trades Council Kathleen A. Stoneburner, Citizen, Dealer Guy Gesualdo, Citizen, Dealer SENATE BILL 375: Prohibits performance of act or neglect of duty in willful or wanton disregard of safety of persons or property. The chairman opened the hearing with a subcommittee consisting of Senator James and Senator Lee. He reminded the audience of the floor session beginning at 10:30 a.m., and opened the hearing on Senate Bill (S.B. ) 375. Robert D. Faiss, Attorney, Lobbyist, Nevada Resort Association, addressed the committee about the bill, reading from a prepared statement (Exhibit C). Mr. Faiss noted the presence of Mark Fiorentino, Attorney, Lionel Sawyer & Collins, who is very familiar with the case which brings this bill to the fore, noting he was the chief draftsman for the Clark County ordinance prohibiting the actions of individuals such as the "fan man." Ben Graham, Chief Deputy, Clark County District Attorney, echoed the sentiments of Mr. Faiss, adding the bill would allow a specific violation for the type of conduct that resulted in the "fan man" case. The chairman interrupted to note for the record the presence of a quorum of the full Senate Committee on Judiciary. He asked Mr. Graham to continue. Mr. Graham observed there is a great potential for harm to occur with activities such as the fan man's paragliding into the ring of a high-stakes prize fight. He could have fallen into the crowd, causing harm to a great many people, the witness agreed. This measure would make such actions subject to criminal prosecution and would, thus, reduce the likelihood of such occurrences in the future. SENATE BILL 416: Makes various changes regarding sentencing of persons convicted of felonies. Senator James noted there have been other bills addressing other areas of neglect of the law, such as neglect of elderly patients or children, but this bill will take a broader sweep to cover instances where there is no one specific victim. He agreed the bill is appropriate, but wondered where the crime would sit on the categorization scheme proposed in other legislation before the Legislature. He asked for Mr. Graham's opinion as to its placement on the sentencing grid designed in conjunction with S.B. 416. Mr. Graham opined the offense would fall into place with crimes such as assault with bodily harm, or other such offenses fall. The chair asked if the crime created by this bill would really be a category B felony. Mr. Graham did not concur, stating it would more appropriately be considered a category C felony. Opining the bill is fairly straightforward and should be moved by the committee, the chairman noted it would be addressed at the work session to follow. He asked Mr. Graham to be available for that hearing. Senator James then closed the hearing on S.B. 375, as there was no further testimony. SENATE BILL 399: Clarifies term "gross revenue" for purposes of gaming statutes. The hearing on S.B. 399 was opened, with Mr. Faiss again addressing the committee. Mr. Faiss noted the Nevada Resort Association's support for the bill, adding this support would be voiced by a panel of individuals who had recently worked together in an effort to persuade the Congress of the United States, along with the United States Treasury Department to "continue authority for Nevada to be the only state to police its gaming industry with respect to cash transactions and the documentation of them." Mr. Faiss introduced the members of the panel as Marc H. Rubinstein, Vice President, Caesars Palace; Anthony J. Brolick, Senior Vice President, Chief Financial Officer, Caesars Palace; and Phillip L. Flaherty, Senior Vice President, Sheraton Desert Inn. Mr. Faiss offered the committee an amendment to S.B. 399 (Exhibit D). He read aloud paragraph c of section 1 of the bill, with the changes as proposed. He interpreted the paragraph to mean when a licensee wins back chips for which it has received no cash, the licensee has not received any taxable revenue. The witness opined this change is in harmony with the historical meaning of the statute, which has only taxed the net cash winnings of a casino. Mr. Faiss observed it has been found necessary to reemphasize this holding, from time to time. The most recent occurrence was in 1993, when the Legislature clarified that uncollected baccarat commissions are not taxable because they are not cash received by the licensee. This thinking should translate quite easily to the bill at hand, he noted, and opposition to its passage will likely voice arguments the Legislature rejected in 1993 when considering the commission's question. Mr. Rubinstein spoke next from a prepared statement (Exhibit E). He then offered to answer any questions the committee might have. Mr. Brolick noted he is also present to assist in answering questions. Senator Porter questioned whether the Internal Revenue Service (IRS) has any qualms about this proposal. Mr. Brolick stated there are no objections offered by the IRS. Mr. Flaherty offered his services to answer questions. The chairman noted he had attempted to explain the previous session's baccarat legislation to Senator Porter, thanked the witnesses and called for speakers from the opposition. Before they departed, Senator Porter asked Mr. Flaherty what the cost to the state would be if the bill is passed. Mr. Flaherty explained there are no monies collected because this deals with a promotional chip which is given to the customers to entice them to gamble at the various establishments. Referring to Mr. Rubinstein's remarks about the baccarat and its growth in popularity is due to this type of promotion. Thus, if this sort of promotion applies to other games, it will be beneficial to the state, he opined. C. Brian Harris, Board Member, State Gaming Control Board, and Sydney H. Wickliffe, C.P.A., Deputy Chief, Audit Division, State Gaming Control Board, took the witness table and explained the position of the State Gaming Control Board. This bill will change the computation of gross gaming revenue in the area of certain promotions used by gaming licensees, Mr. Harris explained. In its original form, the bill offered a potential for significant risk to the state, Mr. Harris asserted, because it could have been interpreted to allow deductions for "any chips given out by a licensee for which the licensee did not receive cash, regardless of the reasons those chips were given out, even if fraudulent activity were involved." Mr. Harris pointed out the Nevada Resort Association has worked with the gaming board to close the loopholes in the bill. He stated the board agrees also with the amendments proposed at the present hearing, however, the board remains "fundamentally opposed to the bill, as a whole." In order to understand the board's opposition, Mr. Harris suggested looking at the basic concept on which gross gaming revenue is calculated in Nevada. This is done, simplistically stated, by calculating cash received as winnings less cash paid out as losses to patrons. The representatives of the gaming industry pointed out that Nevada Revised Statutes (NRS) 463.0161, which the bill would modify, outlines certain things will not be recognized as gross gaming revenue. These things include counterfeit money, baccarat commissions, coins of other countries, cash taken in in fraudulent acts, and credit issued from their cashier cage. These credits are not included in the calculation because if chips are issued on a marker and the patron goes to the gaming floor and loses those chips, the casino has not yet collected on the marker and there is no revenue. When the marker is paid, then the casino claims the revenue, Mr. Harris explained. Mr. Harris stated that after licensees calculate their gross gaming revenue they are liable to pay the state a 6.25 percent tax on it. Then, for federal income tax purposes, they deduct certain other expenses to arrive at a figure for net revenue. Those expenses include promotional expenses, he noted. Mr. Harris asserted this bill allows such promotional expenses to be deducted from the gross revenue figure, which is the portion the state taxes. Mr. Harris agreed the larger casinos, such as the ones represented before the committee, do attract "big-end customers," and the use of these promotional chips helps to retain those customers. Additionally, he agreed it is important to remember the competition in the gaming industry is ever increasing. It is important for the state's casinos to attract the big-end customers. Mr. Harris stated the Gaming Control Board has no problem with the concept if the casinos can clearly demonstrate the customer took the chips he was given and went directly to the gaming table and immediately lost them. In this instance, the casino has simply moved the chip from "point A in their establishment to point B in their establishment" and the board will agree that the casinos should not have to pay taxes on such movement of chips, he said. There are other means by which the licensees can accomplish the same thing, Mr. Harris pointed out. NRS 463.371(3) allows a licensee to "discount a credit instrument in order to retain a patron's business for the future or to obtain a patron's business," Mr. Harris reported. Such prearranged settlements can accomplish the same end as the gift chips, he opined. The board's concern is this rule will apply to all the licensees in the state, even those who give tokens to patrons who cash their paychecks at the casino and spin a wheel. This, the board feels, will mean a financial impact to the state, Mr. Harris told, which cannot be easily calculated. He agreed the larger casinos are likely to bring in the "high-end" customers, but it is impossible to know whether those customers will offset potential losses from allowing deduction of all the promotional expenses from gross gaming revenue. Senator Adler asked if the promotional chips are uniquely marked. Mr. Harris stated the current situation is they are regular chips, with no unique marking. The senator asked if marking the special chips would alleviate the concern for auditing purposes. Mr. Harris said a unique marking would allow it to be demonstrated that they were won from the patron, and the board would not be opposed to the bill with that requirement. Senator James voiced confusion, wondering why the tokens received for a paycheck spin is different from the other promotional chips. Mr. Harris replied there is no difference. The patron can take the chips and cash them in, he noted. These are chips for which the casino has not received cash, and would be deductible from the gross gaming revenue. Currently, Mr. Harris pointed out, those chips are not deductible from gross gaming revenue. The chairman pressed the witness, observing the promotional chips really are not revenue. Senator James offered his understanding of gross gaming revenues as "everything that comes in the door minus everything that goes out the door;" and, if the casino gives the chips to the patron and is fortunate enough to win them back, there is no increase in the revenue of the casino; "it is a wash." Mr. Harris emphasized his point to be that these are expenses that are currently not deductible, and thus generate income for the state. If the bill passes, the state's income will be impacted. Senator James could not agree. Ms. Wickliffe was asked to respond to the senator's observation. She stated statutes do outline the formula for calculating gross revenue, however, regulations offer a more extensive definition. This definition is generally accepted as amounts won less amounts paid out, she stated. Ms. Wickliffe explained Mr. Harris' example is taken from the Carson Nugget Casino that gives tokens to the patrons for spinning the paycheck wheel. These are regular tokens which are considered to have value, she stated. It is the fundamental belief in the gaming industry that these tokens have value, and can be exchanged for cash. Based on this belief, when they are lost, it is as though the patron lost "actual cash," she opined, and as a result it is revenue. Still, Senator James pointed out, they are playing with the casino's money. Senator Porter referred to NRS 463.0161, wherein gross revenue is defined, noting that under subsection 2 it says the term revenue does not cover various items including entry fees for contests. Ms. Wickliffe explained entry fees are not revenue. The senator inquired if the fees are similar to promotional offerings. The witness reported such fees had been removed from taxable income in 1987. She agreed that contests are considered an enticement for patrons to come to the casino and play, however, the difference is no gaming actually occurs. In contests, she said, the patrons compete against each other, not the house. The entry fee is divided up as prizes for the competitors, she further noted. Senator James returned to the uncollected baccarat commissions, asking to be reminded of how these remain untaxable. He then stated his understanding that commissions, owed to the casino, are accumulated by the player based on the value of the hands played. It is the practice of some casinos to sometimes forgive these amounts owed, as a way of encouraging the patron to play longer. He asked if this was the same thing. Ms. Wickliffe concluded there is a "big distinction" because commissions that are not paid and forgiven, "it is in conjunction with a credit issuance. ...[C]redit play is substantially different from cash play, in the gaming industry," she pointed out. Ms. Wickliffe explained the difference stating: Credit play point of sale does not take place until collection. There is no revenue impact at the time of play. ... On baccarat commissions, those are not paid; those become a credit transaction; and, in effect, become more like a settlement, which moves us into the realm of credit transactions and the statutes that [C. Brian] Harris spoke of in [NRS 463.]371. It is very different for someone to be given chips to play with and for a credit to be issued by the house to the patron. Credit activity is based on a cash basis and is not taxable until the patron pays it, Ms. Wickliffe asserted. Senator Adler asked why there would be a difference if the tokens or chips were uniquely marked; why would it be a more acceptable practice to the board? Ms. Wickliffe replied it is more easily tracked if the chips were won at the table; easier to differentiate the type of play. The senator asked if there is a special mark it would not be difficult to credit those chips. Mr. Harris interjected that the audit division of the Gaming Control Board would still be opposed to the bill, however, he opined that some members of the board "could live with it." The special mark would allow it to be tracked, the senator asked, once again. Ms. Wickliffe replied it would be the only way to track the transaction. Senator Porter asked if special language might be put into the bill which would allow the deduction for only the major licensees, rather than all the general licensees in the state. Ms. Wickliffe reported this bill was probably the result of one of the properties considering very large promotional activities. She opined this activity would be better addressed in the credit sections of the gaming statutes. This activity deals with credit customers and these transactions are very different from cash transactions in a casino. The senator asked if this option has been discussed with the proponents of the bill. Ms. Wickliffe responded in the affirmative, noting the discussions were very brief. Senator Lee noted that despite his many years of residence in the state, he is unfamiliar with gambling. He asked for confirmation that the chip given a patron who cashes his paycheck can be turned into money. Ms. Wickliffe confirmed the chip can be exchanged for cash. The senator asked if the opposite applied to the baccarat chip. Ms. Wickliffe replied this is not the case. This discussion, she explained, was of forgiven baccarat commissions, which never become chips. She offered a further explanation of how the commission system works. Because the wagering in baccarat is done with credit, if the commission is not paid by the patron, money never changes hands, and it is not considered revenue, the witness concluded. The discussion continued regarding the difference between a cash and credit transaction. The witness confirmed a marker is a credit given to the patron by the casino. If the marker is never paid, there is no revenue for the casino. If the marker is paid, it becomes revenue at the time it is paid, she emphasized. Senator Porter wondered if the markers are listed as accounts receivable on the casino's ledger. Ms. Wickliffe confirmed they are for financial statement purposes and income tax purposes, however, the state is on a cash basis for its gaming revenue and the marker does not become revenue until it is paid. Mr. Harris and Ms. Wickliffe stepped down. Mr. Flaherty took an opportunity to respond to Senator Adler's question about the specially marked chips. He told the senator some casinos do use specially marked chips so they can be easily tracked. Others use "live" chips and others use "dead" or non-negotiable chips. Senator Adler asked if the industry representatives would have an objection to making part of the bill a requirement that only uniquely marked chips or tokens could be deducted. Mr. Flaherty stated it is his belief this would not address the concerns of the gaming board. He declared Ms. Wickliffe had made the industry's argument for them when she stated the state is on a cash basis. It is the casinos' desire to pay taxes on what is collected in cash, he stated. Mr. Faiss noted the bill puts the burden on the casino to demonstrate the tokens were won back from the patron. He explained that in order to carry that burden, many of the casinos do use specially marked chips. Senator Adler asked if Mr. Faiss would agree there is a need for some uniform method of tracking these transactions. Mr. Faiss replied that typically such a decision is up to the Legislature, but typically it has been allowed the casinos can best decide what method to use to carry the burden of proof. Mr. Faiss stated the gaming industry appreciates the cooperation of Mr. Harris and Mr. Bible, who is the chairman of the State Gaming Control Board, with respect to the present bill, as well as other bills that will come before the committee. Additionally, he noted appreciation for the "fine audit division leadership of Sydney Wickliffe." He admitted there are differences of opinion between the two entities. Mr. Faiss insisted despite the testimony of Ms. Wickliffe, the baccarat commission is not a credit transaction. He stated there are particular guidelines that apply to credit transactions, which cannot be applied to some of the baccarat players, who play for cash. Mr. Faiss stated the state has a very simple tax statute which "has nothing to do with the IRS," and there is much resistance to changing the statute to an IRS statute. Mr. Faiss reminded the committee of Mr. Harris' articulation of certain standards contained in the law, which outline certain activities do not constitute cash activities (e.g. prearranged discounts, counterfeit money or tokens, money from foreign countries, etc.). The witness asserted this bill is consistent with the standards Mr. Harris spoke of; as well as being similar to the other activities listed under the exclusions from cash activity. He further asserted that legislative history will reveal that each of these activities is listed in the statute because the audit division of the State Gaming Control Board has attempted to tax the activity as cash. Mr. Faiss concluded his remarks asking the committee to once again delineate that the giving of tokens or chips to entice gaming is not a cash activity. Senator Adler opined the difference between this activity and those already outlined is "you can take these chips and get cash," and this causes him some concern. Mr. Faiss replied the "benefit to the player and the effects on taxation are the same, there is no tax implication at all, if that did happen." He asked the other gaming representatives to address the senator's concern. Mr. Brolick asked the senator to consider the concept that the customer would be able to take money from the casino, and then to ask "why would the casino want to do that?" This type of arrangement is of no benefit to the casino, he opined. These programs are designed to entice the customer to gamble, no matter what scale the enticements reach, he asserted, with the goal to generate revenue for the casino. Senator James stated he understands the tax theory and tax policy of the situation better than he understands the nuances of the practice. He stated the policy is to tax gross revenues-when money is added to the establishment. In his understanding, these promotional tokens simply travel around within the casino and result in no benefit to the casino. Mr. Brolick agreed with the chairman, reiterating the chips originally belong to the casino, they are given to the patron, and hopefully returned to the casino through winnings. There is no revenue from these chips, only from money wagered by the patron beyond the tokens given to him. Senator James said he understands what the gaming industry is attempting to do and asserted it is in the state's best interest to encourage means that allow the state's gaming industry to compete in an ever-expanding gaming world. This is very important he said, especially considering the growing competition. He observed the bill is not a big money issue, but rather a tax policy issue which will assist in this successful competition. Senator Porter still had questions regarding the baccarat commissions. Mr. Brolick took another opportunity to explain. With this explanation there were no further questions or testimony regarding the bill. The chairman closed the hearing on S.B. 399. SENATE BILL 400: Provides absolute privilege for certain communication between gaming licensee or its affiliate and employer regarding employee. Once again, Mr. Faiss addressed the committee in support of the bill. He introduced the other persons who join him at the witness table as Lawrence Samenza, Attorney, Assistant General Counsel, Circus Circus; Sandra McHenry, Employment Manager, The Mirage; and Linda Bernstein, Manager, Regional Human Resources, Hilton Gaming Corporation. He provided a copy of his prepared testimony (Exhibit F). Mr. Faiss noted there are amendments to the bill being proposed, as outlined in Exhibit G. Senator James asked Mr. Faiss if the language in subsection 2 changes "the fact that assertion of the privilege is an affirmative defense." He noted there is a presumption that exists, but wondered if this presumption only exists after it is shown the communication is made within the parameters set forth in the statute. Mr. Faiss referred the question to Mr. Samenza. Mr. Samenza agreed. The chairman next asked when the presumptions set out in subsection 2 arise. Mr. Samenza explained the plaintiff would have to prove where the communication fell outside the elements under section 1. With this answer the chair again asked if it is an affirmative defense. Mr. Samenza replied: In essence it would not be considered an affirmative defense, but it will be part of the burden of proof that the plaintiff would have to sustain in order to get past his case in chief. In essence he would have to prove that the information that was conveyed did not fall within one of these classifications as set forth. For example, if the information that was provided did not serve a legitimate business purpose, or was for some purpose other than a legitimate business purpose. If it was to defame that particular individual, to cast doubt upon his credibility or his honesty, that is was not for some business purpose, he would have to prove that fact. Senator James restated there would be a need to allege all those things. It would be useless to allege you were defamed and expect the employer to come forward with an affirmative defense. Under this bill, the senator asked, the employer would have the burden of showing the communication was not for the reasons set out in the statute. Mr. Samenza corrected the senator, noting the plaintiff would have to prove that there was a communication that related to employment, but fell outside any of the parameters set forth. Senator James noted the communication would not have to relate to the employment, but could only be about the employee by the former employer which fell outside the parameters of the statute. Mr. Samenza agreed. Senator James summarized the bill as requiring a rebuttal of the presumption by proving that all those parameters are not met. Next, the chair noted his recollection from law school classes on libel and slander and that there exists a qualified privilege. He asked about the bill providing an absolute privilege, questioning if it is absolutely privileged only under the circumstances set forth, which are those also set forth in the common law. Mr. Faiss concurred, noting once it is established the communication existed within the parameters set forth, then it is absolute. Thirdly, the chairman turned to the question of legitimate business purpose. The question exists as to "whether this bill will insulate discussions about someone's union activity...," the senator observed. He asked if such discussions would fall within "the notion of a legitimate business purpose, as defined in the bill." Mr. Faiss asked to refer this question to the other witnesses, noting the chairman's concern that the bill does not infringe the rights of employees or prospective employees. Mr. Faiss did respond noting such activities [union activities] are protected by the National Labor Relations Act and such discussions would not be protected by this bill as a legitimate business purpose. Senator Adler asserted his confusion about the wording of the bill in regard to the immunity it provides to the employers. The senator explained his understanding of good-faith immunity as applying to individuals such as policemen who perform their duties in good-faith against suit. This bill goes beyond that, Senator Adler opined, affording an absolute immunity to the employer, especially in section 1, subsection e. Secondly, he asked if the communication is absolutely privileged, how can a plaintiff obtain information during discovery, because the employer can claim this absolute privilege. The senator questioned the intent of this wording. Mr. Samenza stated the immunity should apply to liability not disclosure. Senator Adler opined it afforded absolute immunity from disclosure, as it is written. Thus, if there is a lawsuit, the plaintiff cannot depose the parties to the communication because of the privilege, he observed. Mr. Faiss stated that is not the intent of the bill. Senator James suggested wording along the lines of "is absolutely privileged to the extent that it does not impose liability for defamation." Mr. Faiss and Mr. Samenza concurred such a language change would clarify the intent. Senator Adler restated his concern. Mr. Samenza stated the communication, as the bill is currently written, would fall under the same guidelines as when a lawyer subpoenas records from the state gaming authorities, which also fall under the absolute privilege. He opined the wording change would clarify the intent. Senator Titus asked why there is suddenly a need for this legislation, wondering if there has been some incident or some trend that has developed to inspire such a need. Mr. Faiss replied there has been no such incident, but rather a steady erosion of the situation because there is an increased fear of lawsuits, adding the other speakers would address that question in their statements. He outlined the current state of affairs that requires researching federal and state statutes, as well as existing case law, to determine the interpretation of the law. Next, Ms. McHenry spoke from a prepared statement (Exhibit H). At the conclusion of Ms. McHenry's testimony, Senator Washington asked if this bill will allow all employers to screen their potential employees more thoroughly. Mr. Faiss replied the present bill only applies to gaming, but there would be no objection to expanding it to include employers generally. Ms. Bernstein spoke next, also providing a copy of the text (Exhibit I). She spoke in support of the bill with the suggested amendments. There were no questions for the panel, and they stepped down. Testimony against the bill began with Michelle Morrow, Citizen, Dealer. Ms. Morrow provided the committee with some background information noting she is a native of Nevada, who has worked as a dealer in the state's casinos for 16 years, as well as on a cruise ship in the Caribbean. Ms. Morrow reminded the committee of the very extensive background checks that are required by employers and local authorities when applying to work in the casinos. These checks include fingerprint and lie detector examinations. She offered examples of the difficulties she has encountered during her employment with the casinos including sexual harassment and discrimination and demanding tip kickbacks. She stated there are laws against these activities, including blacklisting employees, but these laws do not seem to apply to the casinos. She stated casinos (particularly the Hilton) do not hire union employees. Ms. Morrow told the committee all she wants "is the chance to work. If you pass this law, I'm not an exception, there will be millions on welfare... because we can't get a job because we're blacklisted." Michael Langton, Attorney, Lobbyist, Nevada Trial Lawyers Association, Northern Nevada Building Trades Council, spoke in opposition to the bill. Mr. Langton reported the building trades council he represents includes 22 construction unions. Even though these unions may not be directly involved in this bill they adamantly oppose it. Mr. Langton noted Senator Titus had hit on his theme when she asked what need exists for this legislation. He stated he is unaware of what abuses exist which would require this legislation. Mr. Langton reminded the committee that lawsuits are very costly, not only for the defendant, but also for the plaintiff. While he has heard reference to frivolous lawsuits, he said he has not seen any evidence of them. Mr. Langton observed the casinos can screen applicants quite sufficiently with the means available. This bill, he opined will sanction gossip. The witness stated that discussions of bad attitude should not be a legitimate business interest because these judgements are highly subjective. He confirmed sexual harassment is widespread in the gaming industry; and if the bill passes, an employee's response to such harassment will be a legitimate topic of discussion between employers, using phrases like "this employee is not a team player." Mr. Langton told the committee NRS 613.210(2) outlaws blacklisting. He reminded the committee of Mr. Faiss' representation that the proposed bill will not abrogate that law. The witness stated, "I disagree." Mr. Langton read the statute, which he opined limits the inquiring employer to seeking "only legitimate and lawful information." Senator James asked if this statute abrogates the common law qualified immunity. Mr. Langton replied in the negative, stating in defamation lawsuits the issue is whether or not there was a truthful conveyance with a malicious intent or simply a reckless disregard. This is a high standard of proof to meet, the witness explained, but if the present bill is passed, it will be nearly impossible. The chairman asked if the bill expands the common law privilege. The witness opined "it does substantially." Mr. Langton offered an example of the type of conversation which might transpire between employers to include the repeating of hearsay and rumor. "I heard that ... stole from his last employer," Mr. Langton, proposed. Currently, this kind of remark would be considered defamatory, if there was no attempt to verify the truth of the statement. With the proposal there is only a "good faith belief" requirement. This is a much lower standard, Mr. Langton opined. Senator James asked the witness to tell him how the language in the proposal is different from the language in the common law. The witness opined the bill will change the standard of proof for defamation from a reckless disregard for the truthfulness of the statement to a mere good-faith belief in its truthfulness. Mr. Langton opined the ability to screen applicants currently exists, and the gaming industry does not need to be treated differently in this regard. While defamation is very difficult to prove, the deterrent effect of a possible suit for defamation is very important to provide equity to the employee. An employer's need to know about the bad attitude of a prospective employee is not real. If an employee has used the lawful grievance procedure of an employer, he or she is likely to be reported as having "a bad attitude," Mr. Langton opined. It could be argued there is a good business interest in not having employees who "take you to grievance" or who resist sexual advances of superiors, Mr. Langton stated. Senator Washington asked Mr. Langton how, as an employer, he would determine if a prospective employee has integrity. Mr. Langton replied making such a determination is very difficult at an interview. There is certain verifiable data on the application which, upon verification, can show the honesty of the applicant, he noted. He added that past actions do not always accurately predict future actions. There is always a means to terminate an employee who does not perform his job duties satisfactorily or who is dishonest, the witness stated. Senator Washington stated the employer has a great deal at stake and should be able to make every effort to determine the integrity or loyalty of a prospective employee. This can be determined, he opined, through contacts with former employers. He stated his opposition to the view of the witness. Mr. Langton stated the breadth of the proposed law would say a person with "a bad attitude" could be excluded from employment, based on an inquiry. There is always a possibility of personality conflict within workplaces that can affect subjective reports about employees, he stated. Senator James asked Mr. Langton if he would agree one employer could call another and ask whether they would recommend an individual for employment. Mr. Langton was willing to agree such calls happen all the time and during these calls revelations are made that should not be, such as this employee is very active in union business. Based on such reports, that individual will not be hired, Mr. Langton speculated, despite the prohibitions of the National Labor Relations Act. Pressing the witness, the chairman again asked if calls should be made between employers. Mr. Langton replied the calls should be limited to the actual performance of the job of the employee, but they are not. The senator asked the witness to propose some language which would address his concerns. Senator James voiced his disagreement with the statement the bill would sanction gossip. There was further discussion as to the breadth and applicability of the absolute immunity the bill affords employers. Mr. Langton stated he could not imagine any situation where an attorney as intelligent as the gaming representative's Mr. Samenza could not be creative enough to imagine a situation which could defeat any lawsuit brought in objection to information exchanged under this proposed bill. The wording is extremely broad, he opined. Again, the chairman asked the witness to supply language which prohibits unlawful information exchange. He stated he would "support putting it in the bill." Senator James opined there is a lot of "hype" surrounding the bill which is unwarranted. He stated his intention to "move the bill" and such "hype" does damage to the process, because the hype becomes the issue. He stated the law already exists in the state, and all that the bill does is put it in the statute, and clarifies how "this is asserted as a privilege which has to be overcome as a presumption." He took exception to the newspaper reports that the Legislature is sanctioning gossip, or doing anything new. He asked the witness to show him places where the bill really expands the qualified privilege that exists in common law currently, and promised he would work with Mr. Langton to ensure it does not expand this privilege. Mr. Langton agreed to work with the senator and to provide some language, adding he is also concerned with enforcing the law once it is passed. He asked the committee not to allow the bill to become an arbitrary perversion of the law in the area of defamation. He stated the current system works and the bill is not needed. Senator Adler voiced some disagreement with the chairman's view. He referred to the bill, noting common law is contained in the bill within section 1, subsections a through d, however, subsection e with its references to privilege does not exist in the current law. He speculated the wording is simply a drafting error, that the absolute privilege prohibits the employee (or representatives of the employee) from talking to the employers about what was said between them regarding the employee. Then, the bill requires that in order to rebut the privilege, the employee (or representative of the employee) must prove the communication is not privileged, he read. The senator asked how one proves a communication is not privileged if that communication is not revealed. Senator James told Senator Adler there is an intention to amend the wording to say "to the extent that it does not impose liability..." so it is not a privilege from disclosure, and deposition can be taken to determine what was communicated between the employers. Mr. Langton agreed with Senator Adler's interpretation of the bill as it currently reads, opining it offers a privilege similar to that between an attorney and a client. The chairman stressed that language is a "nonissue" because it will be changed as indicated earlier in the hearing. The next witness, Kathleen Stoneburner, Citizen, Dealer, also spoke in opposition to the bill. Ms. Stoneburner told the committee she has been a gaming industry employee for 20 years. She stated her feeling is the bill is morally wrong because the gaming industry currently has a system to do background checks. Employees are required to obtain a police card and they are subject to probationary periods. The witness urged for this bill to be fair, the employee must be an active participant in these communications. This will allow the employee opportunity to rebut any negative allegations. She suggested there be access to due process for casino employees. There should be a system whereby the employee can request a hearing to present his side to clear his name. Under the proposal, Ms. Stoneburner observed, "an employer presents evidence which is based solely on rumor, conjecture and personal prejudices of a member of management." Ms. Stoneburner told of personal experience with a grievance she brought for sexual harassment at her place of employment. The members of the review board, she told, did not even know the definition of sexual harassment, and therefore, found against her. Despite this being a right-to-work state, Ms. Stoneburner asserted, if a person is called as a witness to discrimination or sexual harassment, they are considered a bad employee and a risk. The witness told of her own experience of being terminated, only getting six interviews for subsequent jobs, and being unable to secure employment. She said there is a possibility that she will lose her home because of these unfair employment practices. The chairman thanked Ms. Stoneburner for her testimony. Guy Gesualdo, Citizen, Dealer, also addressed the committee in opposition to S.B. 400. He reported he traveled from Lake Tahoe in order to testify regarding the bill. Mr. Gesualdo said he had seen the article in the local newspaper regarding the bill. This article caused him and his coworkers to feel outraged, he stated, because this bill allows human resource personnel "to manipulate a person's future in the industry." The questions on job applications for casinos inquire as to why a person left their previous employment. Mr. Gesualdo stated it is his belief that if a person admits they have been involuntarily terminated they open themselves up to intense scrutiny by the prospective employer. He opined that admitting to an involuntary termination should notify a prospective employer the employee broke some rule or another, and this should be enough. Mr. Gesualdo further noted the depth of questioning on a job application is inappropriate. He stated he feels these questions are really not applicable to the employment. He opined with this type of questioning and investigation, enough information is being provided to the prospective employer without allowing them to communicate with a former employer about attitude or union activity. The witness expressed his view that bills such as S.B. 400 do nothing but add stress to the daily lives of working people. "Trying to get a job in this town is a full-time job in itself," he said. He observed the recent election showed a desire to reduce the bureaucracy and red tape in people's lives, but this bill will only increase that red tape. He noted employees in the state of Nevada "really don't have any protection; they don't have anybody representing them." Addressing the issue of blackballing [listing], Mr. Gesualdo suggested that it does not have to be documented in order to be a reality. He stated it only takes a single phone call to a prospective employer to reduce the chances of employment there to zero. Unfortunately, there is no recourse for the employee. It is difficult to fight "overpriced lobbyists and high-priced attorneys" who represent the gaming industry, he stated. Additionally, everyone would enjoy reduced liability, which is what the gaming industry claims will be the result of this bill, the witness observed. Why should "we the people" have to be liable for their actions, he asked. Finally, Mr. Gesualdo addressed Senator Washington in answer to his comment about employers needing and deserving loyalty in their employees. Mr. Gesualdo asserted that employees also deserve loyalty. This sentiment should be earned and it should be part of a two-sided relationship. The witness agreed that integrity is a very important aspect of a good employee, adding integrity evolves from a mutual understanding and loyalty between employer and employee. It is not a one-sided thing, he stated. He thanked the committee for their time and stepped down. The chairman thanked the witness and called for further testimony. There was none. Senator James convened the hearing until the adjournment of the floor session, or until which time as the committee can reconvene, at the call of the chair. The hearing recessed at 10:30 a.m. It was not reconvened. RESPECTFULLY SUBMITTED: Lori M. Story, Committee Secretary APPROVED BY: Senator Mark A. James, Chairman DATE: Senate Committee on Judiciary May 11, 1995 Page