MINUTES OF THE

SENATE Committee on Commerce and Labor

 

Seventy-second Session

April 4, 2003

 

 

The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:08 a.m., on Friday, April 4, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Warren B. Hardy II, Vice Chairman

Senator Ann O'Connell

Senator Raymond C. Shaffer

Senator Joseph Neal

Senator Michael Schneider

Senator Maggie Carlton

 

STAFF MEMBERS PRESENT:

 

Scott Young, Committee Policy Analyst

Courtney Wise, Committee Policy Analyst

Kevin Powers, Committee Counsel

Lynn Hendricks, Committee Secretary

Laura Adler, Committee Secretary

 

OTHERS PRESENT:

 

Jake L. Parmer, Lobbyist, Nevada State Contractors’ Board

Birgit K. Baker, Administrator, Employment Security Division, Department of Employment, Training and Rehabilitation

Tim Rubald, Director, Business Development, Division of Economic Development, Commission on Economic Development

Janine Hansen, Lobbyist, Nevada Eagle Forum

Lynn Chapman, Lobbyist, Nevada Eagle Forum

Stan Olsen, Lobbyist, Nevada Sheriff’s and Chief’s Association/South, and Las Vegas Metropolitan Police

Robert E. Roshak, Lobbyist, Nevada Sheriff’s and Chief’s Association/South

James J. Jackson, Lobbyist, Consumer Data Industry Association

John Sande III, Lobbyist, Nevada Bankers Association, Nevada Franchised Auto Dealers Association, and Western States Petroleum Association

Timothy D. Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General

John R. McGlamery, Deputy Attorney General, Consumer Advocate, Bureau of Consumer Protection, Office of the Attorney General

Margaret A. McMillan, Director, Governmental Affairs, Sprint Nevada

John E. Jeffrey, Lobbyist, Southern Nevada Builders and Construction Trades Council

Derek G. Rowley, Lobbyist, Nevada Resident Agents Association/Carson City

Doug Ansel, Director of Operations, Incorp Services, Incorporated

Peter D. Krueger, Lobbyist, Nevada Petroleum Marketers and Convenience Store Association

Dorothy B. North, Lobbyist, President, Board of Examiners for Alcohol and Drug Abuse Counselors

Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada

Ann W. Nelson, Lobbyist, Employers Insurance Company of Nevada

Nancyann Leeder, Nevada Attorney for Injured Workers, Department of Business and Industry

Barbara J. Gruenewald, Lobbyist, Nevada Trial Lawyers Association

 

Vice Chairman Hardy:

We will start on Senate Bill (S.B.) 437. I have to make a disclosure and will not be voting on this bill, but I need to speak to this bill.

 

SENATE BILL 437: Makes various changes relating to contractors and projects involving residential pools and spas. (BDR 52-1288)

 

Last session I was a paid lobbyist representing the swimming pool industry on a comprehensive bill relating to pool builders. This bill is a cleanup to side effects of that bill, and I think noncontroversial. The earlier bill said the home owner can act as an owner‑builder; in essence, as a contractor to pull their permits, and hire contractors to do the work. What resulted was a whole new industry of consultants operating under the cover of home owner-builder rules that were not licensed. This bill clarifies the home owner-builder must be the owner of the home where the pool is being installed. Another problem was pool builders were also operating their own financing companies, received large down payments, then pulled out without building the pools. Previous legislation restricted pool contractors from having ownership in financial institutions. Inadvertently, this prohibited them from buying stock in mutual funds or something mutually traded in a financial institution. Senate Bill 437 will correct the situation.

 

Jake L. Parmer, Lobbyist, Nevada State Contractors’ Board:

We agree with your characterization of the circumstances surrounding pool‑contracting work that has been accomplished since the Seventy-first Legislative Session. I agree that complaints, according to the board, are down significantly on this problem. The board has not met since we looked at this legislation. I do not have a position to state for them, but we are comfortable with the bill.

 

Vice Chairman Hardy:

I want to thank the State Contractors’ Board for their involvement and cooperation, along with members of the industry.

 

Senator Carlton:

Has anyone discussed this with Senator Care after what he went through last session?

 

Vice Chairman Hardy:

I have not discussed the bill, but did discuss the issues addressed in the bill. We will close the hearing on S.B. 437 and open the hearing on S.B. 423.

 

SENATE BILL 423: Makes various changes relating to unemployment compensation benefits. (BDR 53-476)

 

Birgit K. Baker, Administrator, Employment Security Division, Department of Employment, Training and Rehabilitation (DETR):

I will read from prepared text (Exhibit C).

 

Senator O'Connell:

How does this overlap with what we are already doing with “Do It,” the State job training program?

 

Ms. Baker:

The Career Enhancement Program is among several job training programs. The former job training office was abolished with the passage of the Workforce Investment Act of 1998, which is administered by the Employment Security Division. We have funds available for incumbent worker projects through the Workforce Investment Act. We will also make additional funds available through the Career Enhancement Program. The Governor’s Workforce Investment Board will be the entity to review and approve these proposals. There will be oversight and there will be formal proposals that have to be provided to the State board in order to access these funds.

 

Senator O'Connell:

I have a constituent problem, and I would like to know how you handle this. An employer called because he had an employee who could not present him with a social security number. The employer let it slide for a month, and then let the worker go because the law required the employer have that information for his record. The discharged employee filed for unemployment and was able to collect from the employer because there was nothing in the law to prevent it, even though the person was an illegal worker in the State. The labor commissioner said that was correct, there was nothing in the law to prevent it. I would like to know how you would handle that?

 

Ms. Baker:

I am not sure because we require wages be reported for every individual that works for an employer based on a social security number (SSN). I could meet with you to look at the specifics, but I do not know how it would work without a social security number.

 

Senator O'Connell:

Would you have any idea, sir, how that works?

 

Tim Rubald, Director, Business Development, Division of Economic Development, Commission on Economic Development:

No. I do not.

 

Ms. Baker:

We require a foreign national who files for benefits to have an SSN that can be verified through a national system where SSNs are issued. I would need to look at the specific case to give you an answer because there must be more to it.

Senator O'Connell:

After a dry cleaner in Green Valley received notices from the DETR, he called me because he could not figure out how the worker could collect unemployment without a social security number.

 

Senator Carlton:

I would like to address the section on banquet workers. Could you explain exactly what we are doing and how it would benefit the employee?

 

Ms. Baker:

By providing a definition for new and additional claims for on-call workers. The banquet workers may work 3 days, then have 1 or 2 days separation and return to work. If they have a long enough separation, they are entitled to unemployment benefits. This section would not jeopardize their benefits. Because they have wages during the week in which they are separated, the only way their wages can be reported now is to mail in a card, which frequently delays their unemployment check. By changing the definition, the on-call workers will be able to file their continued claim on the Internet and use our Touch-Tone telephone system. This bill would allow a banquet worker to file his or her claim on a Sunday, the check cut on Monday, and have it by Tuesday or Wednesday at the latest.

 

Chairman Townsend:

We will close the hearing on S.B. 423. Committee, what is your preference on S.B. 437?

 

SENATOR CARLTON MOVED TO DO PASS S.B. 437.

 

SENATOR O’CONNELL SECONDED THE MOTION.

 

THE MOTION CARRIED. (SENATOR HARDY ABSTAINED FROM THE VOTE. SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)

 

*****

 

Chairman Townsend:

Do we have proponents or supporters for S.B. 379?

 

SENATE BILL 379: Establishes various provisions relating to identity theft. (BDR 52-266)

 

Janine Hansen, Lobbyist, Nevada Eagle Forum:

I will read from prepared text (Exhibit D).

 

Senator O'Connell:

We now require social security numbers for children who may be among the most vulnerable for theft. Do you have any statistics on that?

 

Ms. Hansen:

We have not seen a lot of reporting as of yet, but it has huge potential. My daughter and her husband had a baby last year and did not want the baby to have a social security number. They have yet to get a social security number for their baby. Almost everyone now automatically accepts a social security number for their newborns. The information is available at the hospital, easily accessible by almost anyone, and ripe for abuse. The receptionist at a doctor’s office stole a person’s identity, and it took the woman years to repair the damage.

 

When I went to the hospital for surgery, I asked that my social security number be removed from visible records. They would not do it until I explained to another person the reason, who took it off my records. The problem is the numbers are so available everywhere that people have easier access. The theft of social security numbers at the college level may occur simply by someone hacking into the computer system. Or a person could hack into our SMART system in Nevada where people are being tracked by their social security numbers. When is a 5-year-old going to check on their credit? Their number could be misused for years. By the time the person wants to use it, who knows what might have happened. I think it is a potential for a serious problem.

 

Senator O'Connell:

Mr. Chairman. I see Stan Olsen here, and his identity was stolen.

 

Chairman Townsend:

We cannot seem to get the public engaged in awareness of identity theft, yet. When it happens to you, it is the ultimate violation of your privacy and it stops your life.

 

Ms. Hansen:

It is the fastest growing crime at this time. It can be done over the Internet. You do not have to lose your wallet or purse. You can be invaded right on the Internet. We need to be extremely careful how we use the social security number that opens up everything to someone who steals it. The government needs to be more cautious as to how they use the number. Several years ago the law was changed so social security numbers were not permitted on Nevada drivers licenses. We need to look at more things like that to protect citizens from this serious potential abuse.

 

Lynn Chapman, Lobbyist, Nevada Eagle Forum:

I went through the CALPIRG/Privacy Rights Clearinghouse Report, May 2000 (Exhibit E). They interviewed thousands of victims of identity theft. Since the interviews there has been an increase of thousands of victims. Any help the Legislature can provide to protect private citizens would help, and we support S.B. 379.

 

Senator Neal:

Section 6 contains the things a person shall not do. In subsection 5, paragraph (a), “The provisions of this section do not prevent the: (a) Collection, use or release of a social security number as required by state or federal law; or (b) Use of a social security number for internal verification or administrative purposes.” As I read the section, any time the Legislature required the use of a social security number, it would be all right.

 

Ms. Hansen:

The inspector general spoke about the need for some limitation in government as well. One problem is there are 146 licenses in Nevada that require the social security number. The federal government requires babies to have social security numbers, which it uses routinely. One of the deficits of the bill is there is no opportunity to look at some of the uses and abuses by government concerning the social security number. Another concern about this bill is it does not require review of the uses. Our resolution called for a review of 42 United States Code (U.S.C.) 666 by the federal government, which requires the extensive use of the social security number that we think is excessive and open to abuse. This bill is a beginning, but there is a lot more to be done.

Senator Hardy:

Section 5 exempts all State and local government practices, and the federal government. There are legitimate reasons for these exemptions, but we need to more narrowly define the circumstances under which the social security number can be used.

 

Stan Olsen, Lobbyist, Nevada Sheriff’s and Chief’s Association/South:

I would like to introduce Robert Roshak and myself. We both represent the Nevada Sheriff’s and Chief’s Association/South.

 

Robert E. Roshak, Lobbyist, Nevada Sheriff’s and Chief’s Association/South:

We support legislation protecting personal identity against identity theft. We are constantly dealing with identity theft. It is a growing problem.

 

Mr. Olsen:

A few years ago the parents of a college-bound high school student wanted their daughter to have a credit card for emergencies. The application was denied because of bad credit. After further investigation, it was found a prostitute had stolen the daughter’s identity. The Las Vegas Metropolitan Police Department had significant background on the person who had been arrested repeatedly. Fortunately for the high school girl, this person did not have any warrants, but had a lot of bad credit. When the prostitute died, it made it more difficult to clear things. It took the Las Vegas Metropolitan Police Department and the credit card company 3 years working with the Internal Revenue Service to clear this teenager’s credit.

 

In another incident, a legislator called regarding a 21-year old constituent working at McDonald’s. The constituent’s paycheck was garnisheed and he was arrested on a warrant. The investigation discovered a person who had stolen the man’s social security number and used it to get four credit cards, each with a $200 limit. The person “maxed out” the credit cards and made no payments. The person also used the constituent’s social security number to acquire a driver license. He also received a traffic ticket later. The constituent was arrested for not paying the ticket. The constituent was released right a way, but it took 3 weeks just to straighten out the warrant.

 

Another example concerns a man in the Midwest who graduated from college with a degree in finance and banking. He was hired and terminated from several jobs. The young man could not get a job in the banking industry, because the man who took over his identity was a bank robber. The man ended up being homeless because it took 10 years to straighten out his record. Additionally, the other man was in prison part of the time, adding to the young man’s problem of getting a job. The young man’s working career was destroyed because of another person.

 

There are many examples of identity theft problems based on social security numbers and other personal identifiers. We support protecting personal identifiers because they are a detriment to the public. The police also use the social security number as a personal identifier. A number of years ago I stopped a visitor in downtown Las Vegas who was listed in the national crime information computer as a Navy deserter. Both the wanted man and the man I stopped were from the state of Washington, had a connection with the Navy, fit the general physical description, and had the same birthday. The only difference was the last two digits of the social security number. That is how we were able to distinguish between the two men. We use the social security number but we do not release it.

 

Several years ago we stopped putting social security numbers on citations because they can be lost. We do use the number on booking sheets. The social security number is no longer used on crime reports.

 

Senator O'Connell:

The penalty for identity theft appears to be all over the books depending on what occurred during the period the person had the false identity. Is there anything currently on the books specifying additional time incarcerated because of the type of crime?

 

Mr. Olsen:

There are no enhancements right now.

 

Senator O'Connell:

Should there be any enhancements?

 

Mr. Olsen:

I believe it would depend on the type of crime committed while using another’s identity. The reason is if someone takes over another’s identification and commits a serious crime such as against another person, the identity takeover may not have anything to do with the violent crime. Many times enhancements tend to be a negotiating point when it comes time to go to trial, and may or may not be of help.

 

Senator O'Connell:

It is so outrageous to hear these stories. I would think that is enough to keep these people off the streets for a long time.

 

Senator Hardy:

Where is the current jurisdiction for Internet fraud? Is that at the local level?

 

Mr. Olsen:

The Internet is international, and it is very difficult to enforce at the local level. We know from our fraud detail that a lot of Internet crimes and identity takeovers are done by the new type of organized crime. Much of it out of Russia, Bulgaria, and Southeast Asia. It is an international problem. Travelers to foreign countries use their bank cards. They are putting their bank accounts in danger, and we urge people not to use their bank cards.

 

Senator Hardy:

I used my ATM card while in Hong Kong, and a year later my bank account was completely drained.

 

Mr. Olsen:

In Europe there is an interesting technology. Restaurants use a wireless device to run the credit card through. It operates like a garage door opener, an automatic clicker to your car, and other devices. The thieves go to the European version of Radio Shack and buy a device that intercepts the airborne signal and re-encodes it. Now the thieves can create other credit cards using the access information from the strip on your credit card.

 

James J. Jackson, Lobbyist, Consumer Data Industry Association (CDIA):

I had documents (Exhibit F and Exhibit G). Original is on file in the Research Library.) prepared for you by the Consumer Data Industry Association (CDIA). The CDIA is an association of credit-reporting agencies who fully support any steps taken to effectively address identity fraud and identity theft. In that regard, the CDIA supports stronger tools for local law enforcement to fight identity theft and misuse of the social security number. Any enhanced penalties would be welcomed to discourage it.

 

Our main concern is in two areas of the bill. First, the statutory requirement of file flagging as expressed in the documents (Exhibit F and Exhibit G). Starting in 1993, the CDIA has been innovative and forceful in coming forward with initiatives to fight consumer fraud and identity fraud aided by advancing technology and methodology. Currently, each member of the CDIA has the ability to allow the consumer to flag his or her file. A person attempting to properly access that credit file would know the consumer may have been a victim of fraud. Requiring us to do that by statute, in our opinion, would create 50 different standards from 50 different states being imposed. It is for this reason we urge the committee to allow the consumer data industry to continue in its own innovative efforts that have been effective in advancing solutions to the ever‑changing conditions.

 

The second part of which the CDIA has a problem concerns file freezing. While that may sound like an effective step, it would do nothing to stop identity fraud. As previously indicated, identity fraud does not occur by somebody getting access to a credit report or credit file. It starts much earlier by a person obtaining a personal identifier. By allowing a person to freeze their file, they may actually be harming themselves more than helping. As indicated, the Federal National Mortgage Association, Fannie Mae, will not consider any application with any altered credit file or one with a freeze placed on it, thus denying a consumer the possibility of a Fannie Mae mortgage loan. Many industries and retailers use credit reports to determine whether or not to extend credit to a consumer or deny credit to a consumer who has placed a freeze on their file. There are concerns how that would hamper law enforcement’s ability if they are seeking information on an individual, and are not able to access that file. They may be thwarted in their efforts.

 

John Sande III, Lobbyist, Nevada Bankers Association (NBA), Nevada Franchised Auto Dealers Association (NFADA), and Western States Petroleum Association:

The NBA has concern over section 6 regarding the social security numbers. They would propose amendments. I understand a similar bill passed in California. We will be monitoring the results. The NFADA’s concern regards the security freeze. We believe it would be difficult for a consumer to purchase an automobile.

 

Under section 16, the freeze will stay in place until the consumer contacts the credit-reporting bureau to request the freeze be temporarily or permanently lifted. Under section 17, subsection 2, it could take up to 3 days for the freeze to be lifted. An automobile dealer would not be able to process any transaction without first checking the purchaser’s credit. This delay could chill a consumer’s decision to purchase an item while they wait for their credit information to become available. With these considerations, we hope someone can explain how a security freeze would help deter identity theft.

 

Senator Neal:

When a consumer fills out an application they include address, references, employment, et cetera. What is wrong with contacting a bank without knowing the customer’s social security number or checking account number?

 

Mr. Sande:

Under section 6 of the bill, I think the financial institutions may determine they do not have a problem regulating where and when you disclose or print a social security number. Federal and state laws have guidelines for required information on an application for credit. Section 6, subsection 5, paragraph (a) is covered.

 

Senator Neal:

Does the Federal Deposit Insurance Corporation (FDIC) require the social security number?

 

Mr. Sande:

The FDIC and federal laws also apply to state chartered banks. Federal law applies to what must be on an application or other documents. I have to do further checking on the requirements, but I have been told it could cause a compliance problem for banks. Section 6 needs a few changes to be in compliance with federal law.

 

Chairman Townsend:

We will close the hearing on S.B. 379, and open the hearing on S.B. 399.

 

SENATE BILL 399: Revises provisions governing trade practices and resident agents. (BDR 52-429)

 

Timothy D. Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General:

The legislation is intended to revise and update our deceptive and unfair trade practices law to comport with changes in the nature of the commercial transactions that have proven to be difficult to police under some of our existing statutes. In particular, the increase on the Internet and other electronic transactions have further reduced the face-to-face contact between customer and vendor. The changes are mainly derived from the telemarketing statutes. They were devised in light of changes the Federal Trade Commission (FTC) has made in certain federal regulations.

 

Chairman Townsend:

There is a large document (Exhibit H. Original is on file in the Research Library.), and a large bill. I would like to stay with the primary issues, such as telemarketing.

 

John R. McGlamery, Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General:

The bill expands beyond telemarketing. As of March 31, 2003, the new federal telemarketing sales rules came into effect. In reviewing those rules, we saw a gap for other non-face-to-face transactions, such as Internet, fax, and other means. To be more effective we are recommending using the gist of the federal rules, but take out the word telemarketing. Now the rules would apply to any situation where there are no face-to-face sales, because they are the bigger problem. Oftentimes the consumer cannot find these people, and the information (Exhibit H) shows how these scams frequently work. The FTC announcement on top (Exhibit H) is a case we have been working on extensively this year, because this scam was using Nevada as their address for their telemarketing and other deceptive trade practices. They were also located in several other states and in Canada. This company was buying and selling banking and credit card information to telemarket to consumers. If the consumer refused, the company told them they would get the item anyway because they had their banking information.

 

Senator Neal:

Would you expand on the definition of deceptive trade and how that would help you in your job to protect the consumer?

 

Mr. McGlamery:

Right now it is legal to do most of the things in the bill. It is legal for me to take someone’s financial information and sell it to someone else, and that person could then use the information for telemarketing, mail by fax, and e-mails. The way the credit card industry works, the merchant is their customer, not the holder of the credit card. Therefore, if a charge is placed on a person’s card, automatically the business relationship between the credit card issuer and the merchant becomes binding. These relationships would require the same type of verification as for the slamming and cramming of telecommunications, and would expand it to the credit card industry. If you ask someone to prove an individual made a purchase, there is no law they would have to prove it.

 

The case in the FTC announcement (Exhibit H) is a good example of how extensive the operation. Our office put in 800 hours on this case working closely with the Federal Bureau of Investigation (FBI), and the FTC to put down this scam. The victims of these scams would have to go to their banks and credit-reporting organizations to get the unauthorized charges removed. If someone gets hold of your credit card information and charges against your account, the credit card company believes it is the cardholder. The only way to stop it is to close the account. The same holds true for your bank account and electronic debits. This bill would assist consumers by making the person charging the account prove the purchase.

 

Chairman Townsend:

Give me some specifics. What in the bill would fix a problem?

 

Mr. McGlamery:

Section 2 of S.B. 399 regarding failure to disclose the entire amount may fix the problem. The Bureau of Consumer Protection receives numerous complaints. For example, a $10 cell phone with undisclosed shipping and handling charges of $700. It is not illegal under current law, but it would be with this bill. These are undisclosed amounts, and the bill is designed to have the seller disclose all information about additional charges to the consumer so they have a clear idea when they make a purchase.

 

Chairman Townsend:

So far there has been reference to telemarketers and credit cards, but the way I read this bill, it includes all commercial transactions or all occupational transactions.

 

Mr. McGlamery:

All deceptive trade laws under Nevada Revised Statutes (NRS) 598 refer to the buying and selling of goods and services. It does not apply to other transactions that could be out there. It really applies to non-face-to-face contact.

Chairman Townsend:

“A person engages in a ‘deceptive trade practice’ if,” and then it goes on to list a lot of face-to-face transactions. Is it somewhere in the bill where it is not face to face?

 

Mr. McGlamery:

It does apply to face to face as well, because the word “telemarketing” was removed.

 

Chairman Townsend:

This language is obviously not your language. It looks like it is from the FTC.

 

Mr. McGlamery:

It is from the FTC rules without the word “telemarketing” so it would apply to all transactions. Most of the face-to-face transactions are not a problem; it is the non-face to face where the problems arise. Again, it would apply to face‑to‑face transactions where a later charge shows up that the consumer did not know about at the time of purchase.

 

Chairman Townsend:

On page 2, subsection 1, subparagraph (3), does that mean you would now go into every health food store, and say what they are selling does not prove the efficacy of diet pills, muscle-building pills, or whatever? That is what it is saying in this bill.

 

Mr. McGlamery:

It is designed to cover things similar to a case I have now, where the seller advertised a 4-karat diamond ring. The purchaser found out it was a cubic zirconium.

 

Chairman Townsend:

Could not you have prosecuted under the current statutes?

 

Mr. McGlamery:

We could, but again, this bill was designed more for the non-face-to-face transactions. It is more of a common sense thing.

Chairman Townsend:

If I purchase vitamins and supplements from a health food store, and it does not do what it says it will, that is a deceptive trade practice. Then I would come to you to apply all the fines and penalties.

 

Mr. McGlamery:

Under that specific example, you are right. We see this all the time with the Food and Drug Administration (FDA). It is mostly with diet pills advertising fantastic weight loss, and that can be prosecuted under current law.

 

Chairman Townsend:

I want to make sure this bill addresses the problems in Nevada you described. This bill is the ultimate net. It would give you the authority to do almost anything.

 

Mr. McGlamery:

It gives us the authority to prosecute. We would still have to convince a judge. But without it we are dead in our tracks.

 

Chairman Townsend:

Some of your predecessors cast a wide net that caused a great deal of concern in this State. We want to make sure you have the tools to get criminals and people who mislead others. But I also do not want to be in the position where this becomes a consumer jihad, and every business in the State faces your wrath.

 

Mr. McGlamery:

I understand. I cannot say what my predecessors did or what some other person might do, but I need the tools. I am in a frustrating situation.

 

Chairman Townsend:

We purposely kept deceptive trade practices loose so you could scoop in undesirables when needed, and carve out those when they did not warrant it. Now this bill is a literal blank check. I am not certain this is not a solution looking for a problem, based on the way it is written.

 

Mr. McGlamery:

The Bureau of Consumer Protection needs the tool.

 

Chairman Townsend:

I understand. But a lot of this is how the tool is used. You can literally get every single prosecutor, investigator, and deputy attorney general, and if you press real hard on this, you could close every business in this State.

 

Mr. McGlamery:

I would hope not. To be honest, my reading of this is not to only protect consumers, but to protect businesses. This is to enhance honest businesses and marketplaces in Nevada. Honest businesses are our friends. When we put down the bad guys, we are able to enhance the businesses instead of the dollars going to some scammer. I need the tools, but the real offsets are the courts. It is very hard to enforce these in court. I have an obvious case of deceptive trade in the Nevada Supreme Court, and the court refused to grant an injunction to keep them from doing it. The court said it was not an emergency. There are hundreds of complaints against this company.

 

Chairman Townsend:

I am not against giving you this kind of authority, just so long as you understand. I am thinking of efficacy and the last time I went to one of my health practitioners. Based on advertising I might have had the impression that I was going to feel better. After a couple of days I did not feel better. According S.B. 399 it would be a deceptive trade practice.

 

Mr. McGlamery:

I would say it has to be false in fact. It is an axiom of law that pure puffing is not deceptive trade.

 

Chairman Townsend:

Go back to the bill and “licensed occupation.” We are talking about advocacy. I can walk up and down Carson Street and find something in the bill to charge a business or occupation with a deceptive trade practice. Again, I am not saying you should not have the tool; I want you to be aware of the broad scope of this bill.

 

Mr. McGlamery:

I want you to know this office is charged with understanding that S.B. 399 is to protect honest businesses, too, and that is in NRS 598.

Chairman Townsend:

I do not think the Senate Committee on Finance would ever give Mr. Hay or the attorney general the kind of resources necessary to go wild. The point is, given your limited resources, your focus is going to be on the most serious and egregious deceptive practices. But in order to prosecute with any chance at all, you need as many tools as you can get. Is that a fair description?

 

Mr. McGlamery:

I could not have said it better.

 

Chairman Townsend:

Look at section 5, subsection 4, which is part of NRS 598. It is specific. It says it is important for the consumer to know the business exists somewhere. Personally, I ask a solicitor to fax their information, because I want to know about them, including an address. You are right about one thing, and that is if no one gets killed, then the courts do not look at this as a high priority.

 

Mr. McGlamery:

On pages 3 to 9 of the document (Exhibit H) are good examples of how an identity could be hidden. Everything was tied to one address, which is a small house, as seen in the picture. Yet, the person on the other end of the telephone tried to convince me they had 300 employees. I have had cases of people in Minnesota or Indiana use Nevada’s laws to hide their actual locations. We handled that example case because the laws in the other locations were not adequate enough to help the consumer. I have to give kudos to the Consumer Affairs Division that worked with us on this case.

 

Chairman Townsend:

You could have gone through the whole testimony and not talked about the Consumer Affairs Division.

 

Mr. McGlamery:

It is a good thing I could use the Consumer Affairs Division because it gives us more manpower to handle some of these cases.

 

Chairman Townsend:

You know where I stand. I would like to get more manpower to you and I have tried over the years.

 

Mr. McGlamery:

The Consumer Affairs Division do deserve kudos in this case because it reduced my workload so I could work with law enforcement agencies to bring the case to a head. Later the case shifted to the FTC who had the manpower to shut down that operation. In this operation everything was put on the resident agent who simply acted as a mail drop. Instead of putting it on the resident agent, we wanted to put it on the scammers themselves to factually disclose actual location and other information.

 

As for the rest of the bill, the only concern is section 11. There are portions where the attorney general’s office does not have the same authority as the commissioner or the district attorneys. Some of these changes are to fill in the gaps so the Bureau of Consumer Protection has the same authority to function better.

 

Section 12 has to do with telecommunications. Under the current law, if a long distance telephone company hires a third-party agent, it is the agent’s address and other information that appears on behalf of the company, with only a passing reference to the actual company. I have to spend hours trying to identify the third-party agent’s company and location. Oftentimes the business name does not match the actual company name.

 

For instance, there was a company named Mercury and it turned out to be Go‑Internet. The address of the actual company needs to appear on customer billing. Third-party agents confuse and frustrate consumers, costing time and resources. This disclosure would be consistent with other areas of the bill. I want to make clear the minutes and seconds do not apply to flat-rate billing. If someone said there was a $49 charge for unlimited calls, it would not apply to that case. It would apply to those cases where the first 1000 minutes are covered, but then it is 5 cents a minute thereafter. Unless the time frame is on the bill, there is no way for the consumer to determine if they are being properly billed. This is a disclosure matter. Another problem is companies using something other than minutes to compute charges. You would need a mathematics degree to figure it out how long were the calls.

 

Mr. Hay:

I would like to emphasize the issues Mr. McGlamery raised are valid. I think the Bureau of Consumer Protection’s track record on prosecuting only egregious violators should speak for itself. Since the nature of these transactions continually changes, I am sure other issues will arise between now and the next time the Legislature meets in 2005. Therefore, we would like to have the tools to alleviate consumer concerns during that period of time.

 

Chairman Townsend:

One problem that concerns me regarding Senator Wiener’s earlier testimony on her bill is picking an unauthorized charge off a bill after 3 or 4 months. I thought one of the reasons for a consolidated bill from a company was so you could go through each one of the items. Senator Wiener said she did not notice the unauthorized charges until 2 or 3 months later. I think we have to be realistic because there are certain elements in the bill that bother me relative to the consumer, such as trying to protect the consumers against themselves. This does not address that, which is good, because that has some troublesome issues in it.

 

Mr. McGlamery:

We talked about opt in and opt out on that one. If you did not tell the person you were not going to buy it, that is addressed here.

 

Chairman Townsend:

I am talking about Senator Wiener’s bill. She wanted an “If I went brain dead for 4 months and did not pick up on an unauthorized charge, I ought not be responsible for it.”

 

Mr. McGlamery:

From a business standpoint, I find the consumer is telling false information, and the business has the evidence to prove it was a valid transaction. I am not happy with the consumer either. I have to do what is right under the law, and I cannot be party to a consumer perpetrating a fraud as well.

 

Chairman Townsend:

What is the fiscal note? Do we have it?

 

Senator O'Connell:

It says it is nothing.

 

Chairman Townsend:

Why did it end up with yes and yes? Is it because there are penalties included?

 

Mr. Hay:

That is correct. It is because there are penalties.

 

Margaret McMillan, Lobbyist, Director, Governmental Affairs, Sprint Nevada:

On section 12, subsection 5, page 13, Sprint’s only concern is we have two exchanges that are on measured services, Mt. Charleston and Nelson. Those are covered by tariff, and the billing is based in units. I understand from the regulatory people the first unit is 4 minutes and beyond that they are billed in 1‑minute increments. The customer’s bill does not show it in minutes and seconds, it is shown in units. There is a tariff on file for the customer to find out how many units they have used and how those units are calculated. The exchanges tell me to change it so it shows on the consumer’s bill in minutes and seconds would involve quite an extensive billing change, and a change to the tariff.

 

John E. Jeffrey, Lobbyist, Southern Nevada Builders and Construction Trades Council:

DeHart and Darr Associates Incorporated is a firm in Washington, D.C., that deals with the Direct Marketing Association, telemarketing, and direct sales. The problem with this bill is it tends to treat all businesses like telemarketers, and all businesses do not operate the same way. The FTC rule (Exhibit G) became effective March 31, 2003, and covers many things in this bill.

 

For example, if you order something over the phone, you are required to give exact cost for the item, including shipping and handling charges. The Book of the Month Club sends out information on their offerings. They do not know which books the customer may choose, so they cannot tell the customer how much it will cost. These types of transactions require extra time and communication. I think the bill needs some work, and I have submitted proposed changes (Exhibit G) to separate the kinds of businesses and violations so it makes sense to businesses trying to function within the laws of this bill.

 

Ann Darr, owner of DeHart and Darr Associates Incorporated, has offered to make herself available to work with the proponents of the bill to make it acceptable to all entities. She worked with the FTC for the year it took to develop the revised FTC rules. The rules do a good job of separating businesses and how they should operate. In fact, California adopted the FTC rule in exchange for a bill similar to this bill.

 

Derek G. Rowley, Lobbyist, Nevada Resident Agents Association/Carson City (NRAA):

The NRAA also has trouble with the bill. In stating our opposition to it, I want to be clear we are not in favor of deceptive trade practices. In fact, our association recently met to adopt ethical standards for resident agents in our industry for promotion of corporate filings within the State. Currently, we are working on establishing procedures for handling consumer complaints that happen internally within our organization. I have been a business owner since 1989, and a member of the Reno Better Business Bureau and other organizations. We have never had one complaint filed against us anywhere, by anybody. I want to tell you my company would be in violation of this bill as it is written. Senate Bill 399 as written applies to every transaction that occurs. To burden Nevada businesses with standards designed to deal with problems that specifically apply to a telemarketing industry, would be unfortunate.

 

For example, some of the disclosure requirements on page 2, subparagraph 3, line 12, subparagraph 5, and page 5 requires disclosure of every location where the goods are offered, and the address of everybody involved in selling those goods.

 

When I go to the market once a week to fill up two shopping carts for my four children, I would need another two shopping carts for the grocery store to provide all the proper disclosures this bill requires. That would not be workable for any Nevada business if they were held to those standards. The bill also limits the payment options that can be made in a transaction to either a written signature on a credit card, an oral authorization with a lot of other information that has to be recorded, or a 30‑day advanced billing.

 

The language in this bill would not allow for ATM transactions, or to fill your car using the gasoline company’s card. I think this bill has a lot of problems. We would like to work with the attorney general’s office to help resolve some of the concerns they have. There are current provisions in the law which address all the issues presented to make it enforceable now. The disclosure already has some form in due process. If there is a complaint, and a need to find out where these businesses are based, the resident agent is served. One of the roles a resident agent serves is to maintain that information. If it is determined there is a need to tighten up on the amount of information a resident agent is required to have, we would be happy to entertain that as part of the solution. But required public disclosure of all this information is something no Nevada business could live with. This is clearly a bill whose reach far exceeds its grasp.

 

Senator Neal:

What is your business?

 

Mr. Rowley:

It is an incorporation business. I am one of the members in my association. We help people file incorporation papers.

 

Senator Neal:

Are you a resident agent?

 

Mr. Rowley:

Correct.

 

Senator Neal:

You say this bill would affect you?

 

Mr. Rowley:

Absolutely. Under the broad scope of the way deceptive trade practices are defined specifically in section 2, virtually every business would be in violation of the deceptive trade practices as defined in this bill. The fact that I represent several thousand companies in my business, tells me all of them would likely be in some form of violation. As resident agents we provide substantial assistance as defined on page 4, line 40. Those companies would place us in the position of being involved in deceptive trade practices by virtue of representing those companies under this bill. By default we would also be involved in deceptive trade practices, and that would impact us.

 

Senator Neal:

Are you saying all of section 2 would affect you? It describes entities and associations. It lists a number of disclosures, which I think would be good business practices in dealing with the public. Are you saying you would like to mislead the public in terms of their contact with you in purchasing from you?

 

Mr. Rowley:

Absolutely not. We follow good business practices, which is why we have never had any complaints filed against us. But if you take section 2, line 12, subparagraph 3, as it specifically applies to my business, the fact that we help people form business entities, line 3 would require resident agents enter into the business of practicing law. We would have to be involved in the full disclosure of any material aspect of the use of the entities that we provide. That is not what we do. We have publicly stated we do not engage in the practice of law, but that paragraph would virtually require us to fulfill that obligation. There is no way we could cover every material aspect of the performance of a particular company, including all of the limitations and legal issues.

 

Senator Neal:

But line 3 is followed by all of the disclosures starting in line 7, and going to line 26. Are you saying you do not want to do those things?

 

Mr. Rowley:

Do I want to get involved in being required to practice law as part of my business? No, Senator, I would not. What would the definition be of any affiliation we have with any person? How would I even know if I am in compliance with that law? I do not even know what subparagraph 6 means, so I cannot answer how that would apply to our industry.

 

Senator Neal:

Subparagraph 6, “That any offered goods or services are required by a person to provide protections that the person already has pursuant to any federal or state law or regulation.” You say you do not know what that means?

 

Mr. Rowley:

That is correct. I do not understand what that means and how that would impact us.

 

Senator Carlton:

I have tried to boil this down in my mind as to how we can do the right thing here. I keep coming back to what was said earlier about taking out the provision of telemarketing, and applying this to non-face-to-face transactions. If the present definition of telemarketing does not suit the needs in order to enforce those regulations for Internet and fax transmissions, maybe the easiest way to deal with it is to allow the inclusion of the Internet and fax transactions in the definition of telemarketing. Then we would not have to worry about spreading this wide net on a lot of other businesses that are part face to face and part not face to face, that have other regulations involved.

Mr. Rowley:

Section 17 through to the end of the bill, deals with a business where one resident agent might solicit the business and corporations serviced by other resident agents. This makes that a deceptive trade practice unless a 30-day written notice is given to the existing resident agent and the corporation. We do not understand why this would be in the deceptive trade practice bill. Why does this sort of restraint of trade and restraint of competition belong in this bill at all?

 

Senator Neal:

If a consumer complains about a company you represent, how do you resolve that complaint?

 

Mr. Rowley:

We run into that regularly. Because we have a relationship with our client, we do not automatically voluntarily disclose every time there is a complaint all the details of the client. We do and have referred the complainants to the Internal Revenue Service (IRS), FBI, district attorney, or the attorney general depending on the nature of the complaint. If in due process there is an investigation where our information is a necessary part of that investigation, we are subpoenaed and always comply by supplying any information at our disposal.

 

Ms. Hansen:

Page 2, line 3, says, “fails to disclose in a truthful, clear and conspicuous manner.” If all these things are not done then it could be a problem.

 

Let me illustrate how it might spread a broad net to little organizations. Page 3, line 13 talks about presenting the expressed written authorization of a customer or donor for the payment of a charitable contribution. On line 20, it says if it is not written, it has to be recorded in an audible form. We are a small nonprofit organization. At Christmas time we sell See’s Candies. We often take orders over the phone without expressed written authorization, and we do not have any means of recording the authorization for using the credit card number to pay for the candy. Perhaps the legislation is too broad. There might be some difficulties arising in terms of legitimate transactions. When we create laws, we need to make sure they are not too broad as to infringe on people’s rights to operate and put them in jeopardy.

 

Another point is on page 3, beginning with line 4. This is important because it relates directly to the issue of identity theft. A problem occurred nationally when U.S. Senator Shelby passed legislation that would have prohibited banks and other financial institutions from selling and trading their information, which inundates us with numerous credit card offers. Part of this was because the banking industry was so against any limitation on this nationally. Because of the issue of identity theft, it is important to look at this portion, and nationally they continue to try to do something about it. When you get that slip of paper with your credit card that says privacy policy, it really means non-privacy policy. If you read through, you will see that in order to really be protected with your privacy, you have to call them, or send something back, or opt out. Otherwise, you are automatically opted in to their sharing of your information to marketers, advertisers, and to almost anybody. That needs to be changed so you would have to opt in, because privacy is not protected in any way.

 

I think this section is important in protecting identity theft. It is opposed by many industries because private, personal information, credit information, and your social security number are valuable commodities on the open market. We need to consider the threat of identity theft that exists through the selling of your personal financial information without your expressed authorization.

 

Doug Ansel, Director of Operations, Incorp Services, Incorporated:

As far as the section on due diligence, we commonly take phone orders and we do not have a written authorization. What happens is the customer gets a charge back from the credit card company. If we continued to charge the customer’s card we would lose our merchant account and the ability to charge anything further. In any case, when a customer has contested a charge, we had to provide a large amount of due diligence. Even without regulation, it behooves a business to get as much information from a customer as possible, if only to serve them. Also when a traveler makes a face‑to-face transaction and then leaves the State, there is nothing to prevent the seller from running that credit card number again. There are protections inherent in credit card use with the ability to charge back.

 

Lastly, section 17 regarding mailer solicitations. This section makes it nearly impossible time-wise for somebody who wants to change a resident agent via solicitation because resident services are usually billed annually. The customer could run into another annual billing cycle forcing them to pay for another year of service only because they lapsed into that 30-day period.

Chairman Townsend:

We will close the hearing on S.B. 399, and open the hearing on S.B. 422.

 

SENATE BILL 422: Revises certain provisions relating to operation of service stations by refiners. (BDR 52-1071)

 

Mr. Sande:

Many of you may remember the divorcement law amended in 1997 to which this is a small change. The rest of the bill is tweaking by the Legislative Counsel Bureau (LCB). Delete lines 27 through 32 because we believe it is no longer necessary. It would allow a refiner to purchase a station from a dealer, or if the arrangement was terminated, to operate it as a company-operated station as long as it complied with the remaining provisions of the law.

 

Section 1 is the LCB bringing it up to date because the calendar years mentioned are in the past. Section 2 contains language put in by the LCB to the effect that if you acquire a service station and cannot company operate it long‑term because the cap referenced in section 1 was hit, then it can be operated as a company station for 180 days until a new lessee dealer can be found to operate the service station. We think this would be more beneficial to both sides because if a retailer wanted to sell, and could sell it to a refiner who believed they could operate it more profitably as a company station, they would be willing to pay more. There are less than 10 percent of company-operated service stations in Nevada.

 

Peter D. Krueger, Lobbyist, Nevada Petroleum Marketers and Convenience Store Association:

We agree with the other people regarding the changes and support the bill. It will serve both the lessee dealer we have wanted to protect over the years, and the needs of the refiner. I would also ask that the letter (Exhibit I) from Mr. Sande of Jones Vargas be entered into the record.

 

Senator Neal:

This started out to help the small dealership and franchise, but I am seeing a lot of mini-stations with big flags flying in southern Nevada. There were two or three companies that took advantage of this.

Mr. Krueger:

If you are referring to the American flag, it is part of what the divorcement bill was really about. As to what has happened to the number of refiners, that is just a fact of what has happened in the oil marketplace. The existing portions of this bill still protect those lessee dealers that choose to remain lessee dealers.

 

Senator Schneider:

I was curious why the gas prices went so high. Is that because the refiners are controlling or manipulating the market?

 

Mr. Krueger:

As I told the attorney general and our members, this is not about refiners artificially raising prices to my wholesale members. This is about California switching from methyl tertiary butyl ether (MTBE) to ethanol, and the war in Iraq. The war jitters are over now. A barrel of oil was down to about $24 this morning. I would like to be able to tell you the real culprit is the refiners, but it is not. We have high demand and we are prosecuting a war, and now prices are coming down. Prices tend to go up quickly so the price of new fuel going into the ground can be recovered. They come down slowly to maintain the margins or to recapture the market lost on the way up.

 

Chairman Townsend:

We will close the hearing on S.B. 422. Mr. McGlamery, with regard to S.B. 379 and S.B. 399 apparently some of the people who testified said they would work with you about narrowing their concerns. I encourage all of you to do so. Senator Shaffer is chairman of the subcommittee on trade practices. If you could get back to him to let him know where you are, that would be helpful.

 

Committee, we will now go to work session concerning S.B. 248. Senator Carlton, what insight can you provide us on this issue?

 

SENATE BILL 248 (1st Reprint): Revises provisions relating to alcohol and drug abuse counselors. (BDR 54-327)

 

Senator Carlton:

Courtney Wise, Committee Policy Analyst, did some hard work in addressing issues at our subcommittee meeting. I believe the mock-up document (Exhibit J) is quite good. It addresses the issue of Indian services. The prevention specialist is being deleted because we have not yet reached the level of need at this time. We addressed licensing, grandfathering, and time limits. The Board of Examiners for Alcohol and Drug Abuse Counselors (BEADAC) would have the opportunity to look at people who are in the process of being licensed. It takes a long time to become a certified counselor because they are trying to do it while they are employed. Dorothy B. North, President of BEADAC, would have the option to look at the progression of licensing of the people and be allowed to reasonably extend the amount of time they would need to become licensed.

 

Dorothy B. North, Lobbyist, President, Board of Examiners for Alcohol and Drug Abuse Counselors:

When people come up for renewal, we wanted to be able to fingerprint and conduct background checks on counselors just as we do for new applicants, and now we can.

 

Senator Carlton:

I was speaking to the amendment and how to readdress the bill. Your reference was in the original bill, and we saw no reason to change.

 

Senator O'Connell:

Senator Carlton, did you look at Senator Rawson’s bill S.B. 349? Did that come into play in your discussion?

 

SENATE BILL 349: Provides for certification of gambling counselors and course of study and funding of programs for treatment and prevention of problem gambling. (BDR 54-155)

 

Senator Carlton:

No. That discussion will happen next Tuesday afternoon. We wanted to keep that totally separate from this.

 

Senator O'Connell:

Are we going to vote on this issue before we have the information on the issue?

 

Senator Carlton:

Senate Bill 351 is the board’s bill. It is totally independent of S.B. 349.

 

Chairman Townsend:

Senate Bill 349 addresses certification and licensing of counselors for gambling addiction. Correct?

Ms. North:

Correct. There are two bills S.B. 349 and S.B. 351, but this is S.B. 248.

 

SENATE BILL 351: Requires certification for persons who counsel problem gamblers. (BDR 54-123)

 

Chairman Townsend:

The amendment contains things Ms. North articulated on what the professions worked. The additional amendment, which was left out, deals with those the chairman of the Nevada Indian Commission articulated, which was the education requirements for an applicant who is authorized under these various public laws and who does nothing but treat people under one of these compacts.

 

Senator Carlton:

We did hammer that out, and the language of chapter 18 of the federal Indian Health Agency Manual was inserted as the counselors’ required performance guidelines. We thought it was the best way to address the issue to make it consistent.

 

Courtney Wise, Committee Policy Analyst:

I inadvertently left out an amendment, which was discussed in its entirety in subcommittee. It is number 3 on the handout (Exhibit K).

 

Ms. North:

Also there was the issue of the detoxification technical support.

 

SENATOR NEAL MOVED TO AMEND AND DO PASS S.B. 248.

 

Senator Neal:

To also include the amendment that was inadvertently left out.

 

SENATOR O’CONNELL SECONDED THE MOTION.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Chairman Townsend:

SENATE BILL 320 (1st Reprint): Makes various changes to provisions governing industrial insurance. (BDR 53-600)

 

Robert A. Ostrovsky, Lobbyist, Employers Insurance Company of Nevada (EICON):

You will note in the workbook (Exhibit L. Original is on file in the Research Library.), we removed all reference to the external review, except on page 6. For some reason language in section 2, lines 8 through 10, were left in and should have been marked out. The external review concept will be considered in another piece of legislation at which time we will discuss its application in the workman’s compensation setting. Section 2 of the original bill requested the division adopt the fourth edition of the American Medical Association’s Guides to the Evaluation of Permanent Impairment. The new version requests we now select the fifth edition. There is a question mark on the printing because we are checking to see whether it is the first or second revision. But it should be the fifth edition, which is the most recent version of the guides. We tried to clarify the application, which indicates it must be consistent with the guide, and must not incorporate any contradictory matter from any other edition or printing. It can consider no factors other than the degree of physical impairment of the whole man in calculating the amount of entitlement. The degree of physical impairment language was taken from a different section of the law. The issue all along in the fifth edition of the American Medical Association’s Guides to the Evaluation of Permanent Impairment is whether pain would be rated. I understand there is an agreement on the Assembly side that pain would not be rated, and pain would be taken out by the Division of Industrial Relations (DIR). We are proposing the fifth edition as long as the pain piece will not be in there, it will be the physical impairment of the whole man.

 

Senator Carlton:

I want to make sure I understand because I have watched coworkers suffer pain. The actual impairment may not be very serious, a percentage degree. In my first session I learned a lot about odd-lot doctorates. The pain aspect of an injury can change a person’s life forever. You are telling me now the pain aspect of an injury would not be considered when we look at this provision?

 

Ann W. Nelson, Lobbyist, Employers Insurance Company of Nevada:

Currently, pain is not in and of itself rated. If there is an elbow injury and the pain of the elbow injury stops full motion of the elbow, it is rated. It is the impact the pain has on the worker’s ability to live his life and do his job; it is currently rated and should be rated. Pain in and of itself is not a compensable injury, but the impact of the pain or the impact of the injury is a compensable injury. That is current law; that is future law. Where the fifth edition has everyone concerned is it adds compensable benefits for pain in and of itself, not for the impact of the injury on the worker’s ability to work.

 

Mr. Ostrovsky:

The DIR has been reviewing this for some time. There was some discussion about the cost of putting in the fifth edition. We know the ramification of the fifth edition will add costs to the rating. There will be large awards as a result of the fifth edition. The National Council on Compensation Insurance Incorporated (NCCI) now says it is the cost of about 2 percent to 3 percent of premium that will go up without paying, just by moving from the fourth to the fifth edition. Injured workers in the fifth edition will get larger awards than those in the fourth edition. In any given case, there may be some injuries that get more and some that may get less under the fifth edition.

 

Senator Neal:

Does EICON pay for medication?

 

Ms. Nelson:

Yes.

 

Senator Neal:

Does this now mean you would not pay for pain medication?

 

Ms. Nelson:

No, Senator. We would continue to pay the same medications we pay for now. If a worker needs pain medication to overcome the injury, he would still get it. All it says is that pain in and of itself is not a separate compensable injury. Pain cannot be rated as a broken arm or a torn knee could be rated.

 

Senator Neal:

So, you would have to have a torn knee associated with the pain in order to pay for the medication?

Ms. Nelson:

That is not accurate, either. We do have injuries where the manifestation is pain. Pain medication, pain therapies, and pain treatments are prescribed by a doctor.

 

Mr. Ostrovsky:

The next is section 3, regarding our request in the way subsequent injuries are determined.

 

Ms. Nelson:

This section is brought forward by our managed-care organization. The issue discovered under the current law is that the company is required to prove a negative, which is difficult. There has also been a lot of discussion regarding the phrases, “substantial contributing injury” versus “primary injury.” The problem with those phrases is they do not exist in medical parlance. What EICON, the doctors, and lawyers attempted to do was put in language allowing a positive to be proved as opposed to attempting to prove a negative, and also put it in common language. The words “substantial contributing” and “primary cause” were removed, and replaced with “major cause.”

 

Senator Carlton:

Does it still elude to “primary” rather than to “contributing?” Or is it saying it in a different way?

 

Ms. Nelson:

The term “major” does not mean 99 percent. We struggled with what “substantial contributing” and “primary cause” mean. Every time it was discussed, it kept coming out as the “major cause” of the current condition. It was decided to simply use the word “major” because no one could define “substantial contributing” or “primary cause.” We do not have 50 percent or 50 percent plus 1 in the language.

 

Senator Carlton:

I would like to backtrack to “preponderance of evidence.” When “preponderance of evidence” and “major” are added together, what barrier is being crossed?

 

Ms. Nelson:

“Preponderance of evidence” is the lowest burden of proof. One suggestion was to go by “clear and convincing,” and we went back to the lowest burden of proof, which is a little bit more one way than the other. All that has to be done is establish by a “preponderance’ that this subsequent injury is the “major cause.” The two do not go together. What was discovered in hearings is even if “substantial contributing cause” was used; the two burdens of proof do not go together to take it to 50 percent plus 1.

 

Senator Carlton:

The burden of proof now lies with the claimant, not with EICON as it did before, when you had to prove the negative. Now the burden is on the claimant who has to prove the positive.

 

Ms. Nelson:

Or on the doctor.

 

Mr. Ostrovsky:

We have asked the burden of proof be put on the medical records. Going back to when we changed from “primary” and went to “substantial contributing,” the Legislature at that time decided putting “substantial contributing” was not enough. The employers had voiced their opinion, it was too easy. That is when the “preponderance of evidence” standard was negotiated into the language. This is guidance for judges more than anything else. What we are saying is if a doctor can prove the injury through medical records, then the employer ought to pay the injured worker.

 

Senator Carlton:

I remember that because it was my first session. The reason I believed the hill should be a short climb is because we were privatizing workers’ compensation. We did not want to see anyone in Nevada not make it over that hill if they were injured, and it would be a hard hill to climb.

 

Mr. Ostrovsky:

I am in agreement. There were negotiations over how big a hill did we want to create. Sections 5 and 6 were already discussed. We want to make sure we get appropriate notice for hearing. This affects the Department of Administration’s Hearings Division to what they should give EICON for a notice of hearing. We do not think it is cumbersome. We think it will solve the problem of getting notices with only a name and date of hearing, but nothing as to what the hearing is about.

 

Mr. Jeffrey:

We have two problems with the two remaining provisions. First, we think the present method of adopting American Medical Association (AMA) guides allowing the DIR to do that by regulation should stay the same. The major problem with the bill is it takes us back to primary cause. In the Sixty-sixth or Sixty-seventh Session there was a court doctrine in the law called the “but for” doctrine. It meant if a worker had an injury, and that injury was worsened by another injury, the court said, “but for” the second injury. This gave the worker a low threshold to cross. We took the pendulum to the other side by saying the second injury had to be the primary cause of the disability. That became a means to deny a lot of claims. If the injured worker had any kind of a past injury, the worker would have to prove the second injury was the primary cause, which was also a difficult standard. The injured worker was the one who had to provide that proof, and they had no resources by which to do it, because they were out of work and benefits had been cut. It became a stalling tactic used again and again.

 

Finally, the pendulum was brought more to the middle for the standard. Insurers are probably paying more claims as a result. This is not good enough, and the insurers want to go back to what we had before and fight every claim before them. If I appear upset about this, it is because I am. This is a standard an injured worker should not have to meet.

 

Nancyann Leeder, Nevada Attorneys for Injured Workers, Department of Business and Industry:

No. We do not like it.

 

Barbara J. Gruenewald, Lobbyist, Nevada Trial Lawyers Association:

With regard to the AMA guides and adopting the fifth edition, we agree with Mr. Jeffrey’s testimony. We would like the law to stay the way it is, so the responsibility is still DIR’s to consider the most recent edition. Otherwise, we will be back here every year the AMA adopts a new edition. I understand they are now working on the sixth edition. My recommendation is to leave the wording at the most recent edition.

 

With regard to the changes to “preponderance of evidence;” right now it is the claimant’s burden to prove the injury was caused by the accident. The claimant does his job and produces evidence showing their problem was caused by the industrial injury. With that proof, under the present law, the burden now shifts to the insurer to prove that it was not the cause, or there was a preexisting condition, or another cause, and we believe that is fair. The NTLA is asking you to leave the law the way it is written. If the change goes through, you would be asking the claimant to jump through two hoops.

 

The last item is the issue of giving notice in section 5. The way it is now, if someone sends in an appeal only saying that person is the claimant and they are appealing, the hearing officer would send a letter requesting a copy of the determination before proceeding, which puts the claim in limbo. At this point no one is hurt by the delay. The way the bill is written, the claim would be dismissed just because the claimant did not provide sufficient information with the appeal request. That is not fair to the claimant. This is another burden on the claimant who may not be sophisticated enough to handle the claim on their own.

 

Another thing left out of the bill is the right of the claimant to appeal a failure‑to‑respond letter. I have a big file of failure-to-respond letters I have written to insurance companies over the past 3 years. Under NRS 616C.315, I can appeal the failure-to-respond letter. This bill would delete that benefit to the claimant and take away an important right of the claimant. The NTLA is asking to not pass this bill.

 

Ms. Nelson:

Our intent in sections 5 and 6 was to not eliminate the ability to appeal the failure to respond. I would have no objection to adding to that. These two sections were specifically added after conversations with appeals officer Bryan Nix, Perry Comeaux, and their staff regarding this issue. An injured worker can file a request for a hearing, and sometimes it only says, “I disagree with the decision made regarding my case.” We do not know if EICON was part of the case. Mr. Nix felt his hands were tied because the statute requires the hearing be set within 30 days. He has attempted by regulation and by adoption of form to have the injured worker supply the determination letter or the letter that received no response, but has not been much help. By statute Mr. Nix cannot suspend or dismiss a hearing, he must set it within 30 days. As a result EICON employees go to hearing after hearing to request continuance until additional information is provided. Numerous requests for continuance prior to the hearing have been made until additional information was provided, and all have been denied. It was suggested to Mr. Nix to request a change in the wording to allow his division more flexibility to deal with these requests, and that is what the language in this bill is attempting to do. It is not intended to preclude Ms. Gruenewald’s situation, and we would be happy to add that in.

 

Chairman Townsend:

I may be missing something, but where is that in the bill?

 

Mr. Powers:

Her reference is to subsection 2, and the new paragraph (c). I believer her testimony is it is under-inclusive. The items that you can request a hearing for in subsection 1 are broader than just say hearing on a letter of determination. So, her position is that by paragraph (c) of subsection 2, be under-inclusive than by implication of the Legislature has removed a right to a hearing for a certain type of decision. So the language needs to be modified in such a way that it encompasses every type of matter that may be subject to a hearing.

 

Ms. Gruenewald:

What you are missing is the most important point. By this change in the law, you are putting a total burden upon unsophisticated claimants at the hearings officer level to have all four of these things ready for the hearings officer or it is dismissed. I disagree with Ms. Nelson. In northern Nevada we do it differently, and Bryan Nix runs both northern and southern Nevada. I think we should ask Mr. Nix this question.

 

In northern Nevada the hearings officer does not dismiss the appeal, but neither do they go forward. They grant the continuances, put it in limbo, so nobody loses. The claimant’s case is not dismissed, the insurance company does not have to go forward with a defense, so no one loses and it is a win-win for everyone. I question if we need this change, where it would become a lose situation for the claimant?

 

Chairman Townsend:

Your point is well taken. Is there a reason Mr. Nix or somebody from his division is not here to represent them?

 

Ms. Nelson:

I do not know why Mr. Nix is not here, but I can tell you this situation is happening throughout the State. I have had a number of conversations with Mr. Nix regarding this, and the conversations have not always been nice. One thing EICON would be willing to do is to further amend the language to read, “a request for hearing must not be granted unless and until the request includes.” That might solve the dismissal problem, and force the department to hold it in abeyance until that information is received, and not force our representatives to appear at hearings only to have them continued later. We tried to have this addressed by asking for the hearing to be continued until the required information was received. Without the records no one can go forward with the hearing. It costs in time and money to appear at the hearing, including the claimant, the claimant’s attorney, the insurance company, the employer, the union, and any others, just to find out what the matter is about, and then set another hearing in order for everyone to gather the needed information. If the dismissal is the issue, I do not mind saying it must not be granted unless and until that information is provided so everyone knows the reason for the appeal.

 

Mr. Powers:

“Mr. Chairman. On that proposal, how does that tie into the time limits on requesting a hearing?”

 

Chairman Townsend:

You would have to say you would not run up against it, because you have a conflict. It says a hearing would not be granted, and yet you are required to have it in 30 days. You would have to waive the 30 days.

 

Ms. Nelson:

Perhaps it could say the 30-day period begins at the point the requested information is provided.

 

Ms. Gruenewald:

What I would rather see is that you set the hearing and then grant the continuance. Otherwise unsophisticated claimants who do not get a hearing and do not know what to do drift away. If they had a hearing, then the hearing officers could explain things, which they are very good at doing, to help the claimant.

 

Chairman Townsend:

We are running out of time, so I suggest all of you get together to figure out the issue and come back again. Next, we will work on S.B. 425.

 

SENATE BILL 425: Makes various changes relating to pharmacy. (BDR 54-530)

 

Senator Carlton:

This is the State Board of Pharmacy bill on which we had the discussion. In the workbook (Exhibit L) the first amendment addresses the concerns about pharmaceutical technicians and the fees involved on which all parties agree. The board and the secondhand wholesalers proposed the next amendment. I had an additional discussion with the proponents, and this language is the results. It allows the pharmaceutical technicians to keep doing business in their areas while allowing for tracking of these drugs, and better ensures the safety and quality of these drugs in Nevada.

 

On the bottom of page 1 the student registered nurse issue is addressed, because they do handle drugs as part of their training program within the hospitals. It was important to address to the board we did not want to limit the student registered nurse training.

 

The 10 percent language is gone. It is still in the regulation of the board. Upon passage and approval of this measure with this amendment added, it would supersede the 10 percent and allow for a chain of evidence, a chain of possession of certain drugs. It should alleviate the problem of monitoring and tracking certain drugs.

 

Senator Hardy:

Would this still allow the board of pharmacy by regulation to deal with that issue?

 

Senator Carlton:

Upon passage of this regulation the 10 percent rule will be removed, and the State Board of Pharmacy will draw upon S.B. 425 for its regulations. I believe that will address concerns on how to ensure monitoring certain drugs. The legislation protects the businesses, and lays responsibility on the businesses. When dealing with drugs, I think that responsibility should be taken seriously, and allows the board to monitor certain drugs to protect Nevadans.

 

On the second page of the proposed amendment under section 2 with the heading of NRS 639.233, are the other two subjects discussed in subcommittee. The issue under section 3 was a bit contentious with opinions from two lawyers, so I relied on Mr. Powers to help me through this. I wrote my statement to get it right in the record, so there would be no arguments or discussions later as to what actually occurred.

 

Mr. Gibson had proposed that by removing this language in subsection 1, the acceptance of a license, using the argument that the board already has the capability to copy and remove, to copy any documents necessary under NRS 639.239. However, Mr. Powers has indicated to me the provisions in that statute pertain to removal of original prescriptions if those records will be used as evidence in a criminal action, civil action, or in an administrative proceeding or contemplated action or proceeding. This language would not allow the board to copy and remove any record needed during a routine investigation.

 

And that is where the hammer of the board actually falls is during those routine investigations.

 

This is the reason why I have decided that I would like to propose to the committee that this language stay as written. The board needs to be able to have access to these records in order to properly carry out its duties monitoring pharmaceuticals for the safety of the public in this State.

 

Mr. Chairman. These are my recommendations as presented to you.

 

SENATOR CARLTON MOVED TO AMEND AND DO PASS S.B. 425 WITH ALL THREE AMENDMENTS.

 

SENATOR O’CONNELL SECONDED THE MOTION.

 

THE MOTION CARRIED. (SENATOR NEAL WAS ABSENT FOR THE VOTE.)

*****

 

Chairman Townsend:

We are adjourned at 10:09 a.m.

 

RESPECTFULLY SUBMITTED:

 

 

 

Laura Adler,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Senator Randolph J. Townsend, Chairman

 

 

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