MINUTES OF MEETING
ASSEMBLY COMMITTEE ON COMMERCE
Sixty-seventh Session
April 26, 1993
The Assembly Committee on Commerce was called to order by Chairman Gene T. Porter at 3:40 p.m., Monday, April 26, 1993, in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Gene T. Porter, Chairman
Mr. Morse Arberry, Jr., Vice Chairman
Ms. Kathy M. Augustine
Mr. Rick C. Bennett
Mr. John Bonaventura
Mr. Val Z. Garner
Ms. Chris Giunchigliani
Mr. Dean A. Heller
Mr. David E. Humke
Ms. Erin Kenny
Mr. Richard Perkins
Mr. Scott Scherer
Ms. Myrna T. Williams
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblyman C. W. Tom Collins, District 1; Assemblyman Lynn C. Hettrick, District 39.
STAFF MEMBERS PRESENT:
Mr. Paul Mouritsen, Senior Staff Analyst, Legislative Counsel Bureau
OTHERS PRESENT:
Ms. Sharon Weaver, Department of Insurance; Ms. Arleen J. Henton, State Industrial Insurance System; Nancy Samon, Employment Security Department; Mr. Kevin S. Morley, President, National Contract Staffing; Mr. Glenn Goza; Mr. Rick Halbaudier; Mr. Pat Coward, The Wine Institute; Mr. Bob Cole, Farmers Insurance; Ms. Ande Engleman, Nevada Press Association; Mr. John Kuminecz, Commissioner of Consumer Affairs (See also Exhibit B attached hereto).
AB 474 - Requires registration of employee leasing companies.
Assemblyman C. W. Tom Collins, District 1, testified in support of AB 474. He said AB 474 required employee leasing companies to register annually with the Department of Corporations and Commercial Code. He stated registered employee leasing companies were considered employers for the purpose of maintaining insurance and benefit plans. He advised an employee leasing company was defined as an individual or business which under a written agreement between a client company and the leasing company and for a fee, placed all or substantially all of the regular, full-time employees of the client company on the leasing company's payroll. He explained the purpose of AB 474 was to eliminate potential problems such as unpaid SIIS and employee benefit payments.
Ms. Sharon Weaver, Department of Insurance, testified. She said the department was in favor of AB 474. She provided proposed amendments to AB 474 (Exhibit C) including in addition to those suggested by the Department of Insurance, amendments proposed by the Employment Security Department and by SIIS. She advised the Employment Security Department was able to address its concerns regarding a Senate bill, SB 380, through the proposed amendments to AB 474 (Exhibit C).
Ms. Arleen J. Henton, State Industrial Insurance System, and Nancy Samon, Employment Security Department, seated at the witness table with Ms. Weaver, introduced themselves.
Mr. Scherer asked why AB 474 provided that the Securities Division of the Office of the Secretary of State be the regulating entity. Ms. Weaver replied she was unable to answer Mr. Scherer's question. She advised the Department of Insurance was not the sponsor of AB 474.
Mr. Scherer referred to Section 7, subsection 3, of AB 474, and asked why an employee leasing company should not be allowed to offer a self-funded insurance program on the same terms as any other employer was allowed to offer such a program. Ms. Weaver responded for purposes of insurance regulated by the Department of Insurance, a self-funded employer was one who was exempt (from regulation by the Department of Insurance) under a federal law known as "ERISA." She advised ERISA defined an employer as one who had the right to hire and to fire. She explained an employee leasing company did not have the right to hire and to fire and therefore, did not fall under the ERISA definition of "employer." She stated a company exempt (from insurance regulation) under ERISA was exempt from the jurisdiction of the Department of Insurance, but because an employee leasing company was not exempt under ERISA, it was not exempt from the jurisdiction of Title 57. Mr. Scherer asked, "In all cases?" Ms. Weaver replied affirmatively.
Mr. Scherer asked if an employee leasing company never had the right to hire or to fire. Ms. Weaver answered the employee leasing companies discussed in AB 474 did not reserve the right to hire and to fire.
Mr. Scherer asked, "What about with regard to SIIS?" Ms. Weaver replied AB 474 would permit a company to become self-insured even though the company did not meet the criteria of the Department of Insurance to be self-insured. She said AB 474 would allow an employee leasing company to "...pull its client companies, who are small companies, into self-insurance without having those small companies qualify."
Mr. Scherer asked if the reason for asset or net worth requirements (for a company to be self-insured) was to insure that insurance premiums were paid. Ms. Weaver replied affirmatively.
Mr. Scherer asked what difference it made if an employee leasing company leased its employees to a number of companies if the employee leasing company was the employer and met the requirements for security of benefit payments. Ms. Weaver responded the employee leasing industry was relatively new, and the department was not certain to what extent an employee leasing company would stand as an employer. She indicated SIIS would suffer a loss of premium income by losing small employers (to self-insurance).
Chairman Porter asked the number of employees a company must have to meet the threshold requirement of ERISA. Ms. Weaver said she assumed the requirement was 25 employees. Chairman Porter asked if ERISA required an employer with more than 25 employees to offer its employees a major medical insurance policy. Ms. Weaver replied to her knowledge, ERISA made no such requirement. Chairman Porter asked if to the extent an employer offered its employees major medical insurance, the employer was required to offer the right to purchase the same level of coverage upon termination of employment. Ms. Weaver said she was unfamiliar with the area of Chairman Porter's inquiry.
Chairman Porter asked Assemblyman Collins to obtain answers to the questions Chairman Porter and Mr. Scherer had raised regarding how the self-funded insurance program discussed in Section 7 of AB 474 would function in regard to major medical benefits.
Chairman Porter asked Ms. Henton how SIIS "would set the rate for these people." Ms. Henton responded, "Currently the classification would be the same as any other employee working in the same industry. It's an industry rate." Chairman Porter posed a hypothetical situation in which an employee leasing company which had 100 employees entered into a contract for 10 of its employees to work on heavy machinery for a heavy equipment operator and then rotated the employees. Chairman Porter asked how under such a situation, SIIS would keep track of the rating mechanism to be used to calculate insurance compensation premiums. Ms. Henton said SIIS proposed each employee leasing company keep a separate record for each of the employee leasing company's client companies. She advised SIIS was not as interested in individual workmen as in client companies. She explained a client company would have the same classification "if it were standing alone" as the company would have under an employee leasing situation. She said in the hypothetical situation postulated by Chairman Porter, the 10 employees of the employee leasing company who operated heavy equipment for a client company would be classified as heavy equipment operators. She stated in a year's time, should those same employees perform entirely different work for a different (client) company, the employees would be classified based upon the nature of the second company's business.
Chairman Porter asked if the proposed amendment to Section 8 of AB 474 would require employee leasing companies to provide copies of their employment agreements to SIIS. Ms. Henton responded Section 8 provided only that a client company was liable for any unpaid (insurance) premiums or contributions. Chairman Porter contended SIIS could not set a rate for an employee leasing company's employees if it did not know where those employees were working. He asked how SIIS could determine the rate for such employees if AB 474 did not require copies of an employee leasing company's employment agreements be furnished to SIIS. Ms. Henton said SIIS planned to make such a requirement through regulation. Chairman Porter suggested the requirement could be made through AB 474.
Ms. Giunchigliani asked if the fact the Employment Security Division (ESD) had a computerized mechanism for determining who was an "employee" and who was an "employer" was considered when determining proposed amendments to AB 474. Ms. Henton responded, "No."
Ms. Giunchigliani asked if ESD had the capability to review employment contracts of employee leasing companies and ensure SIIS was properly assessing premiums. Ms. Saman responded ESD would like to maintain its wage lists based on client companies and intended to require, by regulation, that an employee leasing company provide ESD with the names and addresses of its client companies and a list of employees being leased.
Mr. Humke asked Assemblyman Collins if a fiscal note was prepared on AB 474. Assemblyman Collins indicated he was unable to provide any information regarding a fiscal note.
Mr. Kevin S. Morley, President, National Contract Staffing, testified in favor of AB 474. He advised the employee leasing industry had encountered fraudulent practices throughout the United States and identified self-funding as the area in which most fraud was perpetrated. He said the National Staff Leasing Association supported licensing bills in every state which had addressed the issue and advised Florida was the first state to pass such legislation.
Mr. Morley maintained a tremendous amount of money belonging to other than the employee leasing companies passed through those companies and no law existed to monitor those monies.
Chairman Porter asked if self-funding was entirely prohibited under the Florida statute governing employee leasing companies. Mr. Morley answered affirmatively.
Colloquy between Chairman Porter and Mr. Morley.
Chairman Porter asked Mr. Mouritsen to obtain a copy of the Florida statute governing employee leasing companies.
Chairman Porter asked Mr. Morley what states other than Florida had enacted legislation concerning employee leasing companies. Mr. Morley said the National Staff Leasing Association could provide the answer to Chairman Porter's question and he would furnish the association's phone number. Mr. Morley said he would also provide a copy of the association's model legislation.
Mr. Glenn Goza testified. He advised he owned Olsten Temporary Services and was president of the Northern Nevada National Temporary Help Service Organization. He said the organization supported AB 474 and encouraged the legislature to pass AB 474.
He advised Utah was the last state to pass a bill such as AB 474.
Chairman Porter asked how many other states had passed bills such as AB 474. Mr. Goza replied he did not know.
Chairman Porter closed the hearing on AB 474 and assigned AB 474 to a subcommittee comprised of himself and Mr. Scherer.
AB 186 - Increases population threshold for county in which domestic winery may be operated.
Assemblyman Lynn C. Hettrick, District 39, testified in favor of AB 186. Mr. Hettrick advised AB 186 would raise the population "cap" on counties entitled to a domestic winery. Mr. Hettrick said he anticipated no opposition to AB 186. He proposed AB 186 would result in increased tourism, tax revenues and employment.
Mr. Rick Halbaudier testified from prepared text (Exhibit D).
In addition, Mr. Halbuadier advised he planned to sponsor many events such as wine tastings, "crush parties" and seasonal events designed to attract tourists.
Chairman Porter asked Mr. Halbaudier whether he intended to import grapes for his winery or to develop grapevines on his property. Mr. Halbaudier replied his was the only commercial vineyard in the state of Nevada, mainly due to a experiment conducted with the University of Nevada, Reno, in growing several varieties of grapes. He advised there was no history of commercial grape-growing in the state of Nevada. He explained his goal was to grow grapes in the state of Nevada and then produce wine from those grapes in the state.
Mr. Bonaventura asked Mr. Hettrick how he arrived at the population figure of 100,000. Mr. Hettrick replied there was a need to increase the designated population level from 30,000 and he was advised by the Legislative Counsel Bureau that "the next step up" was 100,000.
Mr. Pat Coward, The Wine Institute, testified. He said the institute wholeheartedly supported AB 186 and wished to see the wine industry grow and flourish in Nevada.
Ms. Giunchigliani asked the reason for a population "cap". Mr. Coward replied there was no reason.
Chairman Porter closed the hearing on AB 186.
ASSEMBLYMAN HUMKE MOVED DO PASS AB 186.
ASSEMBLYMAN BENNETT SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
AB 508 - Requires furnishing additional information to subject of credit report.
Ms. Giunchigliani left her seat in the committee to testify in support of AB 508. She suggested AB 508 be referred to the same subcommittee to which the Commerce Committee previously had referred a related bill, AB 358.
Chairman Porter closed the hearing on AB 508 and referred AB 508 to the subcommittee on AB 358, chaired by Mr. Arberry.
AB 509 - Regulates solicitation of older persons.
Chairman Porter recused himself and relinquished the chair to Vice Chairman Arberry for the purpose of conducting the hearing on AB 509.
Ms. Giunchigliani left her chair in the committee to testify in support of AB 509. She explained AB 509 was intended as a consumer protection bill. She advised senior citizens had expressed fear of evening solicitation and concern that once solicited, they would be subjected to subsequent solicitations. She advised senior citizens had expressed a desire for a "cooling-off" period. She said AB 509 would provide a 20 day "cooling-off" period.
Ms. Giunchigliani indicated the provisions of AB 509 governing "cold calling" differed somewhat from federal rules governing such activity and advised the difference existed because AB 509 was generated prior to the federal rules being issued. She suggested there might be avenues to accomplish the intent of AB 509 other than those contained in the bill.
Mr. Arberry referred to language in Section 2 of AB 509 stating "A person is 'older' if he is 60 years of age or older." and asked if solicitors would ask individuals being solicited their ages. Ms. Giunchigliani replied some groups engaged in solicitation targeted only individuals 60 years and older and would be aware of the ages of those individuals they solicited but age restriction was a problem area.
Mr. Perkins referred to Section 7 of AB 509 which specified those things which must be done by a solicitor communicating with an older person at night and suggested it would be very difficult to enforce such a law. Ms. Giunchigliani agreed with Mr. Perkins. She advised the main purpose of AB 509 was to provide an individual who was solicited with a "cooling-off" period, as provided in Sections 9 and 12 of AB 509, and said she would like to see that purpose accomplished.
Mr. Bonaventura suggested perhaps AB 509 should also apply to individuals under the age of 60 years. Ms. Giunchigliani responded everyone was entitled under federal law to a three day "cooling-off" period, but AB 509 was directed toward those individuals more apt to be taken advantage of. Mr. Bonaventura stated he believed AB 509 should apply to all individuals.
Mr. Bonaventura referred to the provisions of Section 14 of AB 509. He posed a hypothetical situation in which an older person purchased automobile insurance from a solicitor and then canceled the policy within the 14 day period provided in Section 14 but after having been involved in an automobile accident. He asked if in such a hypothetical situation, the insurance company would be liable for any claim arising from the accident. Ms. Giunchigliani replied she believed the insurance company would not be liable.
Mr. Bob Cole, Farmers Insurance, testified. He said Farmers Insurance supported the concept of AB 509. He advised he wished to respond to Mr. Bonaventura's question regarding an insurance company's liability (under the hypothetical situation posed by Mr. Bonaventura). He stated if an insurance company returned all funds received (for a policy of insurance), he believed the policy of insurance would be voided and there would be no coverage for the 14 day period in question. He said if it was the committee's intent that coverage be provided during that 14 day period, he was willing to assist in developing appropriate language to accomplish that intent.
Mr. Bonaventura asked if Mr. Cole was suggesting an insurance company would allow an individual to be covered by an insurance policy even though the individual canceled the policy. Mr. Cole responded he was stating that AB 509 was unclear as to whether or not an individual was covered in such a circumstance. He reiterated his opinion that an individual would not be covered under such a circumstance if the entire premium for the policy of insurance was returned to the individual and stated he was uncertain whether that was the result intended by the legislature. Mr. Bonaventura asked how insurance coverage could be provided in the hypothetical situation he had previously posed. Mr. Cole said that purpose could be accomplished by changing the language of Section 19 of AB 509, on page 6, at line 41, to say "shall refund to the former insured any unearned premium."
Ms. Ande Engleman, Nevada Press Association, testified. She said there were constitutional problems concerning AB 509 because it contained no exemption for the press. She advised the association did not understand the exemptions for charitable and political organizations contained in AB 509 which provided such organizations were exempt if they were required to file (reports of receipts), but did not say such organizations were not exempt if they failed to file.
Ms. Giunchigliani asked the basis upon which the press should be exempted from the provisions of AB 509. Ms. Engleman advised the exemption was a constitutional exemption. She stated telemarketing law also provided that publishers of newspapers, magazines and periodicals and broadcasters were exempt from the provisions of AB 509.
Ms. Giunchigliani asked for clarification of Ms. Engleman's remarks concerning an exemption for charitable organizations. Ms. Engleman explained AB 509 provided an exemption for charitable and political organizations required to file certain reports but it appeared those organizations remained exempt even if they did not file the reports.
Ms. Sharon Weaver, Department of Insurance, testified in opposition to AB 509. She stated AB 509 conflicted both with federal regulations concerning Medicare and with the department's regulations concerning Medicare supplement products, both of which provided "a 30 day free look, during which they could return and get complete refund." Ms. Weaver contended it was nearly impossible to deliver a contract of insurance at the time of sale. She advised individuals who purchased Medicare supplement products were given a buyer's guide and an outline of coverage at the time they purchased those products.
Mr. Arberry asked how long Ms. Weaver had been aware of AB 509. She replied she had just become aware of AB 509 1/2 hour earlier.
Ms. Giunchigliani asked if Ms. Weaver was suggesting that exemptions from the provisions of AB 509 should be provided for the sale of Medicare supplement products. Ms. Weaver responded she was.
Mr. John Kuminecz, Commissioner of Consumer Affairs, testified. He said he was neutral as to AB 509 but because AB 509 tasked the Consumer Affairs Division with registration of those solicitations not exempt the provisions of AB 509, he wished to provide some input on the bill.
He stated he prepared a fiscal note on AB 509 reflecting a fiscal impact on the Consumer Affairs Division as a result of the requirements placed on the division, including handling registrations, complaints and audits. He suggested if registration was required, the committee might consider having the registration accomplished through a municipal licensing process.
Mr. Kuminecz indicated his main concern involved deceptive trade and telemarketing regulations. He explained there were many legitimate companies providing products and services which would generate telephone calls from out-of-state into Nevada. He advised those companies would not be subject to the provisions of AB 509 but would cause complaints identical to those which resulted in AB 509.
He indicated if AB 509 required registration, consideration should be given such matters as registration fees and who was to be responsible for posting the surety bond.
Mr. Humke asked if Mr. Kuminecz had information indicating it would be less expensive to regulate solicitation if solicitation of any individual (regardless of age) between the hours of 9:00 a.m. and 9:00 p.m. was prohibited. Mr. Kuminecz responded if such a prohibition was imposed, he believed the registration requirement could be eliminated from AB 509 but he would need to reconsider the provisions of AB 509 to ascertain what other costs to the division might still exist.
Mr. Humke asked Mr. Kuminecz if states which prohibited all solicitation from 9:00 a.m. to 9:00 p.m. had found it reasonable to include publishers of newspapers and magazines under that prohibition. Mr. Kuminecz responded he had done no survey of other states (regarding legislation such as AB 509) and would need to do some legislative review in order to answer Mr. Humke's question.
Vice Chairman Arberry closed the hearing on AB 509.
BDR 54-1175 - Makes various changes relating to physical therapists.
Vice Chairman Arberry called for a motion for committee introduction of BDR 54-1175.
ASSEMBLYMAN BENNETT MOVED FOR COMMITTEE INTRODUCTION OF BDR 54-1175.
ASSEMBLYMAN GIUNCHIGLIANI SECONDED THE MOTION.
MOTION CARRIED UNANIMOUSLY.
Vice Chairman Arberry called for a motion to approve the minutes of the Commerce Committee for those meetings held on January 26th, January 27th, February 22nd, February 23rd, February 24th, March 1st, March 3rd, March 8th, March 15th, March 17th, March 22nd, and March 24th, 1993.
ASSEMBLYMAN WILLIAMS MOVED TO APPROVE THE MINUTES.
ASSEMBLYMAN GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
Vice Chairman Arberry turned the meeting over to Chairman Porter.
ASSEMBLYMAN BONAVENTURA MOVED FOR COMMITTEE INTRODUCTION
OF AN ASSEMBLY JOINT RESOLUTION COMMEMORATING SENATOR
HARRY REED FOR ALTERNATIVE USES OF A TEST SITE.
ASSEMBLYMAN PERKINS SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
There being no further business to come before the Commerce Committee, Chairman Porter adjourned the meeting.
RESPECTFULLY SUBMITTED,
_______________________
SARA J. KAUFMAN
Committee Secretary
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Assembly Committee on Commerce
April 26, 1993
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