MINUTES OF MEETING

      ASSEMBLY COMMITTEE ON LABOR AND MANAGEMENT

 

      Sixty-seventh Session

      March 16, 1993

 

 

 

The Assembly Committee on Labor and Management was called to order by Chairman Chris Giunchigliani at 3:38 p.m., on March 16, 1993, in Room 321 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.

 

 

COMMITTEE MEMBERS PRESENT:

 

      Ms. Chris Giunchigliani, Chairman

      Mr. Bernie Anderson, Vice Chairman

      Mr. Douglas A. Bache

      Mr. John C. Bonaventura

      Mr. John Carpenter

      Mr. Tom Collins, Jr.

      Mr. Peter G. Ernaut

      Mr. Lynn Hettrick

      Mrs. Erin Kenny

      Mr. John B. Regan

      Mr. Michael A. Schneider

 

 

COMMITTEE MEMBERS ABSENT:

 

      None

 

GUEST LEGISLATORS PRESENT:

 

      None

 

STAFF MEMBERS PRESENT:

 

      Donald Williams, Research Analyst

 

OTHERS PRESENT:

 

      Jim Shelly, Employment Security Department; David Reese,      State Contractors Board; Margi Grein, State Contractors       Board; Terry Gilmartin, State Contractors Board; and Nancy

      Samon, Employment Security Department.

 

ASSEMBLY BILL NO. 303 - Authorizes state contractors' board to

                        obtain certain information from state

                        industrial insurance system and

                        employment security department.

 

                        

Opening the hearing on Assembly Bill 303, Margi Grein, of the Nevada State Contractors Board (NSCB), reviewed the origins of AB 303 which would authorize the contractors board the means to obtain information from Employment Security Department (ESD) and State Industrial Insurance System (SIIS).

 

David Reese, attorney for Nevada State Contractors Board, stated contracting without a license was a tremendous problem and the NSCB could use all available help to investigate and prosecute

offenders of this crime.  ESD, SIIS, and the Department of Industrial Relations (DIR) had records of great assistance to NSCB in its efforts to investigate unlicensed contracting activity.  In the past, the NSCB was unable to obtain access to information held by SIIS, DIR, and ESD because of the broadly restrictive confidentiality provisions in the present laws.  The only exemptions the contractors board had were the provisions in the related sections which stated the information was confidential except for other state agencies which were charged with the administration or enforcement of unemployment compensation law, health assistance law, workers' compensation law or labor law.  This statute did provide for disciplinary action against licensees who had violated safety, labor, or industrial insurance laws. However, when suggested the exemption might apply to the state contractors board, opinions by counsel of those agencies and the attorney general's office ruled the NSCB did not fit the exemption definition. 

 

Mr. Reese indicated originally the state contractors board sought to amend NRS 624 to clarify that NSCB did fit within the exemption.  That bill draft request was not drafted and AB 303 would amend each of the respective confidentiality provisions to specifically provide the state contractors board, in the enforcement of its duties under NRS 624, access to information held by ESD, SIIS, and DIR.  Mr. Reese defined two general areas of concern where the information received would be helpful:  first, investigation and prosecution of unlicensed contractors; second, disciplinary actions against contractors who were licensed and had violated laws subjecting their licenses to be disciplined by the board.  Mr. Reese suggested Terry Gilmartin, NSCB, would offer further information concerning the need and use of this knowledge, and Margi Grein would share statistics for cases involving unlicensed contractors where NSCB could not obtain information from one of these agencies.

 

Ms. Giunchigliani agreed with Mr. Reese's suggestion.  She explained she had previously asked DIR to address AB 303 in writing, and had received in reply a memo (EXHIBIT C) and asked for Mr. Reese's reactions to the memo.

 

Margi Grein, Director of Finance, NSCB, stated the proposed legislation was part of their prime attack on the unlicensed contractor.  In 1992, there were 459 complaints concerning contractors without a license, and of those, 252 cases were submitted to the various district attorney's offices for prosecution.  207 cases were deemed invalid because of improper evidence or information.

 

Ms. Giunchigliani inquired as to what types of things caused the invalidity of NSCB cases and what other areas needed to be reviewed by the committee to strengthen legislation.  Ms. Grein responded the main reason for so many cases outstanding was a backlog.  Ms. Giunchigliani wondered if there was additional authority the board needed rather than having to rely on the district attorney's offices because so many areas were backlogged.  Ms. Grein responded legislation that would give the contractors board the authority to issue citations for violations would soon be introduced to the Commerce Committee (BDR 1796).  In response to Ms. Giunchigliani's question regarding the effect of citations, Ms. Grein stated NSCB currently had no authority to issue a citation to an individual in violation.  Ms. Giunchigliani said  contractors are required to have workers' compensation or self-insurance in order to be licensed, and with the passing of AB 303, NSCB could prove that contractors circumvented the law by doing business in the state while unlicensed. 

 

Ms. Giunchigliani asked how NSCB would use the legislation if unlicensed contractors had workers' compensation or self-insurance.  Terry Gilmartin, NSCB, replied currently NSCB had to accumulate the evidence, present it to the DA's office where it was evaluated and a decision made whether to present the case.  With the citation power, NSCB would have the immediate ability to issue a citation -- on the spot.  The cited contractor would have to go directly to the respective justice court for disposition.  This would circumvent the time-consuming process of presenting all evidence to the district attorney's office for a misdemeanor offense and the waiting while evidence was evaluated.

 

Ms. Giunchigliani asked if it was currently a misdemeanor if a contractor was found to be unlicensed and doing business in the state of Nevada.  Mr. Gilmartin replied the first offense was a misdemeanor with fines depending on the judge and the circumstances.  Many times the NSCB used the offense as a lever to restitute the victim of the unlicensed contractor.

 

Ms. Giunchigliani wondered if, within the citation piece, when the BDR comes out, the fine should be automatic and large enough to ensure the consumer would be reimbursed.  She also suggested with a second offense to use a "heavier hammer."  The issue was not about making money but getting and keeping contractors licensed properly within the state.  Five or ten examples might have to be made to get their attention. 

 

Ms. Giunchigliani drew attention to the DIR memo (EXHIBIT C).  She asked Mr. Gilmartin if NSCB's intent was to access employer records only, not employee records, and Mr. Gilmartin said yes.  She felt the language was somewhat "loose" and might need to be clarified.  The intent was solely to request the name, address, phone number, and social security number of the general contractor.  Mr. Gilmartin commented there was additional information; it was not just for the purpose of locating or identifying an individual.  He said there was an important document called Form 3 which the employer signed to represent the individual as an employee.  Mr. Gilmartin explained these individuals came to SIIS and showed people on Form 3 as employees, eligible for insurance, but through the NSCB they were independent contractors.  NSCB contractors were not allowed to contract with independent contractors and, in this way, they were circumventing the law. 

 

Mr. Gilmartin had spoken to Scott Young of SIIS.  He mentioned a test case that came to NSCB via SIIS whereby a contractor was using independent contractors and soaking SIIS for a lot of money.  SIIS was taken for $600,000.  Mr. Gilmartin further explained during this case, the NSCB was unable to obtain and use information SIIS had, and went through the Labor Commission, circumventing SIIS.  Ms. Giunchigliani questioned whether fraud could be charged against those companies and if citations could also be issued.  Mr. Gilmartin answered taking money under false pretenses by an unlicensed contractor was processed through the local authorities with felony charges.  NSCB was looking for every available avenue to prosecute unlicensed contractors at a higher level.  Ms. Giunchigliani mentioned Scott Young, SIIS, was in another committee meeting and supported this legislation. 

 

Mr. Anderson asked to verify the figures given by Ms. Grein for the prosecuted cases.  He then asked how many of the 52 cases taken to court were upheld by the court.  Mr. Reese replied he did not know the exact figure.  Once the NSCB investigated and turned their findings over to the DA's office, the investigator essentially became a witness.  Mr. Anderson queried how the money obtained in fines was disbursed.  Mr. Reese stated all of the fines taken by the justice court were turned over to the state.  Mr. Anderson was curious in regard to compliance with the courts in addressing these fines and felt perhaps the fines were of such low magnitude that compliance was not being met.  He stressed it might be easier for offenders to pay a small fine than to pay the cost of maintaining SIIS insurance.  Mr. Reese stated during the last legislative session, the fine was increased.  Prior to that time, there was a great emphasis on getting the contractor licensed.  The justice of the peace, in the past, took the position of not wanting to stop a person from making a living, rather allowed the person to get licensed instead of jail and dismissed the case.  Mr. Anderson wondered, if the fines had been increased yet the courts were not fining for fear of driving someone out of business, how would this stronger statute be implemented and cases not be dismissed.  Mr. Gilmartin addressed Mr. Anderson's concerns by stating every court and every judge would take into consideration the gravity of the offense, therefore the implementation of the statute would vary.  Mr. Gilmartin indicated SIIS provided insurance for everyone that requested it.  He recently discovered SIIS had a file entitled unlicensed contractors, which was directly contradictory to the NSCB statutes.  Mr. Anderson would like to see the loophole closed whereby unlicensed contractors got by without paying insurance premiums continuously.

 

Mr. Bache questioned what specific information would be requested by the NSCB from ESD and SIIS.  Mr. Gilmartin answered the basic information was the identity of persons holding SIIS accounts that were unlicensed.  The Form 3 was also needed by the NSCB.  He stated audits were supposed to take place every eighteen months and if audits never took place, a lot of revenue was lost in a circle of events.  Mr. Gilmartin stated ESD had the same information as SIIS only they identified the individual.  SIIS was paid on a quarterly basis and depended on audits whereas ESD had to be paid monthly and identifed the individual. 

Mr. Bache asked whether a cross-match ability with SIIS and ESD would be helpful.  Mr. Gilmartin agreed cooperation between the agencies would be extremely helpful.  Mr. Bache stated cross- matching with Business License Tax (BLT) might provide assistance for NSCB.  Mr. Gilmatin had spoken with Perry Comeaux about BLT and the NSCB did not have a problem with accessing their information.

 

Mr. Bonaventura queried how the NSCB would know how many employees a contractor had working when they had many employees working at various times during the license term.  Mr. Gilmartin explained NSCB had access to everyone who was supposedly on the payroll and access to all the records of every contractor.  He further expounded if NSCB had their contractor's information, SIIS information and ESD information, it would all match up and nobody would slip out of the system.  There was further discussion regarding the board and agencies eliminating fraud.

 

Mr. Collins requested Ms. Grein again state the number of cases that went to court.  Ms. Grein said in 1991-92, unlicensed contractor complaints totaled 459, cases filed with DA's offices statewide totaled 252.  Of the 459 complaints, 207 did not have enough evidence to prosecute.  As of June 30, 1992, 721 total unlicensed contractor complaints were pending, 500 pending with various DA offices.  Mr. Collins followed up by making reference to the seven members of the Labor and Management Committee who were also on the Judiciary Committee, and noted laws could be made to be mandatory.  Ms. Grein recollected a recent case in Las Vegas where the fine was $9,000 and 15 years in prison.  She stated the average fine was $500 - $1,000 and required licensing.

 

Ms. Giunchigliani drew attention to the memo (Exhibit C) and asked for reaction to NRS 624.256.  She reiterated it basically dealt with the issue of maintaining the insurance.  Mr. Reese expressed a desire to review the memo in greater detail but addressed some red lights he had seen.  He spoke of withdrawn, cashed out, or cancelled bonds which created a suspension of the license and of companies who had an employee who qualified for the test but subsequently left the company without a licensed individual upon their departure from the company. It became a matter of public health and safety when there was an automatic suspension.  Mr. Reese's concern was there was a whole body of laws dealing with SIIS and ESD and the penalties for failure to comply with those laws should be contained within those sections.  He was concerned with subjecting the contractors board to a position of an automatic suspension which later was shown to not be a violation of SIIS or ESD laws and NSCB had deprived someone of their livelihood.  Mr. Reese understood what Carol Jackson's memo (Exhibit C) was suggesting and felt it might assist the DIR, yet he saw some problems for the NSCB.

 

Ms. Giunchigliani referred to contractors not having a license who played the game of pretending to have insurance, yet did not pay.  There had been allegations of backdating as to effective dates of insurance coverage.  She understood the language of AB 303 to state contractors must continue paying insurance premium rates and if the contractors board found a contractor had dropped coverage or fraudently held it or misrepresented his employees, the contractors board must suspend that license for a period of time.  Ms. Giunchigliani asked if that was what the language said.  Mr. Reese explained it went further.  He reiterated a contractors license and registration must be suspended if insurance was not maintained.  Mr. Reese's concern was it was not within NSCB perview to decide whether or not a contractor had complied with SIIS law.  Ms. Giunchigliani pointed out in order to issue a license NSCB did not verify a contractor carried insurance or was self-insured.  She did not see AB 303 did anything more than what was already law outside of offering an additional power to suspend a license until the contractor paid insurance.  Mr. Reese was appreciative of DIR's efforts, yet was concerned there not be a deprival of due process, for example, a person was not automatically penalized without due process.

 

Mr. Ernaut indicated his perception of AB 303 was to find out certain criterion about contractors.  His research of NRS 624.301 found disciplinary actions were for willful and prejudicial departure from, among other things, the laws of the state regarding industrial insurance.  He stated there was no way to prove without access to SIIS records.

 

Mr. Collins requested clarification of the effectiveness of the bill for enforcement.  Mr. Gilmartin suggested the director could have a regulation that could hamstring the NSCB.  Mr. Collins said the memo was then not needed, but Ms. Giunchigliani stated the memo was, in fact, needed but not in AB 303.

 

Ms. Giunchigliani stated the committee had clarification AB 303 was for employer records only and would work out with SIIS any problems concerning the confidentiality access issue.

 

Mr. Gilmartin reiterated the NSCB did not want any access to employee medical records.

 

Ms. Giunchigliani requested a motion on the bill and suggested Mr. Schneider and Mr. Regan look at additional information and the DIR memo in order to strengthen enforcement separate from this bill.

 

      ASSEMBLYMAN REGAN MOVED TO DO PASS AB 303.

 

      ASSEMBLYMAN COLLINS SECONDED THE MOTION.

 

Mr. Bache wanted to hear if ESD had any technical problems with this legislation.  Mr. Jim Shelly, Senior Research Analyst, Nevada Employment Security Department, stated there were no technical problems with AB 303 and ESD supported the bill.  ESD had experienced some problems with contractors claiming to ESD they were contractors and claiming to NSCB they were employees.  He felt this legislation would deter these contractors.  ESD also had legislation submitted requiring contractors' licenses for those people considered to be independent contractors, and Mr. Shelly summarized both bills would go a long way in solving their problems.

 

Ms. Pam Miller of the Associated General Contractors (AGC) noted AGC welcomed the opportunity of the contractors board to have more "teeth" in its capabilities.

 

      MOTION CARRIED UNANIMOUSLY.

 

Ms. Giunchigliani asked Mr. Schneider and Mr. Regan and any others who wished to participate to use this bill as a basis to review and possibly come back with a totally separate bill draft.

 

There being no further business to come before committee, the meeting was adjourned at 4:25 p.m.

 

      RESPECTFULLY SUBMITTED:

 

 

                              

      JUDY HANNA

      Committee Secretary

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Assembly Committee on Labor and Management

March 16, 1993

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