The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:30 a.m., on Monday, March 22, 1999, in Room 2135 of the Legislative Building, Carson City, 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 Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

COMMITTEE MEMBERS ABSENT:

Senator Dean A. Rhoads (Excused)

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Ardyss Johns, Committee Secretary

OTHERS PRESENT:

Chairman Townsend opened the hearing with the introduction of Senate Bill (S.B.) 325.

Gary Vause, Chairman of the Board, Lit’l Scholar Child Care Pre-School, told the committee that in addition to owning and operating private kindergartens in Las Vegas, his business offers before- and after-school programs and Club House programs for summertime students. He stated the Nevada Administrative Code (NAC) required that he keep minimum staffing, and as a result any of his employees who leave without notice, are paid the prevailing minimum wage for any unpaid hours. He said this is clearly and freely agreed upon before the employee is hired. He claimed in August 1995, one of his employees quit in the middle of the night without notice and after being paid the prevailing minimum wage for her unpaid hours, she went to the labor commission. Mr. Vause was then told by the labor commission, that he was required, under Nevada Revised Statutes (NRS) to pay the employee the difference. When he sought legal counsel, Mr. Vause explained, he was told nothing in NRS precluded him from contracting in this way with his employees. He claimed a hearing was held on December 19, 1995, and it was July 8, 1996, before a ruling was issued in which he was not only ordered to pay the disputed wages, but was also penalized.

Mr. Vause said his attorney filed for judicial review on July 19, 1996, and over a year and a half later, after numerous requests, the deputy attorney general finally filed a transcript of the record, with the district court. When the district court received the transcript, he noted, it was only half there; because according to the deputy attorney general, half of the tape of the transcript had been lost. He asserted the district court ruled in his favor on August 17, 1998 and a week later the labor commissioner filed an appeal to the Nevada Supreme Court. He presented a copy of the district judge’s decision (Exhibit C), to the committee.

Mr. Vause told the committee that about 3 months into this procedure, he had asked his attorney if the labor commissioner did not file the transcript with the court as requested, would it mean Mr. Vause would win. He said his attorney had said no, that because he and his attorney were the ones who had asked for judicial review, the onus was upon them to get the record and the transcript over to the court. He stated he then asked if the labor commissioner was not required under statute to file that transcript with the court, to which his attorney answered yes, and added, he had 30 days in which to do it. He claimed that, in effect, the labor commissioner violated Nevada law for a year and a half; and dragged his feet, not wanting this to go to judicial review. Mr. Vause maintained:

Senator O’Connell said the major thing about this situation that disturbed her was the fact the labor commissioner could interpret the law in an entirely different way than it was intended. She stated Mr. Vause was required by NAC and the city and county ordinances to have a certain ratio of adults to children. Because of that requirement, she noted, Mr. Vause had a contract with his employees who understood that if they quit without 2-weeks notice, they would be paid the prevailing minimum wages for any accumulated hours. She declared the labor commissioner’s actions had cost Mr. Vause in the neighborhood of $10,000 just trying to defend the principle that a contract has to be honored. Especially, she pointed out, when he is forced by Nevada law to have that ratio of clients to adults.

Dan Tom, Director of Business and Industry, told the committee while he realized nobody would want to experience what had happened in Mr. Vause’s case, he was testifying in opposition to S.B. 325, which in essence, denied judicial process to the labor commissioner. He stated everyone should be availed of the appellate process, and though he could not speak to whether there were reasonable decisions made in Mr. Vause’s instance, there were still judgements that could occur at a district court level that the labor commissioner would like to appeal. Nobody knows what might be in a district court judgement, he remarked, and for the labor commissioner to have no opportunity to appeal is a denial of the judicial process that is availed to everyone else.

Senator O’Connell stated the most offensive thing to her was that the labor commissioner had interpreted the law as he saw fit. She said the law says what it needs to say and everyone should be abiding by it, which, she added, obviously did not happen in this case.

Mr. Tom said his difficulty with the bill was broader in scope than what Senator O’Connell was suggesting. He claimed there might be judgements emanating from the district court that were not as clear cut as perhaps this matter seemed to be. People are always depending on the reasonableness of administrators, he declared, and there are times when that does not occur. He said he did not know that denying judicial processes was the way to resolve that particular instance.

Danny L. Thompson, Lobbyist, American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), said he was not familiar with this particular case but told the committee he shared the concerns voiced by Mr. Tom. He claimed there were good decisions as well as bad ones, both by administrators and by judges, and to change the law based on one incident did not make sense. There are circumstances to everything, he declared, and each case has different circumstances so the AFL-CIO would be opposed to S.B. 325 based on the fact that it would somehow limit the ability of the labor commissioner. He testified that though he sympathized with Mr. Vause’s case and acknowledges that it did sound bad, to limit the ability of the labor commissioner based on one case, did not seem appropriate.

Chairman Townsend stated in this case there was a contract that apparently the company had with its employees over a long period of time. Part of that contract, he noted, was generated out of the requirement of the local county ordinance with staffing patterns, which was important for public health and safety, particularly with regard to children. He explained if a contract came before a regulatory agency or a court, it could be found null and void if it is improper. In this particular case, he summarized, the employee quit and then went to the labor commissioner and said, ‘I should be paid whatever remaining hours I have at a different rate than the one in my contract.’ He asked Mr. Vause if this was correct so far and Mr. Vause replied that he believed that to be correct.

Chairman Townsend wanted to know if the labor commissioner had found the contract to be null and void, or did he say, ‘You can write anything you want, but our position is quite clear. It is going to be at the rate they were being paid prior to quitting.’

Mr. Tom said he believed the labor commissioner was comparing this particular case with one that perhaps was seen more often by his office. One in which a person who does not have a contract quits his job and the employer decides in the final pay, to make a deduction for something that had not been previously discussed. Clearly, he added, in that instance, there was not a contract.

Chairman Townsend asserted there was a certain expectation by both parties in a situation such as this, of timeliness. He said part of the issue in this case was not that the labor commissioner did not rule in favor of Mr. Vause, but that they dragged him out for so long. He told Mr. Tom, that in his capacity as the new director of the Department of Business and Industry, he should set the tone in making sure the expectation of timeliness is realized. Mr. Tom concurred.

Chairman Townsend stated S.B. 325 would be sent to subcommittee to determine whether or not there was a trend of this kind of problem and try to find a reasonable solution.

Mr. Vause told the committee that he, as a small businessman, was subject to all kinds of penalties if he did not follow the law. In this case, he said, he had appealed to the district court and asked for judicial review, and the labor commissioner violated the statutes for well over a year. He claimed the labor commissioner was not penalized in any way whatsoever. They have a rogue agency, he declared, and an arrogant state agency that is able to run roughshod over people in their jurisdiction.

Chairman Townsend asked Mr. Tom if he knew whether or not there was judicial opportunity in this case, to fine or penalize that state agency. Mr. Tom did not know, but stated it would not be unreasonable to enact those kinds of measures.

Chairman Townsend closed the hearing on S.B. 325 and opened the hearing on S.B. 462.

Dino DiCianno, Deputy Executive Director, Department of Taxation, told the committee S.B. 462 was simply a housekeeping bill proposed by his department. He explained that when S.B. 246 of the Sixty-ninth Session was passed in 1997, it amended the filing day for the annual insurance premium tax return from March 1, to March 15. He said it appears that NRS 680B.050 was not correspondingly changed at that time, which was what his department was requesting with this bill, to change the filing day for the home office credit from March 1 to March 15.

Clark (Danny) Lee, Lobbyist, Nevada General Insurance Company, said he had no problems with changing the date; but stated, according to his client, there had been some problems with interpretation. He claimed his client was a domestic insurance carrier who operates out of more than one building and had some interpretation problems as to what would or would not be eligible. He offered a proposed amendment (Exhibit D), which changes the word "building" to "buildings" throughout the bill.

Chairman Townsend said the committee needed to be sure Mr. Lee’s proposed amendment did not change the meaning of the whole statute based on his client’s concern. He stressed there had to be agreement between the Department of Taxation and Mr. Lee on what this amendment might or might not do to the total premium tax issue.

Mr. DiCianno mentioned that if he could be afforded the opportunity to discuss the proposed amendment with Mr. Lee, and if it was something that could be taken care of from a regulation standpoint, he would be happy to take a look at it for the tax commission.

Chairman Townsend suggested Mr. DiCianno and Mr. Lee discuss the issue and then come back to the table with a recommendation. He then closed the hearing on S.B. 462 and opened the work session on S.B. 178 and S.B. 334. He directed the committee to refer to their "Work Session Document" (Exhibit E).

Ken Braunstein, Licensed Security Consultant, pointed out on the summary sheet of Exhibit E, his proposal to amend page 2, lines 18 and 19 by changing the word "and" to "or." In addition, he noted, he had also submitted a proposed addition to NRS 648.018 shown as attachment A-2 of Exhibit E. Original is on file in the Research Library.)

Alfredo Alonso, Lobbyist, Nevada Resort Association, stated his proposed amendment to S.B. 178 simply excluded employment and tenant screener for the definition of private investigator. He said he believed the expansion of the state Private Investigator’s Licensing Board was going a bit too far in the sense that the current definition would take in too many people. He pointed out Nevada Resort Association’s proposed amendment to the bill, shown in Exhibit E, attachment A-3.

Carol Widmer-Hanna, Executive Director, Private Investigator’s Licensing Board, told the committee it had been determined through the years that tenant and employment screeners should be licensed. S.B. 178 would put tenant and employment screeners in a different licensing category than that of private investigator.

Peter C. Wetherall, Attorney, explained to the committee how a letter from the Private Investigator’s Licensing Board, to one of his clients, had initiated litigation. The letter told his client to cease and desist their tenant and employment screening activities until such time as they obtained a license from the board. After reviewing chapter 648 of NRS, he said, he had determined that the definition of private investigator was very broad and very all-inclusive, and included activities which one would not think should be regulated by the Private Investigator’s Licensing Board. He asserted he had litigated against the inclusion of tenant and employment screeners under the definition of private investigator. That process, he noted, culminated in a hearing by Judge Michael Fondi in district court. He said Judge Fondi determined that based on the present reading of the statute, it does in fact give the Private Investigator’s Licensing Board the ability to enforce the dictates of its statute and regulations against tenant and employment screeners.

Mr. Wetherall declared S.B. 178 would establish a separate category of licensing so that his clients and other tenant screeners were not designated private investigators, which is a term of art for credit-reporting agencies. Those credit-reporting agencies such as Equifax, he stated, do not like to provide credit reports to private investigators under certain circumstances. He told the committee that the tenant-screening companies he represented had reported to him that they could not do their business; that is, they could not get the credit reports that they receive from the credit-reporting bureaus if, in fact, they were deemed private investigators. Therefore, he stressed, they must be called something else. He said his clients have never had a problem regarding being regulated, because they had nothing to hide and they conduct their businesses in a very professional manner. He pointed out that his clients were concerned about losing their access to credit reports, which were the lifeblood of their business. They essentially provide these credit reports to property managers, he asserted, as part and parcel of the information which property managers rely upon to make tenant screening decisions. Exhibit E, attachment A-1 provides further background regarding why S.B. 178 was requested.

Chairman Townsend asked Ms. Widmer-Hanna how long the current definition used under private investigator had been in the statute. She replied it had been there since 1967 and Chairman Townsend wanted to know why it was now such an issue.

Mr. Wetherall answered that enforcement of this statutory provision was only recently initiated against tenant and employment screeners. He said it was a fairly new industry and something that has grown dramatically, particularly in Nevada.

Chairman Townsend turned his attention to S.B. 334 and read Mr. Alonso’s proposed amendment from Exhibit E, attachment B.

Mr. Alonso pointed out that subsection 7 of his proposed amendment already existed in Senator Schneider’s original bill, but that subsections 8 and 10 had been added to exclude tenant and employment screeners from S.B. 334. He said the concern of his clients was that the broad scope of the current law took in practically everybody. He claimed in today’s world, where Nevada has to compete at a much higher level, something like this would hinder his client’s industry in general.

Chairman Townsend referred to mystery shoppers described in Exhibit E, subsection 7, and asked Mr. Alonso if they were hired by the gaming industry itself, or by a separate company. Mr. Alonso replied that a company is usually hired to come and do the marketing work for the industry.

Chairman Townsend wanted to know if the industry knew who the mystery shoppers were while they were on the property and if the company that hired them required them to have a work card.

Peter D. Krueger, Lobbyist, Nevada Petroleum Marketers and Convenience Store Association, stated his industry employed a lot of out-of-state mystery shoppers and in doing so, looked at a broad group of things. He said management knows who the mystery shoppers are and also knows when they are on-site. Though the mystery shoppers do not have a work card in the sense that Nevada thinks about a work card, he emphasized, the company by whom they are hired is counted on to produce people that are knowledgeable of rights and the law.

Michael C. Rizer, President, Gold Coast Investigations, told the committee that the availability of the state to monitor, track, license and regulate investigators in Nevada was a good thing for the client utilizing their services. He said that time and again he had seen a business using a mystery shopper hired by an out-of-state agency receive substandard service. Then, he explained, that business was left basically holding the bag when a wrongful termination action was initiated by an employee who has been terminated as a result of that mystery shopper’s report. He claimed lost revenue to the State of Nevada was another issue that needed to be taken into consideration. He stated there was no workers’ compensation coverage and no liability insurance coverage.

Michael E. Johnson, Private Investigator, Nevada Investigators Association, and The Advantage Group, stated that what was being described in S.B. 334 was, from his perspective, investigations. He said it was having someone go in covertly and conduct surveillance and generate a report based on his or her observations. He claimed that, in essence, described an investigation. He pointed out there were other ways for mystery shoppers to accomplish what they were trying to accomplish. They could stand outside and conduct a survey, he noted, or they could do a telephone solicitation to find out how the customers liked the displays and customer service that they had received.

Mr. Johnson told the committee that the way S.B. 334 was written, infringed on his ability to perform in his profession. He said in order to become licensed in the State of Nevada, he had to have 10,000 hours of experience, not just as a police officer, but as an investigator. He stated he was very proud of the fact that Nevada very severely regulated what he did for a living. This bill, he pointed out, undermines the qualifications, the experience and the professionalism he brings to his job every day.

Daniel D. Crate, Private Investigator’s Licensing Board, and General Manager, Burns International Security Services, stated the regulations did not require every individual mystery shopper to be individually licensed. What it does require, he added, is that there be a licensee and accountability for the actions of a mystery shopper. He said if the employer of a mystery shopper is licensed, that is all that is necessary. In an employee/employer relationship, he explained, only the employer needs to be licensed.

Chairman Townsend stated that what Mr. Alonso was saying was that he wanted to be able to hire who he wanted to hire, and not have to force them to be licensed because that employee is responsible to Mr. Alonso’s clients.

Gina Crown, Owner, Crown, Stanley and Silverman; and Lobbyist, Nevada Investigators Association, told the committee her business, as a licensed investigation company in Reno, had been checking Internet companies who claimed to offer mystery-shopping services. She said almost all of those Internet companies claim to use independent contractors, so there are no taxes, and no workers’ compensation coverage. After obtaining a definition of independent contractor, she declared, it was not certain those mystery shoppers even met that. She claimed the Internet companies were avoiding and clearly circumventing the employee/employer relationship. She stated that in a newsletter published by one of the bigger mystery-shopping companies, they claimed to train and highly recruit specialists in the field to do this mystery-shopping service. She added, "Now they are telling the mystery-shopping companies in the industry, ‘Don’t train them too much because then the IRS will consider them to be employees and you are going to have to pay all of the payroll taxes.’"

Chairman Townsend announced that the committee had to attend a Senate Floor session momentarily, and directed everyone who had testified on S.B. 334 to remain in the committee room to work out any differences regarding the bill. He said the committee would meet again in the morning, March 23, 1999, at 7:00 a.m. and make a decision one way or the other. He told the group he expected them to communicate with one another and come to some kind of agreement.

There being no further business, the meeting was adjourned at 11:00 a.m.

RESPECTFULLY SUBMITTED:

Ardyss Johns,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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