The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:05 a.m., on Wednesday, March 24, 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 Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

GUEST LEGISLATORS PRESENT:

Senator Jon C. Porter, Sr., Clark County Senatorial District No. 1

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Crystal Suess, Committee Secretary

OTHERS PRESENT:

Chairman Townsend indicated the meeting would commence with the first order of business being Senate Bill (S.B.) 460.

Stanley P Jones, Administrator, Employment Security Division, Department of Employment, Training and Rehabilitation, stated S.B. 460 is necessary to comply with the distribution of Reed Act funds in the fiscal years 2000, 2001, and 2002.

Chairman Townsend requested the makeup of the Reed Act funds and how the fund originated. Mr. Jones iterated Reed Act funds were overflow funds from three accounts in the Unemployment Trust Fund. The Employment Security Administration Account pays for the federal and state administration of the unemployment compensation and employment service programs. Chairman Townsend questioned if Mr. Jones had a list that shows the accounts and how the funds are allocated. Mr. Jones stated he did. Senator O’Connell inquired if 42 U.S.C. section 1103 was, in fact, the Reed Act. Mr. Jones said that was correct. Chairman Townsend asked why the Reed Act was named accordingly. Mr. Jones clarified the Reed Act was named in honor of a New York congressman who was chairman of the ways and means committee at the time the act was enacted.

Mr. Jones emphasized the Reed Act funds only become available when the federal accounts reach Congress’ predetermined statutory ceilings. The Employment Security Administration Account, the Extended Unemployment Compensation Account, and the Federal Unemployment Account, have reached their statutory ceiling and will be distributed in the federal fiscal year 2000. S.B. 460 will allow the State of Nevada to receive its portion of the distribution in each of the 3 years in conformity with federal requirement. Senator O’Connell questioned the amount of funds the state would receive from all three funds. Mr. Jones claimed it would be in the amount of $127,000. Senator O’Connell queried how the funds were allocated. Mr. Jones asserted the amount of each state’s share is based on the proportion of wages subject to the Federal Unemployment Tax Act, attributable to the state during the calendar year 1997. Chairman Townsend questioned if the funds were dispersed out of all three accounts. Mr. Jones averred when the three accounts have reached their statutory ceiling, the funds flow from all three accounts into the Reed Act distribution account. Chairman Townsend questioned if the three accounts are federal accounts and the State of Nevada will receive one lump sum from the Reed Act distribution. Mr. Jones stated that was correct.

Chairman Townsend asked if there were any further questions on S.B. 460.

SENATOR O’CONNELL MOVED TO DO PASS S.B. 460.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

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Chairman Townsend introduced Senate Bill (S.B.) 464 and asked for testimony.

Nancy Samon, Chief of Unemployment Insurance Contributions, Employment Security Division, Department of Employment, Training and Rehabilitation, stated S.B. 464 is in response to recommendations from the 1997 legislative audit report on management and collection of the state’s accounts receivable. Section 2, subsection 2, of S.B. 464 provides for a $25 handling charge for dishonored checks. Currently the Employment Security Division (ESD) has no penalty for dishonored checks. Section 4 increases the interest rate on past-due taxes, from ½ percent per month to 1 1/2 percent per month. Ms. Samon stated the audit report indicates that penalty and interest rates are not consistent between state agencies and should be set at sufficient levels to deter taxpayers from becoming delinquent. Subsequent to the proposal of this language ESD has learned the interest rate for the Department of Taxation will probably be reduced to 1 percent, effective July 1, 1999. She averred in order to follow the intent of the auditor’s report, the ESD would like to amend S.B. 464 to read 1 percent per month. Section 3 strengthens the ESD’s garnishment procedures and addresses the offset of state payments to debtors, specifically when ESD currently issues a notice to withhold; the holder of assets to which the ESD gives notice, must advise this department if he or she is holding said assets. The ESD must then arrange with the sheriff of that particular district to execute the withholding notice so the ESD can obtain those assets. Ms. Samon pointed out S.B. 464 will require that assets be directly transmitted to the division. If this is not done, the holder of the assets would be liable for the debt.

Chairman Townsend asked if the audit report (Exhibit C. Original is on file in the Research Library) was available for the committee. Chairman Townsend also asked if submission of this bill was reported to Mr. Crews (Wm. Gary Crews, CPA, Legislative Auditor, Audit Division, Legislative Counsel Bureau). Ms. Samon stated yes.

Senator O’Connell pointed out her concern regarding the interpretation of the language of section 2, lines 5-13. Ms. Samon stated on page 2, subsection 3, currently is what the ESD uses. If the ESD can locate assets of a debtor, and survive due process, then the ESD will serve notice on whomever is holding the assets. The department may use said assets for garnishment. Senator O’Connell queried as to what types of assets would be considered for garnishment. Ms. Samon indicated the ESD normally looks at business bank accounts and retention payments from prime and subcontractors. The ESD does not garnish personal property. Senator O’Connell asked if there was any other statute which gives the ESD the authority to take assets.

Ms. Samon expressed page 3, Nevada Revised Statutes (NRS) 612.685 has given the department statutory authority until the present time. The difference between what has been done, and what S.B. 464 proposes (with the old system the ESD had to renew the notice to withhold every 30 days), this system eliminates a lot of unnecessary paperwork.

Chairman Townsend opened the hearing on S.B. 332.

Senator Jon C. Porter Sr., Clark County Senatorial District No. 1, stated air-tour operators are used as a training ground for the larger airlines. In some cases these small tour operators will have a pilot employed only long enough to get the required 1500-hour certification that would allow the pilot to move into a job with the major airlines. Airline pilots are getting a higher rate of pay and with that comes more responsibility. Subsequently airline pilots have a higher risk of losing major airline jobs. In the airline industry, there is constant turnover and little stability. The employee then tries to collect his unemployment benefits which reflects on the previous smaller air tour airline employer.

Ray E. Bacon, Lobbyist, Nevada Manufacturers Association (NMA), stated this was an issue that had come up with the members of NMA on two or three different occasions. One issue is military dependents that voluntarily leave their jobs, and then file an unemployment claim and receive benefits for which the small air-tour airline employer has to pay. Chairman Townsend stated small business is what makes this country and we have to look out for the little people. Mary F. Lau, Lobbyist, Retail Association of Nevada (RAN), expressed the position of RAN being in support of S.B. 332. Samuel P. McMullen, Lobbyist, Las Vegas Chamber of Commerce, iterated support of S.B. 332. Mr. Jones emphasized his respect for Senator Porter and the ESD support for S.B. 332.

Chairman Townsend requested a motion.

SENATOR O’CONNELL MOVED TO DO PASS S.B. 332.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

Chairman Townsend closed the hearing on bills and commenced a work session with the first order of business being S.B. 374

Gary E. Milliken, Lobbyist, Nevada Contractors Network, stated after discussing the changes with the Division of Insurance, it seemed difficult to combine the proposed changes into one description. The original proposed recommendation, in the work session handout (Exhibit D), reinstated the line that says, "An association’s administrator shall not perform any of the duties assigned to a third-party administrator." Chairman Townsend requested the position of the Division of Insurance. Eloise Koenig, Coordinator, Self-Insured Workers Compensation, Division of Insurance, Department of Business and Industry, stated the division stands behind the change. Mary F. Lau, Lobbyist, Retail Association of Nevada, said the association stands by the Division of Insurance’s amendment to the bill. James L. Wadhams, Lobbyist, Nevada Independent Insurance Agents, testified the insurance agents were in agreement with bringing the aforementioned language back into the bill. Fred L. Hillerby, Lobbyist, Professional Insurance Agents in California and Nevada, iterated his agencies had no problem with the change. Mr. Milliken pointed out the amendment was under tab E (Exhibit D). He further testified part 2 of the proposed changes was to not repeal NRS 616B.371.

Senator Carlton asked about the solicitor’s permit, and what reason one would be needed. Ms. Koenig commented when the original bill was passed allowing the association of the self-insured public and private employers, the provision of the solicitor’s permit was put in as a safeguard.

Mr. Wadhams averred the solicitor’s permit, under tab F (Exhibit D), would add a new section to chapter 616B of NRS.

Chairman Townsend read the amendment as follows:

Ms. Koenig stated the proposed amendment was to replace the solicitor’s permit language. The solicitor’s permit specified who could and could not recruit members. Mr. McMullen remarked that the Las Vegas Chamber of Commerce is supportive of the amendment brought forth by the Division of Insurance. Mr. Milliken stated the Nevada Contractors Network also supports the proposed amendment from the Division of Insurance.

Mr. Wadhams stated the Nevada Independent Insurance Agents object to a secretary or janitor selling insurance and feel that persons that sell insurance should be licensed or qualified. He further stated if the associations stay within their current membership, the association should be able to solicit in any manner approved by the insurance commissioner. If the associations decide to market to the street in competition with companies like The Hartford or Liberty Mutual Insurance Group, then the associations should be required to have informed people educating the employers who would buy that insurance.

Chairman Townsend asked Mr. Wadhams if he was opposed to the last section, under tab G (Exhibit D). Mr. Wadhams stated if the association stays with their current membership, they can do whatever the commissioner allows. If the association begins to compete with insurance companies or insurance agents, then the associations should have the same licensing requirements as anyone else in the industry.

Mr. Hillerby iterated he knew the committee was aware that workers’ compensation is a casualty line of business. Professional insurance agents of California and Nevada have licensed agents and brokers for casualty insurance; in addition the 1999 Legislative Session wanted additional training in workmen’s compensation so that agents could be licensed. He pointed out people representing how an employer can buy workmen’s compensation insurance should represent the professional standards of an agent or broker.

Chairman Townsend questioned if it was the conclusion of Mr. Hillerby that the term in section 1, subsection 3, "An employee of a member of the association of self-insured" who would represent an association and solicit or recruit new members, in essence would act like an insurance agent. Mr. Wadhams stated the Nevada Independent Insurance Agents are opposed to the total definition. He further stated the insurance agents object to the amendment proposed by the insurance division and feels a compromise is better proposed under tab G (Exhibit D). Chairman Townsend queried if Mr. Wadhams’ and Mr. Hillerby’s position was that everyone deserves to have a qualified individual soliciting insurance sales, and all persons that join "associations" have the same protections and professionalism that anyone else being solicited for insurance would have. Mr. Wadhams stated if the intent of the association is to stay within the existing classification of business, they can do anything the commissioner allows. The Nevada Independent Insurance Agents have offered a compromise, not allowing individuals to be licensed if they are selling to nonmembers.

Ms. Lau added the Retail Associations of Nevada is in support of the amendment brought forth by the insurance division. The Retail Association of Nevada has been using solicitors. These groups of solicitors are required by law to maintain a 25 percent, 75 percent administrative and claims ratio. Ms. Lau further stated by reinstating Nevada Revised Statutes 616B.383, the insurance commissioner could review advertising and written materials used by solicitors.

Mr. Milliken pointed out the amendment under tab G (Exhibit D), covered the issues that concerned the insurance division and certainly reinstating NRS 616B.383 will provide some clarification.

Senator O’Connell asked Ms. Koenig at what point she felt the self-insured groups should be held to pay the premium tax. Ms. Koenig iterated the self-insured associations were set up under a self-insured program. Senator O’Connell stated she was aware how the self-insured association was set up and commented the definition was given during the interim that the self-insured associations were not considered insurers. Senator O’Connell asked again at what point the insurance division would consider these groups an insurance company and, therefore, make those companies liable for the premium tax. Ms. Koenig explained an insurance company is a company that has received a certificate of authority through Title 57 of NRS codes. Senator O’Connell asked how the insurance division differentiates between insurance companies as opposed to the associations. Ms. Koenig clarified the self-insured groups accept the liability for their own claims. Being members of a trade association they must be accepted into an association and also be accepted into the self-insured association for the underwriting standards of that particular association. These groups cannot market freely to anyone. Senator O’Connell noted the self-insured association accepts the responsibility of their own group, thereby making them unclassifiable as an insurance company.

Ms. Koenig concluded the solicitor’s permit had not been amended.

Mr. Wadhams suggested the premium tax paid by insurance companies, while these associations are exempt from the tax for an identical transaction, raises a constitutional discrimination issue. The amendment submitted by the Nevada Independent Insurance Agents suggested if the associations stay true to a limited-classification system then the associations can do what they want under their governing system. Mr. Milliken pointed out the self-insured associations are in the business of providing workers’ compensation under a statutory obligation in the most cost-effective way. Mr. Hillerby maintained that these associations were in the business of recruiting other members for the sole purpose of gaining new members so that a minimum amount of employees could be met, thereby making the cost of workers’ compensation insurance less.

Chairman Townsend voiced there were two separate issues. The first issue is an individual not licensed by the Division of Insurance soliciting on behalf of a trade association for new members for the trade association. The second issue is an individual not licensed by the insurance division soliciting new members or potential members to the self-insured group of an association. Mr. Milliken concurred that was correct. Mr. Wadhams clarified the troubling portion of the amendment submitted by the insurance division has to do with the classification of businesses and how they can or cannot be eligible to join one of these associations. Chairman Townsend acknowledged Mr. Wadhams’ concern. He also asked Ms. Lau if a law firm sold Christmas cards in the lobby and collected sales tax, if that law firm would be eligible to join the retail sales association. Ms. Lau insisted the law firm would not qualify under the bylaws of the association because the law firm’s primary revenue did not come from retail sales.

Chairman Townsend called attention to the fact that there were three proposed amendments to S.B. 374. He further stated that he would like to have a motion on Mr. Milliken’s amendment under tab E (Exhibit D).

SENATOR O’CONNELL MOVED TO AMEND S.B. 374.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

Chairman Townsend asked Ms. Koenig if the Division of Insurance is comfortable with their control over the people who are going to solicit new members. Ms. Koenig stated there are safeguards that are built into the self-insured association laws; there are requirements that each member sign several liability agreements. If a proposed member comes through the Division of Insurance that does not seem to fit into that association, the division requires justification from the proposed member. Chairman Townsend questioned if the Division of Insurance was capable of keeping on top of the self-insured association, making sure they were following the guidelines set forth by the commissioner. Ms. Koenig stated she felt the Division of Insurance could manage the task.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

SENATOR O’CONNELL MOVED TO AMEND AND DO PASS S.B. 374.

SENATOR SCHNEIDER SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

Vice Chairman O’Connell closed the hearing on S.B. 374 and opened the work session on S.B. 218.

Senator Carlton stated she had been working with the parties with concern to S.B. 218 and it was her belief that the parties had come to an agreement.

Vice Chairman O’Connell iterated there would be no need to review the previously agreed upon items.

Robert G. Whittemore, Lobbyist, expressed, in his opinion, S.B. 218 was not good legislation. He further said he was prepared to present a document (Exhibit E) jointly reached by the Board of Marriage and Family Therapists and the representatives of the Nevada State Psychological Association.

Helen A. Foley, Lobbyist, Board of Marriage and Family Therapists, stated the importance of this legislation is due to how the groups of therapists will work together.

Myra A. Sheehan, Lobbyist, Nevada Trial Lawyers Association, commented the trial lawyers had rescinded their opposition to S.B. 218, as amended.

Stephen L. Sprinkle, President, Board of Examiners for Marriage and Family Therapists, added the process of creating the amendment had been painful. He further stated the commitment goes further into the standards of testing and therapy procedures.

Elizabeth W. Neighbors, past President, Nevada State Psychological Association, pointed out that five of the board members had talked about and are in support of amending S.B. 218.

Alfredo M. Amezaga Jr., Psychologist, Treasurer, Nevada State Psychological Association, said he agreed with Ms. Neighbors’ statement.

Mr. Whittemore stated a number of years ago, then-Governor Michael O’Callaghan created the "super board." At that time the board of psychologists fought that legislation; in retrospect it was a perfect solution.

SENATOR CARLTON SECONDED THE MOTION.

THE MOTION CARRIED UNANIMOUSLY.

*****

Chairman Townsend asked if there was any further business; there being none, the meeting was adjourned at 8:45 a.m.

RESPECTFULLY SUBMITTED:

Crystal Suess,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

DATE: