MINUTES OF THE meeting

of the

ASSEMBLY Subcommittee on Commerce and Labor

 

Seventy-First Session

March 9, 2001

 

 

The Subcommittee on Commerce and Labor was called to order at 12:30 p.m., on Friday, March 9, 2001.  Chairwoman Barbara Buckley presided in Room 4100 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

SUBCOMMITTEE MEMBERS PRESENT:

 

Ms.                     Barbara Buckley, Chairwoman

Mr.                     Lynn Hettrick

 

SUBCOMMITTEE MEMBERS ABSENT:

 

None

 

STAFF MEMBERS PRESENT:

 

Crystal McGee, Committee Policy Analyst

Dawn Lee, Committee Secretary

 

OTHERS PRESENT:

 

Susan Dunt, Risk Manager, State of Nevada, Department of Administration, Risk Management Division

John Wiles, Division Counsel, State of Nevada, Department of Business and Industry, Division of Industrial Relations

Brett Kandt, Senior Deputy Attorney General, State of Nevada

Wayne Carlson, Executive Director, Nevada Public Agency Insurance Pool and Public Agency Compensation Trust

May Shelton, Human Services Consultant and Lobbyist, Washoe County

Chairwoman Buckley dispensed with the roll call, noting both members of the subcommittee were present, and opened the hearing on A.B. 160.

 

Assembly Bill 160:  Clarifies that sole proprietor is not required to obtain industrial insurance or coverage for occupational diseases before performing work under certain contracts. (BDR 53-1097)

 

Chairwoman Buckley called forward Susan Dunt, Risk Manager, Department of Administration; John Wiles, Division Counsel, Department of Business and Industry, Division of Industrial Relations; and Brett Kandt, Senior Deputy Attorney General, Office of the Attorney General.

 

Ms. Dunt indicated she had been able to confer with Mr. Wiles and Mr. Kandt prior to the hearing.  Pursuant to their conference, it was decided that the current language of A.B. 160, in conjunction with current statutes, could result in the State of Nevada being held liable for industrial benefits to a sole proprietor if coverage was waived.

 

Mr. Wiles testified that the principal contractor definition is Nevada Revised Statute (NRS) 616A.285.  Under present Nevada law, a sole proprietor could comply with the provisions of the Nevada Industrial Insurance Act by merely not electing to have coverage.  The complicating factor was that Nevada had created coverage for statutory employees, and those relationships existed outside of what might ordinarily be considered to be employer-employee relationships.

 

Mr. Wiles pointed out that the principal contractor statute covered one such relationship and had tremendous breadth.  He brought up the fact that there is a provision related to independent enterprises that could be applicable as well.  With the statutes and the current language in A.B. 160, a sole proprietor exercising his rights under the Nevada Industrial Insurance Act to not be included could be determined to be a statutory employee of a principal contractor who would then be liable for that claim.

 

Mr. Wiles stated that he, Ms. Dunt, and Mr. Kandt all agreed that A.B. 160 was a clarification of current statutes and there was a reason for the state to be concerned.

 

Mr. Wiles suggested that this concern could possibly be addressed by providing language in A.B. 160, Section 1, Subsection 3, ensuring that a state agency, political subdivision or metropolitan police department would not be liable for the payment of compensation for any industrial injury to a sole proprietor.

 

Mr. Wiles acknowledged there was a wide difference in the services provided by sole proprietors.  Some sole proprietors could present a very low risk factor and would elect not to have coverage.  By the same token, there might be others that would present a significant risk, not only to themselves in the course of their duties, but also possibly to the state of Nevada.

 

Ms. Dunt continued that she, Mr. Wiles, and Mr. Kandt had spoken with Wayne Carlson of the Public Agency Compensation Trust, who was also present.  Mr. Carlson had indicated that under Section 1, Subsection 1 of A.B. 160, the intent of the last sentence of the Subsection was to not have the political subdivision have liability in the event of an injury.

 

Mr. Hettrick commented that it appeared to him, between that language and the language in Section 1, Subsection 2, “a sole proprietor may submit . . .” that the entity entering into a contract with a sole proprietor would have the contractual ability to insist on the sole proprietor obtaining coverage or agreeing that neither party would be liable in the event of an injury.  The option would be there, provided all parties were comfortable with that option.

 

Ms. Dunt stated she would be comfortable with the option if a small piece of language was added to include “the state.”  If that piece was added, it might meet the concern.

 

Chairwoman Buckley recognized Wayne Carlson, Executive Director of Public Agency Compensation Trust.

 

Mr. Carlson began by providing some history dating back to the legislative session in 1983.  At that time, he had requested the language Ms. Dunt had spoken about in Section 1, Subsection 1, lines 10 through 12, which was included in Section 2, Subsection 1, lines 17 through 19 of A.B. 160.  The reason behind the request was due to a tri-county contract that was in place at the time.  Two of the counties were insured by what is now EICON (Employer’s Insurance Company of Nevada).  The third county, for which he was Risk Manager at that time, was self-insured.

 

There was a contract with a crop duster at that time to spray for mosquito abatement.  The crop duster was a sole proprietor.  The county did not want to pick up the exposure to risk by default.  Mr. Carlson, then the Risk Manager, insisted that he purchase coverage, for which the county and the crop duster would split the cost.  Even with the county taking some of the burden, it was a tremendous cost for the crop duster and he did not want the coverage.  The county held firm stating that the principal contractor statute forced them to protect their interests by not taking on the exposure of a crop duster, a fairly risky profession.

 

Mr. Carlson explained that the intent behind the language was to say that unless a government entity specifically entered into an agreement with a contractor to do so, the government entity would not be the default principal contractor.  At that time, it was being looked at from a county point of view and no one suggested the state be added, although he agreed it would certainly be appropriate to include the state to accomplish the same result.

 

A short conversation between Chairwoman Buckley and Mr. Hettrick ensued.  At the end of that conversation, Chairwoman Buckley informed those assembled that Mr. Hettrick was noting that the state was included in parts of the current statute, but not throughout.

 

Mr. Hettrick then suggested the language could be amended in Section 2, Subsection 1, line 17, to read, “A state agency or a political subdivision shall not furnish . . . ” and again in Section 1, Subsection 1, lines 10 through 12.

 

Mr. Carlson brought up the question of other contractors about which there has been some concern.  For instance, “mom and pop” janitorial services would not always carry coverage and the agency would not always know.  The county wanted to include those provisions in the contract, if appropriate.  Sometimes the county would pick up the coverage if that was the only way they could get the service, but it was always a negotiated choice.  The county did not want to be the default for everyone who worked for them.

 

Chairwoman Buckley called on May Shelton, Human Services Consultant and Lobbyist for Washoe County.

 

Ms. Shelton commented on the impact A.B. 160 might have on foster parents, especially in light of the fact that the responsibilities may well be transferred to the county.  Clark County had indicated to Chairwoman Buckley that they would like the ability to obtain workers’ compensation insurance for foster parents should funds be available; and it could, perhaps in the future, be permissive, rather than mandated.  Chairwoman Buckley expressed her concern that the language under discussion might prohibit that.

 

Ms. Shelton testified that the language that had been outlined would, in her opinion, allow the option at the county level to provide coverage.  She did not feel it could be done on a reimbursement basis, but that it was very possible on a contractual basis.  Ms. Shelton felt that the county would prefer having an option for coverage.

Chairwoman Buckley thought foster parents were, by law, independent contractors; not employees of the state.  She then questioned the circumstances surrounding foster parents on this issue.  For instance, foster parents could choose to cover themselves with health and other insurance.  They would be unable to sue the state as an employee.  If the statutes were clear under principal contractor, then should the burden be put on the foster parents?  Should it be left to the counties to decide to cover them all?  Should it be handled by ordinance or by allowing foster parents to use their own health insurance, while making it clear that the county or the state was not responsible for workers’ compensation coverage?

 

Ms. Shelton responded that foster parents were paid the higher daily rate to cover those kinds of costs for doing business.  She felt the counties would want the option so they could work with foster parents and involve them in the decision making process.

 

Mr. Hettrick commented that if the words “A state agency or . . .” were inserted in front of “A political subdivision . . .” in Section 1, Subsection 1, lines 9 and 10, and Section 2, Subsection 1, lines 17 and 18, it would indeed give entities the option.  If they wanted to provide coverage, they could.  If they did not agree contractually to provide coverage, they would not have to.

 

Chairwoman Buckley then questioned as to whether the language was clear enough in that they were addressing only sole proprietors with no employees.  Mr. Kandt responded by stating it would actually expand the effect of the language to any person from a corporation.  It would go beyond the original scope of Chairwoman Buckley’s proposed amendment, which addressed just the sole proprietor.

 

Chairwoman Buckley stated that her intent was to not go beyond the sole proprietor.  If a business had employees, it should have to obtain workers’ compensation insurance.

 

Mr. Hettrick questioned whether other statutes require that all employees must be covered.

 

The committee concurred that language should be developed to ensure there was no ambiguity.

 

Mr. Kandt deferred to Mr. Wiles and his extensive knowledge of the particular statutes under discussion.

 

Chairwoman Buckley, in accordance with Mr. Kandt’s deferment, questioned Mr. Wiles on how A.B. 160 could be amended while retaining the intent of the legislation as discussed.

 

Mr. Wiles stated he would work with the parties involved to address those concerns.

 

Chairwoman Buckley commented that sole proprietors had to be able to elect not to be covered and questioned what had changed in the system.

 

Mr. Carlson testified that he felt the statute only exempted sole proprietors and partners.  All employees were required to be covered with industrial insurance.  A sole proprietor that had employees must cover their employees; they were not required to cover themselves.  The initial concern, when the language was first added to the statute, was for the sole proprietor who had chosen not to cover himself.  By law, the same sole proprietor needed to cover everyone but himself.  He did not feel the proposed amendment damaged anything in terms of broadening the scope of the statute.  He did think that it would certainly meet the intent of the state in terms of what he was initially trying to accomplish in 1983 from a local government perspective.

 

Chairwoman Buckley stated she would like the language to be clearer.

 

Mr. Hettrick suggested that the words “sole proprietor” be added after the words “any person” in Section 1, Subsection 1, line 3.  When combined with Section 1, Subsection 2, it would appear to address the current concern with the possibility of clarifying further the sole proprietor’s option of electing not to cover himself, while still being required to cover employees.

 

Chairwoman Buckley agreed that Mr. Hettrick’s suggestion might accomplish the intent.  The committee discussed the possibilities in depth, after which Chairwoman Buckley opened the floor for comments from the audience.

 

Mr. Carlson questioned Mr. Wiles regarding the provision on the sole proprietor’s election of coverage.

 

Chairwoman Buckley asked if the problem was that the language was still addressing the principal contractor statute.

 

Mr. Kandt agreed he was still concerned with that particular aspect of the bill.  He indicated that he and Mr. Wiles had discussed it and felt the inclusion sentence at the end of the proposed additions would simply say the state was not liable for the payment of compensation for any industrial injury to a sole proprietor who elected not to have coverage.

 

Chairwoman Buckley restated the proposed addition, along with her concern that a blanket immunity not be included in the language.  Mr. Kandt acknowledged Chairwoman Buckley’s concerns regarding the ability to make tort claims against the state.  Under existing law, a contractor could sue the state in tort, whether they had coverage or not.  He concurred that any amendments should not change or limit that right in any manner.

 

Chairwoman Buckley observed that the language appeared to keep the state from being liable if a sole proprietor elected not to have coverage.

 

Mr. Hettrick asked how Mr. Kandt’s proposal could be expanded to include cities, counties, and any other political subdivisions.

 

Crystal McGee, Committee Policy Analyst, prefaced her suggestions pending review and approval by the Legislative Counsel Bureau’s Legal Division.  She suggested that the intent and concerns could be addressed with three amendments.  First would be an amendment clarifying that the exemption be applied to sole proprietors only and not their employees; second, the inclusion of language that would provide that a state agency or political subdivision would not be liable for any compensation to a sole proprietor who incurred an industrial injury or occupational disease; and third, the addition of a new Subsection, if appropriate, that would address the issue of offering agencies the option of furnishing industrial insurance coverage for a contractor as specified in contract should they choose to do so.

 

Chairwoman Buckley felt that the third suggestion made it clear that entities had the option of providing coverage at their discretion.  She went on to comment on Ms. McGee’s second suggestion by stating she felt it needed to be perfectly clear that the state or entity would not be liable as a principal contractor to pay workers’ compensation benefits to a sole proprietor who would waive his right to coverage for himself.

 

Mr. Carlson concurred that it appeared to address all the concerns brought forth.  He had a question regarding partners, as he believed that partners had the same option sole proprietors had.

 

Chairwoman Buckley mentioned that the question had been raised regarding partnerships and limited liability companies, but that the Legal Division had yet to respond to that concern.  She stated that possibly concern would be added as an amendment.  They would wait to hear from the Legal Division.

Chairwoman Buckley then called for other comments regarding the issue of partners from those present.

 

Mr. Wiles stated he believed that partners were included under the definition of sole proprietor.

 

Chairwoman Buckley referred to Nevada Revised Statute (NRS) 616A.310, and read the definition aloud.  A brief discussion showed all parties in agreement that the definition covered their concern regarding partners.

 

Chairwoman Buckley called for any comments or concerns with the approach that was being taken with A.B. 160 as a whole.  Mr. Hettrick voiced the possibility of addressing owners who were the only employees of a corporation and asked Ms. McGee what the status was on that issue.

 

Ms. McGee said she had requested that particular language from the Legal Division and that it could be brought back to the full committee as a separate amendment to A.B. 160 during work session.

 

Chairwoman Buckley asked Mr. Hettrick to restate his concern regarding owners who were the only employees of a corporation.  Mr. Hettrick gave the example of owners who are the only employees of a corporation who work from their home.  The owners would never be able to collect workers’ compensation benefits.  However, owners in such a situation were still forced by state law to acquire workers’ compensation insurance.  It was felt by many in that situation that, since they could never collect benefits, there should be an exemption for them.

 

Chairwoman Buckley restated the concern and clarified that the exemption would be only for the principals in such a corporation.  She then opened the floor for public comment.

 

Mr. Kandt said to his knowledge there were no hidden perils with such an exemption.  He acknowledged that, given the prevalence of such corporations and the intent of the bill, he felt the concern should be addressed.

 

Chairwoman Buckley questioned how that would be defined in regard to who was an employee and who was not.

 

Mr. Cliff King, Chief Insurance Examiner, Division of Insurance, Department of Business and Industry, was recognized.  He testified to the fact that, in most states, officers of a closed or private corporation were allowed to reject coverage.  In most states, sole proprietors and partners were not required to cover themselves, but could elect to be covered.  He clarified that involved only officers in private corporations.

 

Chairwoman Buckley suggested the amendment could so reflect that trend for officers in a private corporation.  She then asked for further comments or concerns.  Seeing none, she adjourned the committee at 12:59 p.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Dawn Lee

Committee Secretary

 

 

 

 

APPROVED BY:

 

 

 

                       

Assemblywoman Barbara Buckley, Chairwoman

 

 

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