Call to Order and Roll Call
The 1st meeting of the Interim Joint Committee on Licensing, Occupations, and Administrative Regulations was held on Wednesday, June 7, 2017, at 10:30 AM, at the Northern Kentucky Convention Center. Representative Adam Koenig, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Adam Koenig, Co-Chair; Senators Joe Bowen, Jimmy Higdon, Paul Hornback, Ray S. Jones II, Christian McDaniel, Dan "Malano" Seum, and Damon Thayer; Representatives Al Gentry, Dennis Keene, Chad McCoy, Jerry T. Miller, Kimberly Poore Moser, David Osborne, Sal Santoro, Arnold Simpson, Diane St. Onge, Walker Thomas, and Susan Westrom.
Guests: Representative Jill York, Representative Phil Moffett, Secretary David Dickerson, Deputy Secretary Gail Russell, General Counsel Barry Dunn, and Communications Director Elizabeth Kuhn, Public Protection Cabinet; Bill Woodward, Ohio Iron Workers; Hunter Limbaugh, Southeastern Counsel, Wine Institute.
LRC Staff: Tom Hewlett, Jasmine Williams, Melissa McQueen, and Cindy Smith.
Minutes
The minutes of the December 15, 2016 meeting were approved without objection.
North Carolina State Board of Dental Examiners v. Federal Trade Commission
David Dickerson, Secretary, Cabinet for Public Protection said the need to reorganize the makeup of state boards and commissions, and the oversight structure for them is to ensure free markets and bolster competition; to promote Kentucky professionals and businesses; to achieve cost savings; and to improve compliance.
Barry Dunn, General Counsel, Cabinet for Public Protection discussed the North Carolina State Board of Dental Examiners v. Federal Trade Commission. He said the lawsuit resulted in a 2015 U.S. Supreme Court 6-3 decision. The North Carolina Dental Board sent cease-and-decision letters to non-dentists that were engaging in teeth whitening practices. The Board said this action constituted the practice of dentistry because there was a service that was being provided. The court found that boards comprised of market participants that include board members who hold active licenses in the field regulated by the board must be supervised by the state. Implications for state licensing boards include, if a board is not actively supervised by the state, the board could be held liable for potential anti-trust actions. Potentially, board members may be subject to personal liability. There were no personal damages in the North Carolina case. However, since this case there has been a rash of litigation that has been brought throughout the country. In many states there have been lawsuits against boards and board members.
Mr. Dunn discussed FTC guidance. He said the following do not constitute active state oversight according to the FTC: the entity responsible for supervising the regulatory board is comprised of active market participants in the occupation the board regulates; a state official monitors the actions of the regulatory board but lacks the authority to disapprove anti-competitive acts; a state official monitors the actions of the regulatory board but lacks the authority to disapprove anticompetitive acts; a state official serves as an ex-officio member of the board but lacks the authority to disapprove competitive acts; and the state’s attorney general or another state official provides advice to the regulatory board on an ongoing basis, but has nothing more than advisory powers.
Gail Russell, Deputy Secretary, Cabinet for Public Protection discussed options other states have tried. One was about citizen advocacy centers, but the Cabinet did not like their solutions and do not feel they are palatable to the Cabinet. Other suggestions the cabinet considered but didn’t agree with include; public member majorities on boards, rather than having a majority of the board composed of professionals from the licensed industry, multi-party board membership, an umbrella board with broad policy oversight, an independent review board to oversee rules making, majority public review board for scope of practice actions, making boards advisory only, expanding the powers of sunrise/sunset review, and giving the attorney general additional oversight powers.
Mr. Dunn spoke about other states’ reaction to the case. Some states have proposed legislation and Executive Orders to deal with the issue and those are being studied. There have been conversations with those that do professional licensing in Illinois, Ohio, West Virginia, Virginia, Missouri, and other states. In Kentucky, the boards that make up this proposed reorganization license are roughly 300,000 people, with about 150 employees doing that licensing. In Indiana, approximately 500,000 people are licensed with 84 employees doing that licensing. Some other states have super boards.
Secretary Dickerson said the state licensing boards will maintain their individual identities. Similar boards will be grouped together under an authority which shall be headed by an executive director. The executive director will provide active state supervision to each group under the authority. Each board will continue to regulate and license its respective profession with oversight from the executive director and commissioner of the Department of Professional Licensing within PPC.
In response to a question by Senator Thayer, Secretary Dickerson said their plan is to do the reorganization by Executive Order within a few weeks. This will give them a six month window to do the vetting on things before the next legislative session. They are deferring to the General Assembly, once it convenes, to codify the plan. They just want some time to make it work before the final decision comes from the General Assembly.
In response to a question by Senator Jones, Secretary Dickerson said this will be rolled out in multiple executive orders within the next 30 days.
In response to a question by Senator Jones, Secretary Dickerson said the potential does exist for the existing executive director to stay in his position. Each board will have its own executive director or will each have an administrative coordinator if the oversight umbrella dictates that.
In response to a question by Senator Jones, Secretary Dickerson said existing employees are non-merit employees, and are subject to at-will employment. The ultimate decision will come from the Secretary.
In response to a question by Senator Jones, Secretary Dickerson said there has to be an ultimate appointing authority somewhere. Presently the authority for PPC is the secretary. The secretary has the authority to designate that. In some cases there are already good manager at the boards.
HB 444 (17RS BR 1532), AN ACT relating to welding safety.
Representative Jill York, sponsor, said structural steel welding is a heating process which bonds metals. Accreditation of welders and inspectors is important. Construction contracts for projects involving steel erection often contain language that requires contractors to provide certification that all welders performing work on the project have been tested to meet AWS D1.1 standards. This standard defines the protocol that must be used for welder qualification and it uses nationally recognized AMS Codes which represent the bulk of welding performed in the industry. For projects owned by public entities contractors who perform welding on those projects must submit qualifications for any welder who will work on the project. Unfortunately, this criteria for certification and inspection is component written into job specifications and is not required by law. Some people break rules and endanger others, and this has been seen in Kentucky where some projects fail during the construction process. Problems include; falsified welding certification and testing, mail in welding test facilities, too few on-site inspections, structure collapse, and increased cost. Due to fake welding tests and facilities, a puppy was issued a certification paper from a fraudulent testing facility.
Bill Woodward, District Counsel President, United Iron Worker of Southern Ohio said there is great support in Ohio from all the faculties that have anything to do with welding, so it is going very well in Ohio. Mr. Woodward also discussed fake welding tests and facilities, and showed the members examples of good and bad welding.
Next, Representative York shared what is at risk. She said the risk includes children and student safety, public safety, worker safety, confidence in Kentucky construction, confidence in oversight by state government, and taxpayer dollars. She said what needs to happen is legislation needs to be passed to enforce standards when they are included in jobs specs, and to change the enforcement of building codes to require contractors to used accredited testing facilities and accredited inspectors. The bill requires the use of accredited AWS testing facilities, provides oversight through third-party testing, and requires AWS qualified welders on structural steel construction.
In response to a question by Representative Miller, Representative York said the bill does not affect the problem of too few on-site inspections.
HB 298 (17RS BR 1159), AN ACT relating to alcoholic beverages.
Representative Phil Moffett discussed direct shipment of alcohol. He said in 1933 prohibition ended, and a 3 tier system was put in place to protect the public and promote economic growth. This prohibits one tier from owning an interest in another tier. In 1991 the internet opened for commercial use and then Amazon started in 1995. Internet eCommerce changes everything. You can buy from anywhere in the world and have it shipped to your house. The alcoholic beverage industry is booming, and changing quickly. The question is, should Kentucky capitalize on eCommerce? If yes, Kentucky needs to consider modifying the 3 tier model to allow a more robust expansion of Instant Direct Shipments of alcoholic beverages across the nation. There are currently 47 states allowing instant direct shipment of wine, 26 that allow instant direct ship of beer, and 17 that allow all spirits. The 3-tier system was put in for accountability. A big part of that was local accountability. The State ABC accountability is compliance checks and audits. Instant direct ship is not a new concept. It goes back to 1861. The internet is just a modern representation of the mail order catalog from the 1800s.
There is recent case law that has changed the 3-tier system. Granholm v. Heald where the courts ruled in favor of the consumers saying that states have broad discretion to regulate production, transportation and sale of alcoholic beverages but the Commerce Clause suggests states can’t be anti-competitive against out-of-state interests without Congressional approval. In another case, Huber Winery v. Wilcher from 2006, the court ruled with Huber Winery saying that the in-person sale requirement was anti-competitive. This was upheld on appeal.
The three-tier system does come with concerns and flaws. Currently small farm wineries can ship using UPS or FedEx directly to the consumer who orders product online or over the phone. The winery collects and remits all applicable 3-tiers of taxation. This is an exception to the usual concept of a three-tier system.
If direct shipping was extended to other producers, licensees should be required to submit periodic reporting to ABC, and fees should cover the costs of ABC’s increased monitoring needs, to include GIS system access, license administration, and enforcement.
Hunter Limbaugh, Southeast Counsel, Wine Institute said the Wine Institute is in favor of direct shipment of wines, and there are currently 44 states that allow instant direct shipping of wines. Kentucky does not allow it to be direct shipped from out of state. He would like to see Kentucky pass model legislation to direct ship. Because of the consolidation in the wholesale tier, there are fewer wholesalers through which they can sell their products.
In response to a question by Representative Koenig, Mr. Limbaugh said there are over 8,000 licensed producers of wine in the nation, and he would imagine there are over 50,000 different wine labels.
Representative Osborne noted that attitudes have changed over direct shipment of wine and availability is continuing to increase and he think there will be additional support on the issue.
Representative St. Onge said this is an issue whose time has come and there needs to be fair treatment of all industries across the board.
With no further business, the meeting was adjourned at 11:50 a.m.