Use of foreign labor by slot makers sparks regulation consideration

By Liz Benston

Monday, Aug. 24, 2009 | 2 a.m.

Amid a slew of little-noticed gaming bills, the Legislature this year passed a law enabling the Nevada Gaming Commission to draft regulations requiring licensing of third parties, including contractors, who have significant roles in building gambling devices for use in Nevada.

Most casino industry rules passed in Nevada aim to make it easier for the state’s primary industry to do business — either by easing regulations or allowing new business opportunities — but this provision goes in the other direction: adding oversight where little existed.

The bill grew out of Gaming Control Board concerns with slot machine manufacturers using foreign labor to make components.

International Game Technology and Bally Technologies began using workers in India a few years ago, claiming they couldn’t find enough local talent for the job. IGT has outsourced work to India, and Bally, in part because of regulatory concerns surrounding the use of contractors, opened offices in India and hired workers there as full-time Bally employees.

Many companies rely on Indian labor because of that country’s relatively inexpensive yet educated workforce in areas such as engineering and computer technology.

This move by the slot giants has upset locals seeking to encourage the growth of technology jobs in Nevada, but it has caused more pressing concerns among regulators charged with protecting the integrity of the state’s gambling games.

State law requires manufacturers of gambling devices, just as it does the heads of Nevada casinos, to be licensed — an extensive process of probing the personal and work histories of a company’s top executives. Lower down the corporate ladder, engineers and others working on gambling machines or gambling-related technology must get a work card, a less invasive process involving filling out an application, passing a criminal-background check and being fingerprinted by local law enforcement. Workers who change jobs must update their information with the Gaming Control Board, which keeps each individual’s application on file.

Because of the difficulty of licensing foreign workers and contractors, let alone licensing top executives based abroad, manufacturing companies say they use domestic labor for sensitive jobs such as coding and other work related to the outcome of any particular game.

Regulators have allowed unlicensed, foreign workers to develop what manufacturers call “peripheral” technology, such as the graphics and sound used in slot machines and other gambling equipment.

But now, regulators think those workers also should be licensed.

The way the Control Board sees it, just about everything is related to the outcome of a gambling game, not simply the random number generator — a device in each slot machine that determines whether a player has won or lost. Today’s high-tech slots no longer feature mechanical reels with a certain number of physical “stops.” A slot machine result triggers a complex set of video graphics, noises and other features.

For instance, a slot machine could record a loss yet outwardly display something looking like a win — a feature that could entice more people to gamble yet also elicit complaints from players.

Allowing unlicensed companies to design or make such features just out of the reach of regulators’ control is causing growing anxieties at the Gaming Control Board.

Just how far regulators will extend their regulatory reach will be hashed out in workshops hosted by the Gaming Control Board with industry representatives in the next few months.

The five-member commission, which ultimately votes on changes or additions to Nevada’s gaming regulations, can expect pushback from game manufacturers that seek less, not more, regulatory interference.

The board must balance its mandate to promote industry growth and innovation with the need to ensure gamblers get a fair shake. In a state where most gambling legislation does the former, regulators are wary of complaints by angry gamblers, which not only take up valuable time but create problems for Nevada’s reputation as the gambling industry’s gold standard.