Okla. DOL Wrestles with End of Workers’ Comp Non-Coverage Program

The Oklahoma Department of Labor reported it is trying to determine the extent of the impact of the Legislature’s decision to repeal two sections of Oklahoma law and abolish the Certificate of Non-Coverage (CNC) Program as part of its workers’ compensation reform measure. The repeal is effective July 1, 2005.

The CNC program was created in 1994 and the Department of Labor was authorized to issue CNC cards to bona fide independent contractors. A CNC card was intended to identify the cardholder as an independent contractor exempt from the Workers’ Compensation Act. During existence of the CNC program, there were persistent industry complaints about the ineffectiveness of the CNC program and no validation of its effectiveness.

Ending the program, which was unique to Oklahoma, was among several recommendations made in January by a workers’ compensation reform task force. Despite legislative intentions when it established the CNC program, considerable frustration has been expressed in recent years by contractors whose insurance companies purposely dishonored CNC cards. This practice left many businesses with higher workers’ compensation premiums and no appeals process.

The state Labor Department was not represented in the process by which the Legislature decided to abolish the statewide CNC program. For more than 20,000 Oklahomans, the measure does not provide a gradual program phase out provision or any alternative to replace the CNC program.

Without an alternative mechanism to exempt legitimate independent contractors from the workers’ compensation system, the full impact of this change for both the cardholders and the Labor Department is uncertain. Because the Labor Department must phase out the program at the end of June, new CNCs can only be issued to those independent contractors who need immediate documentation in order to get paid for current jobs. However, due to this new legislation, all existing CNC cards will be void as of July 1, 2005.

Because of the pressure to approve a workers’ comp reform measure quickly, the Oklahoma Department of Labor was not invited to provide customary agency impact statements before the new law passed. The agency is still studying the implications of the end of CNCs.

Concerned business owners and CNC card-holders may want to discuss the implications of the new law with a workers’ comp insurance provider.