Three OK lawmakers offer replacement CNC program: Officials warn

Journal Record, The (Oklahoma City), Jul 5, 2005 by Janice Francis-Smith

Three lawmakers have announced a plan to replace the old system whereby sole proprietors can document that they aren't required to have workers' compensation coverage. But the plan may need a little more work, according to the agencies assigned to carry out the proposed plan.

State Reps. James Covey, D-Custer City; Ryan McMullen, D-Burns Flat; and Randy Terrill, R-Moore, are proposing the certificate of non-coverage, or CNC cards, be replaced with signed affidavits.

Under the CNC system, which was dissolved July 1, a sole proprietor could obtain a CNC card from the Oklahoma Department of Labor for a $20 fee that was valid for two years. Lawmakers did away with the program during the last legislative session, citing problems where some contractors used the cards illegally to skirt their responsibility to purchase workers' compensation insurance for employees.

Under the system proposed last week, the Labor Department would supply an affidavit for subcontractors to sign, which would be kept by the general contractor and the company's insurer. The insurance companies would be required to provide contractors with a questionnaire to determine if they legally qualify as a sole proprietor.

The lawmakers asked Insurance Commissioner Kim Holland to begin the process of writing new administrative rules that would require insurers to use the system, and asked Labor Commissioner Brenda Reneau to accept the affidavits as proof of compliance with the law.

Diana Hartley, public information officer for the Insurance Department, said the three lawmakers had recently visited the department, inquiring about what possible solutions had been proposed to replace the CNC system.

While supportive of possible solutions, the Insurance Department cannot fulfill the lawmakers' request to create new rules at the present time, however.

That actually would require legislative action, said Hartley. We can't actually create rules or mandates for insurance companies. That has to be legislated. Our responsibility is just making sure that it's carried out-. The only thing we have to do with workers' compensation is we license the companies that sell workers' comp.

Patrick McGuigan, deputy commissioner for the Department of Labor, said the affidavit idea was one of several proposals that have been discussed over the past few weeks, but the two departments had already identified some areas of concern with proposal.

In insurance circles and in government, there's concern that whatever replaces the CNC could be unwieldy, said McGuigan. Under the old CNC system, the Labor Department would conduct the proper inquiries, one-on-one with contractors, to determine their status as sole proprietors, before issuing a document that would verify their standing for two years.

At times contractors whose circumstances had changed would abuse the system, but the CNC cards provided an efficient way of verifying the status of a sole proprietor as they moved from job to job, said McGuigan.

It took us 12 hours to process 175 CNCs yesterday, and we had seven people working on it, said McGuigan. You can do the math.

The proposed affidavit system might require a similar process to be conducted every time an independent contractor went on to a new job.

The Labor Department, which is charged with enforcement of workers' compensation coverage laws at the work site, is working on devising an efficient replacement for the CNCs, said McGuigan. Reneau understands the lawmakers' desire to shift more of the burden to the private sector, he said.

Sometime in the next several weeks there will be something put together, through the regulatory or oversight process, or possibly through the industry itself, that will work to affirm the status of independent contractors, said McGuigan, and it has essentially nothing to do with anything said or done by any of those representatives.