Understanding Workers Compensation Insurance

Understanding Oklahoma Workers Compensation Insurance

Jeffrey Miller, LL.M.

Oklahoma CPC Insurance



Workers Compensation Insurance may be one of the most misunderstood and quite often misused and abused insurance coverages that all Oklahoma businesses are required to have.  Any business who has any employees, part time or full time, or who hires independent contractors who are not covered by Workers Compensation Insurance (WCI) or who do not have a current Affidavit of Exempt Status Card, likely fall under the responsibility of the business who pays them, either directly or indirectly.  Over the last several years the Oklahoma Workers Compensation Commission[i]  have made a few changes that business owners should understand.

In the past, a business who qualified to be exempt from carrying WCI could provide those who requested a Certificate of Workers Compensation Insurance, a signed and notarized Exempt Status Affidavit letter.  These exempt businesses were typically owners of the business with no W2 employees or Independent Contractors or Subcontractors who received a 1099 Misc. for their income earned.

However, beginning February 1, 2014, Title 85[ii] went into effect, changing it from where you can no longer just provide an Affidavit of Exempt Status letter instead of a Certificate of Insurance confirming you have WCI coverage.  Now, if you are exempt from being required to carry WCI, you need to apply, be approved by the Workers Compensation Commission and provide the updated Affidavit of Exempt Status Card, which is only provided through the Workers Compensation Commission. This assures those claiming they are exempt, are actually exempt. This change happened partially due to the misuse and misunderstanding of who was an independent contractor and who was an employee.  You can get your Affidavit for Exempt Status Card by going to www.ok.gov/wcc/  to apply online for an Affidavit of Exempt Status Card or by using CC-Form 36A. There is a Fifty Dollar fee to apply and if approved, your Affidavit of Exempt Status Card is good for two years from the date of application.  If not approved, you do not get a refund of the fifty-dollar application fee. Typically, only owners or stockholder employees, who own at least 10% of the company or a business with five or less total employees, all of who are relatives of the owner are not required to be covered by Workers Compensation Insurance[iii]. Additionally, there are other people who may be not required to be covered by WCI, such as licensed real estate brokers, certain agricultural workers as well as several other types of employees. To find out exact details of who may be able to be exempt go to www.ok.gov/wcc/.

Any business owner with no employees, but may hire subcontractors (independent contractors) are required to have on file for any and all work done on their behalf, either a Certificate of Insurance showing that their subcontractors have WCI coverage for any and all workers on the job or have an Affidavit of Exempt Status Card on file for each person who works on every job.  In essence, anyone you pay for work, even if they have workers who they pay, needs to have provided you with one of these two documents for all people working on your behalf.  If someone you hire/pay as an independent contractor has an Affidavit Exempt Status Card, the moment they bring a person(s) to work with them, that person(s) has to be covered by WCI by someone, or have their own Affidavit of Exempt Status Card, which you then have to have in your file.  If not, you are ultimately responsible to cover them with WCI coverage and are legally liable if something happens to them while working on your behalf, regardless if they are working directly for you of indirectly for the subcontractor you hired.  

Today, you can find an enormous amount of what appear to be legal forms and waivers on the internet for just about anything, but my suggestion is to ALWAYS get professional legal advice whenever using any kind of waiver for any purpose.  

So, what if you are not exempt and you do not have WCI, or you do not have on file the proper paperwork for all those who have done work on your behalf?  A few things you could face; you may be subject to a fine of up to $1,000.00 per day; you and your business could be subject to a lawsuit brought by an injured person claiming to have worked for you and was hurt while working on your behalf; you could be legally prohibited from employing workers in the future; you might even be subject to jail time.  Again, you can find all of the specific information about WCI at www.wcc.ok.gov.[iv]

There are options to have a No Payroll/No Employee Workers Compensation Policies, which typically cost in the range of $350.00 to $500.00 per year. They are used a great deal by small business owners and contractors for a couple of reasons. Keep in mind, these type policies do not cover you, if you are exempt, however it gives your business a policy that is often required by most commercial clients and this often allows small companies to be able to compete with larger companies.  Additionally, if you have a policy in place, it allows you to add a person(s) at any time during the year or even at the end of the policy year.

The bottom line, if you were to be audited by the Oklahoma Workers Compensation Commission at any point and do not have a WCI policy, you may have to verify how much you paid all subcontractors and confirm and verify that you have on file Certificates of Insurance or have Affidavits for Exempt Status Cards for every person who did any work for you or on your behalf, either directly or through a subcontract you hired. Otherwise you are likely liable for potential fines as well as other penalties.  Even worse, if sued by someone hurt, disabled or by the family of someone who died while doing work for you without WCI coverage, could cost you thousands or even hundreds of thousands of dollars, which most business cannot afford.

[i] Oklahoma Workers Compensation Commission: 1915 North Stiles Avenue, Ste. 231, Oklahoma City, OK 73105; 405-522-3222 www.wcc.ok.gov
[iii] An Employer’s Guild to Workers’ Compensation Insurance in Oklahoma; https://www.nolo.com/legal-encyclopedia/an-employers-guide-to-workers-compensation-in-oklahoma.html, page 1, para 2
[iv] Oklahoma Workers Compensation Commission: 1915 North Stiles Avenue, Ste. 231, Oklahoma City, OK 73105; 405-522-3222 www.wcc.ok.gov