Request By:
Mr. William L. Huffman
Director
Workmen's Compensation Board
Department of Labor
Capital Plaza Tower
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Martin Glazer, Assistant Attorney General
By letter dated August 5, 1977, you requested an opinion of this office concerning the following situation:
You state that KRS 351.175 requires the Commissioner of Labor to certify that an applicant (for a coal mine license) has presented proof of compliance with the Workmen's Compensation Act. You point out that recently many coal operations have initiated the practice of securing Form 4, Rejection Notice, pursuant to KRS 342.395 from all employees. The practice is often accompanied by a standard "disability" insurance policy. You also state if the rejection notice were to be held invalid, the Kentucky Uninsured Employers Fund would most likely incur liability in the absence of an approved Workmen's Compensation policy. The Board is naturally concerned about this problem, since the Uninsured Employers Fund is funded from the Workmen's Compensation Maintenance Fund (KRS 342.760), the fund which also funds the Board itself. You pose the following questions:
"1. If all employees of a given employer file Form 4, Rejection Notices, is the employer relieved of the obligation to have a policy of Workmen's Compensation Insurance, as approved by the Kentucky Department of Insurance and sold by an insurance carrier licensed to sell Workmen's Compensation Insurance in Kentucky, in force and available for such employees as may at any time choose to withdraw the 'Rejection Notice' or for employees to be hired in the future?
"2. Can the Commissioner of Labor issue the Certificate of Compliance, pursuant to KRS 351.175 where there is no Workmen's Compensation Insurance coverage in force, and where the employer has failed to qualify as a self-insurer pursuant to the Rules and Regulations of the Kentucky Workmen's Compensation Board?
"3. If 'Rejection Notices" are on file for all present employees of a given employer, but such employer has not secured workmen's Compensation Insurance coverage or qualified as a self-insurer may the Workmen's Compensation Board, acting pursuant to KRS 342.402, file suit in the Franklin Circuit Court seeking injunctive relief?"
As you know, KRS 342.630 sets out the coverage of employers which includes, "[a]ny person, other than one engaged solely in agriculture, that has in this state one or more employes subject to this chapter."
KRS 342.640 sets out the coverage of employees, including:
"(1) Every person, including a minor, whether lawfully or unlawfully employed, in the service of an employer under any contract of hire or apprenticeship, express or implied, and all helpers and assistants of employes whether paid by the employer or employe, if employed with the knowledge, actual or constructive, of the employer.
"(2) Every executive officer of a corporation.
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"(4) Every person performing service in the course of the trade, business, profession or occupation of an employer at the time of the injury."
KRS 342.650 excludes from coverage among others:
"(6) Any person [employee] who would otherwise be covered but who elects not to be covered in accordance with the rules and regulations promulgated by the board."
KRS 342.395 requires that every employee of an employer must be covered unless he (the employee) files written notice to the contrary with the employer and with the Workmen's Compensation Board. That section also permits the employee to withdraw his rejection at any time.
It would seem that it would be highly unusual for every employee of an employer to elect not to be covered by Workmen's Compensation. Such a situation could indicate that the employer was requiring such an election as a condition of employment or continued employment. Obviously, that type of an election would not be a voluntary election contemplated by the Workmen's Compensation statutes.
Secondly, a corporation would require coverage not only of its working employees but its executive officers as well. Considering the fact that there is usually some turnover of employees of any employer and that the law permitting rejection by an employee also authorizes the withdrawal of such rejection, the Board could find itself in the position of certifying Workmen's Compensation compliance with the Department of Mines and Minerals of an employer based on the situation that might only be temporary, at best.
Even if an employer could truthfully certify that all of his present employees had voluntarily rejected the Act, he could not certify that they would continue to do so in the future for the remaining period of an annual mining license or that new employees would voluntarily continue to reject the Act. This being so, the employer would still have to obtain Workmen's Compensation coverage for those prospective conditions, i.e., new employees not rejecting the Act, old employees rescinding prior rejections, and employees whose rejection was subsequently adjudicated as not having been given voluntarily or effectively pursuant to KRS 342.395, and persons adjudicated employees that the employer considered to be independent contractors.
Therefore, the Board could not issue a certificate of compliance for an employer who has no Workmen's Compensation coverage, either with an insurance company or as a self-insurer, even though that employer's present employees choose not to be covered. Such an employer would need coverage for those aforesaid contingencies. In such a case where there has been noncompliance, the Board could utilize procedures set out in KRS 342.402 seeking a temporary restraining order or temporary and/or permanent injunction against the employer in the Franklin Circuit Court.