Request By:
Commissioner James R. Yocum
Department of Labor
Commonwealth of Kentucky
U.S. 127 South
Frankfort, KY 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas C. Jacobs, Deputy Attorney General
This opinion is rendered in response to your letter of February 16, 1978, wherein you request that this office review an earlier opinion designated OAG 77-527.
For purposes of context the following is relevant. KRS Chapter 342 and in particular KRS 342.610 and the sections that follow require that, subject to certain exceptions and exemptions, all employers maintain and carry workmen's compensation insurance on all employees. KRS 342.395 requires that every employee of an employer be covered unless he (the employee) files written notice to the contrary with the employer and with the Workmen's Compensation Board. KRS 351.175 requires that the Department of Labor certify to the Department of Mines and Minerals', as a condition precedent to the issuance of a mine license, that a mine license applicant has complied with the provisions of KRS Chapter 342.
In light of the above, a practice has developed whereby certain small mine operators have submitted to the Workmen's Compensation Board so-called "Form 4 Rejection Notices" for all their employees, and have simultaneously asked that the Department of Labor certify to the Department of Mines and Minerals that the said miner is in compliance with the Workmen's Compensation Act so as to permit the issuance of the applied for permit. While the described practice is not in contravention of the act per se (in fact the constitutionality of the act depends upon the inclusion of a method of voluntary rejection), a close examination of KRS 342.395 presents a problem of unlimited magnitude for the Department of Labor in handling these types of filings and requests.
KRS 342.395 states as follows:
"Where an employer is subject to this chapter, then every employe of such employer, as a part of his contract of hiring or who may be employed at the time of the acceptance of the provisions of this chapter by such employer, shall be deemed to have accepted all the provisions of this chapter and shall be bound thereby unless he shall have filed, prior to the injury or incurrence of occupational disease, written notice to the contrary with the employer; and such acceptance shall include all of the provisions of this chapter with respect to traumatic personal injury, silicosis and any other occupational disease. However, before an employe's written notice of rejection shall be considered effective, the employer must file the employe's notice of rejection with the workmen's compensation board. The workmen's compensation board shall not give effect to any rejection of this chapter not voluntarily made by the employe. If an employe withdraws his rejection, the employer shall notify the workmen's compensation board.
Until such notice to the contrary is so given to the employer, the measure of liability of such employer shall be determined according to the compensation provisions of this chapter. Any such employe, may, without prejudice to any existing right or claim, withdraw his election to reject this chapter by filing with the employer a written notice of withdrawal, stating the date when the withdrawal is to become effective. Following the filing of such notice, the status of the party withdrawing shall become the same as if the former election to reject this chapter had not been made, except that withdrawal shall not be effective as to any injury sustained or disease incurred less than one (1) week after the notice is filed." (Emphasis Added)
While it is clear that the right of rejection exists and cannot be denied an employee, it is nonetheless plainly clear that no such rejection is valid unless same is voluntarily made by the employee. As a practical matter, no determination as to the voluntariness of the rejection is made by the Workmen's Compensation Board until some 18 months after the date of its filing, if at all. Thus, in the interim period, the employer has likely not purchased insurance or otherwise qualified under the Act and both employee and employer are left in a state of uncertainty.
OAG 77-527 recognized this problem and in the critical language on Page 3 thereof stated as follows:
"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." (Emphasis Added).
As can be seen clearly from the foregoing, in order to solve this matter, some determination must be made of the voluntariness of the rejection. If the rejection is, in fact, voluntary and not the result of any inducement or duress on the part of the employer, then it would be valid under the act, and an employer submitting the "Form 4 Rejection Notice" for, otherwise, covered employees would be entitled to a letter of certification pursuant to KRS 351.175. Absent some finding of voluntariness the caveat of OAG 77-527 would be valid and the Department of Labor would be correct in looking askance at wholesale use of the rejection notice vehicle for compliance.
It is the opinion of this office that the matter can be resolved and validity can be given to rejection notices, if the following procedure is followed. Upon the filing of the Form 4 Rejection Notices with the Board, an immediate order should be entered by the Board setting a date for a hearing, at which time both employer and employees would be required to appear before a Departmental Hearing Officer and submit whatever proof and answer whatever questions the Hearing Officer might deem to be relevant to the issue of voluntariness. It is acknowledged that the Department maintains a roster of such Hearing Officers, who ordinarily and routinely hear matters of proof in claims presented to the Workmen's Compensation Board. The Hearing Officer, after due deliberation, should make his report to the Board, and the Board, acting on said report and such other inforamtion as it may have in its possession or wish to obtain, would enter an order as to the validity of the rejection notices. That order would then be prima facie evidence that the rejections were or were not voluntarily entered into, and based on this order the Department of Labor would have no reason to be concerned in carrying out its obligations under KRS 351.175 with regard to certification of compliance under the Workmen's Compensation Act.
No opinion in connection with this question would be complete without reference to Paragraph 2 of KRS 342.395, which authorizes any employee who has rejected the act to withdraw his election to reject by simply filing with the employer a written notice of withdrawal, stating the date the withdrawal is to become effective. The Department of Labor and the Department of Mines and Minerals must, therefore, administratively set up a procedure whereby employers are mandated to forward immediately to the Department of Labor any such withdrawals so filed. The filing of such a withdrawal would immediately cause the employer to be required to procure insurance or otherwise comply with the requirements of the Workmen's Compensation Act. Penalties for failure to do so are mandatory if the proposed system is to work.
In summary, OAG 77-527 observed that wholesale use of the rejection forms as compliance with the act, without further scrutiny by the Workmen's Compensation Board, the Department of Labor, or the Department of Mines and Minerals, would, in fact, be indicative of an abuse of the voluntary rejection provisions of the Act and in that respect the opinion remains in full force. Voluntary rejection, however, is a valid means of complying with the requirements of the Workmen's Compensation Act and, if a program can be established and maintained whereby the voluntariness of the rejections can be ascertained and all questions regarding same resolved at an early date, then there is no reason to believe that the rejection form of compliance can not be a viable means of compliance.
We trust that the Board and the Department of Labor will establish the necessary guidelines and administrative procedures to make the necessary determinations as to the voluntariness of these rejections and, thereby, permit the use of the rejection form as a means of compliance.
We hope that this modification of OAG 77-527 answers the questions raised in your letter requesting our re-examination of same.