What Is an Arkansas Certificate of Non-Coverage?

An Arkansas Certificate of Non-Coverage is a document issued by the Arkansas Workers’ Compensation Commission that lets a sole proprietor, partner, or LLC member formally opt out of workers’ compensation coverage. Once issued, it creates a conclusive legal presumption that the holder is not an employee under Arkansas workers’ compensation law, which is what prime contractors rely on to keep uninsured subcontractors off their own comp policy.¹

The word “conclusively” carries the weight. During the term of the certificate and any renewal, no one can argue the holder was really an employee, regardless of how the day-to-day work looked. That single feature is what makes the CNC useful, and it’s what separates it from a general independent contractor argument that might not survive scrutiny.

Who Can Get One

Three categories of people are eligible:

Sole proprietors operating as a subcontractor
Partners in a partnership
Members of a limited liability company

Each of these individuals could otherwise be treated as an uninsured worker on someone else’s job site. Arkansas requires workers’ compensation coverage from contractors and subcontractors with even one employee, and from construction-related businesses with as few as two workers, so the exposure is real.²

Corporate officers are not eligible. Their exclusion from a workers’ compensation policy is handled directly through the insurance carrier, not through the Commission.²

The Trade-Off You Are Accepting

Opting out means what it sounds like. If you hold a CNC and are hurt on the job, you have no workers’ compensation benefits. Medical bills, lost wages, and rehabilitation costs come out of your own pocket. The certificate is a deliberate choice to give up that protection in exchange for the legal status of a non-employee, and it should be treated as one.

How to Apply

Applications go through the Arkansas Workers’ Compensation Commission. You will need to:

Complete Form AR-A, the Application for Certificate of Non-Coverage
Provide your Social Security number on the application
Have the accompanying affidavit notarized
Submit a $50 fee by check or money order payable to the Commission

You can mail the completed application, notarized affidavit, and payment to the Commission, or complete the paperwork and use the online payment process. Either way, the affidavit has to be notarized before the Commission will process anything.³²

Certificates are issued for a set term and must be renewed. Watch the dates. A lapsed CNC removes the legal presumption of non-employee status, and that creates problems for both you and the prime contractor you’re working under.

What It Does for the Prime Contractor

Under Arkansas law, when a subcontractor lacks workers’ compensation coverage, the prime contractor becomes liable for that subcontractor’s injured employees unless an intermediate subcontractor in the chain already carries coverage. Delivering a current CNC to the prime contractor shuts that exposure off as to the certificate holder. For the certificate’s entire term, the holder is conclusively presumed not to be an employee of the prime contractor.⁴

The premium side follows the same logic. When a valid CNC is on file, the statute says the carrier “shall not include compensation paid by the prime contractor to the sole proprietor or partners” holding a current CNC in computing the prime contractor’s insurance premium.⁴ Without a CNC, auditors will look at payments to an uninsured subcontractor and assess additional premium on the prime contractor for the labor portion.⁵

Two limits on what a CNC actually does are worth understanding before you rely on one:

A CNC only covers the individual holder. It does not shield any employees the sole proprietor or partnership might have. Those employees still need coverage.⁴
A CNC cannot be presented to a subcontractor who lacks workers’ compensation coverage. It works up the chain to a prime contractor or intermediate sub that carries its own coverage.⁴

It Only Settles State Workers Compensation

A CNC is an Arkansas workers’ compensation document. It creates a conclusive presumption under state workers’ compensation law and nothing more. The IRS applies its own criteria (behavioral control, financial control, and the type of relationship) to decide whether a worker is an employee or independent contractor for federal tax purposes, and a state CNC carries no weight in that analysis. A sole proprietor can hold a valid CNC and still be classified as an employee by the IRS if the working relationship looks like employment under federal standards, with back employment taxes, penalties, and interest riding on that outcome.

When a CNC Is Not Enough

Some prime contractors, particularly on larger commercial projects or where an out-of-state company sets the terms, require a certificate of insurance rather than a certificate of non-coverage. In that situation, a “ghost policy” (a minimum-premium workers’ compensation policy for a business owner with no employees) generates the certificate of insurance the contract asks for. It provides no actual injury or wage benefits to the owner, so it solves the paperwork problem without changing the underlying trade-off: any job-related injury cost still comes out of the owner’s pocket, the same as under a CNC.

Fraud Penalties

Arkansas treats workers’ compensation fraud as a Class D felony. The statute reaches anyone who willfully makes a material false statement, conceals material information, or uses any scheme to obtain or avoid workers’ compensation coverage, or to avoid paying the proper premium.⁶⁷ Anyone who conspires with the person committing the fraud is equally guilty as a principal, and the Arkansas Insurance Department’s Criminal Investigation Division actively investigates and prosecutes these cases.⁵

1
Justia Law. Arkansas Code 11-9-102 – Definitions
2
Arkansas Workers’ Compensation Commission. Application for Certificate of Non-Coverage Form AR-A
3
Arkansas Department of Labor and Licensing. Certificates of Non-Coverage
4
FindLaw. Arkansas Code 11-9-402
5
Arkansas Insurance Department. Joint Bulletin – Certificate of Non-Coverage
6
Justia Law. Arkansas Code 11-9-106 – Penalties for Misrepresentation
7
Justia Law. Arkansas Code 5-4-401 – Sentence