Classifying Construction Risks – Confusing Task For Businesses
One of the subjects we receive emails and phone calls almost every week centers on the confusion with classifying construction risks. Usually, a construction business owner or risk manager has received their premium audit results and has questions.
The premium auditor has reclassified 5606 – the supervisory class code to 5610 the construction and contracted employee class code. Even if you do not have business interests in California, the infographic found here is a nice guide on how to think about classifying construction risks no matter the state. It may not exactly match the other worker’s comp rating bureaus’ classification description. The infographic is a good start for considering the different construction risks at a worksite.
The infographic would not fit in this article – please follow the link – worth your time.
Code Changing 9/1/2023
The new 5606 Classification Code description is below. The description should help with classifying construction risks.
CONTRACTORS — construction or erection — executive level supervisors — no direct supervision — division of a single employee’s payroll with any other classification is not permitted
This classification may be assigned only in connection with the construction or erection classifications listed in Appendix I, Construction, and Erection Classifications.
This classification applies to executive-level supervisors of construction operations wherein the employer develops payroll in one or more construction or erection classification(s) provided not less than two levels of supervision, as defined in Section IV, Rule 2d, Executive Level Supervisors, are retained between the executive level supervisor and the workers performing actual construction operations.
This classification also includes management-level employees, such as safety managers, project managers, and engineers, who do not supervise construction operations but whose duties include walking through a construction site during the construction phase, provided the employer retains two levels of supervision over the construction crew(s) or where all operations have been subcontracted to licensed subcontractors. Otherwise, such employees are miscellaneous employees and shall be classified in accordance with Section IV, Rule 2c, Miscellaneous Employees (Construction or Erection).
This classification also applies to executive-level supervisors when all construction operations are subcontracted to licensed contractors and no payroll is developed under any construction classification. In such instances, executive-level supervisors exercise control exclusively through licensed subcontractors.
On jobs where all construction operations are subcontracted to licensed subcontractors, Classification 5610, Contractors — construction or erection — all construction subcontracted, applies to all other employees, including but not limited to job site cleaning and debris removal and post-construction warranty repair operations.
Classification 5606 does not apply to employees whose job site duties are limited to estimating, outside sales, or public relations. Employees whose non-clerical duties are confined to visiting job sites for the purpose of pre-construction estimating, or for meeting with clients or other project representatives, are classified as 8742, Salespersons — Outside, provided they have no supervisory responsibilities over construction operations, they do not walk through job sites for purposes such as assessing construction progress, evaluating the quality or determining compliance with safety standards, and their activities do not exceed those of Standard Exception Employees. See Section III, Rule 4, Standard Exceptions.
Fee-based construction management companies that do not engage in or perform supervision over construction operations, but serve as an intermediary between the general contractor and project owner or otherwise provide expertise regarding a construction project, shall be classified as 8601(1), Engineers — consulting.