California Classification Insights – Great WCIRB Webinar
I apologize to the blog and newsletter readers. Due to an eye problem, now resolved, this comes out a week late. The California Classification Insights Webinar can be viewed at the link at the bottom of the article. For more articles on the WCIRB, please check out this link.
This document presents a comprehensive overview of classification practices and updates related to the Workers’ Compensation Insurance Rating Bureau of California (WCIRB). It covers
the hierarchy of classification rules, interpretation of WCIRB inspection reports, changes in baked goods manufacturing classifications, and the application of specific classification procedures including Special Industry Classification Procedures (SICP). The content is designed to guide WCIRB members, policyholders, underwriters, brokers, agents, and auditors in correctly assigning and understanding workers’ compensation classifications in California, with particular focus on retail stores and food manufacturing sectors.
Hierarchy of Classification Rules
The WCIRB classification system is structured as a hierarchy of rules and procedures guiding the assignment of workers’ compensation classifications:
| Section | Description | Key Points |
|---|---|---|
| Section I – Introduction | Objectives and foundation of the classification system | Classifies the business of the employer, not individual occupations or operations except when specified |
| Section II – Classification Terminology | Definitions of key terms and phrases impacting classification | Terms like “including,” “shall be separately classified,” and “shall be classified as” are critical for classification assignments, with footnotes providing specific directives |
| Section III – General Classification Procedures | Broadly applicable rules for classification determination | Covers single enterprise, multiple enterprises, general inclusions, and exclusions |
| Section IV – Special Industry Classification Procedures (SICP) | Rules applying to specific industries (e.g., construction, stores, farms) | Supersedes general procedures when applicable |
| Section VII – Standard Classifications | Provides specific phraseology and footnotes for classifications | Phraseology and footnotes supersede general and special procedures |
Key Insights:
- The business of the employer as a whole is typically classified rather than individual jobs or operations unless specifically directed.
- Multiple Enterprises (ME) rules apply when an employer’s operations are distinct and separable as separate sources of revenue or business.
- Classification footnotes and phraseology provide the most specific guidance and override more general rules.
- Payroll division is directed by classification instructions; for example, drivers or installation operations are often separately classified.
- Physical separation of operations is not required to assign multiple classifications but may support ME determination.
Classification Terminology and Footnotes
- The term “including” in classification descriptions prohibits payroll division for those specific operations.
- Terms like “shall be separately classified” obligate separate classification without applying ME rules.
- “Shall be classified as” suggests reviewing alternative classifications where confusion exists.
- Examples:
- Juice or juice concentrate manufacturing is classified as 2116.
- Dairy product manufacturing is separately classified as 2063.
- Blending juices into beverages is classified as 2163.
- Wine production falls under 2142(1).
Multiple Enterprises Determination
When an operation could be classified separately, the following factors are analyzed:
- Whether the operation exists as a separate business.
- Whether it is a separate source of revenue.
- The significance of the operation relative to the employer’s overall business.
The Multiple Enterprises Analysis Table in WCIRB inspection reports assists in identifying and categorizing distinct operations, including payroll allocation and classification rates.
Stores Classification and Sales Thresholds
- Store classifications depend on the type of merchandise sold and whether sales are wholesale or retail.
- A 25% threshold of gross receipts generally determines classification assignment unless superseded by more specific language.
- For example, Classification 8006(1) “Stores – groceries – retail” applies if over 50% of gross receipts are from grocery items.
- Departments such as fresh meat, bakery, and hot food preparation require separate classifications, even within grocery stores.
Example Calculation of Grocery Sales (from Knowledge Check):
| Item | Percentage of Gross Receipts |
|---|---|
| Groceries | 35% |
| Baked Goods | 10% |
| Hot Food | 10% |
| Meat/Deli | 10% |
| Total (Groceries + Baked Goods + Hot Food + Meat/Deli) | 65% |
- Since this total exceeds 50%, Classification 8006(1) applies.
Interpreting WCIRB Inspection Reports
The WCIRB Inspection Report serves multiple stakeholders with tailored purposes:
- Policyholders: Understand applicable classifications.
- Underwriters: Validate classification assignments and exposure assumptions.
- Brokers/Agents: Explain classification outcomes.
- Auditors: Ensure payroll is assigned correctly.
Key Components of Inspection Reports:
- Business description and location.
- Identification of multiple enterprises.
- Table of assigned classifications, payroll estimates, and basis of assignments.
- Analysis of stores by customer and merchandise type.
- Notes on discontinued operations, exclusions, duties of officers or leased employees.
- Licensing information relevant to industry.
Changes in Baking Manufacturing Classifications (Effective September 1, 2025)
Baking manufacturing classifications have been updated to reflect distinctions between sales to retail and wholesale customers:
| Classification | Description | Application Criteria |
|---|---|---|
| 2003 – Baked Goods Mfg. – Retail | For employers selling >50% baked goods to retail customers | Retail stores, bakery departments within grocery stores |
| 2004 – Baked Goods Mfg. – Wholesale | For employers selling >50% baked goods to wholesale customers (restaurants, dealers) | Wholesale sales primarily |
Additional points:
- Retail store operations remain separately classified even when manufacturing baked goods.
- Doughnut shops preparing and serving food on premises continue under Classification 9081(1) due to risk exposure differences.
- Restaurants incorporating baked goods manufacturing apply Multiple Enterprises rules and assign baking operations depending on sales percentages.
Special Industry Classification Procedures (SICP) for Stores and Food Preparation
- Stores with food or beverage preparation departments, such as fast food counters or bakeries, must classify food preparation separately, typically under the Food and Beverage Service Industry Group.
- For example, a convenience store with a bakery and hot food counter:
- Hot food preparation is classified as 9083, Restaurants – fast food or fast casual.
- Baking operations sold primarily to the general public through the restaurant are also assigned to 9083.
- This contrasts with grocery stores, where bakery departments are separately classified under store classifications.
Knowledge Check Examples and Considerations
When determining classifications for employers with mixed operations:
- Calculate gross receipt percentages to identify applicable classifications.
- Assess whether baked goods are sold wholesale or retail.
- Evaluate physical separation and timing of baking operations.
- Determine if bakery operations are transferred to other employer locations or used internally.
- Understand that if baking operations fall under Classification 2004, store/counter operations are not separately classified but included in the restaurant classification.
WCIRB Resources and Training
- WCIRB offers online training, industry insights, and certification via WCIRB CompEssentials®.
- Members can access new features on WCIRB.com such as multiple classification comparisons and classification search tools.
- Pricing changes for WCIRB special inspections took effect on July 1, 2026, increasing fees from 200to500 per location.
Key Terms and Definitions
| Term | Definition / Application |
|---|---|
| Multiple Enterprises (ME) | Separate business operations classified distinctly based on revenue and business nature |
| General Inclusions / Exclusions | Broad rules governing classification unless specific instructions apply |
| Footnote Directives | Specific instructions in classifications overriding general rules |
| Stores Classification 8006(1) | Stores primarily selling grocery items (>50% gross receipts) |
| Classification 2003 | Baked Goods Manufacturing – Retail |
| Classification 2004 | Baked Goods Manufacturing – Wholesale |
| Classification 9081(1) | Restaurants – N.O.C. (Not Otherwise Classified) including doughnut shops |
Conclusion
The WCIRB classification system is a carefully structured hierarchy governed by detailed terminology, footnotes, and special procedures to ensure accurate assignment of workers’ compensation classifications. Recent changes particularly affect baked goods manufacturing classifications to better reflect retail versus wholesale sales. Understanding the hierarchy, terminology, and inspection report interpretations is essential for all stakeholders involved in workers’ compensation insurance in California. The system emphasizes precise payroll division, clear identification of multiple enterprises, and adherence to specific classification rules to maintain accuracy and regulatory compliance.
**Please note that I did use AI to summarize the handout and video for this California Workers Comp Classification Code Webinar. I heavily recommend that you watch the webinar if you deal with anything covered in the material. The handout is a great mini guide. It will be worth your time. Go here to watch it.
