WCIRB 8871 Webinar – What California Insureds Need To Know

February 18, 2021 By JL Risk Management Consultants Leave a Comment

California’s Rating Bureau WCIRB 8871 Webinar Today – Some New Insights

I just finished watching the WCIRB 8871 webinar. The webinar was only 30 minutes. Then again, how long can a group talk about the new classification code?

Very few changes were introduced from the previous WCIRB 8871 webinar that you can find here.

The Main Issues Learned Today – Important Ones

WCIRB will begin with the same rate as 8810 until they have enough data to start with an 8871 rate. Last year, two different premium auditors told me this was going to happen at the beginning.

Please click the thumbnail below to see the complete slide. The WCIRB will use almost the same rules as NCCI’s 8871 Classification Code.

The most important part of the classification code is the amount of time worked in the office or at home. If more than 50% of the employee’s time is in the office, the correct classification code is 8810.

WCIRB 8871 Webinar Answered my Question

I had sent in a question posed by one of our clients in Orange County, CA. How about 8868 – the teacher’s classification code – are we going to see any of the teachers considered as 8871 employees?

The answer was what I had thought – 8868 Teachers, Professors, Instructors is an inclusive code. So, any Standard Exceptions including 8871 (a standard exception code) would be considered 8868. Online teachers are still 8868.

NCCI – 8868 COLLEGE—PROFESSIONAL EMPLOYEES & CLERICAL – cross-referenced as School—Professional Employees & Clerical

WCIRB – Classification 8868, Colleges or Schools – private – not automobile schools – professors, teachers or academic professional employees, was amended to clarify its intended application and provide direction as to how related operations should be classified.

COLLEGES OR SCHOOLS – private – not automobile schools – professors, teachers or academic professional employees

8868
Academic professional employees consist of but are not limited to, deans, chancellors, vice-chancellors, directors, principals, assistant principals, presidents, vice presidents, librarians, registrars, curriculum developers, psychologists, speech therapists, and counselors. The responsibilities of such employees typically include planning, directing, administering, counseling, or curriculum development.

This classification also applies to teachers’ aides, tutors, athletic team coaches, or library employees. This classification also applies to Independent Living Skills (ILS) instructional programs that are administered through state-contracted Regional Centers.

The above represents just the basic classification code rules for 8868, I did not include the alternate definitions of 8868 that would be under alternate class codes.

Telecommuters Are Part Of Your Company – even if not in CA

The reason that I have covered Telecommuters so much is that unless your company is in one of a few states that do not have 8871 as a classification – you are going to deal with this code for what could be a long period of time.

Many companies have now said (Microsoft(c), etc.) that employees will be working from home for a very extended period.

The presentation from today should be available by Friday. I will post a link to the webinar next week. I recommend watching the recording of the WCIRB 8871 webinar even if you do not have a business in CA.

Most Reclassified Class Code – Which One Topped NCCI List For 2019?

July 23, 2020 By JL Risk Management Consultants

Reclassified Class Code During 2019 Inspections – Which Code Changed The Most?

NCCI recently released a quick report on the most reclassified class code for 2019. We have seen this class code very often in the last five years. Which was one was it?

picture of convenience store reclassified class code NCCI

Wikimedia Commons – Mbrickn

The most reclassified class code for 2018 can be found in an article I wrote earlier. That Classification Code was 9015 – Building or Property Management—All Other Employees.

We received many questions on that reclassification. Some companies, consultants, and other workers comp experts were a little confused. We answered them by going over the article. Check that one out. The link is in the above paragraph.

The most reclassified class code for 2018 – 2019 was 8006 – the 7-11 QuikTrip code but not for all 7-11’s or QuikTrip’s. The exact NCCI Class Code moniker is 8006 – Gasoline Station – Self-Service and Convenience/Grocery Retail.

Let’s not cover the whole class code. I sometimes will provide the whole Class Code page – instead, we will concentrate on which codes were assigned in place of 8006.

NCCI Governing Class Code Definition

One of the most popular questions that we have received in our 24+ years of business is

“Why is our business rated under one classification code.” The answer from the article is:

The governing code, as defined in NCCI’s Basic Manual for Workers Compensation and Employers Liability Insurance (Basic Manual) Rule 1-B-5, is the basic classification at a specific job or location (other than a standard exception code) that produces the greatest amount of payroll. If a change to a policyholder’s governing class code occurs (as documented on an NCCI Inspection & Classification Report), then the governing code is considered reclassified.

The other one is – wait, we have had Class Code 8810 Clerical/Administrative reclassified the most in our business. The article was referring to the Governing Class Code.

Code 8006 – Which Class Code Was Substituted?

Employers reclassified class code substitute

Wikimedia Commons – https://pixabay.com/en/users

The answer would be these codes were substituted for 8006. NCCI was kind enough to share three different Class Codes. They are:

8033 Store – Meat and Grocery, and Provision Combined – Retail NOC – as a side note look very closely when your business is rated under a NOC (Not Otherwise Classified) operation – Check the 10 Red Flags Article for clarification
9083 – Restaurant – Fast Food
8017 – Store – Retail NOC

I will not cover the exact specifications within each reclassified class code. Please read the NCCI article.

A quick summary of why the codes were changed:

8033 – handling of fresh meats
9083 – sales receipts for the food and beverage service exceeded 50% of the overall sales.
8017 – did not sell a variety of items that are typically sold at a convenience or grocery store or kiosk operations that sold prepackaged snacks, sandwiches, and beverages.

The 8017 Class Code has created many lively debates over the past few years as this code is very interrelated with so many other reclassified class codes.

If any of this seemed confusing or if you disagree, please comment below. We would love to hear any questions on the Reclassified Class Code 8006 at any time.

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Are The Recent Class Code Changes Saving My Company Premium?

June 11, 2020 By JL Risk Management Consultants

The Recent Class Code Changes – A Further Look – J&L

The recent class code changes buzzed in the workers’ comp news for well over a month. Why am I writing another article on this subject? The class code changes convert into amounts of premium dollars > your company’s budget.

picture - a closer look at recent class code changes in newspaper

Wikimedia License – Dutch National Archives

One does not have to be a premium auditor to appreciate how much budget can be expended with the change of code. The answer is a huge amount.

I had written a few articles concerning the changes over the last two weeks:

Two very recent articles –

California Adds 8871 Telecommuting Employee Class Code

Accounting For Paid Furloughed Employees

Comparing The Advisory Rates (called different names in different states)

Examining the advisory rates (pure premium rates, Loss Costs, etc.) should give one an indication of what each rate will comparatively cost your company. The most common classification code rates mentioned by me in the last few weeks are:

8810 Clerical Administrative – The Magical Mystery Code
8871 Telecommuting Employee
0012 Furloughed Employee – still paying their salaries or wages even though they are not currently working.

Most of the comparable rates exist behind paywalls. I will use our home state of North Carolina for comparison purposes. North Carolina’s Rate Bureau converted from NCCI to a completely independent bureau in ***.

The pure Loss Costs are per $100 of remuneration (modified payroll):

8810 – .07
8871 – .04
0012 – .00

Let us not go into the specifications of each code here. These three codes have been covered often in our set of articles. Use the search box.

If you have any questions on the class codes, please comment below or use the Contact Us page.

Five Caveat/Caution/Cart Before The Horse Considerations

U.S pennies recent class code changes 2008

Wikimedia Commons – Roman Oleinik

Looking at those rates, one might think – Hey, 8871 is a cheaper code. Cheapest does not necessarily mean cheaper.

Any class code that starts with 88 has very particular rules. Many unpublished Rating Bureau decisions shape those codes.
The insurance carriers file Loss Cost Multipliers to deviate from the rate. No carrier HAS to accept those base rates. The carrier’s underwriters can easily and often do change the rates by filing a list of Loss Cost Multipliers.
If you are in the Assigned Risk Pool, your rates will be different – much more expensive, use the Contact Us link above if you have questions concerning the Assigned Risk Rates.
An important one that an 80-year-old premium auditor taught me many years ago. Say that many companies change some of their employee’s jobs to fit 8871. More accidents now happen to 8871 employees. The number of claims paid for the 8871 codes spikes and the accident rate for 8810 falls. The rating bureau actuaries adjust the rates to fit the claims experience. Now you have your employees in a rate code that increased 150%. Uh-oh.
California has just now published the 8871 code. It will not count until 2021. The rates will have to be developed for a few years. The pure premium rates (Loss Costs) may vary greatly.
Bonus – Each state is unto its own on the Advisory Rates. States such as California, New York, Colorado, and others may have different Advisory Rates. The very tech-heavy states may contain many telecommuting employees. The North Carolina codes above were used as an example for discussion.

Bottom Line On The Recent Class Code Changes

Know what you are doing when you start to reclassify employees in your company. The main time to understand the recent class code changes comes at premium audit time. The premium audit bill is usually your final bill for that policy year.

©J&L Risk Management Inc Copyright Notice

California Workers Comp Telecommuting Class Code 8871 Added

June 4, 2020 By JL Risk Management Consultants

Telecommuting Class Code 8871 Added To California WCIRB Class Codes

California’s Workers Comp rating bureau (WCIRB) added in Telecommuting Class Code 8871 after a regulatory meeting this week.

picture of train engine telecommuting class code 8871

Wikimedia Commons – Dan from PQ, Canada

If your company is domiciled in California or you have California-based employees, you will need to separate these employees from furloughed employees and 8810 Clerical Administration employees.

The Telecommuting Class Code becomes effective on January 1, 2021. Regardless, preparing your accounting or bookkeeping software to add in this code will save many unneeded headaches when your premium auditor makes their yearly appointment or when you self-report your payroll.

NCCI – the rating bureau for approximately 40 states released their advisory last month on reporting 8871 Telecommuting Class Code for in-home workers last week.

The agenda notes from the WCRIB can be found here. You can search for 8871 in the notes They WCIRB will have another meeting on this and other subjects in August.

From The Meeting Agenda

Item III-A

Giving Presentation of Telecommuting Class Code 8871 in Conference Room

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Clerical Telecommuter Employees
In response to state and local stay-at-home orders necessitated by the Coronavirus Disease 2019 (COVID-19) pandemic, many California employers have limited their employees’ duties to clerical work that can be accomplished from employees’ homes. In view of this recent and significant increase in “telecommuting”, at the April 14, 2020 meeting, members of the WCIRB’s Classification and Rating Committee noted that several other jurisdictions maintain a specific classification for telecommuters and recommended that the WCIRB consider establishing a similar classification so that statistical data can be captured for clerical telecommuter employees.

Currently, telecommuting employees whose duties meet the definition of Clerical Office Employees1 found in the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP) are assignable to Classification 8810, Clerical Office Employees, or to their employers’ standard classification if that classification specifically includes Clerical Office Employees.

While California does not have a unique classification for clerical telecommuting, the National Council on Compensation Insurance (NCCI), as well as a number of other jurisdictions, use Classification 8871, Clerical Telecommuter Employees, for employees that spend more than 50% of their time performing clerical duties from a clerical work area located within their home, 2 provided the remainder of their time is spent engaged in clerical duties at the employer’s place of business. If 50% or more of their time is spent performing clerical duties at the employer’s place of business, Classification 8810 is applicable.

Since the use of telecommuting will likely grow in California, staff is proposing that Classification 8871, Clerical Telecommuter Employees – N.O.C., be established as a Standard Exception classification applicable to clerical employees who work more than 50% of their time at their home or other office space away from any location of their employer. This will enable the collection of payroll and loss data for these employees to determine if their exposure differs from that of other clerical employees who work primarily at their employer’s office location and will align California with other jurisdictions that assign clerical telecommuters to Classification 8871. Additionally, staff is proposing amendments to Classification 8810, Clerical Office Employees, and Section III, Rule 4, Standard Exceptions, of the USRP for consistency with this proposal.

There are 41 classifications that specifically include Clerical Office Employees and 2 classifications that specifically exclude Clerical Office Employees. 3 When a classification phraseology specifically includes Clerical Office Employees, all clerical employees are assigned to that classification, and not to Classification 8810. As the proposed scope of Classification 8871, Clerical Telecommuter Employees, embraces operations performed by Clerical Office Employees, staff recommends that each of these 43 classifications be amended to also specifically include or exclude Clerical Telecommuter Employees. These amendments are necessary to make clear that all clerical telecommuter employees are also included in, or excluded from, the scope of these 43 classifications.

Telecommuting Class Code 8871 and 8810

Woman using laptop Telecommuting Class Code 8871 wearing headset

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Do not rush to move employees after January 2021 from Class Code 8810 to 8871. You will need to compare each of those codes once published by the WCIRB in its final form. Class code 8810 tends to be less expensive than 8871. With the wave of work from home employees, one cannot make that a 100% true cost statement yet.

When the final Telecommuting Class Code 8817 has been published by the WCIRB, I will update this article or add a new one.

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Work Comp Class Code 8871 Clerical Telecommuter Very Popular Now

May 27, 2020 By JL Risk Management Consultants

Work Comp Class Code 8871 Popular During the Coronavirus Pandemic

The Workers Comp Class Code 8871 represents telecommuters. Exactly who are telecommuters? Let us first cover the general non-workers’ comp generic definition.

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Definitions of Class Code 8871

General

Telecommuters are defined as:

Someone who works at home and communicates with his or her office by phone, email, or internet.
On another level, the teleworker or telecommuter is someone with computer knowledge who can utilize and work on data transmitted down a telephone line or bounced off a satellite

The first definition covers many people who are working out of their homes now for their employers. The second definition seems a little archaic.

Workers’ Compensation Rating Bureau (NCCI) definition(paraphrased):

For purposes of Class Code 8871:

A residence office is a clerical work area located within the home of the clerical employee.
The residence office must be separate and distinct from the location of the employer. In the event
If an employer operates a business from a residence and the employer has clerical staff at the employer’s business location residence, these clerical employees are classified to Code 8810.

Clerical duties of an employee classified to Class Code 8871 include but are not limited to

The creation or maintenance of financial or other employer records, handling correspondence, computer composition, technical drafting, and telephone duties, including sales by phone.
Depositing funds at banks*
Purchase of office supplies*
Pickup or delivery of mail*

*Outside the office duties are incidental and directly related to that employee’s duties in the residential office.

State Exceptions To Class Code 8871

The following states do not allow this class code:

California
Massachusetts
Montana
New Jersey
Oregon
Texas

I will not research each of the states besides California

Calfornia has its own rating bureau – the WCIRB. Many of our article and blog readers are from the Golden State. California may introduce Class Code 8871 after their June 2, 2020 meeting. The WCIRB lists the topic for discussion at this meeting.

Will the WCIRB use the same code? We will find out sometime in June.

Two Very Similar Caveats

Some Classification Codes include telecommuting clerical employees as part of the basic code. Do not assume that all telecommuters are listed under 8871. An example is Doctor’s offices.
Do not assume everyone working from home goes under Class Code 8871 – such as delivery drivers.

Coronavirus Pandemic And Wage-Splitting (Very Important)

Close-up of female surgeon Class Code 8871 wearing face mask

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One of the questions that we have received often since the pandemic shutdowns started- If an employer is mid-policy and requires employees to work from home, how do they handle their wage reporting when the job changes to a telecommuter.

From this NCCI webpage:

In accordance with Basic Manual Rules 1-D-3 and 2-G, the employer would be responsible for maintaining separate payroll records for the change in operations or the wages earned for an employee whose occupation has changed. If these records are not maintained, then all payroll would be assigned to the highest-rated applicable class code. See footnote. ¹

¹An example could be a retail store that remains open for delivery of goods but closes the showroom to consumers. Several of the retail showroom employees will work from home to assist with phone orders, customer service calls, and related clerical paperwork. These employees may be reassigned to Code 8871—Clerical Telecommuter Employees.

_____________

You must split the payroll between when the employees were working in an office and then when they had to work out of their home due to the coronavirus lockdowns.

Bottom Line –

Hand pointing Class Code 8871 at a financial concept

StockUnlimited

Sloppy or ignoring your wage and time recordkeeping is going to cost you dearly with your worker’s comp audit and will likely affect your company greatly during tax reporting time.

Organize your records now. If you have them organized – a good job. Switching to the proper Class Code be it 8871 or another code may save your company a large amount of premiums.

©J&L Risk Management Inc Copyright Notice

Civil Engineer Asks Great Worker Compensation Class Code Question

September 6, 2018 By JL Risk Management Consultants

Civil Engineer Was On The Right Track With Workers Compensation Codes

A civil engineer was looking over the house that I am presently selling. He had asked me what I do for a living. I had told him that I am a worker’s compensation consultant.

Public Wikimedia License – Blkutter

He posed this question –

I work as a civil engineer. My company is moving all the civil engineers from a remote location into the main plant. Today we were told that they are setting up an offsite trailer for us with a barrier fence between the plant and us.

Why would they put us so far away from the plant and build a fence between the trailer and the plant? Is it some risk factor?

I said – “Well your plant manager did not do that because he does not like the civil engineers. It could be due to the Workers Compensation rating system. ”

Wikimedia Commons – Master Sgt. Roger Parsons

I went on to explain that the civil engineers working inside the actual plant would likely cost the company a large amount of workers compensation premiums as the civil engineers could be grouped into a plant worker’s classification code.

The plant manufacturers large metal pipes so the difference would be huge in the Workers Compensation rate. I pulled out my trusty smartphone and pulled up the North Carolina Rate Bureau advisory lost costs.

Class Code – 8742 (Civil Engineer that does not handle material manufactured) – .26 per $100 – very low rate
Class Code- 3022 – (Pipe Mfg) – 4.81 per $100 – much higher rate

Comparing those two classification codes = 4.81 / .26 = 18.5 or 1850% more expensive if the group was included in the pipe manufacturing Class Code. Ouch!

He said so you are telling me that there is an 1850% difference if we work directly inside the manufacturing plant even though we are not involved in the manufacturing process? I said yes.

One has to remember that these are advisory rates and not the insurance carriers rates due to the Loss Cost Multipliers filed by all workers compensation insurance carriers.

The average civil engineer salary is $83,750. Let us take that a step further.

83, 750 * (.26/100) = $217.75 in yearly premiums for Civil Engineer

83,750 * (4.81/100) = $4,028.38 in yearly premiums working in the plant

And yes, I have made a ton of assumptions, but the idea is the same. The plant manager and likely the CFO were smart not to bring the civil engineers into the plant. I am sure there were many other considerations. Workers Comp rates would have likely been one of the considerations.

©J&L Risk Management Inc Copyright Notice

Workers Compensation Class Code 9015 – Most Reclassified in 2017

May 30, 2018 By JL Risk Management Consultants

NCCI Names Most Reclassified Workers Compensation Class Code 9015

The Workers Compensation Class Code 9015 has long been a source of confusion for agents, underwriters, and premium auditors. NCCI (National Council on Compensation Insurance) reaffirmed the confusion by naming the Code as their most reclassified code.

graphic Workers Compensation Class Code 9015 wheel of fortune

License Public Domain

In the past, NCCI had published their Top 10 Reclassified Codes each year. I assume we will just have the Top 1 only now and in the future.

How could Workers Compensation Class Code 9015 draw so much likely unwanted attention? Let us look a little closer.

I was catching up on my Worker Comp reading yesterday when I came across this article by NCCI on the most reclassified code Workers Compensation Class Code 9015 Building or Property Management—All Other Employees.

The reclassifications are due to in-person physical inspections by NCCI. The changes are not the result of an agent, insurance carrier, or premium auditor changing the codes.

According to NCCI, the 9015 classification terminology out of the Basic Manual, not the Scopes Manual, is:

Applies to the care, custody, and maintenance of premises or facilities. Not applicable to an owner or lessee of a building who occupies the entire or principal portion of the premises for manufacturing or mercantile purposes. Includes doormen, security desk personnel, elevator operators, gatekeepers, and concierges. Separately rate maintenance or repair work at any location where the owner or lessee does not also perform janitorial services. Includes real estate management companies and real estate investment trusts.
License Public Domain-by. Corrina Duron
Clerical and sales employees are assigned to Code 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons, including those who operate at a separate location from the properties managed.
Employees working exclusively for a country club operation run by a hotel, resort, condominium, or other community association are assigned to Code 9060—Club—Country, Golf, Fishing or Yacht—All Employees & Clerical, Salespersons, Drivers.

The third bullet point creates the most questions out of any classification codes mentioned in the article. We are contacted rather often by employers that are confused when they are reclassified into 9060.

The 9060 Code was not mentioned in the NCCI articles as the Class Codes where 9015 employers find themselves post-inspection. The three codes where the 9060 Code employers are reclassified into consist of:
Code 9012—Building or Property Management—Property Managers and Leasing Agents & Clerical, Salespersons, including those who operate at a separate location from the properties managed. For this one, I highly recommend you read the original NCCI article. You can download the PDF if you follow the link in red above.
Code 8855 – Banks and Trust Companies – all employees including salespersons, clerical and drivers
Code 8723- Insurance Companies – salespersons and clerical

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Classification By Analogy Can Affect Workers Comp Rates

August 31, 2016 By JL Risk Management Consultants

Classification By Analogy

The term Classification by Analogy is one of those workers comp buzzwords that generates a large number of emails and call to us. The term is usually mentioned by a workers comp auditor or rating bureau.

One of the challenges of classification is when there is no direct classification for a business. Sometimes, no code fits.

California’s Rating Bureau – the WCIRB (Workers Compensation Insurance Rating Bureau) publishes many great explanations of workers comp terms as does the NCCI. The rating bureau has that covered with the classification by analogy moniker.

higher line rating classification by analogy graphics

Any business or operation specifically described by a classification shall be assigned to that classification.
Any business or operation not described by a classification shall be assigned to the classification(s) most analogous from the standpoint of process and hazard.

The dictionary term for analogy is:

a similarity between like features of two things, on which a comparison may be based
similarity or comparability:
Biology. an analogous relationship.
Linguistics.
- the process by which words or phrases are created or re-formed according to existing patterns in the language, as when shoon wasre-formed as shoes
- a form resulting from such a process.
Logic. a form of reasoning in which one thing is inferred to be similar to another thing in a certain respect, on the basis of the known similarity between the things in other respects.

The #5 definition may make ones head spin. That definition is important when it comes to Workers Comp ratings by analogy.

Here is a great example of the #5 definition above by the WCIRB –

For example, Classification 2501(1), Clothing Manufacturing, contemplates cutting and sewing of fabric to produce

five yellow star rating classification by analogy graphics

clothing and is often assigned by analogy to employers that cut and sew fabric to produce other non-clothing items. For this reason, Classification 2501(1) is often the first classification that comes to mind for employers engaged in any cutting and sewing operations. However, classifications such as Classification 2576,Awning, Tarp or Canvas Goods Mfg., and Classification 2571, Pillow, Quilt, Comforter or Cushion Mfg., also include cutting and sewing operations and must be assigned to the operation rather than Classification 2501(1) if they more specifically describe the employer’s operations.

One would have to say that the above analogy is an opinion and not stamped in stone. Check out #5 in the list of the above definitions again. After I read the #5 definition a few times, it kind of sinks in that an analogy is an opinion of sorts.

The bottom line is that employers should not just accept their Classification Codes as the correct ones. They could be the subject of classification by analogy and not a direct classification. You know your business better than anyone.

©J&L Risk Management Inc Copyright Notice

Workers Comp Classification Codes – How Do We Verify Them?

June 24, 2015 By JL Risk Management Consultants

Workers Comp Classification Codes

This question on Workers Comp Classification Codes was phoned into our offices last week due to the prior post on Classification Codes. One of the blog readers asked where to find the manual or website that contains all of the Workers Comp Class Codes.

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The employer had received a workers comp audit and subsequent billing recently. The employer did not notice they had new classification codes on their policy and at time of audit.

The one main determinant is what states or states are covered by the policy. There are many independent rating bureaus that have their own classification codes manual such as California or Ohio.

The NCCI out of Boca Raton, FL covers most of the individual states and covers virtually all of the interstate (multistate) ratings including classification codes.

The Scopes Manual is produced by NCCI. This is the manual which contains all of the workers comp classification codes. However, referencing the manual and attempting any type of dispute comes with a Goliath caveat.

We receive a large number of emails and calls from employers that have decided to DIY on this subject. The employer has often referenced some type of classification manual and disputed the classification codes.

The carrier accepted the codes which actually increased their earned premium over what was contained in the audit billing.

Woman Audit Bill Workers Comp Classification Codes Using Calculator

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One has to also be very careful when attempting to switch class codes if your company has a very high Mod (E-Mod or X-Mod). This is one of the most frequent ways to actually end up paying more premium.

If your company has a high Mod and then changes workers comp class codes to less risky ones, your Mod may increase enough to offset any type of refund that you would be owed and even result in a higher bill.

We usually receive the phone call after the Classification Codes have been reassigned and the Mod has spiked. There is not much we can do at that point.

Recalculating (re-promulgating) the Mod should be part of the dispute process.

The increased Mod is the result of the intricacies of the rating and Mod formulas. For the most part, Mods and class codes have an inverse relationship of sorts.

There are many articles in this blog concerning the premium dispute process. Feel free to use them to aid your company in researching the workers comp class codes.

This post was not meant to discourage any employer that has questions on their policy and audit to find out the correct answers or to dispute any audit.

©J&L Risk Management Inc Copyright Notice

Classification Code 8810 – Final Answer?

April 14, 2015 By JL Risk Management Consultants

Classification Code 8810

Classification Code 8810 may not be the final determination for many clerical office employees at the time of the workers comp premium audit. Classification Code 8810 NOC (Not Otherwise Classified) is a Standard Exception Code.

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We receive a large number of inquiries from employers when, during a premium audit, employees are moved from the 8810 code. The following examples do not mean the premium auditor may have not made a mistake.

Any time payroll is moved from Classification Code 8810, an employer should question this heavily. The auditor should have to and usually will justify the reassignment of payroll.

The phrase Not Otherwise Classified means that the class code should only be used if there is not a code with a better description of the employer’s operations.

Standard Exception codes refer to classifications that are common to many businesses and that are generally not allowed to be designated as the governing classification.

The governing classification is the class code that produces the most payroll in a business.

Below is a list of codes that are similar to 8810. However, these codes better describe an employer’s operations in certain cases.

Man Doing Classification Code 8810 At Computer

Wikimedia Commons – Matthew

8803—Auditors, Accountant or Factory Cost or Office Systematizer—Traveling

8820—Attorney

8855—Banks and Trust Companies—All Employees, Salespersons, Drivers & Clerical

8861—Charitable or Welfare Organization—Professional Employees and Clerical

8856—Check Cashing Establishments—All Employees, Salespersons, Drivers & Clerical

8871—Clerical Telecommuter Employees

8814—Federal Employer’s Liability Act—Clerical Office Employees

8723—Insurance Companies—Including Clerical & Salespersons

8799—Mailing or Addressing Company or Letter Service Shop—Clerical Staff

8800—Mailing or Addressing Co.

8901—Telecommunications Co.—Office or Exchange Employees & Clerical

Classification Code 8810 and the list of alternative codes do have state exceptions. Eight states do list exceptions to 8810 of varying degrees. Massachusetts seemed to have the most state exceptions.

As one might expect, the classification codes tend to be more expensive than 8810.

©J&L Risk Management Inc Copyright Notice

Top 25 Dangerous Jobs – Highest Injury Rates 2011 and 2012

June 12, 2014 By JL Risk Management Consultants

Top 25 Dangerous Jobs Using BLS Statistics

The Top 25 Dangerous Jobs list contained a few surprises. The Bureau of Labor Statistics publishes many great employment statistics. When I was searching for the injury rates of the teacher from yesterday’s article, I came across the injury rate rankings of the most dangerous occupations.

Wikimedia Commons – bls.gov

These are not the fatality rates that are referred to when mentioning dangerous jobs. This list is the highest risk for injury when compared to the same number of work hours.

For the sake of readability and to fit all browsers, the rankings could not place them side-by-side for comparison. The Top 25 Dangerous Jobs rankings are by SIC Code. The SIC codes differentiate between State and Local government facilities.

The usual industries with high injury rates were really no surprise except Skiing Facilities. I had not really considered them to be a high-risk occupation. One has to remember that these are all analyzed by the business or organization’s SIC code, not the Workers Compensation Classification Codes.

The companies and organizations that were highly ranked in 2011 and 2012 may be the most dangerous overall. The types of employment that appeared on the 2011 and 2012 lists in the Top 10 are:

1. Fire protection

2. Nursing and residential care facilities (State Govt.)

3. Skiing facilities

4. Police protection

5. Travel trailer and camper manufacturing

6. Manufactured home (mobile home) manufacturing

7. Iron foundries

2012

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Nursing and residential care facilities (State Govt)
Manufactured home (mobile home) manufacturing
Police protection
Travel trailer and camper manufacturing
Iron foundries
Fire protection
Truck trailer manufacturing
Truss manufacturing
Heavy and civil engineering construction
Skiing facilities
Iron and steel forging
Veterinary services
Nursing and residential care facilities (Local Govt)
Hog and pig farming
Beet sugar manufacturing
Prefabricated wood building manufacturing
Hospitals
Ambulance services
Secondary smelting and alloying of aluminum
Materials recovery facilities
Correctional institutions
Animal (except poultry) slaughtering
Aluminum foundries (except die-casting)
Aluminum die-casting foundries
Light truck and utility vehicle manufacturing

2011

Fire protection
Nursing and residential care facilities
Steel foundries (except investment)
Ice manufacturing
Skiing facilities
Police protection
Travel trailer and camper manufacturing
Manufactured home (mobile home) manufacturing
Iron foundries
Copper foundries (except die-casting)
Pet and pet supplies stores
Seafood canning
Nursing and residential care facilities (Local Government)
Soft drink manufacturing
Ambulance services
Aluminum foundries (except die-casting)
Beet sugar manufacturing
Light truck and utility vehicle manufacturing
Truck trailer manufacturing
Metal tank (heavy gauge) manufacturing
Hospitals
Heavy and civil engineering construction
Beef cattle ranching and farming, including feedlots
Plate work manufacturing
Consumer electronics and appliances rental

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Most Expensive Classification Code in Texas Is USL&H Code

August 13, 2013 By JL Risk Management Consultants

The Most Expensive Classification Code in Texas Involves USL&H

The Most Expensive Classification Code in Texas. I was working on a project for a client that had a large % of their operations in Texas. The Texas Relativity schedules for 2013 (usually known as Classification Codes) indicated that 6874F was the most expensive code. The rate was 16.81 per $100 of payroll.

Clip art Map Of Texas Classification Code Most Expensive

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The 16.81 relativity rate of Texas does not mean this is the charged rate for that state. As I have mentioned often, the advisory rates are usually lower than the actual premium rate charged by insurance carriers.

The class code 6874F has the “F” appended to it. The notation means the classification is considered a USL&H Code. USL&H is the acronym for United States Longshoreman and Harbor Workers. The class code 6874 is Ship Hull Painting.

If one Googles the class code, many of the insurance carriers will not underwrite that class code. The code often appears on the prohibited class code list.

Business People In Conference Classification Code Paying Attention

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The amount of risk involved would likely be the reason for not underwriting employers with that code. We have found the number of carriers that will underwrite any type of USL&H exposure is limited at best.

Classification code 6872F – Ship Hull Repair is also one of the most expensive class codes. In fact, the advisory rate in New Jersey is actually somewhat higher than 6874F. Janitorial services are actually the highest New Jersey advisory loss cost.

The relativities (loss costs) are set by the rating bureau’s actuaries on a periodic basis – usually yearly. There is great variation from state to state on the advisory loss costs. I used to try to say that a certain class code is the most expensive across-the-board. After many emails from the blog readers, I came to realize there is such a great variation on advisory loss costs from state to state.

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Workers Comp Audit Dispute Question From Twitter Tweeter

August 1, 2013 By JL Risk Management Consultants

Audit Dispute Question From A Twitter Follower

Our Workers Comp Twitter handle received an audit dispute question from a Twitter Tweeter.

Can an insurance carrier perform a mid-term audit and then come back in for another audit after the policy expires? That seems to take up a large amount of our time to have to assemble all of the data twice per year. Will the carrier (name removed) be able to do this every year? What are the rules on Workers Comp audits?

Wikimedia – David Ferreira

The email had a few expletives and the carrier’s name that I removed to avoid receiving another threat of a lawsuit due to this blog. Unless our customer base has changed, we seem to be receiving questions concerning multiple premium audits per year more than in the past.

It is noted that employment agencies seem to have more audits per year than most other lines of business. Those audits can be very complicated as they may cover multiple states and long lists of classification codes.

The best place to start on payroll or premium audit rules is the policy for that year itself. In every policy, there is going to be a small section on premium audits. I have often advised every company, risk manager, human resources manager, business owner that I have met with policy questions to review their policies in depth. There are many interesting subtleties in every policy.

The premium audit section will usually say something similar to:

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Carrier has right to audit multiple times per year during policy term and up to three years after policy expiration.
Employer must turn over any/all records that have been requested – not just payroll records
Audit must be convenient to employer and not interrupt business practices
Refusing audit appointment will result in a heavy penalty – not in all policies
Employer will receive audit notice letter well in advance of audit date

The bottom line is the WC policy is a contract between the employer and insurance carrier including any policy amendments during the year. Do I agree with these? I would say not necessarily, but it is the insurance contract that conforms to the rules of every state of WC coverage that dictates the rules.

The most upset employers we hear from are the ones where the carrier decided to audit them more than two times per year. I would have to agree with these employers. It is understandable possibly for the first year. After that time, what is to be accomplished by three audits per policy year?

The rule from one of the state rating bureaus (CA’s WCIRB) on premium audits is:

Piggy Bank Audit Dispute Question With Dollars

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(1) Each policy producing a final premium of $10,000 or more shall be subject to a physical audit at least once a year. On policies subject to monthly, quarterly, or semiannual interim audits, …

The last audit of the policy shall be a physical audit of the complete policy period.

I used the WCIRB’s rule as they seem to be more concise. The keyword is the policy. One of the areas of the most concern is changing premium by a non-audit based endorsement. Any type of interim changes to your WC policies should be met with a certain level of skepticism and close review.

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California – WCIRB Upcoming Meeting Will Affect Certain Employers

February 28, 2013 By JL Risk Management Consultants

WCIRB Upcoming Meeting Will Affect Certain Employers Heavily

The upcoming meeting of WCIRB in California may be one to mark on your calendar if you own one of the below listed companies. The WCIRB may change some classification codes depending on a meeting on March 5th. The WCIRB is California’s rating agency for Workers Compensation. I usually do not point out any meetings of the rating agencies. The meeting is open to the public.

This is the meeting reminder –

The first 2013 meeting of the WCIRB’s Classification and Rating Committee will take place on March 5, 2013 at the WCIRB office in San Francisco. The Committee will review planned changes to the WCIRB’s regulatory filing schedule for 2013, as well as review several WCIRB staff recommendations for changes to the California Workers’ Compensation Uniform Statistical Reporting Plan – 1995 .The classification code changes will affect these employers:

Contractors — Construction or Erection

Day Care Centers

Mechanized Tree Harvesting and Log Chipping

Parcel Delivery Companies

Pipe or Tube manufacturing — Riveted or Welded

Sheet Metal Products Manufacturing and Metal Stamping

Stores — Repair Departments

Weighmasters and/or Dispatchers

Weight Control Institutes, Salons or Clubs

The proposed changes can be found here at the WCIRB’s website. The link will download a large PDF file. The WCIRB Committee will also cover:

Policy Number

Reinstatement of Cancelled Policies

Self-Insured Data for Experience Rating Purposes

Any of these changes may not be a negative factor for employers. If you are one of the affected employers, then a review of the PDF file may be worth your time.

I have attended many WCIRB conferences/educational programs. They are truly a great group of people for the most part.

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North Carolina Workers Comp Info – Shared Between Agencies By Creating Another Agency

February 18, 2013 By JL Risk Management Consultants

North Carolina Workers Comp Produces Another State Agency

A recent North Carolina House Bill (HB 112) seemed to cover the concerns that Workers Comp data is not being shared between agencies. This situation has been of great concern as 35,000 companies were found to be uninsured for Workers Comp by a newspaper reporter who compared the available databases.I noticed a term in NC HB 112 referred to as the GBICC . After further reading, I located a 66 page document by State Controller David McCoy on the GBICC. The GBICC is an acronym for the Government Business Intelligence Competency Center.

Picture Of Model House North Carolina On Roll Of Dollar

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The GBICC’s initial Workers Comp focus will be on employer’s compliance with insurance and employee misclassification. Misclassification refers to reporting employees as independent contractors to avoid paying Workers Comp insurance and the various associated employment taxes.

Misclassification does not refer to the classification codes that are assigned to each worker or job function at a certain business or organization (i.e. 8810, 7219)

The agencies specifically mentioned in HB 112 are:

North Carolina Industrial Commission
Employment Security Commission
NC Rate Bureau
NC Department of Revenue
NC Department of Labor

House Icon North Carolina With Hand Holding Magnifying Glass

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According to passage from the Controller’s report, the GBICC will work on key areas of program management to facilitate improved data sharing and analytics including:

Building consensus and agency “buy-in” for the emerging GBICC initiative to ensure that efforts are focused on appropriate priorities and adding value to the agencies
Establishing working groups of business stakeholders
Establishing a registry of available data for use by all State organizations
Establishing governance policies, procedures, and guidelines to broker data sharing agreements including the creation of a legal advisory group of subject matter experts on state and federal privacy, disclosure and security regulations
Establishing data and metadata standards based on national standards and industry best practices and determine how enterprise data model management and standards will be implemented

I will look over some of the other states’ methods of combining and analyzing employment databases for Workers Comp enforcement. I will post any interesting findings.

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Why Did Classification Codes Change On My Workers Comp Policy?

August 13, 2012 By JL Risk Management Consultants

Why Did Our Classification Codes Change So Abruptly?

Why did the classification codes change on my Work Comp policy? I received this Class Code question last week. With NCCI changing so many classification codes, I thought this would be a good area to cover this week.

Graphic Classification Codes Change Comp Policy

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Since 2006 the NCCI and State Rating Bureaus have changed many classification codes by either combining codes or creating new ones. If your class codes change due at renewal or at the yearly premium audit, this may not be a negative occurrence for your company.

The new class codes may actually reduce your premiums. It is not necessarily a negative change. One of the most common mistakes I see is when the employer decides that there is a better classification code that fits their business even though the code they wish to have is actually more expensive. This can happen even if the codes look less expensive.

How can this happen? There are other variables that are associated with each class code that may have the wrong effect on your Workers Comp premiums. You have to be very careful before disputing a class code change or if you think your current codes are incorrect.

Graphic Classification Codes Change Programmer

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Another classification code may look tempting as it is much less expensive. However, a class code that is associated with less risk can actually dramatically increase your E-mod (X-Mod). The workers comp savings that are due to a classification code switch may be wiped out and possibly even cause your company to pay more premiums. Some of the calculations and considerations can be very complicated.

If you feel your classification code does not necessarily fit your business and there is a better one that describes your business, it may be good to consult an expert on workers compensation premiums.

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Classification By Analogy – When No Class Code Describes Your Business

August 6, 2012 By JL Risk Management Consultants

When No Code Fits – Classification By Analogy

The term Classification by Analogy generates many questions on how companies are rated by the rating bureaus such as NCCI and the WCIRB.

One of the most confusing terms associated with classification codes is the classification by analogy. This is especially true if the class codes were changed at the time of the premium audit. Last week, I covered how a company’s workers compensation classification codes may change as a company grows over time.

Graphic of Five Bulb Classification By Analogy With One Bulb Open

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Classification By Analogy is the interpretation of what Workers Comp Classification Codes are the closest to the job functions in a company. The insurance company looks at each classification code as a level of risk. These are “guesstimations” as there is no exact classification code that matches a job function or employee’s job description. The most important word is interpretation. No one knows your business as well as you do. However, the correct class codes for your business can be a tricky matter.

One of the red flags on Workers Comp audits is the use of Not Otherwise Classified (NOC) when classifying some of the job functions in your company by analogy. Over time, most rating bureaus have reduced the number of class codes. This has given rise to many of the old classifications that better described your business being combined into a more general class code or NOC.

One of the caveats with challenging or questioning a classification code that is analogous to your company’s job functions is the class code that you think more closely matches your company may end up costing more money that the original one. This is especially true if the Experience Mod is above a 1.4.

As always, if you feel you that there is something wrong (gut feeling), you may want to call in an expert.

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Class Code 8810 – Magical Mystery Code

July 3, 2012 By JL Risk Management Consultants

Workers Comp Code 8810 aka Class Code 8810

Class Code 8810 also known as workers comp code 8810 is one of the most misunderstood classification codes in Workers Comp. We receive a very large number of emails and phone calls on this subject usually just after an employer’s yearly premium/payroll audit.

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The premium auditor has switched some of the employees to include more expensive classification codes. This has resulted in a much higher than anticipated final premium bill. We will usually hear that the switched employees had been classified as 8810 employees for many years. Why did the insurance auditor switch them from 8810 clerical?

I have posted on this business subject often. You may want to perform a search on the blog and input 8810. The search box is down the screen on the right side. I will link to some of the posts in this article.

Class Code 8810 is a standard exception code along with class code 8742 in most states. The quick definition of the code is a clerical office employee. These employees are considered to be in the safest work environment in most companies. The risk is very low for injury. The result is a very low rate for these employees.

Hand Presenting Class Code 8810 With Magnifying Glass

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If your company is in a risk pool or assigned risk, the difference can be astounding between 8810 and other classification codes as assigned risk rates are usually very high.

If you receive a premium audit report where any or a large number of employees have been switched to other codes, the premium auditor must explain in full detail why the class codes were changed during their audit.

You can sometimes find them in the audit workpapers that the auditor produces during the audit. If you did not receive a copy of those papers or electronic file (often a spreadsheet), you may want to request a review copy.

Even if the audit was completely performed using software, the auditor will input explanations. You may find those in the miscellaneous notes section. If you find that the employees should have been classified as 8810, you may want to initiate an audit dispute.

If you feel like you may need advice on whether the move from 8810 was correct or mistaken, call in a premium expert to help your company. You only have one shot to make the correct dispute with your carrier.

©J&L Risk Management Inc Copyright Notice

Workers Comp Classification Codes vs Employee Classifications

March 14, 2012 By JL Risk Management Consultants

Employee Classifications vs WC Classification Codes

The Employee Classifications and WC classification codes are entirely different. I had written about this subject late last year. I receive a few questions every time the online press starts publishing articles warning employers concerning classifications. There is a big difference in these two very similar sounding terms.

Vector Graphic Of Employee Classifications Holding Magnifying Glass

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It has never been OK to purposely classify an employee as an independent contractor. We have never given the advice to classify employees as independent contractors. This method of cost savings will only backfire. If you are unsure whether a person that performs work for you is an employee or and independent contractor, please refer to this blog post on independent contractors.

Many states have clamped down on employee misclassification (contractor vs. employee) not the classification codes on your Workers Comp policies or E-Mod sheets. If you think some of your employees have been misclassified with the wrong Class Code, you can check on the codes and make a decision whether to dispute them or not.

Graphic Hand Holding Magnifying Glass Employee Classifications Concept

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Employee misclassification does not mean classifying an employee under a classification (class) code such as 8810 Clerical. Those are the classification codes that are assigned by the carrier, NCCI, or State Rating Bureau. Disputing a classification code has never been illegal unless it is done to delay paying a Workers Compensation premium audit bill.

There are many more complications that can arise when an employer tries to reclassify the Classification Codes. Approximately 20% of the time, I have seen it actually cost the employer more premium. That discussion turns to the ELR or D-ratio that you will see on your rating sheets.

There are many articles in this blog on how to determine whether or not your employee or employees are under the wrong classification codes and the proper dispute process.

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8742 Class Code And Your Company – Often Misunderstood

September 11, 2011 By JL Risk Management Consultants

8742 Class Code Salespeople Messengers and Outside Collectors

One of the most misunderstood is 8742 Class Code also known as the Salespeople, Messengers, and Outside Collectors Class Code. 8742 along with Class Code 8810 are the most popular Standard Exception Codes. Please click on the link for more on Standard Exception Codes.

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8742 is not a clerical type classification code such as 8810. If the employee delivers any of the material being sold, Class Code 8742 would likely not apply. This Standard Exception code can cover many types of jobs, even sports agents.

Florida and Massachusetts are the only two states that do not recognize this classification code. Judging from our premium audit reviews, this code can often be assigned by analogy. Assignment by analogy occurs when a job type that does not perfectly fit is assigned to the one that closest represents the class code.

Assignment by analogy involves a large amount of intuitiveness by the premium auditor. For instance, a newspaper reporter is usually assigned the 8742 class code. A reporter is a messenger of a type, but it is quite a stretch. Most of the time, it is used for for salespeople. One key is the job duties performed by the employee must be off-site in almost all cases. The off-site part of the job description is critical.

There are a few circumstances where it may seem that the 8742 class code is a perfect fit. However, if a class code has the All Employees moniker then 8742 is not allowed as a class code. Some classification codes are all-inclusive such as 8829 Home For the Aged – All employees.

The All Employees moniker removes certain codes known as Standard Exception codes from that type of employer. Click on the first red link in this article to completely understand Standard Exceptions.

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Classification Codes 8810 and 8742 Again – Standard Exception Codes

May 18, 2011 By JL Risk Management Consultants

Classification Codes 8810 and 8742

My posts on Classification Codes 8810 and 8742 seem to generate the most interest of the whole blog. I have posted on them often. They both are referred to as Standard Exception Codes. They differ greatly from your company’s Governing Class Code.

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I had posted previously on the premium auditors all knowing that companies tend to try to put every employee into those classifications to save money. That is one of the first figures a premium auditor will examine is what payroll is allocated to any of the Standard Exception codes. They especially look very hard at Class Codes 8810 and 8742.

One of the trends to watch for in your premium audits and associated billing is when employees are moved from one Standard Exception Code to another Standard Exception Code that results in a higher premium owed figure. That may not seem much of a difference on paper. However, some of the alternate Standard Exception Codes can result in up to a 76% increase in premiums for certain employees.

I will cover the new Standard Exceptions codes in an upcoming post. My best advice now is to make sure that your job descriptions are very thorough. I would not leave any questions on the job duties of especially your clerical employees.

©J&L Risk Management Inc Copyright Notice

Great Premium Audit Follow Up Question From Yesterday

May 17, 2011 By JL Risk Management Consultants

A Great Premium Audit Classification Codes Changes Question – Be Careful Here

Earlier this morning, I received a great follow up question about great premium audit class codes. Yesterday I posted on how changing classification codes can backfire in certain instances. I received two questions since that asked – Why then should our company even try to review our premium audits or use your services if we are going to end up paying more $$$?

Picture of Two Hands Giving Money Federal Government Back Ground Great Premium Audit Class Codes

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That is a very fair question. The point I was trying to make about yesterday’s article was that without non-agent professional help, what looks great on paper at the beginning can be a nightmare if all facets of a request for a change in Classification Codes or another factor such as reserves are not fully explored from step one.

When we do premium audits, we run many tests to make sure that at the end of the day, you are not paying more than you were originally billed for your Workers Comp. A full review of your Workers Comp situation results in us writing a report making recommendations on how to proceed with your insurance policy and audits.

Picture Of Hand Great Premium Audit Paying With Gold Credit Card

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The example that I gave yesterday was actually from a live audit situation that was overnighted to us to see if we could fix the situation. I was attempting to send out a warning to our blog readers to make sure all the numbers have been calculated on every part of their Worker Compensation insurance policies.

As I have posted very often, if you have a gut feeling that your Workers Compensation situation is not quite right, then do pursue that feeling. Business owners, risk managers, safety officers, and other key company personnel usually know when something seems off in their workers compensation policies and program. However, please make sure that all angles have been explored before you contact your insurance carrier.

General Inclusions

December 23, 2010 By JL Risk Management Consultants

General Inclusions – Term Of The Day

In Workers Compensation, there are employers that may operate what seems to be two separate businesses. There are certain activities that are specifically included in all classifications and may not be separately classified. These activities must be assigned to the classification that describes your business or industry. These activities, referred to as General Inclusions, include the following:

Picture Of Aircraft General Inclusions With People

Wikipedia – Ahunt

Aircraft travel by employees, other than members of the flying crew
Commissaries i.e., cafeterias for your staff
Manufacturing of containers, such as bags, barrels, bottles, boxes, cans, cartons, or packing cases
Plant dispensaries i.e., first aid for staff
Maintenance or ordinary repair of the employer’s buildings or equipment when performed by employees
Printing and lithography e.g., printing instruction sheets or product labels
Stamping, welding, drilling, and blasting e.g., in connection with other construction or manufacturing operations
Research laboratories e.g., new product research and development
Drivers and their helpers
Supervisors

As you may have thought, these general inclusions may change from state to state and year to year, please notice this was written in 2010. We try to update articles. We do not delete them except under extremely defined circumstances.

What Is The Governing Class Code On My Policy?

August 10, 2010 By JL Risk Management Consultants

Governing Class Code-Workers Comp Term

The governing class code is the employers code that generates the most payroll. It is used to determine the type of business the insured is in. Miscellaneous employees will be coded under the governing class code as well.

Chart Of Governing Class Code Generates Payroll

Wikimedia Commons – Sandia National Laboratories

8810 and 8742 Classification Code Correction From Earlier Post

March 6, 2010 By JL Risk Management Consultants

Classification Code Correction 8810 and 8742

Example Classification Code Correction looks like

Wikimedia Commons – Bill

We have a Classification Code Correction for 8810 and 8742 – the Standard Exception Codes. I had posted previously in this post concerning the All Employees designation under certain class codes. I knew the rule, but I was in a hurry to get the post out and made a misquote. I am glad that many Workers Compensation premium auditors including our auditors, insurance company premium auditors, and auditors for auditing companies all emailed me very quickly to correct my incorrect post.

_____________________________________________________________________________

In the last paragraph you seem to be saying that an “all employees” notation precludes the use of the standard exception codes. That is not how I read rule 1-D-4 in the users guide. They seem to say that a class including “all employees” still uses the standard exception codes unless one or more standard exception codes is specifically precluded, such as 7720 – Juvenile Detention Center- all employees & salespersons, drivers – this wording would still allow the separate classification of employees under 8810.

_____________________________________________________________________________

Business People Classification Code Correction At Conference Table

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Regarding your recent post on the difference between 8742 & 8810 which states:

“I have noticed very recently some of the class codes now include an “all employees” notation. The “all employees” designation on a class code means there are not Standard Exception Codes that will be accepted for a certain type of employer. ”

This is inaccurate. The all employees etc. designation has no bearing on the standard exception codes. The standard exception can be separately rated unless it is specifically mentioned in the phraseology and or phraseology note. With regards to the inclusion of standard exceptions phraseology in some recent code changes, I wrote some of them and had input into the others that were changed.

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This is one of those posts that I rushed to produce. Thanks to all for correcting my mistyping. What I had meant to say is in bold above. Thanks to Carlos, Spencer, and others for making me toe the line.

Class Codes 8742 and 8810 Revisited

February 1, 2010 By JL Risk Management Consultants

Revisited Class Codes 8742 and 8810

Some of the most read articles on my blog involve Classification Codes 8810 and 8742. These two class codes can sometimes be very confusing as they are very general. They cover so many jobs and job functions in a company. There is one caveat to these two class codes – especially 8810. If an employee performs any other job function that would place them in a higher classification, premium auditors will place the person in the highest code. This is allowed by the NCCI and State Rating Bureau rules. Even if the employee works for only a few minutes in a job task that places them at a higher rate, they will be removed from the 8810 or 8742 codes.

Wikimedia Commons – Peter J. Souza

We often receive phone calls and emails not long after an employee or group of employees have been recently reclassified by the premium auditor. Classification Codes 8810 and 8742 are called Standard Exception Codes. The reclassification sometimes results from a miscommunication between the employer and premium auditor. One recommended way to avoid any miscommunications during a Workers Comp premium audit is by designating one person to provide any requested material to and answer questions from the premium auditor.

Standard Exception Codes are normally not included in the governing classification. These are clerical, outside sales, and often (but not always) drivers. The governing classification is the one that generates the most payroll other than the standard exceptions codes.

There are many employees that can likely be classified under 8810 and 8742 in an organization as these class codes can describe many jobs in an organization – not just clerical, outside sales, and drivers. The Standard Exception codes have some of the longer descriptions in any of the class code manuals.

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I have noticed very recently some of the class codes now include an “all employees” notation. The “all employees” designation on a class code means there are not Standard Exception Codes that will be accepted for a certain type of employer. Some the recent class code changes have eliminated 8810 and 8742 from being used by certain companies. I am not saying these were fair decisions. They are what we have to work with once they are changed by NCCI or the State Rating Bureau.
If a group of your employees that were classified as 8810 or 8742 have been reclassified, you may not want to just accept these changes. Always call in a non-agent expert if you feel that the changes on the premium audit bill were not correct.

California Worker’s Classification Code Changed Walking Thru Plant

September 30, 2009 By JL Risk Management Consultants

California Worker’s Classification Code Oddity

This Classification code for the trapped employee. A recent review by our company showed that a premium auditor in California reclassified a worker just for the fact that the employee had to walk through the plant to get to his workstation as an administrative assistant (class code 8810). This reclassification was one of the oddest ones that I had seen in quite some time.

Graphic Of Money Plant Classification Code In Green Color

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This type of premium audit reclassification in California was likely a response to employers trying to stack all workers into the Standard Exception Code 8810 – Administrative Workers.

The employer had decided not to start a premium dispute as they wanted to keep on good terms with their current insurance carrier. Usually, most insurance carriers will not cancel a policy just because of a premium audit dispute.

There is no other path that the employee could have taken unless he crawled through an office window. The employee was reclassified as a manufacturing worker even though he never touches any of the equipment. Should the employer have to build a special covered walkway just for this employee? I will cover this later in the week

Update – The classification code turned out to not be 8810. Why? The employee was deemed to be a Computer Programmer. In California, that would place him in Class Code 8859

The 8859 Class Code rates represent a much lower rate than the Manufacturing Class Code he was place under at premium audit time.

Work Comp Classification Codes Are Critical To Your Policy

September 22, 2009 By JL Risk Management Consultants

Your Company’s Work Comp Classification Codes Are Important

Your Work Comp classification codes are very critical to your premiums.

Picture of Hand Holding Paper Work Comp Classification Codes With Audit Graphic

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We have received quite a few inquiries over the last few weeks about Classification Codes during premium audits by the insurance carriers. The Classification Codes are not SIC codes. However, there is some correlation between the Classification Codes and the SIC or NAIC codes. Classification codes are often called Class Codes, or NCCI Codes or State Rating Bureau codes.

One of the main red flags to look for in any premium audit by the insurance carrier is that the Classification Codes were changed or new ones were added at audit. This is a true red flag. It may be your best course of action to seek out a specialist in this area such as J&L when this happens. You are likely being overcharged on your premiums in this case.

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The premium auditors do not know your business as well as you do. Like most insurance company employees, auditors are under time constraints and pressures. They may not have the time to study your business and to see all of the job functions in detail. As I have said very often, do not blame the individual premium auditor – blame the Workers Comp insurance system as a whole.

If you feel something is wrong – a gut feeling that your workers compensation program may be in error, then that should be considered another type of red flag. I have written many articles and spoke on the subject many times – your gut feeling as a Risk Manager, company owner, or in charge of your insurance – is always the best measure of whether something is amiss or not.

Start asking questions if you think your company has the incorrect work comp classification codes.

Most Expensive Workers Compensation Classification Codes California

September 2, 2009 By JL Risk Management Consultants

Most Expensive Workers Compensation Classification Codes California Version

For the most expensive Workers Compensation classification codes California seems to be the highest in the US.

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In performing recent premium audits for California employers, I decided to check out which type of employers paid the most for workers compensation coverage in California. The most expensive was not a surprise. The second most expensive was an unexpected one.

There are hundreds of Classification Codes in the California Workers Compensation system. The most expensive classification code in California is:

5552: Roofing —hourly wage below $23.00 per hour

When the insurance crisis in California existed a few years ago, insurers were charging well over $100 per $100 of payroll for Class Code 5552. This is the same as a 100%+ tax on a certain line of business. Why is this Classification Code the highest? The severity and number of accidents that involve roofers are very high compared with all other job types.

One only needs to read the California or national workers comp publications to see Cal-OSHA fining a roofing company for some type of safety violation – usually lack of fall protection.

The next most expensive California Classification Code is:

9185 Carnival or Circus – all workers

The all workers designation means that there are no Standard Exceptions (Class Code 8810 or 8742) with this code. As with roofers, carnival and circus workers expose themselves injuries while performing or while tending to the animals.

NCCI Class Code Premium Audit Questions – Match Code to Job

August 18, 2009 By JL Risk Management Consultants

NCCI Class Code Can Be Complex

I have received a large number of questions on NCCI class code over the last month. I seem to receive the most about how to correctly match a company’s jobs to the class codes they have been assigned at the inception of the policy or at the premium audit.

Graphic Of Businessman NCCI Class Code With Question Mark

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The NCCI Class Codes are not necessarily based on a company’s SIC codes or NAIC codes. There are often NAIC codes within a classification code’s description. However, they cannot just be arbitrarily matched to the class codes. The matching can be very confusing and could even cause a company to pay even more on Workers Comp premiums in a down economy.

The easiest way to match your company to the class codes is by examining:

Experience Modification Factor sheets provided by NCCI
Your initial policy
The year-end premium audit and billing

Do they look accurate? That is one of the most ambiguous questions in Workers Compensation as there are almost 600 NCCI or State Rating Bureau class codes that can possibly be matched to your business. It is not an easy process and, as previously mentioned, it could cost you more in the long run.

I will post on Standard Exception codes 8810 and 8742 next time. These codes that can save or cost your company a large amount of $$$.

What Is The NCCI Class Code 8810?

May 21, 2009 By JL Risk Management Consultants

NCCI Class Code 8810

This is the most popular question that we receive about the NCCI Classification Code system. Class Code 8810 is the Administrative/Clerical code that is used in all 50 states, including the monopolistic states. It is usually the least expensive code as employees that fall under the Class Code are considered very low risks for a Workers Compensation accident.

Graphic Of Bar Code Class Code 8810 And Magnifying Glass

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The 8810 Class code is what is referred to as a Standard Exception. I will cover Standard Exceptions in the next post. NCCI class code 8810 is an all-encompassing code. There are very many job titles that would fall under this code. Class code 8810 is not just for administrative assistants. The rating manuals have very long descriptions of this popular class code.

As I write this article, the 8810 listing in the NCCI clocks in at just under 10 pages.

We have performed quite a few workers comp audits for employers where a large number of workers were included under the 8810 code that more than likely could have been classified under another code. The insurance companies’ Workers Comp Premium Auditors have become very adept at reclassifying employees out of the 8810 Class Code into other more expensive class codes.

NOC – What Does That Mean?

January 26, 2009 By JL Risk Management Consultants

Workers Comp Rating Acronym NOC

NOC is an acronym you need to know. Another great question from one of the blog readers – We received our Workers Comp policy for this year. We noticed that all of our positions – Classification Codes have an NOC on the end of them. What does it mean?

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NOC stands for Not Otherwise Classified. If you see this on a Workers Comp policy or premium audit, it means that the Classification Code is non-specific. There are usually more specific Class Codes, however, the underwriter or premium auditor could not place your business in any other Classification Codes other than the more general ones.

It is advisable that you look further into this general-type classifying of your business. You may find other classification codes that would describe your business more accurately.

For instance, Store Employees, NOC means that the classification of your employees could not be associated with a more specific code. This is one of the most common mistakes that we see on policies and audits by the insurance carriers. These Class Codes are much more expensive as the NOC Classification Codes are seen as more risky. The more specific Class Codes can be a more accurate assessment of the employees covered in the policy.

If your receive a policy or premium audit with Not Otherwise Classified on it, there could possibly be a more specific Class Code. The previous example could be more specific by using the Store: Clothing or Wearing Apparel Classification Code. This type of Class Code will always be less expensive than the Not Otherwise Classified Code.

Inadvertent Way To Increase Your Workers Comp Premiums

October 12, 2008 By JL Risk Management Consultants

Workers Comp Big Premium Increases – Inadvertent Way To Cause

The inadvertent way that for an employer you can increase your Workers Compensation premium.

Picture of Dollars Inadvertent Way to increase your WC premiums

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I have seen a situation happen very often in a recession that can cost an employer a large amount of workers comp premium dollars, especially at the yearly payroll audit. This is very prevalent in California now.

In a recession, most companies start to cross-train or lay off employees. This causes employees to do job tasks that they might not usually do in a normal economy. If your company is in this situation, please be very careful not to assign an employee to a job duty that would cause a great increase in premium.

For example, if an administrative or clerical worker is given a very small job to help clean tools, that employee’s workers comp classification code may change from a low risk job (clerical) to a higher risk job (mechanic) .

Cupped Hands Presenting Inadvertent Way Financial Growth

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Even if the employee only cleans tools for one-half hour per week, the insurance carrier auditor will move the employee from the lower class code to the higher one, which can increase the premiums you pay for that employee up to 5,000%. We have seen this recently in quite a few of the audits in the down economy.

As I heard at an NCCI conference, if the employee performs the high risk job only for a few minutes a week, they should be classified in the higher class code without a doubt.

Bottom Line – make sure the workers compensation insurance carrier premium auditor knows exactly the job duties of all employees and back up your job classification with documented job duties. This may be time-consuming in the short-term. In the long-term, it will be well worth the documentation effort to avoid the inadvertent way to increase premiums.

Workers Comp Classification Codes – Great Blog Reader Question

July 23, 2008 By JL Risk Management Consultants

Question on Workers Comp Classification Codes

Graphics Hands With Insurance Workers Comp Classification Codes In Black Background

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In one of your earlier blogs, you talk about Workers Comp Classification Codes and how they describe the jobs that are performed in a business. Why do my Classification Codes seem to be different from what my business actually does, and why are they not the same as what our employees do on their jobs? I am confused.

This is one of the questions that is becoming more popular as the National Council on Compensation Insurance (NCCI) revises and eliminates their Classification Codes. This results in more of what is called classification by analogy. We have seen more of this type of classification in the last three years.

Classification By Analogy is the interpretation of what Workers Comp Classification Codes are the closest to the job functions in a company. The insurance company looks at each classification code as a level of risk. These are “guestimations” as there is no exact classification code that matches a job function or employee’s job description. The most important word is interpretation. No one knows your business as well as you do.

If your Workers Comp Classification Codes do not seem to represent the job functions in your company, then have your agent and carrier review your classification codes with you and explain how they best represent your business. If you still feel that something is wrong, consult an expert in Workers Comp.

HVAC Classification Code Retired – NCCI Closes Out Popular Code

October 10, 2007 By JL Risk Management Consultants

NCCI Retired HVAC Classification Code 5536

NCCI Retired HVAC Classification Code – where does that put your company?

Vector graphic of Man Yelling At Big Percentage HVAC Classification Code And Another Man Carrying Dollar Sign Going Up In Bar Graph

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Quite a few of our clients that have been overcharged on Workers Compensation are HVAC employers. Now, to complicate matters even more, the HVAC Classification Code 5536 has been eliminated due to problems of code enforcement. The Code was moved to other Classification Codes, all being at a higher rate than Classification Code 5536. We are starting to see this more often when the NCCI shifts or closes out a Class Code.

If you have had this Class Code in the last five years in your Workers Comp program, you may need to have an underwriting expert check this situation for your company. There are only a few states where the 5536 Classification Code is still allowed.

The NCCI has always been a very professional and fair organization to deal with over the years. We are not questioning their integrity whatsoever. We just do not want any employer to be overcharged in their WC policies or at the time of the year end premium or payroll audit.

The “look-back” period to recover Workers Comp Premiums is four and one half years maximum.

Next Up – We answer the question – When do we usually hear from companies that need help?

Workers Comp Class Codes – Quick Primer On Important Policy Term

August 30, 2007 By JL Risk Management Consultants

Workers Comp Class Codes Quick Primer

The Workers Comp Class Codes are also known as Class Codes, Work Comp Codes, Codes, etc. Today, let us start with the definition of the Class Codes.

Picture of Man workers comp Class Codes Self Audit

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As I mentioned in my last post, the errors that we find have a common theme to them, which are Classification Codes. In laypersons terms, Classification Codes are how a Workers Comp carrier and the NCCI or your state rating bureau views your business operation. For instance, a trucking company may have a Classification Code of 7228 – which are short-haul truckers.

There is a very important point that needs to be made now. Your Classification Codes are not the same as your SIC codes. Your Work Comp Class Codes should not be based on your SIC codes. Quite often very small employers start out by doing a self-audit on their payroll and job types. When they grow, the Class Codes that are used year after year may have been based on the owner’s self-audit and description of the company.

Agent With Man And Woman Workers Comp Class Codes Discussion

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This is not to say that the insured, NCCI, agent, or insurance carrier did anything wrong. Quite often, the Classification Codes are just copied from year to year by the agent. What if you change course in what your business is doing, or if the NCCI or your state rating bureau performs an in-person audit? I am not talking about the premium auditor that does a yearly payroll audit. Do your Classification Codes have quite a few NOC’s (Not Otherwise Classified)?

A great example is a firefighting company that we assisted that was classified as a water carrier. Why? They had Water in their name. As they were a small company, they were audited over the phone year after year. The firefighters now pay over 60% less in Workers’ Compensation premiums after we were able to convince the State Rating Bureau and their insurance carrier of the mistake. Who was to blame? This was just the natural Work Comp insurance process that went slightly awry.

The main area I wanted to cover here today, which should have been covered last Friday, is how to tell if your Classification Codes are wrong. This is a very tough one, but here are some observations that we had while reviewing Workers Comp policies:

You have NOC in your Classification Code
The Classification Code is not what you do in your business.
The NCCI or State Rating Bureau has never inspected your business
Sometimes the Class Codes can be wrong if you have just been inspected (Catch 22)
The NCCI, Insurance carrier or Insurance Company Payroll Auditor has abruptly changed your Classification Code
Along with the abrupt change, you receive a very large Workers Comp premium bill
You have two or more very distinct businesses that are being classified in one “umbrella” class code
Your competitors are being classified differently
The #1 way to know is that you or someone in your company has a gut feeling that your Class Code is wrong, or there is something that is wrong overall with your Workers Comp insurance policy – that is when we receive most of our calls and emails, and gut feelings are right about 80% – 90% of the time.

Picture Hand Pointing Web Workers Compensation Classification Codes Concept

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I will add to this list as time permits. Those are the ones that I can remember off the top of my head. I am on the road this week traveling to the West Virginia NCCI Conference.

West Virginia has come a long way from a monopolistic state for Workers Compensation to a fully open market. Brickstreet has been the interim monopolistic private carrier for the last two years and will be the carrier until July 1, 2008.

Brickstreet will be the carrier for some of the West Virginia state agencies until July 1, 2010.