Workers Comp Code 8810 Clerical Office Employees
properly classifying Workers Comp Code 8810 clerical office employees. How Insurance Companies Take advantage to charge you More!
According to NCCI, Clerical office employees accounted for more than 60% of total payroll by industry group in 2018, and class code 8810 contained 47% of total payroll among classification codes. The difference between clerical office payroll by industry group and payroll classified directly into code 8810 is accounted for by the fact that some of the clerical office employees' payroll is written in class code 8871 Clerical Telecommuting and other classification codes that include clerical work in their description; like class code 8723 Insurance Companies Including Clerical & Salespersons.
Workers' compensation classification code 8810 is one of the "Standard Exceptions;" as is code 8742 and class code 8871. Workers Comp Class code 8810, as you know, is a assigned to clerical office employees. Since work comp code 8810 employees are considered to be in the safest work environment in most companies, the risk (and correspondingly rate/price) of workers compensation class code 8810 is very low.
The more employees classified under Workers Comp Class Code 8810, the lower the premiums due to the low rates. And, within the industry, it's assumed that employers push the envelope and squeeze as many into the 8810 class code as possible including many who don't belong into this 8810 clerical office employee code.
Our experience, however, leads us to 2 different conclusions:
1) Employers understand that misclassifying their employees under workers comp code 8810 can lead to penalties, fines, and higher premiums due to higher Experience Modification Rates.
2) We find that the reverse is true; that insurance companies disallow Workers Comp Code 8810 in error (costing you additional premium).
Insurance companies frequently disallow workers comp class code 8810 in error.
As we know from 20 years performing premium audits for our clients, the application and removal of workers comp 8810 class code is frequently done in error leading to many audit disputes. So much confusion exists over the proper application of Classification Code 8810 that it was the #1 most reclassified code in 2020 according to NCCI.
Here's an example of actual 8810 Class Code dispute. This a common problem our clients encounter.
Below, in blue, is an actual exchange of messages between an insurance company auditor and a Cytron Group LLC client over the reclassification of a manager from class code 8810 to the client's governing classification.
This is an example of events similar to numerous others that happen every day. I posted about it on our blog because it's such a common occurrence for insurance companies to reclassify class code 8810 clerical office payroll at final audit (after the policy expired!) and send their clients nice additional premium bills. (By the way I'm changing client-specific details below to be overly certain nobody would know the parties involved).
Insurance company to their insured:
It appears that you have reported [Bob Smith's] payroll under the clerical class. The auditor moved his payroll to the Machinery Mfg. class because he has some shop exposure. This reclassification has generated an additional premium of $6,146. Please report his payroll under [new class code] going forward.
Insured To Insurance Company:
[Bob] is clerical only. He has no tools and does not work on any equipment. He spends nearly all his time in his office. He truly operates a phone, processes work orders, orders parts, maintains customer service, etc. The only time he’s in the shop is to check status of a job, give a mechanic a change order, etc. Period. Please change immediately.
Insurance company to their insured:
Managers and Supervisors would be assigned to the class code depending on the work that they are overseeing. So given that the employee is a shop manager and supervising shop employees [new class code] would be the proper code. I am referring to someone directly supervising/managing employees. In order to be classified 8810 you have to be separated from all of the operations 100% of the time.
And this is how formal disputes arise. What do you think? Is the insurance company auditor right?
Unfairness Of This Class Code 8810 Reclassification
There are at least 3 things fundamentally unfair about an insurance company reclassifying 8810 class code payroll at final audit like this:
Before writing the business the insurance company could have performed an preliminary test audit to determine proper classification. But, they didn't do it. The insurance company is the expert in insurance right; not the manufacturer? So, in my opinion this is the insurance company's error and it was the responsibility of the insurance company to make sure it knew what it is writing and how to properly classify the employees.
They waited until the policy expired to fix the (supposed) mistake in 8810 code payroll. Imagine buying a car to have the dealer contact you 12 months after the sale to inform you they undercharged you and are sending a bill.
They billed the insured for their mistake after the policy expired instead of trying to simply fix it on the renewal policy.
At this point you should know that this class code 8810 reclassification was the result of a phone audit (a big red flag) rather than a physical audit. And, this reclassification of the 8810 class code was triggered by the employee's title, Shop Manager, rather than any information received related to actual job duties.
This is not a simple issue as the insurance company auditor wanted her client to believe. In this case I replied with the following preliminary requests and questions:
I need you to request copies of auditor’s worksheets from the carrier.
Is the person in dispute an Executive Officer?
When in shop, what exactly is going on? What are his duties in the shop?
What is % of time in shop versus office?
Where is his office located?
How estimated on the policy?
Is there a formal Shop Manager job description in the employee file?
We performed a premium audit and successfully disputed the insurance company's assertion (interpretation) in this particular situation that employees classified as 8810 Clerical Office Employees must be separated 100% of the time from all operations.
And, the above dispute was over $6,000 for just one class code 8810 employee! We've worked with clients who have had entire departments reclassified away from the 8810 class code. Fortunately, we're able to help obtain corrections and refunds for most of the numerous organizations who call and email us about the proper classification of their clerical office employees.
Workers Comp Code 8810: Aggressive Interpretation Of The Definition
Here's another simple example from disputes we've seen with aggressive auditors. How would you classify the following "clerical" employees?
- They park in the lot in behind building
- Enter through the back door
- Walk through the shop to get to 100% separated offices in front of building
- Work exclusively in the office throughout the day
- Walk back through the shop to get to parking lot at end of the day
Believe it or not we've seen auditors reclassify these employees away from class code 8810 by claiming that the employees are not separated from the shop 100% throughout the day. In effect, leaving the employer with zero clerical office staff (from a work comp perspective).
Auditors, like the one mentioned above, would interpret the rules to force these employees in the governing class code rather than clercial 8810 and charge you more premium. "In order to be classified 8810 you have to be separated from all of the operations 100% of the time." But, the actual classification is not that straight forward as you can tell from the questions I had for my client (above).
The price difference can be astounding between class code 8810 and other classification codes. If you receive a premium audit report where any or a large number of employees have been reclassified to other codes, the premium auditor must explain in full detail why the class codes were changed during their audit.
You should find those explanations in the Auditor's Worksheets that the auditor produces during the audit. Even if you have no dispute, it's a good idea to request and review these after your audit. FYI, your broker will not do this for you. Even if a broker is a qualified payroll auditor (none are), your insurance company will not send your broker Auditor's Worksheets. They will only send them to you due to the confidential nature of the payroll information. You may then forward on to anyone whose consultation you engage, of course.
Even if the audit was a phone audit or completely performed using software, the auditor will (should) input explanations. You may find those in the miscellaneous notes section.
THE BOTTOM LINE: INSURANCE COMPANIES WILL REPRESENT CLASSIFICATION RULES RELATED TO THE 8810 CLASS CODE TO BE IRON CLAD WHEN IN FACT THEY'RE NOT.
There's much subjectivity based on a company's unique circumstances and there are numerous state exceptions.
If you determine that your insurance carrier reclassified employees who you believe should be class code 8810, you may want to initiate an audit dispute. Please call us to discuss your unique circumstances and potentially help your company, even if the reclassification was up to three years ago!. These issues will impact your work comp program costs indefinitely, so, let us know if you feel a reclassification away from 8810 was mistaken.
Also, it would be a good idea to take a look at our warning signs and reach out if you'd like assistance for any other reason.
Problems With The 8810 Class Code Designation For Work Comp
From a pricing perspective, of course, having a large part of your workforce classified under workers compensation code 8810 - clerical office employees - NOC is advantageous. It keeps costs down. One thing to keep in mind is that if an auditor determines that your Work Comp Code 8810 employees are subjected to increased risks and a could qualify for another Work Comp Code at some point throughout the year, the auditor will switch your employee to the higher rated (higher priced) Workers' Comp Classification Code.
This could certainly put you in a bind in terms of unplanned additional premium, mispricing your products, & services, etc.
Protect Your Workers Comp Code 8810 Employees
Protecting your clerical employees can mean 2 things. First, make sure your workers comp code 8810 employees are safe. Take the proper safety measures to protect them from the risks associated elsewhere in your workplace. Build or create a physical barrier between Class Code 8810 employees and other workplace hazards, keep the 8810 Class Code clerical office work environment separated from factory floor operations, etc. Reading the definition of Workers Comp Code 8810 in the NCCI Scopes Manual will give a comprehensive idea how to stay compliant.
Second, making sure these Clerical Office Employees are physically safe protects you from disputes and, as discussed, unforeseen additional work comp insurance premiums.
8810 Class Code & Your Experience Modification Rate
However, if you suspect that any of your employees are misclassified as class code 8810 (to your benefit), you may not be saving as much as you think.
That's because your work comp class codes impact your your expected future losses and your Experience Modification Rate. Class code 8810 - Clerical Office Employees is very inexpensive because they so rarely have work comp claims. If they do, 8810 class code employees have very minor injuries that result in no lost time.
Since your Experience Modification Rate is a measurement of your actual losses vs your expected losses, a misapplied 8810 class code will reduce your Expected Losses and make your actual losses look worse by comparison. And, this will drive your Experience Modification Rate higher (let me know if you'd like a more detailed explanation of how this works).
If you think your insurance company is missing something (again, to your benefit) and you have employees classified as class code 8810 who shouldn't be, you might not be saving as much as you think due to an artificially high Experience Modification Rate. And, if you're in an industry where it's common practice to use EMRs for qualifying new business, you might be losing out on the revenue side of the equation too.
What Does "NOC" Mean In Code 8810 Clerical Office Employees NOC
Not Otherwise Classified.
This indicates that the class code is not specific. There are numerous examples of classification codes that include NOC in their descriptions in addition to the 8810 class code. For example, here are 2 work comp classification codes from the retail industry:
Classification Code 8033 Store - Meat, Grocery And Provision - Combined - Retail NOC
Classification Code 8006 Store - Grocery - Retail
This simply means that the insurance company underwriter or premium auditor could not place your business or employees in any other work comp classification codes that are more specific to your industry.
Classification Codes That Include Clerical Office Employees
One reason why you may not qualify for Class Code 8810 is that your current work comp class code includes clerical office work in it's description. Some industry classifications specifically include "Clerical Office Employees" in their description. This is due to the difficulty in distinguishing between clerical and non-clerical activities for these workers comp codes. When an industry classification specifically includes clerical office employees, it is not permissible to separately assign clerical office employees to the 8810 Class Code even when the clerical office employees work at a separate location.
For example, businesses classified as class code 9012 Building Or Property Management, class code 8723 Insurance Companies, class code 8832 Physician, etc. contain clerical office employees in their descriptions.
As stated, these class codes include clerical work as part of their principal business and specify this in their respective classification descriptions. These classification codes can create confusion for employers with respect to workers compensation class code 8810 and proper classification.
Workers Comp Codes Similar To the 8810 Class Code
Workers Comp Code 8803 - Auditor, Accountant, or Computer System Designer - Traveling
Work Comp Class Code 8803 is used for for employees who perform clerical work. However, the single important word in the 8803 workers comp code description is "Traveling." Their clerical work duties are performed at the client’s location, and they are classified differently from Class Code 8810 due to the risk of traveling.
However, in order to qualify for class code 8803 these employees must be in an environment like their class code 8810 counterparts; entirely separate from the main operations of the site.
Unfortunately, there's much subjectivity in assigning code 8803 similarly to the 8810 class code. Just like the class code 8810 example above each company has unique circumstances to take into account. Additionally, there are numerous state exceptions to consider.
Dispute a Workers Comp 8810 Class Code Reclassification
Any reclassification of workers comp code 8810 payroll is bound to significantly increase your premiums. For example, Missouri publishes annually a list of the average rate* for every class code. In 2021 the average rate for workers comp code 8810 was $0.16. 16 cents! Just $160 in premium for every $100,000 in payroll.
If you determine or suspect that your insurance carrier reclassified employees who you believe should be class code 8810, you may want to initiate an audit dispute. Please call us to discuss your unique circumstances and potentially help your company, even if the reclassification was up to three years ago!. These issues will impact your work comp program costs indefinitely, so, let us know if you feel a reclassification away from 8810 was mistaken.
Also, it would be a good idea to take a look at our warning signs and reach out if you'd like assistance for any other reason.
* Here is a link to the Missouri rates for 2021. This table is referred to as "self-insured rates." In Missouri the Department of Insurance averages the rates charged by the top 20 insurance carriers and publishes them for work comp self-insurers. Even though these employers self insure, they need to calculate what they would have paid were they purchasing their insurance in the voluntary market like you. This is so taxes can be assessed and paid at the same rate for all employers.
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