Class Code 8810 Clerical Office Employees
The confusion over properly classifying class code 8810 clerical office employees. How Insurance Companies Take advantage to charge you More!
Workers' compensation classification code 8810 is one of the "Standard Exceptions;" as is code 8742. Class code 8810 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.
Of course, it's safe to assume that most employers want to classify as many employees as possible in class code 8810. Within the industry, though, 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 clerical office employee code. While I'm sure this goes on we find that the reverse is as frequently true:
Insurance companies frequently disallow class code 8810 in error.
As we know from 20 years performing premium audits for our clients, the application and removal of 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? 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.
Fortunately, we're able to help obtain corrections and refunds for most of the numerous organizations who call and email us about the proper application of Class Code 8810.
Class 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
However, if you suspect that any of your employees are misclassified as class code 8810, 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 and you have employees classified as class code 8810, you might not be saving as much as you think through 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.
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