Class Code 8810
The confusion over properly classifying clerical employees
Class Code 8810 is a assigned to clerical office employees. Since these employees are considered to be in the safest work environment in most companies, the risk (and correspondingly rate/price) is very low. The application and removal of 8810 is frequently misapplied and also the source of many disputes.
Below is an actual example of events similar to many others that lead to the numerous calls and emails we receive regarding Class Code 8810 (by the way I'm changing some details 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 reclassification was the result of a phone audit (a big red flag) rather than a physical audit. And, it was triggered by the employee's title, Shop Manager.
This is not a simple issue as both sides seem to think. 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?
By the insurance company's assertion that employees classified as 8810 must be separated 100% of the time from all operations, how would you classify the following "clerical" employees: offices in front of the structure, shop in back, and employee parking behind the shop. Assume office employees who are at their desk in enclosed offices and completely separated from the shop 100% of the time to perform their duties walk through the shop every morning and evening to get from their cars to their offices and vice versa. Common sense says 8810, but this particular insurance carrier would argue otherwise because of exposures to the shop environment twice every day. Disputes over such issues are too numerous to mention.
The price difference can be astounding between 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 not 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.
If you determine that your insurance carrier reclassified employees who you believe should be 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.