Workers Comp Codes - Classification System

Work Comp Standard Classification

 

The primary purpose of the workers' comp classification system helps serve two purposes.

 

1)  It facilitates the accurate collection of data in order to price this line of insurance properly.  Rates are developed from this data by Rating Bureaus (NCCI in most states) based on the payroll and losses submitted to them by insurance carriers.  This ensures that insurers know how much they can expect to pay in losses for every $100 of payroll.  In addition, it ensures employers pay workers' compensation premiums commensurate to the risk associated with their organizations so that the cost of workers' compensation insurance can be distributed as equitably as possible.   

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The workers' compensation Standard Classification System uses hundreds of industry workers comp codes to group employers whose businesses are similar.  Each classification reflects the type of operations common to that group of employers (like workers comp code 9015; Building Or Property Management).  

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Classifications are assigned by to an employer's overall operations by identifying work comp class code that describe a business as a whole. This approach assumes that similar employers (e.g. plumbers) operate similarly and are exposed to similar risks. 

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2) It facilitates the development of an Experience Modification Rate for all employers.  All of the claims, payroll and workers comp code data allow for the comparison of an individual business' loss experience to that of it's industry as a whole (within the state/s where it operates).  This rate tells insurers how much better or worse than average an individual organization is at controlling it's workers comp claims.  This allows for the application of either credits (discounts) or debits (additional premium) to a business' premiums.

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Assignment By Analogy

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Any business specifically described by a classification must be assigned to that classification. However, any business not specifically described by a classification must be assigned to the most analogous (most similar) classification.

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In some instances, the operations of a business may not be explicitly described by a classification. In this case, the operations are assigned to the classification that is most analogous to the operations, from the standpoint of processes and hazards.

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Assignment by Analogy Example

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For example, there is no specific classification for dog walking services. However, Classification 8831(3), Kennels, is closely related in terms of processes and hazards. Therefore, companies engaged in dog walking services will generally be assigned, by analogy, to Classification 8831(3).

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• Standard Exceptions

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In addition to employees who perform basic business operations, nearly all businesses have clerical office workers, and many have outside salespersons. These activities, referred to as "Standard Exceptions," are a deviation from the one-business, one-classification rule. Since clerical office work and outside sales activities are commonly performed and carry a relatively low risk of injury, most businesses are permitted to use these "Standard Exception" classifications for the workers who conduct exclusively clerical or outside sales work.

 

Clerical Office Employees

Classification 8810, Clerical Office Employees, is applicable to workers who are engaged 100% in clerical activities with no additional duties. It is not permissible to divide a worker's payroll between Classification 8810 and any other classification.

 

Example — Assignable to 8810

An automobile repair facility employs a bookkeeper to maintain financial records. This employee processes invoices exclusively in the repair facility's back office. In this instance, the bookkeeper must be assigned to Classification 8810.

 

Example — Not Assignable to 8810

An automobile repair facility employs a bookkeeper to maintain financial records. This employee works primarily in the repair facility's back office, but occasionally must enter the garage to retrieve paperwork and status reports on specific jobs. In this instance, the bookkeeper cannot be assigned to Classification 8810 because this employee must occasionally enter the garage and is exposed to hazards outside those of a strictly clerical office worker.

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Some industry classifications specifically include "Clerical Office Employees" in their description or phraseology. Typically, this is due to the difficulty in distinguishing between clerical and non-clerical activities for these classifications. The pure premium rates for these classifications are calculated including all of the clerical office payroll and loss data associated with these industries. When an industry classification specifically includes clerical office employees, it is not permissible to separately assign clerical office employees to Classification 8810, Clerical Office Employees, even when the clerical office employees work at a separate location.

 

Clerical Telecommuter Employees

Classification 8871, Clerical Telecommuter Employees, applies to employees who work more than 50% of their time at their home or other office space away from any location of their employer and devote the balance of their time to clerical office or drafting duties at any of their employer’s locations in areas that are separated from all other work places of the employer by buildings, floors, partitions, railings or counters and within which no work is performed other than clerical office or drafting duties.

 

Outside Salespersons

Classification 8742, Salespersons – outside, applies to employees who spend 100% of their work time in the field, calling on customers, and performing activities to promote their employer's business. It also applies to employees who act as outside salespersons on a part-time basis provided they perform strictly clerical work when working at their employer's location. For this reason, Classification 8742 is usually not applicable to regional or zone managers, supervisors, and similar employees who may work in a non-clerical area while at one of their employer's facilities.

 

Watch the Standard Exception Classifications Webinar

In this webinar, you will learn about the classification requirements for Clerical Office Employees, Outside Salespersons, Clerical Telecommuter Employees, and the application of the standard exception classifications.

 

​Single Enterprise

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The Standard Classification System is designed so that all activities that are normally associated with a specific business are assigned to the one classification that most accurately describes the entire business. Stated another way, each classification generally applies to all of the "normal and usual" activities of a business, not just a single operation or the most hazardous activity. This rule is referred to as the Single Enterprise Rule. If your business, at one or more locations, consists of operations described by a single classification, your entire business will be assigned to that single classification and all payroll and loss data submitted by your insurance company to the WCIRB will be reported using that classification. It is important to remember that the pure premium rate for a classification represents the average risk of injury, not merely the highest risk, for the activities associated with a given classification.

 

Single Enterprise Example

An automobile body repair shop employs auto body repair technicians, painters, job estimators, auto detailers and shop clean-up personnel. Although the exposure to potential workplace injuries differs for each of these employees, all of these operations are normally associated with auto body repair shops. As a result, all of these employees are assigned to Classification 8393, Automobile or Truck Body Repairing and Painting – all employees including estimators, service writers and customer service representatives. Although a separate classification exists for auto body painting, Classification 9501(3), Painting – automobile or truck bodies, it does not apply in this case because the painters are employed by an auto body shop and are included in the body shop classification.

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• Multiple Enterprises

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Under the Single Enterprise Rule, all employees engaged in activities that are "normal and usual" for an industry are covered by one classification. If a business has two or more operations that do not normally prevail in a business described by a single classification, then the Multiple Enterprises Rule may permit or require the assignment of multiple classifications to the operations. The Multiple Enterprises Rule is found in Part 3, Section III of the California Workers' Compensation Uniform Statistical Reporting Plan—1995.

Multiple Enterprises Rule Effective September 1, 2021:

If the employer’s business, conducted at one or more locations, consists of two or more distinct operations that do not normally prevail in the business described by a single classification, then the distinct operations shall be classified in accordance with the following rules:

1.  If the distinct operations are Physically Separated in accordance with Section II, Rule 21, Physical Separation or Physically Separated, each distinct operation shall be separately classified.

   1. The payroll for employees (exclusive of Miscellaneous Employees) who perform activities integral to separately classified operations shall be divided between or among the applicableclassifications, provided complete and accurate payroll records are maintained pursuant to Section V, Rule 3, Division of Single Employee’s Payroll.

   2. The payroll of Miscellaneous Employees shall be classified pursuant to 3d below.

2. If two or more of the distinct operations are not Physically Separated, such operations shall be assigned to the highest-rated classification applicable to the distinct operations conducted in the common workspace.

3. The above paragraphs notwithstanding, division of payroll is permitted only if:

   1. The operation is not described by any of the General Inclusions;

   2. The division is not contrary to classification phraseology; and

   3. The division is not contrary to any other provisions contained in this Plan.

4. Miscellaneous Employees do not engage in operations that are integral to each classifiable operation but perform operations in general support of more than one classifiable operation and cannot properly be classified in accordance with a single classification. Examples of Miscellaneous: Employees include but are not limited to supervisors, maintenance employees, power plant employees, laboratory researchers, security guards, shipping and receiving clerks, and yard employees.

Unless otherwise directed in this Plan, Miscellaneous Employees shall be assigned to the Governing Classification of the group of classifications to which their work pertains.

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• Miscellaneous Employees

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Miscellaneous employees perform ancillary functions, rather than direct labor, in support of more than one operation. If there are multiple classifications for a business, certain employees that cannot properly be classified within a specific classification are "miscellaneous employees" and will be assigned to the governing classification for their work. Examples of miscellaneous employees include maintenance workers, delivery drivers, supervisors, and shipping/receiving staff.

 

Miscellaneous Employees Example

If an awning and garment manufacturing employer qualifies for separate classifications and uses a single truck driver to pick up materials and deliver products in support of both operations, the driver is a miscellaneous employee and will be assigned to the governing classification. Unlike material cutters or sewers who perform direct labor in support of the manufacturing operations, the truck driver performs an ancillary function.

 

Governing Classification

The governing classification is the classification that contains the largest amount of payroll excluding miscellaneous employees, clerical office employees, and outside salespersons.

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• General Inclusions

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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 an employer's business or industry. These activities, referred to as General Inclusions, include the following:

• 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

 

General Inclusions Examples

1. If a brewery operator also manufactures bottles to bottle the beer that is produced, the bottle manufacturing operations must be included in Classification 2121, Breweries.

2. If a software development firm also prints its own instruction literature to be packaged and sold with the company's software, the printing operations must be included in Classification 8859(1), Computer Programming or Software Development.

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• General Exclusions

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Certain operations present a unique exposure to hazard that is not common or prevalent in most industries. Employees who are engaged in these activities must be assigned to a separate classification. These activities, referred to as General Exclusions, include the following:

• Aircraft operation — all members of the flying crew e.g., pilots, navigators, etc.

• New construction or alteration work (work that goes beyond facility maintenance or repair)

• Foundry operations

• Asbestos abatement

• Day care services if provided by the employer primarily for use by its employees' dependents

 

General Exclusions Example

If a company operates a machine shop and a foundry to produce castings, the foundry activities would be assigned to the appropriate foundry classification, not to the machine shop classification. Most machine shops do not operate foundries, and operating a foundry is a unique exposure that requires a separate classification.

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