Over time we’ve received many calls and questions from employers, insurance agents and insurance company auditors alike inquiring about application of class codes. One of the most difficult topics to understand seems to be the idea of separation of exposure in the work place. Let’s talk about how and why payroll is sometimes assigned to a higher rated class code.
At the very basic level workers compensation employee classification has to do with identification of work place exposure and assignment of a representative class code for that exposure. Remember, different class codes carry different premium rates! But at this point the idea of rates needs to be set aside for a later discussion. When determining the correct classification it’s all about the actual work processes and materials being used in those processes.
Under certain circumstances and for certain types of employers different class codes are allowed to be used on a policy. (Do not assume that your class of business allows multiple codes to be used. Make sure you check with your agent or a work comp consultant for help.) As a general rule, as long as there is separation of exposures, the application of different class codes will be maintained. But the problem comes when an employee normally classed into a lower rated class code becomes blended or exposed to the hazards of the higher rated code. When this happens it is very common to find that all rating payroll from the lower rated code will be moved into the higher rated code.
Let’s take the use of the clerical class code 8810. Say your business is a typical auto repair garage risk with twelve mechanics who work in a shop. You employ one person who greets customers, schedules appointments and takes payments when the customer comes to pickup their vehicle. You have another person who only takes care of your books and who has no customer contact. Both of these employees are located in an open area located in a corner of your repair shop, not separated from your garage operations. In this case the only employee who could qualify for clerical 8810 is your bookkeeper because they have no contact with customers. However in this specific situation, because there is no separation between the bookkeeper, mechanics and general exposures found in the shop, this person will more than likely be included in the same auto repair code as the mechanics.
Let’s take the same garage operation, but instead of being located in an open corner of the shop say the bookkeeper is located in an office, physically separated from the shop exposure. In this situation the bookkeeper should qualify for the clerical code 8810. (Did I mention that the employee who has contact with the customer will be classed into the shop category?)
It’s the separation that counts. Separation of work exposure from one employee to another can make a big difference in how class codes are applied and ultimately the premium an employer may pay.
What exactly constitutes separation? Good question! Certainly physical walls create a separation. But what about space? What distance from one work exposure to another can be considered separation? Can time be separation? What if you operate three separate work crews performing three separate work processes where the first shift never comes into contact with the second and third?
Clear as a milkshake right?
Is there any wonder that employers, insurance agents, insurance company personnel and auditors become confused by the application of workers compensation rules!
Give us a call or drop an email if we can ever help you with a workers compensation problem!
Hope this helps you out and thanks for reading!
