Wrong Workers' Comp Class Code: How to Check It and Dispute It

A code can be right on the Information Page and still go wrong at audit, if payroll is moved between codes. Check all three.

To see how a change of code or payroll moves your premium subtotal, enter both versions in the workers' comp and EMR calculator.

The business is classified, not the separate jobs. North Carolina's manual says that, subject to certain exceptions, "it is the business of the employer within a state that is classified, not the separate employments, occupations, or operations within the business" (NCRB, Rule 1-A). A basic classification describes the business: a furniture manufacturer, a hardware store, a carpentry contractor.

The governing class is the basic class with the most payroll. Standard exception codes never govern unless no basic classification applies. The manual's example: a business with $220,000 of payroll in 2003 Bakery, $120,000 in 8017 Retail Store and $240,000 in 8810 Clerical is governed by 2003, because clerical is a standard exception (NCRB, Rule 1-B-5).

Standard exceptions are narrow. Under the same rule (NCRB, Rule 1-B-2):

• 8810 Clerical Office Employees applies only when duties are limited to office work such as correspondence, records, data entry and phone work, in a work area physically separated from the operating hazards by floors, walls, partitions, counters or similar barriers. An employee is disqualified by outside sales, by supervising non-clerical staff outside an eligible site, by physical labor, demonstration or instruction, or by doing work included in the employer's basic classification.
• 8742 Salespersons or Collectors, Outside covers sales or collection away from the employer's premises. It excludes employees who deliver merchandise.
• Neither code applies when the basic classification's wording already includes clerical or outside sales.

Payroll for one employee can be divided between two basic classifications only when both are properly assigned to the employer and your payroll records show the actual payroll by classification for that employee. Records must document actual time in each type of work. Estimated or percentage allocations are not permitted. Without such records, the employee's entire payroll goes to the highest-rated classification that represents any part of the work (NCRB, Rule 2-G).

Standard exception codes cannot be split off. Codes 8810, 8871 (clerical telecommuter), 8742 and 8748 (automobile salespersons) are not available for division of payroll. When an employee whose payroll is divided between basic codes also does clerical or sales work, that payroll goes to the basic code with the most of that employee's payroll (NCRB, Rule 2-G).

A hypothetical example: an installation technician who spends a few hours a week scheduling jobs at a desk is not partly a clerical employee. The office time is part of the technician's job, and all of that payroll stays in the installation classification. Timesheets do not change this; 8810 requires duties limited to clerical work in a separated area.

Holiday, vacation, sick pay and overtime for a split employee go to the code with the most of that employee's payroll (NCRB, Rule 2-G).

1. Copy the code and wording from Item 4 for each state.
2. Read the official classification wording, not a summary. In California, use the WCIRB's Classification Search. New York publishes its classifications in Part Two of the NYCIRB manual. In NCCI states, use NCCI's Class Look-Up or ask your insurer for the full wording.
3. Compare the wording with your operations: what you make, sell or install, where the work happens and what equipment is used.
4. Test each standard exception against the 8810 and 8742 conditions above.
5. Gather the records that show who does what: payroll by employee, timesheets or job tickets, job descriptions, and photos of separated office space.

A simple worksheet for each job role helps:

In most NCCI states

NCCI's process covers disputes over the application of NCCI manual rules, including the correct class code and the allocation of payroll among codes (NCCI, Dispute Resolution Process):

1. Try to resolve it with the insurer. Pay all undisputed premium, and give the insurer an estimate of the premium in dispute with a written explanation of your calculation. Keep all correspondence.
2. Ask NCCI for dispute resolution. Send a written request to NCCI's Dispute Resolution Services with the premium estimate, proof of payment of undisputed premium, documents and a description of your attempts to resolve it. Send a copy to the insurer at the same time.
3. Work with the NCCI consultant. The consultant contacts both sides and tries to reach a resolution. NCCI may inspect the business, but an inspection describes current operations and is not binding on a past policy period.
4. Appeals board or committee. If there is still no agreement, the dispute can go to the state's Workers Compensation Appeals Board or Committee. You take part by phone or in person, and the written decision explains how and by when you can appeal further.

Carriers and policyholders can also request an NCCI classification inspection for a fee (NCCI, Classification Inspection Program).

In California

The Department of Insurance describes these steps (California Department of Insurance, workers' compensation guide):

• Ask the broker-agent or underwriter to explain the code. If an insurer changes a code and premium goes up, it must tell you in writing within 30 days (Insurance Code section 11753.1(b)).
• If the dispute continues, file a written complaint with the insurer, then an appeal with the Department of Insurance.
• To dispute a WCIRB classification decision, file a written inquiry with the WCIRB. If it is denied or not answered within 90 days, serve a Complaint and Request for Action. If that is rejected or not acted on within 30 days, appeal to the Department of Insurance.

For other independent bureau states, start with your insurer and the state bureau listed in our EMR letter guide. A corrected code also changes how audited payroll is reported, so read our workers' comp audit checklist before the next audit.

If you want help sorting out the coverage questions behind a classification problem, you can request coverage help from PolicyBenchmark.