Most people understand that your claims history directly impacts how much you pay for insurance coverage. But many people don’t realize that employee classification is also a powerful influencer in pricing workers’ compensation.
Employee Classification
The National Council on Compensation Insurance (NCCI), the nation’s governing workers’ compensation rating organization, categorizes occupations into numerous classifications, depending on the nature and accident history of each line of work. NCCI establishes an appropriate rating for each classification that allows workers’ compensation carriers to provide effective, equitable coverage.
If a district classifies its employees incorrectly, it adversely impacts the Pool as a whole by driving rates up for all members who employ those same classes of workers. The district could also be in violation of federal law. For more on the legal aspects of this topic, read our article “Are You Putting Your Employees in the Right Box?”
We take measures to discover if members employ classes not listed in their coverage, but most of our data comes from you. It is critical for the Pool to have accurate data in order to offer fair rates. If we learn that a district’s employees are misclassified, we will make the adjustment, which could result in an unexpected bill that the district had not budgeted for. Conversely, if an employee is classified under a classification deemed less hazardous, your district might be leaving money on the table.
Here is a short list of some of the most common misclassifications within the Pool:
Childcare, day camp, or country club
Many park and recreation workers fall under class code 9063, which NCCI describes as “YMCA workers.” However, if your district also offers childcare services or runs a day camp, a separate class code, 8869, is appropriate. That code includes daycare workers and the like.
If your district operates a country club, you will need to classify those employees under class code 9060. That code applies to country, golf, fishing, ski, and yacht clubs—where the majority of employees work outdoors engaged in activities associated with outdoor sports. Employees assigned to this classification would include managers, teaching professionals or instructors, bar or restaurant personnel, swimming pool and tennis court employees, and office employees.
Park maintenance
While the code for YMCA workers works for many park and recreation employees, it doesn’t apply to all of them. Employees who maintain parks and hiking trails should be classified as park maintenance employees, which is code 9102.
Waterworks operations
Many waterworks districts assign clerical office employees to perform work outside of the office, such as reading water meters. Even though the assignments are temporary, they fall under a different classification because NCCI did not contemplate the risks of those activities when setting the rates for the clerical work class code.
Transportation services
If your district provides transportation to customers or employees, drivers should be under the class code for chauffeurs, which is 7380. For example, a water district utilizes a van to shuttle employees to work on a daily basis. Any employee who drives the van may need to be classified under this particular class code.
Sometimes, however, it is more cost effective to hire a third party for transportation services to avoid additional workers’ compensation contribution and more importantly, unforeseen claims costs in the event of an employee auto accident.
Ambulance services
While many ambulance drivers fall under the code 7370 for ambulance drivers and EMS attendants, there is also another option. A hospital district providing certified ambulance services should be classifying that labor under the less expensive class code for certified ambulance and EMS providers, which is 7705.
Board members performing additional duties
If a board member is performing services outside of their strictly administrative board duties, there is no coverage under board member class code of 8811. A separate class code is required for each separate task, including activities such as planting flowers or shoveling snow.
Independent contractors
If your district hires a contractor without proof of insurance, the district must do one of the following: (1) require the independent contractor to submit a certificate of workers’ compensation insurance prior to starting work; (2) require the independent contractor to sign a written agreement confirming independent contractor status (ask us for the form); or (3) extend the district’s workers’ compensation coverage to the independent contractor and pay additional contribution.
It might seem like a lot, but all you need to do is review the district’s most current workers’ compensation invoice to see if the employee classifications make sense to you. We are here to help if you have any questions, concerns, or need assistance with your employee classifications.
For more on this topic, including tips on properly reporting payroll, read “Ask the Experts: Reporting Payroll for WC Coverage.”
