Don't Let Class Codes Trip You Up: A Quick Guide to Common Misclassifications
Properly classifying a business for a workers' compensation policy is one of the most critical steps in the underwriting process. A small mistake here can lead to big problems down the road, including inaccurate premiums, unexpected audit surprises, and even coverage issues.
Remember, the golden rule is to classify the entire business, not just an individual employee's job. Ask yourself: "What is this business primarily in the business to do?"
To help you get it right the first time, here are some of the most common class code misclassifications we see and how to avoid them.
1. Clerical vs. Everything Else (Code 8810)
The Clerical Office Employees (Code 8810) class code is often misused. It is only for employees who spend 100% of their time in an office performing administrative tasks.
When to use it:
- An employee whose sole job is answering phones, data entry, and filing from a desk in a dedicated office space.
When to avoid it:
- The business's primary operation is not clerical (e.g., a construction company's office staff).
- The employee occasionally visits job sites, a warehouse, or performs any non-office work.
- The role involves direct customer interaction outside of the office.
If an employee's job isn't entirely clerical, their payroll should be included under the business's main governing class code.
2. Construction Executive vs. Hands-On Supervision (Code 5606)
The Construction Executive (Code 5606) code is very specific. It's for managers who oversee projects indirectly, supervising through on-site foremen or superintendents.
When to use it:
- A project manager who primarily works from an office, visiting sites only to confer with a dedicated on-site supervisor.
When to avoid it:
- The manager directly supervises workers on a job site.
- The manager performs any physical, "hands-on" construction work.
- The job site does not have a dedicated foreman or supervisor.
If a manager directly oversees a crew or performs physical work, they should be classified under the code for the highest-rated work they supervise—most often Residential Carpentry (Code 5645).
3. Carpentry's Different Hats (Codes 5645, 5403, & 5437)
Carpentry isn't a one-size-fits-all class code. It's crucial to select the right one based on the type of work and the building.
- Residential Carpentry (Code 5645): For all carpentry work on residential homes up to three stories, including framing, siding, structural work, and interior trim. This is a very broad code.
- Commercial Carpentry (Code 5403): For carpentry on commercial buildings or residential buildings that are over three stories.
- Interior Trim (Code 5437): This code is for specialists who only perform interior finish work, such as installing cabinets, molding, or wood flooring, and do not do any framing or structural work.
Important: If an employee performs multiple types of carpentry and you can't separate their payroll, you must assign all their pay to the highest-rated code that applies (typically 5645).
4. Warehousing vs. Wholesale (Codes 8292 & 8018)
This is one of the most frequently misclassified scenarios. It all comes down to a single question: Does the business own the goods it stores?
- Storage Warehouse (Code 8292): Use this code only if the business stores goods for other companies and has no ownership in the merchandise. They are a third-party logistics provider.
- Wholesale Store (Code 8018): Use this code if the business owns its own goods that are being stored. This also applies to businesses involved in e-commerce, mail-order, or pick-pack-and-ship operations.
If a business sells the goods it stores, it's a wholesale business, not a storage warehouse.
5. Ground-Level Landscaping vs. Tree Work (Codes 9102 & 0042)
The landscaping codes are meant for work performed at ground level only.
- Lawn Maintenance (Code 9102): For maintaining existing lawns, gardens, and landscaping, including mowing, weeding, and spraying.
- Landscaping/Gardening (Code 0042): For installing new landscaping, sod, and planting.
When to avoid them:
- The work involves tree removal or tree trimming, especially when it requires employees to work from ladders, lifts, or by climbing. This work falls under the much higher-hazard code Tree Pruning, Repairing or Trimming (Code 0106), which we do not write.
6. Appliance Repair vs. Appliance Delivery (Code 9519)
The Appliance Repair (Code 9519) code is for businesses that primarily install, service, or repair electrical appliances. It is not for delivery services.
When to avoid it:
- The business's primary function is delivering appliances without offering repair or service. In this case, it may be a delivery or trucking service, which likely falls under a different, unwritten class code.
Take Action: What to Do If You're Unsure
Navigating class codes can be complex, but you don't have to do it alone.
- Use NCCI's class look-up tool to research codes and their descriptions.
- A simple Google search of the business's operations can often point you in the right direction.
- If you're still unsure, don't hesitate to reach out to EverPeak or Attune for help. We're here to support you in writing an accurate policy.
By getting the classification right upfront, you'll save everyone time and prevent premium surprises, ensuring a positive experience for your clients.
