Classification and Rating Committee

Transcription

1 Meeting Agenda Date Time Location Staff Contact June 14, :00 AM Hotel Nikko Brenda J. Keys Bay View Room 25 th Floor 222 Mason Street San Francisco, CA 525 Market Street, Suite 800 San Francisco, CA Fax Released: May 31, 2013 To Members of the Classification and Rating Committee, WCIRB Members and All Interested Parties: This meeting is Open to the Public. I. Approval of Minutes Meeting held March 5, 2013 II. III. Unfinished Business New Business A. CR : Potential January 1, 2015 Changes to Experience Rating B. CR : Draft Report on the 2013 Study of Dual Wage Thresholds C. CR : Draft Report on Dual Wage Construction or Erection Classifications Time Card Verification of Hourly Wage D. CR : Draft Report on the Dual Wage Threshold for the Painting Industry E. CR : Draft Report on Farmers Markets and Amusement Parks or Exhibitions F. CR : Draft Report on Concrete Sawing or Drilling Industry G. CR : Draft Report on Retail Dry Cleaning or Laundries, Commercial Laundries and Dry Cleaning or Dyeing H. CR : Reporting of Penalty Amounts I. CR : Payroll Remuneration J. CR : Filing Process for Regulatory Changes K. CR : Electronic Data Reporting Requirements L. CR : Report on the Advisory Rulings and Interpretations Companion to the California Workers Compensation Uniform Statistical Reporting Plan 1995 M. CR : Proposed Non-Substantive Amendments Antitrust Notice As members of the Workers Compensation Insurance Rating Bureau of California, you are bound, when involved in meetings or other activities of the WCIRB California, to limit your actions (and discussions other than social ones) to matters relating to the business of the WCIRB California. Matters that do not relate directly to WCIRB California business should be avoided. Members should particularly avoid discussions or conduct that could be construed as intended to affect competition (or access to markets). Thus, as members, you should not discuss or pursue the business interests of individual insurers or others, including, in particular, the plans of individual members involving, or the possibility or desirability of (a) raising, lowering, or stabilizing prices (premiums or commissions); (b) doing business or refusing to do business with particular, or classes of, insurers, reinsurers, agents, brokers, or insureds, or in particular locales; or (c) potential actions that would affect the availability of products or service either generally or in specific markets or locales. 1

2 Released: May 31, 2013 IV. Matters Arising at Time of Meeting V. Next Meeting Date: July 23, 2013 VI. Adjournment Notice The information in this Agenda was developed by the Workers Compensation Insurance Rating Bureau of California (WCIRB) for the purpose of assisting the WCIRB Classification and Rating Committee. The WCIRB cannot make any guarantees if this information is used for any other purpose and the WCIRB shall not be liable for any damages, of any kind, whether direct, indirect, incidental, punitive or consequential, arising from the use of or reliance upon this information for any other purpose. WCIRB California 525 Market Street, Suite 800 San Francisco, CA Tel Fax Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted in this copyright notice or by federal copyright law. Each WCIRB member company, including any registered third party entities, (Company) are authorized to reproduce any part of this work solely for the following purposes in connection with the transaction of workers compensation insurance: (1) as necessary in connection with Company s required filings with the California Department of Insurance; (2) to incorporate portions of this work, as necessary, into Company manuals distributed at no charge only to Company employees; and (3) to the extent reasonably necessary for the training of Company personnel. Each Company and all agents and brokers licensed to transact workers compensation insurance in the state of California are authorized to physically reproduce any part of this work for issuance to a prospective or current policyholder upon request at no charge solely for the purpose of transacting workers compensation insurance and for no other purpose. This reproduction right does not include the right to make any part of this work available on any Web site or through any computer or electronic means for any purpose. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Online, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the Workers Compensation Insurance Rating Bureau of California, 525 Market Street, Suite 800, San Francisco, California

3 Item CR Potential January 1, 2015 Changes to Experience Rating At its June 13, 2012 meeting, the Classification and Rating Committee reviewed potential updates to the current $7,000 primary and excess split point in the Experience Rating Plan formula. The Committee was advised that while the overall indication was to increase the primary and excess split point form $7,000 to $9,000, prior staff research suggested that the threshold should potentially be decreased for smaller employers and increased even further for larger employers. As a result, the Committee agreed that the current $7,000 should at least temporarily be maintained and that staff should commence an analysis of alternative approaches to experience rating smaller employers in After obtaining input from the Actuarial Research Working Group (ARWG) as well as an informal working group of employer and labor representatives, the staff reviewed a wide range of experience rating alternatives (e.g., frequency-based experience rating for smaller employers, plans structured on payroll or expected claim count rather than expected losses, debit/credit schedules for a given number of claims, and multiple split points). While a number of these alternatives were actuarially feasible, concerns were expressed by both the ARWG and the employer and labor representatives with making a major overhaul to the Plan that could (a) create significant shifts and dislocations in employer experience modifications, (b) create potential issues at transition points if the plan was bifurcated based on employer size, (c) would be fundamentally different from experience rating plans in other jurisdictions (most insurers and many employers operate in multiple states) or (d) would require a major effort to re-educate employers, producers and insurers about the new plan. As a result, the staff is not exploring a major restructuring of the Plan at this time, but is continuing to assess whether the performance of the Plan can be significantly improved by varying the primary and excess split point by employer size. In the interim, in response to concerns expressed by employers and others as to the wide fluctuation in smaller employer experience modifications, 2 staff has explored several targeted changes to the Experience Rating Plan formula. Specifically, after considering several alternative approaches with the ARWG, staff is recommending that the Committee consider the following: 1. For employers who have incurred only one claim during the experience rating period, limit the impact of that claim on the experience modification to 25 percentage points. 2. Establish a schedule of maximum debit experience modifications beginning at 200% for the smallest experience rated employers. The staff believes that these refinements should address the volatility of the Plan for smaller employers without significantly impacting the Plan s actuarial performance and with only a modest adjustment (less than 0.5%) to expected losses or the experience rating off-balance to adjust for the experience modification limitations. If the Committee agrees to recommend moving forward in this regard, staff suggests making these changes effective January 1, This effective date will allow sufficient time to make the appropriate changes to the experience rating worksheet and various electronic files distributed related to experience modification calculations and to undertake a comprehensive employer, producer and insurer outreach effort explaining the changes. For employers whose modifications are constrained or their debit modification capped, staff expects to publish on the rate sheet the unconstrained, uncapped modification for informational purposes only. Additional information on the potential changes to the formula as well as a summary of the Actuarial Committee s review of the changes will be presented at the meeting. 1 This recommendation was also made by the WCIRB Actuarial Committee and adopted by the Governing Committee. 2 Under the current formula, a small employer s experience modification can be impacted by 50 points or more by a single claim. 3

4 Item CR Draft Report on the 2013 Study of Dual Wage Thresholds In 2010, the Classification and Rating Committee directed the WCIRB to undertake a multi-year comprehensive review of the thresholds in the dual wage classification system. In 2011, the WCIRB studied eight dual wage classifications, and in 2012 five additional dual wage classifications were studied. Enclosed are draft reports for the final five dual wage classifications: 5185/5186, Automatic Sprinkler Installation; 5484/5485, Plastering or Stucco Work; 6218/6220, Excavation; 6304/6316, Sewer Construction; and 6315/6316, Water/Gas Main or Connections Construction. 4

5 Draft Report on the 2013 Study of Dual Wage Thresholds Executive Summary Objective At the direction of the Classification and Rating (C & R) Committee, the WCIRB commenced a multi-year comprehensive review of the wage thresholds for the construction classifications currently segregated based on hourly wage. In 2011, eight dual wage classifications were studied, and in 2012, an additional five classifications were studied. In 2013, the WCIRB completed the study of threshold values for the remaining five dual wage classifications: Automatic Sprinkler Installation (5185/5186), Plastering or Stucco Work (5484/5485), Excavation (6218/6220), Sewer Construction (6307/6308), and Water/Gas Mains (6315/6316). Findings and Recommendations WCIRB staff conducted a comprehensive wage survey of a random sampling of policyholders engaged in operations assignable to the designated classifications. The sampling comprised 1,220 policyholders encompassing 13,413 employees representing approximately 38% of the total payroll in the classifications under review. Following are the WCRIB s principle findings and recommendations. Classifications 5185/5186, Automatic Sprinkler Installation WCIRB staff finds that at the current threshold of $27 for 5185/5186, Automatic Sprinkler Installation: (a) the volume of experience in both dual wage classifications remains statistically credible with five years of experience, (b) there is a relatively small concentration of wages (10%) within one dollar of the threshold, and (c) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 190%. Staff did not find an alternate threshold that improved on the overall performance of the current threshold. As a result, the WCIRB recommends no change to the current threshold at this time. Classifications 5484/5485, Plastering or Stucco Work WCIRB staff finds that at an increased threshold of $27: (a) there remains a credible volume of experience in both the low wage and high wage classifications, (b) the split of survey employees changes from 66% below the threshold to 75% below the threshold; however the dual wage classification total split based on policy year 2009 and 2010 USR payroll data of 49%/51% remains balanced and credible with three years of experience, (c) the concentration of employees within one dollar of the threshold declines from 10% to 6%, (d) the differential in losses per $100 of payroll between employers with average wages at or above the threshold and those with average wages below the threshold increases from 256% to 315%. Given these findings and that average wages in construction have increased by more than 10% in the five years since the threshold in these classifications was last increased, the WCIRB recommends increasing the threshold for these classifications from $25 to $27. Classifications 6218/6220, Excavation, 6307/6308, Sewer Construction, and 6315/6316, Water/Gas Mains or Connections WCIRB staff finds that at an increased common threshold of $30: (a) the payroll split between the low wage and high wage classifications will improve significantly; (b) credibility in the low wage classifications will be preserved, (c) the loss costs differential improves modestly for each classification and (d) the concentration around the wage threshold improves slightly for Excavation, and worsens slightly for Sewer Construction and Water/Gas Mains. Given these findings, the reduced credibility in the low wage classifications in particular for Sewer Construction and Water/Gas Mains, and that average wages in construction have increased by more than 10% in the five years since the thresholds in these classifications were last increased, the WCIRB recommends increasing the threshold for these classifications from $26 to $30. 5

6 Introduction Effective January 1, 1986, the Dual Classification by Wage Level Program (Program) was adopted by the California Insurance Commissioner for six construction classifications. The Program was adopted following a WCIRB study initiated in response to employer concerns about the potential inequities in premiums paid due to variations in wage levels for construction employees. The study showed that in certain construction classifications, high wage paying employers were, on average, paying more manual premium per loss dollar than low wage paying employers. As a result, the Program was established for six construction classifications that were large enough to be segregated into two statistically credible classifications and for which survey results showed (a) a significant variation in wages paid by employers and (b) a significant disparity in claim costs per $100 of payroll by wage level. The Program involves segregating a classification into two distinct classifications based on the hourly wages paid by employers assigned to the classification. Specifically, an hourly wage threshold is established for each classification. Then, in lieu of a single classification, two classifications are created in which the payroll and claims experience of employees earning hourly wages below the threshold are assigned to one of the two (dual) classifications, and the payroll and claims experience of employees earning hourly wages at or above the threshold are assigned to the other (dual) classification. Since an employer often pays different wages within a single classification based upon a worker s skill and experience level, it is not uncommon for a single employer to have experience assigned to both of the dual classifications. The advisory pure premium rate for each of the dual classifications is based on the payroll and losses reported within that particular classification. Effective January 1, 1992, nine additional construction classifications were added to the Program. Effective January 1, 1995, two additional classifications were added related to Automatic Sprinkler Installation and effective January 1, 1996, four additional construction classifications were added for Steel Framing light gauge, residential and commercial. The wage threshold was originally established for each classification at a level so that (a) both the high and low wage dual classifications would have credible experience, (b) relatively few employees in the classifications were paid wages at a level close to the threshold and (c) there was a significant differential indicated between the losses per $100 of payroll among employers with average wages below the threshold and those with average wages above the threshold. The wage threshold for each dual wage classification has been regularly updated based on wage inflation in the construction industry. In reviewing the impact of wage inflation on a classification threshold, the WCIRB monitors a number of wage inflation indicators, as well as the distribution of reported payroll between high wage and low wage classifications. Threshold increases are recommended when necessary to ensure that each classification maintains its approximate existing constituency and the experience assigned to the lower wage classification remains credible. Given concerns that employees may be inappropriately assigned to the high wage classification, in 2007, the Insurance Commissioner adopted amendments to the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) to clarify how to determine the regular hourly wage for dual wage construction or erection classifications. Specifically, the amendments provided that assignment of the high wage classification to any employee (other than a salaried employee) is contingent on a reconciliation of the number of hours worked against actual time cards or time sheets that document the daily start and stop times for each employee. Determination of an employee s regular hourly wage requires employers to produce records to verify the number of actual hours worked as well as actual time cards or time sheets that document the daily start and stop times for each employee. The changes were adopted effective on policies incepting on or after January 1,

7 Additional concerns were voiced by industry representatives during outreach meetings conducted by the WCIRB in 2012 over the assignment of employee wages to the high wage classification. In response, the WCIRB proposed and the Insurance Commissioner adopted amendments to the USRP requiring regular physical audits of policies producing final premium of less than $10,000 and developing exposure in a high wage dual classification. These changes are effective on policies incepting on or after January 1, Existing regulations already require annual audits on policies producing final premium of $10,000 or more and those insuring holders of a C-39 Roofing Contractor license from the California Contractors State License Board. Background Given concerns regarding the appropriateness of the current dual wage thresholds which had last been updated in 2009, the C & R Committee directed the WCIRB to undertake a multi-year comprehensive review of the wage threshold for the construction classifications segregated based on hourly wage. In 2011, the WCIRB studied Classifications 5403/5432 and 5645/5697, Carpentry, along with 5630/5631 and 5632/5633, Steel Framing, 5190/5140, Electrical Wiring, 5183/5187, Plumbing, 5474/5482, Painting, and 5538/5542, Sheet Metal Work. Due to anomalies in the data, particularly for the Painting classifications and concerns about the viability of the dual wage system in California, the Governing Committee deferred recommending any changes to the threshold values, and instead, directed the WCIRB to study the viability of the dual wage system in 2012, 1 and to continue wage threshold studies. In 2012, the WCIRB studied five additional dual wage classifications: 5201/5202, Concrete or Cement Work, 5027/5028, Masonry, 5467/5470, Glaziers, 5446/5447, Wallboard Application, and 5552/5553, Roofing. At the August 15, 2012 meeting, the Governing Committee adopted the 2012 study recommendations to retain the existing program structure and to recommend updated wage thresholds based on the results of the WCIRB s comprehensive review of the dual wage thresholds studied in 2011 and As a result, the WCIRB included proposed changes to the wage thresholds for the classifications studied in 2011 and 2012 in the January 1, 2013 Pure Premium Rate Filing. The Governing Committee also directed staff to complete the study of the remaining dual wage thresholds in While many of the filed changes to the threshold values were approved by the Insurance Commissioner, the changes to Plumbing, Electrical Wiring and Sheet Metal Work were not adopted. Table 1 summarizes the dual wage classifications studied in 2011 and 2012, the recommended threshold values and the 2013 wage thresholds. Dual Wage Classification Table 1 Dual Wage Classification Summary Year Established Recommended 2013 Threshold Adopted 2013 Threshold /5028, Masonry 1992 $27 $ /5187, Plumbing 1986 $29 $ /5140, Electrical Wiring 1986 $30 $ /5205, Concrete or Cement Work 1992 $24 $ /5432, Carpentry* 1986 $29 $ /5447, Wallboard Application 1992 $31 $31 1 Comprehensive Evaluation of California s Dual Wage Classifications 7

8 Dual Wage Classification Year Established Recommended 2013 Threshold Adopted 2013 Threshold /5470, Glaziers 1992 $29 $ /5482, Painting 1986 $24 $ /5542, Sheet Metal Work 1986 $28 $ /5633, Steel Framing light gauge commercial** 1986 $29 $ /5553, Roofing 1992 $23 $23 * 5645/5697, Carpentry private residence, was consolidated with Carpentry, in 2012 ** 5630/5631, Steel Framing light gauge residential, was consolidated with Steel Framing light gauge, in Dual Wage Threshold Study by Classification In 2013, the WCIRB studied the threshold values for the remaining five dual wage classifications: Automatic Sprinkler Installation (5185/5186), Plastering or Stucco Work (5484/5485), Excavation (6218/6220), Sewer Construction (6307/6308), and Water/Gas Mains (6315/6316). The current wage thresholds for these classifications are summarized in Table 2. Dual Wage Classification Table 2 Threshold Values Year Established Original Threshold 2013 Threshold /5186, Automatic Sprinkler Installation 1995 $21 $ /5485, Plastering or Stucco Work 1992 $18 $ /6220, Excavation 1992 $21 $ /6308, Sewer Construction 1992 $19 $ /6316, Water/Gas Mains 1992 $19 $26 As part of the study, WCIRB staff reviewed several sources of wage inflation to help assess how wages are growing in the construction industries. In the five years since the dual wage thresholds were last increased effective January 1, 2009, UCLA Anderson Forecast projects statewide average wages across construction to grow by approximately 10.8% (1.8% in 2009, 0.1% in 2010, 4.7% in 2011, 3.4% in 2012 and 0.4% in 2013). The California Department of Finance (DOF) forecasts the average increase in annual wages in construction as 1.8% in 2009, 0.1% in 2010, 3.6% in 2011, 4.5% in 2012 and 2.6% in 2013; or 13.2% for the five years since the thresholds included in this study were last increased. The WCIRB s studies of the dual wage classifications primarily involved surveying hundreds of employers in each pair of dual wage classifications to obtain hourly wage information for each of their employees for a specified time period and then linking the information on wages gathered through the survey with the individual employer s loss and payroll history reported to the WCIRB. Prior to beginning the wage level surveys, the WCIRB contacted the trade associations related to the affected classifications in November and December 2011 and advised that the survey would be conducted during January through March of The WCIRB then used unit statistical data to select a random sample of employers stratified by size 8

9 with reported payroll in the dual wage classifications being studied. WCIRB staff visited the selected policyholders to obtain the employee hourly wage for each employee assigned to the dual wage classifications for the week of October 17-21, Employee hourly wage data was obtained from 1,220 employers, representing 13,413 employees in the dual wage classifications being studied in Survey wages were rounded to the nearest dollar. For each surveyed policyholder, a payroll and loss history in the affected classifications was obtained from WCIRB unit statistical records for the two most current policy years, 2009 and 2010 (on a preliminary basis). The results of the 2013 wage level surveys and the WCIRB analysis are summarized separately for each of the dual wage classifications studied. Classifications 5185/5186, Automatic Sprinkler Installation Dual wage classifications 5185/5186 were established in 1995 with the further expansion of the dual wage program. The threshold wage, currently at $27, was originally established at $21 and has been increased over the years as summarized in Table 3. Table 3 Automatic Sprinkler Installation Hourly Wage Thresholds Effective Date (Jan 1) Hourly Wage Threshold 1995 $ $ $ $ $ $ $27 9

10 The January 1, 2013 advisory pure premium rate for the low wage Classification 5185 is $9.10 per $100 of payroll, which is 327% of the 2013 advisory pure premium rate of $2.78 for the high wage Classification Table 4 summarizes the advisory pure premium rates for automatic sprinkler installation over the past ten years as of January 1 each year. The differential in the advisory pure premium rate for the 5185 and 5186 dual wage classification has been consistently among the highest of all the pairs of dual wage classifications. Table 4 Automatic Sprinkler Installation Advisory Pure Premium Rates and Rate Relativities Effective Date (January 1) Low Wage Rate High Wage Rate Low Wage/High Wage Rate Relativity 2013 $9.10 $ % 2012 $7.22 $ % 2011 $5.26 $ % 2010 $5.37 $ % 2009 $5.27 $ % 2008 $4.74 $ % 2007 $6.12 $ % 2006 $7.75 $ % 2005 $11.06 $ % 2004 $13.77 $ % 10

11 Surveyed Employees by Hourly Wage The percentage of low wages to total payroll for the classification was 51% in 1997, allowing for full implementation of the classifications. For policy year 2009, 44% of the payroll was in the low wage classification. Table 5 summarizes the survey results distribution of hourly wages comprising 221 employers with 2,087 employees representing 58% of the payroll of the automatic sprinkler installation dual wage classifications. Table 5 Number of Surveyed Employees by Hourly Wage Level Based on Sample of 221 Employers Number of Employees in Hourly Wage Range Hourly Wage Range Based on the survey data, there is a credible volume of experience in the automatic sprinkler installation classifications with averages wage both below (47% of surveyed employees) and above (53% of surveyed employees) the current wage threshold. There is a small concentration in wages around the current wage threshold of $27 with 10% of the total sample distribution within one dollar of the current threshold. The largest concentration of employees, 183 (9%) occurs in the $13 to $15 wage range, followed by 167 (8%) employees in the $51 and above wage range. The lowest concentration of employees in the low wage classification is in the $26 range and the lowest concentration in the high wage classification is in the $47 to $48 range. 11

12 Payroll by Employer Average Wage Table 6 shows the percentage of surveyed employers whose average wage for all automatic sprinkler installation employees falls within a particular range (e.g., the $20 label represents a range from $20.00 to $20.99). The table shows that the employer average wage distribution varies across wage intervals ranging from 0% to almost 8% for each dollar interval with greater concentrations in the low wage classification. Table 6 Percent of Total Employers by Employer Average Wage Level % 8% 7% Percent of Surveyed Employers 6% 5% 4% 3% 2% 1% 0% Hourly Wage Range

13 Employers Payroll by Employer Average Wage Table 7 shows, for each wage range, the total automatic sprinkler installation payroll of all surveyed employers whose average wage falls within that range, as a percentage of the total automatic sprinkler installation payroll of all surveyed employers. This table illustrates the spread between the low wage and high wage employers. Based on the surveyed employers payroll, there is a greater concentration of high wage employers representing 65% of the survey, with the greatest concentration (30%) of wages falling in the range $36 per hour to $40 per hour for high wage employers. Table 7 25% Percent of Survey Payroll by Employer Average Wage Level % Percent of Survey Payroll 15% 10% 5% 0% Hourly Wage Range

14 Loss Cost per $100 of Payroll Differential Table 8 depicts for each wage range, the loss cost per $100 payroll for all surveyed employers whose average wage falls within that range, relative to the average loss cost per $100 of payroll, for all of the surveyed employers. Please note the losses used in this analysis are developed and limited to $100,000 to mitigate the extremes caused by large losses when classification data is reviewed at the more granular levels presented herein. The loss cost per $100 of payroll of the surveyed employers with average wages below the current threshold of $27 is 287% of that of surveyed employers at or above the threshold. Table 8 The WCIRB reviewed alternate thresholds but did not find any that improved on the overall performance of the current threshold value. The current payroll distribution between 5185 and 5186 is fairly well balanced with a 47%/53% distribution in the survey data and 44%/56% in policy year 2009 experience. An increase in threshold value would improve the balance; however, the the loss cost differential per $100 of payroll is eroded as more favorable experience is included in the low wage classification. At a lower threshold value, the payroll distribution in the low wage classification declines eroding credibility in the low wage classification below the level usually targeted in dual wage classifications. 14

15 The WCIRB also reviewed the loss cost differentials by the size of the surveyed automatic sprinkler installation employers. Table 9 shows the loss cost relativity by employer size. In this table, employer size is defined by the number of employees, rather than by total payroll or total premium, and larger employers generally have lower relative loss costs. Table 9 Automatic Sprinkler Installation Loss Cost Relativity by Size of Employer Size of Employer: Number of Employees Loss Cost Relativity 0 to % 11 to % 31 and over 52% Summary Findings and Recommendations The WCIRB finds that at the current threshold of $27 for 5185/5186, Automatic Sprinkler Installation: (a) the volume of experience in both dual wage classifications remains statistically credible with five years of experience, (b) there is a relatively small concentration of wages (10%) within one dollar of the threshold, and (c) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 287%. The WCIRB did not find an alternate threshold that improved the overall performance of the current threshold which provides reasonably balanced payroll between the two classifications, no significant concentration of wages around the threshold value and a significant loss cost differential between the two classifications. 2 As a result, the WCIRB recommends no change to the current threshold for the automatic sprinkler installation classifications at this time. Classifications 5484/5485, Plastering or Stucco Work Dual wage classifications 5484/5485 were established in 1992 with expansion of the dual wage program. The threshold wage, currently at $25, was originally established at $18 and has been increased over the years as summarized in Table 10. Table 10 Plastering or Stucco Work Hourly Wage Thresholds Effective Date (Jan 1) Hourly Wage Threshold 1992 $ $ $ $ $ $ $25 2 A higher threshold improves the distribution of employees by hourly wage but not the loss cost differential. A lower threshold reduces the payroll distribution in the low wage classification eroding credibility of the low wage classification below the level usually targeted in dual wage classifications. 15

16 The January 1, 2013 advisory pure premium rate for the low wage classification 5484 is $17.41 per $100 of payroll, which is 181% of the 2013 advisory pure premium rate of $9.60 for Classification Table 11 summarizes the advisory pure premium rates for plastering or stucco work over the past ten years as of January 1 each year. Table 11 Plastering or Stucco Work Advisory Pure Premium Rates and Rate Relativities Effective Date (January 1) Low Wage Rate High Wage Rate Low Wage/High Wage Rate Relativity 2013 $17.41 $ % 2012 $12.11 $ % 2011 $9.28 $ % 2010 $9.34 $ % 2009 $9.66 $ % 2008 $8.30 $ % 2007 $11.65 $ % 2006 $13.03 $ % 2005 $16.92 $ % 2004 $19.68 $ % 16

17 Surveyed Employees by Hourly Wage The percentage of low wages to total payroll for the classification was 57% in 1994, allowing for full implementation of the classifications. For policy year 2009, 49% of the payroll was in the low wage classification. Table 12 summarizes the survey results distribution of hourly wages comprising 188 employers with 1,841 employees representing 45% of the plastering or stucco work dual wage classifications. Table 12 Number of Surveyed Employees by Hourly Wage Level Based on Sample of 188 Employers Number of Employees in Hourly Wage Range Hourly Wage Range Based on the survey data, there is a credible volume of experience in the plastering or stucco work classifications with averages wages both below (66% of surveyed employees) and above (34% of surveyed employees) the current wage threshold. There is a small concentration in wages around the current wage threshold of $25 with 10% of the total sample distribution within one dollar of the current threshold. The largest concentration of employees, 321 (17%) occurs in the $13 to $15 wage range, followed by 167 (9%) employees in the $18 wage range. The lowest concentration of employees in the low wage classification is in the $24 range and the lowest concentration in the high wage classification is in the $47 to $48 range. 17

18 Payroll by Employer Average Wage Table 13 shows the percentage of surveyed employers whose average wage for all plastering or stucco work employees falls within a particular range (e.g., the $20 label represents a range from $20.00 to $20.99). The table shows that the employer average wage distribution varies across wage intervals ranging from 0% to over 10% for each dollar interval with greater concentrations in the low wage classification. Table 13 Percent of Total Employers by Employer Average Wage Level 12% % Percent of Surveyed Employers 8% 6% 4% 2% 0% Hourly Wage Range

19 Employers Payroll by Employer Average Wage Table 14 shows, for each wage range, the total plastering or stucco work payroll of all surveyed employers whose average wage falls within that range, as a percentage of the total plastering or stucco work payroll of all surveyed employers. This table illustrates the spread between the low wage and high wage employers. Based on the surveyed employers payroll, there is a greater concentration of low wage employers representing 57% of the survey, with the greatest concentration (27%) of wages falling in the range $13 per hour to $16 per hour for low wage employers. Table 14 Percent of Survey Payroll by Employer Average Wage Level 18% % 14% 12% Percent of Survey Payroll 10% 8% 6% 4% 2% 0% Hourly Wage Range

20 Loss Cost per $100 of Payroll Differential Table 15 depicts for each wage range, the loss cost per $100 payroll for all surveyed employers where the average wage falls within that range, relative to the average loss cost per $100 of payroll, for all of the surveyed employers. Please note the losses used in this analysis are developed and limited to $100,000 to mitigate the extremes caused by large losses when classification data is reviewed at the more granular levels presented herein. The loss cost per $100 of payroll of the surveyed employers with average wages below the current threshold of $25 is 256% of that of surveyed employers at or above the threshold. Table 15 20

21 Based on the survey data, the WCIRB reviewed alternate threshold values and determined that there is improvement in the differential in loss costs per $100 of payroll between employers paying average wages at or above a $27 threshold as shown in Table 16. The loss cost per $100 of payroll of the surveyed employers with average wages below a threshold of $27 is 315% of that of surveyed employers at or above a $27 threshold. The survey payroll percentage in the low wage classification increases to 75% from 66%; however, for both policy year 2009 and preliminary policy year 2010, 49% of payroll was in the low wage classification which is credible with three years of experience. In addition, the concentration in payroll within one dollar of a $27 threshold declines to 6%. Table 16 21

22 The WCIRB also reviewed the loss cost differentials by the size of the surveyed plastering or stucco work employers. Table 17 shows the loss cost relativity by employer size. In this table, employer size is defined by the number of employees, rather than by total payroll or total premium. For most classifications, larger employers generally have lower relative loss costs.however, for the plastering and stucco dual wage classifications, the larger employers tended to be low wage employers and had signiciantly higher than average loss cost levels. Table 17 Plastering or Stucco Work Loss Cost Relativity by Size of Employer Size of Employer: Number of Employees Loss Cost Relativity 0 to 10 69% 11 to 30 69% 31 and over 182% Summary Findings and Recommendations WCIRB finds that at the current threshold of $25 for 5484/5485, Plastering or Stucco Work: (a) the volume of experience in both dual wage classifications remains statistically credible with three years of experience, (b) the survey distribution of employees between low wage and high wage employers is 66%/34%; however, the distribution is 49%/51% for both policy year 2009 and preliminary policy year 2010, (c) there is a relatively small concentration of wages (10%) within one dollar of the threshold, and (d) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 256%. Alternately, at a threshold of $27, staff finds: (a) there remains a credible volume of experience in both the low wage and high wage classifications, (b) the split of survey employees changes from 66% below the threshold to 75% below the threshold; however, the dual wage classification total split based on policy year 2009 and 2010 USR payroll data of 49%/51% will remain reasonably balanced and credible with three years of experience, (c) the concentration of employees within one dollar of the threshold declines from 10% to 6%, and (d) the differential in losses per $100 of payroll between employers with average wages at or above the threshold and those with average wages below the threshold increases from 256% to 315%. Given these findings and that average wages in construction have increased by more than 10% in the five years since the last increase in the threshold, staff recommends increasing the threshold for these classifications from $25 to $27. 22

23 Classifications 6218/6220, Excavation Dual wage classifications 6218/6220 were established in 1992 with expansion of the dual wage program. The threshold wage, currently at $26, was originally established at $21 and has been increased over the years as summarized in Table 18. Table 18 Excavation Hourly Wage Thresholds Effective Date (Jan 1) Hourly Wage Threshold 1992 $ $ $ $ $ $26 In 2006, as part of the study of the wage threshold for 6218/6220, Excavation, 3 it was noted that it is not unusual for employers to engage in operations using the same employees assignable to Classifications 6218/6220 and 6307/6308, Sewer Construction, or 6315/6316, Water/Gas Mains. At the time, the threshold value for 6318/6220 was $25 and the threshold values for 6307/6308 and 6315/6316 were $23. Given concerns over disparate thresholds potentially applicable to the same workers engaged in similar operations, the C & R Committee approved the report recommendations to freeze the threshold for 6218/6220 at $25 until such time that 6307/6308 and 6315/6316 reach a common threshold which occurred in May 17, 2006 Manual Subcommittee Meeting Minutes for Item II MS Study of the Dual Wage Threshold. 23

24 The January 1, 2013 advisory pure premium rate for the low wage Classification 6218 is $9.27 per $100 of payroll, which is 144% of the 2013 advisory pure premium rate of $6.43 for Classification Table 19 summarizes the advisory pure premium rates for excavation over the past ten years as of January 1 each year. Table 19 Excavation Advisory Pure Premium Rates and Rate Relativities Effective Date (January 1) Low Wage Rate High Wage Rate Low Wage/High Wage Rate Relativity 2013 $9.27 $ % 2012 $6.70 $ % 2011 $5.50 $ % 2010 $5.67 $ % 2009 $6.12 $ % 2008 $5.58 $ % 2007 $5.65 $ % 2006 $7.10 $ % 2005 $10.99 $ % 2004 $12.15 $ % 24

25 Surveyed Employees by Hourly Wage The percentage of low wages to total payroll for the classification was 50% in 1994, allowing for full implementation of the classifications. For policy year 2009, only 30% of the payroll was in the low wage classification. Table 20 summarizes the survey results distribution of hourly wages comprising 420 employers with 5,412 employees representing 30% of the excavation dual wage classifications. Table 20 Number of Surveyed Employees by Hourly Wage Level Based on Sample of 420 Employers Number of Employees in Hourly Wage Range Hourly Wage Range Based on the survey data, there is a credible volume of experience in the excavation classifications with average wages both below (26% of surveyed employees) and above (74% of surveyed employees) the current wage threshold. There is a concentration in wages around the current wage threshold of $26 with 12% of the total sample distribution within one dollar of the current threshold. The largest concentration of employees, 456 (8%) occurs in the $39 to $40 wage range, followed by 337 (6%) employees in the $41 to $42 wage range. The highest concentration of employees in the low wage classification is in the $13 to $15 wage range with 253 employees (5%). 25

26 Payroll by Employer Average Wage Table 21 shows the percentage of surveyed employers whose average wage for all excavation employees falls within a particular range (e.g., the $20 label represents a range from $20.00 to $20.99). The table shows that the employer average wage distribution varies across wage intervals ranging from 1% to over 6% for each dollar interval with greater concentrations in the high wage classification. Table 21 Percent of Total Employers by Employer Average Wage Level 7% % 5% Percent of Surveyed Employers 4% 3% 2% 1% 0% Hourly Wage Range

27 Employers Payroll by Employer Average Wage Table 22 shows, for each wage range, the total excavation payroll of all surveyed employers whose average wage falls within that range, as a percentage of the total excavation work payroll of all surveyed employers. This table illustrates the spread between the low wage and high wage employers. Based on the surveyed employers payroll, there is a greater concentration of high wage employers representing 84% of the survey with the greatest concentration (33%) of wages falling in the range of $30 per hour to $33 per hour for high wage employers. Table 22 Percent of Survey Payroll by Employer Average Wage Level 12% % 8% Percent of Survey Payroll 6% 4% 2% 0% Hourly Wage Range

28 Loss Cost per $100 of Payroll Differential Table 23 depicts, for each wage range, the loss cost per $100 payroll for all surveyed employers whose average wage falls within that range, relative to the average loss cost per $100 of payroll, for all of the surveyed employers. Please note the losses used in this analysis are developed and limited to $100,000 to mitigate the extremes caused by large losses when classification data is reviewed at the more granular levels presented herein. The loss cost per $100 of payroll of the surveyed employers with average wages below the current threshold of $26 is 134% of that of surveyed employers at or above the threshold. Table Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range 28

29 Based on the survey data the WCIRB reviewed alternate threshold values and determined that there is improvement in the differential in loss costs per $100 of payroll between employers paying average wages at or above a $30 threshold as shown in Table 24. The loss cost per $100 of payroll of the surveyed employers with average wages below a threshold of $30 is 158% of that of surveyed employers at or above a $30 threshold. The survey payroll percentage in the low wage classification increases from 26% to 46% and will improve credibility in the low wage classification. The concentration of employees within one dollar of the threshold is reduced slightly from 12% to 11%. Table Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range 29

30 The WCIRB also reviewed the loss cost differentials by the size of the excavation employers. Table 25 shows the loss cost relativity by employer size. In this table, employer size is defined by the number of employees rather than by total payroll or total premium, and larger employers generally have lower relative loss costs. Table 25 Excavation Loss Cost Relativity by Size of Employer Size of Employer: Number of Employees Loss Cost Relativity 0 to % 11 to 30 94% 31 and over 66% Summary Findings The WCIRB finds that at the current threshold of $26 for 6218/6220, Excavation: (a) the volume of experience in both dual wage classifications remains statistically credible, (b) the survey distribution between low wage and high wage employers is 26% / 74%, consistent with the policy year 2009 distribution of 30% and 70%, (c) there is a relatively high concentration of wages (12%) within one dollar of the threshold, and (d) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 134%. Alternately, at a threshold of $30, the WCIRB finds: (a) the dual wage classification payroll split will improve and the number of employees in the survey with wages below the threshold increases from 26% to 46%, (b) credibility significantly improves in the low wage classification, (c) the concentration of employees within one dollar of the threshold is reduced slightly from 12% to 11%, and (d) the differential in losses per $100 of payroll between employers with average wages at or above the threshold and those with average wages below the threshold increases from 134% to 158%. 30

31 Classifications 6307/6308, Sewer Construction Dual wage classifications 6307/6308 were established in 1992 with expansion of the dual wage program. The threshold wage was originally established at $19 and has been increased over the years as summarized in Table 26. In 2008, the wage threshold achieved parity with the wage threshold for 6218/6220, Excavation. As adopted by the C & R Committee in 2006, the wage threshold for 6307/6308 is maintained at a consistent level with 6218/6220, Excavation, and 6315/6316, Water/Gas Mains. Table 26 Sewer Construction Hourly Wage Thresholds Effective Date (Jan 1) Hourly Wage Threshold 1992 $ $ $ $ $ $ $26 31

32 The January 1, 2013 advisory pure premium rate for the low wage Classification 6307 is $12.10 per $100 of payroll, which is 141% of the 2013 advisory pure premium rate of $8.56 for Classification Table 27 summarizes the advisory pure premium rates for Sewer Construction over the past ten years as of January 1 each year Table 27 Sewer Construction Advisory Pure Premium Rates and Rate Relativities Effective Date (January 1) Low Wage Rate High Wage Rate Low Wage/High Wage Rate Relativity 2013 $12.10 $ % 2012 $11.29 $ % 2011 $8.11 $ % 2010 $8.32 $ % 2009 $7.07 $ % 2008 $8.26 $ % 2007 $9.62 $ % 2006 $13.34 $ % 2005 $16.63 $ % 2004 $20.61 $ % 32

33 Surveyed Employees by Hourly Wage The percentage of low wages to total payroll for the classification was 36% in 1994 allowing for full implementation of the classifications. For policy year 2009, only 19% of the payroll was in the low wage classification. At this low percentage, the low wage classification is not fully credible with five years of experience. Conversely, the high wage classification is fully credible with four years of experience. Table 28 summarizes the survey results distribution of hourly wages comprising 188 employers with 1,594 employees representing 44% of the Sewer Construction dual wage classifications. Table 28 Number of Surveyed Employees by Hourly Wage Level Based on Sample of 188 Employers Number of Employees in Hourly Wage Range Hourly Wage Range Based on the survey data, there is a representative volume of experience in the Sewer Construction classifications with averages wage both below (23% of surveyed employees) and above (77% of surveyed employees) the current wage threshold. There is a concentration in wages around the current wage threshold of $26 with 14% of the total sample distribution within one dollar of the current threshold. The largest concentration of employees, 129 (8%) occurs in the $30 wage range, followed by 127 (8%) employees in the $27 wage range. The highest concentration of employees in the low wage classification is in the $13 to $15 wage range with 52 employees (3%). 33

34 Payroll by Employer Average Wage Table 29 shows the percentage of surveyed employers whose average wage for all Sewer Construction employees falls within a particular range (e.g., the $20 label represents a range from $20.00 to $20.99). The table shows that the employer average wage distribution varies across wage intervals ranging from 0% to over 6% for each dollar interval with greater concentrations in the high wage classification. Table 29 Percent of Total Employers by Employer Average Wage Level 7% % 5% Percent of Surveyed Employers 4% 3% 2% 1% 0% Hourly Wage Range

35 Employers Payroll by Employer Average Wage Table 30 shows, for each wage range, the total Sewer Construction payroll of all surveyed employers whose average wage falls within that range, as a percentage of the total Sewer Construction work payroll of all surveyed employers. This table illustrates the spread between the low wage and high wage employers. Based on the surveyed employers payroll, there is a greater concentration of high wage employers representing 83% of the survey, with the greatest concentration (31%) of wages falling in the range of $34 per hour to $36 per hour for high wage employers. Table 30 Percent of Survey Payroll by Employer Average Wage Level % 14% 12% Percent of Survey Payroll 10% 8% 6% 4% 2% 0% Hourly Wage Range

36 Loss Cost per $100 of Payroll Differential Table 31 depicts, for each wage range, the loss cost per $100 payroll for all surveyed employers whose average wage falls within that range, relative to the average loss cost per $100 of payroll, for all of the surveyed employers. Please note the losses used in this analysis are developed and limited to $100,000 to mitigate the extremes caused by large losses when classification data is reviewed at the more granular levels presented herein. The loss cost per $100 of payroll of the surveyed employers with average wages below the current threshold of $26 is 279% of that of surveyed employers at or above the threshold. Table 31 Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range 36

37 The WCIRB reviewed alternate threshold values and determined that there is improvement in the payroll distribution and credibility of the low wage classification at or above a $30 threshold; the differential in loss costs per $100 of payroll between employers paying average wages at or above a $30 threshold increases slightly from 279% to 291% as shown in Table 32. The survey payroll percentage in the low wage classification increases from 23% to 45% which will improve credibility in the low wage classification which is currently not fully credible with five years of experience. However, the concentration in wages around the threshold deterioriates from 14% to 16% of wages within one dollar of the threshold. Table 32 Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range 37

38 The WCIRB also reviewed the loss cost differentials by the size of the Sewer Construction employers. Table 33 shows the loss cost relativity by employer size. In this table, employer size is defined by the number of employees, rather than by total payroll or total premium. For most classifications, larger employers generally have lower relative loss costs. However, for the Sewer Construction classifications, the larger employers tended to be low wage employers and had signiciantly higher than average loss cost levels. Table 33 Sewer Construction Loss Cost Relativity by Size of Employer Size of Employer: Number of Employees Loss Cost Relativity 0 to 10 99% 11 to 30 77% 31 and over 150% Summary Findings The WCIRB finds that at the current threshold of $26 for 6307/6308, Sewer Construction: (a) the volume of experience in low wage classifications is not fully credible with five years of experience, (b) the distribution of survey employees below and above the threshold is 23% / 77%, consistent with the policy year 2009 distribution of 19%/81% which is well below the amount normally targeted in a dual wage classification system, (c) there is a fairly significant concentration of wages (14%) within one dollar of the threshold, and (d) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 279%. Alternately, at a threshold of $30, the WCIRB finds: (a) the dual wage classification payroll split will improve significantly and the percentage of survey employees in the low wage classification is increased from 23% to 45%, (b) credibility significantly improves in the low wage classification, (c) the concentration of employees within one dollar of the threshold does increase slightly from 14% to 16%, and (d) the differential in losses per $100 of payroll between employers with average wages at or above a $30 threshold and those with average wages below a $30 threshold improves slightly to 291% from 279%. 38

39 Classifications 6315/6316, Water/Gas Mains or Connections Construction Dual wage classifications 6315/6316 were established in 1992 with expansion of the dual wage program. The threshold wage was originally established at $19 and has been increased over the years as summarized in Table 34. In 2008, the wage threshold achieved parity with the wage threshold for 6218/6220, Excavation. As adopted by the C & R Committee in 2006, the wage threshold for 6315/6316 is maintained at a common level with 6218/6220, Excavation, and 6307/6308, Sewer Construction. Table 34 Water/Gas Mains Hourly Wage Thresholds Effective Date (Jan 1) Hourly Wage Threshold 1992 $ $ $ $ $ $ $26 The January 1, 2013 advisory pure premium rate for the low wage Classification 6315 is $10.65 per $100 of payroll, which is 178% of the 2013 advisory pure premium rate of $6.00 for Classification Table 35 summarizes the advisory pure premium rates for Water/Gas Mains over the past ten years as of January 1 each year. Table 35 Water/Gas Mains Advisory Pure Premium Rates and Rate Relativities Effective Date (January 1) Low Wage Rate High Wage Rate Low Wage/High Wage Rate Relativity 2013 $10.65 $ % 2012 $8.79 $ % 2011 $6.34 $ % 2010 $5.92 $ % 2009 $5.11 $ % 2008 $5.81 $ % 2007 $6.53 $ % 2006 $7.08 $ % 2005 $12.19 $ % 2004 $16.14 $ % 39

40 Surveyed Employees by Hourly Wage The percentage of low wages to total payroll for the classification was 40% in 1994 allowing for full implementation of the classifications. For policy year 2009, only 20% of the payroll was in the low wage classification. At this distribution, the low wage classification is currently fully credible with five years of experience and the high wage classification is fully credible with three years of experience. Table 36 below summarizes the survey results distribution of hourly wages comprising 203 employers with 2,249 employees representing 41% of the Water/Gas Mains dual wage classifications. Table 36 Number of Surveyed Employees by Hourly Wage Level Based on Sample of 203 Employers Number of Employees in Hourly Wage Range Hourly Wage Range Based on the survey data, there is a credible volume of experience in the Water/Gas Mains classifications with averages wage both below (30% of surveyed employees) and above (70% of surveyed employees) the current wage threshold. There is a slight concentration in wages around the current wage threshold of $26 with 12% of the total sample distribution within one dollar of the current threshold. The largest concentration of employees, 156 (7%) occurs in the $30 wage range, followed by 150 (7%) employees in the $28 wage range. The highest concentration of employees in the low wage classification is in the $20 wage range with 97 employees (4%). 40

41 Payroll by Employer Average Wage Table 37 shows the percentage of surveyed employers whose average wage for all Water/Gas Mains employees falls within a particular range (e.g., the $20 label represents a range from $20.00 to $20.99). The table shows that the employer average wage distribution varies across wage intervals ranging from 0% to over 7% for each dollar interval with greater concentrations in the high wage classification. Table 37 8% Percent of Total Employers by Employer Average Wage Level % 6% Percent of Surveyed Employers 5% 4% 3% 2% 1% 0% Hourly Wage Range

42 Employers Payroll by Employer Average Wage Table 38 shows, for each wage range, the total Water/Gas Mains payroll of all surveyed employers whose average wage falls within that range, as a percentage of the total Water/Gas Mains work payroll of all surveyed employers. This table illustrates the spread between the low wage and high wage employers. Based on the surveyed employers payroll, there is a greater concentration of high wage employers representing 86% of the survey with the greatest concentration (32%) of wages falling in the range of $31 per hour to $35 per hour for high wage employers. Table 38 Percent of Survey Payroll by Employer Average Wage Level 14% % 10% Percent of Survey Payroll 8% 6% 4% 2% 0% Hourly Wage Range

43 Loss Cost per $100 of Payroll Differential Table 39 depicts, for each wage range, the loss cost per $100 payroll for all surveyed employers whose average wage falls within that range, relative to the average loss cost per $100 of payroll, for all of the surveyed employers. Please note the losses used in this analysis are developed and limited to $100,000 to mitigate the extremes caused by large losses when classification data is reviewed at the more granular levels presented herein. The loss cost per $100 of payroll of the surveyed employers with average wages below the current threshold of $26 is 117% of that of surveyed employers at or above the threshold. Table Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Level 43

44 The WCIRB reviewed alternate threshold values and determined that there is improvement in the payroll distribution and credibility of the low wage classification at or above a $30 threshold. At the $30 threshold, the differential in loss costs per $100 of payroll between employers paying average wages at or above a $30 threshold is increased slightly from 117% to 124% as shown in Table 40. The percentage of survey employees in the low wage classification increases from 30% to 49% which will preserve credibility in the low wage classification which currently requires five years of experience for full credibility. The concentration in wages around the threshold deterioriates slightly from 12% to 14% of wages within one dollar of the threshold. Table Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range

45 WCIRB staff also reviewed the loss cost differentials by the size of the Water/Gas Mains employers. Table 41 shows the loss cost relativity by employer size. In this table, employer size is defined by the number of employees, rather than by total payroll or total premium, and larger employers generally have lower relative loss costs. Table 41 Water/Gas Mains Loss Cost Relativity by Size of Employer Size of Employer: Number of Employees Loss Cost Relativity 0 to 10 96% 11 to % 31 and over 74% Summary Findings The WCIRB finds that at the current threshold of $26 for 6315/6316, Water/Gas Mains: (a) the volume of experience in low wage classifications is fully credible with five years of experience, (b) the survey distribution between low wage and high wage employees is 30% / 70%; the policy year 2009 distribution of 20% / 80% is below the level normally targeted in a dual wage system, (c) there is a slight concentration of wages (12%) within one dollar of the threshold, and (d) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 117%. Alternately, at a threshold of $30, the WCIRB finds: (a) the percentage of survey employees with wage level below the threshold increases significantly from 30% to 49%, (b) credibility is preserved in the low wage classification, (c) the concentration of employees within one dollar of the threshold is increased slightly from 12% to 14%, and (d) the differential in losses per $100 of payroll between employers with average wages at or above a $30 threshold and those with average wages below a $30 threshold improves slightly from 117% to 124%. Recommendations Given the study findings, the WCIRB recommends for Classifications 6218/6220, Excavation, 6307/6308, Sewer Construction, 6315/6316, Water/Gas Mains, a common threshold of $30 be established. At a threshold of $30: (a) the payroll split will improve significantly; (b) credibility in the low wage classifications will be preserved, (c) the loss costs differential improves modestly for each classification and (d) the concentration around the wage threshold improves slightly for Excavation, and worsens slightly for Sewer Construction and Water/Gas Mains. Given these findings, the reduced credibility in the low wage classifications in particular for Sewer Construction and Water/Gas Mains, and that average wages in construction have increased by more than 10% in the five years since the thresholds in these classifications were last increased, the WCIRB recommends increasing the threshold for these classifications from $26 to $30. 45

46 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Classifications 6218(1)/6220(1), Excavation N.O.C., to increase the hourly wage threshold from $26.00 per hour to $30.00 per hour based on the results of the WCIRB s 2013 wage level study. PROPOSED EXCAVATION N.O.C. including borrowing, filling or backfilling employees whose regular hourly wage does not equal or exceed $ per hour Mass rock excavation, grading or excavation in connection with street or road construction, pile driving, shaft sinking, caisson or cofferdam work shall be separately classified. Trenching operations conducted by specialty contractors in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction shall be assigned to the corresponding construction classification. EXCAVATION N.O.C. including borrowing, filling or backfilling employees whose regular hourly wage equals or exceeds $ per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $ per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $ per hour shall be classified as 6218(1), Excavation N.O.C. Mass rock excavation, grading or excavation in connection with street or road construction, pile driving, shaft sinking, caisson or cofferdam work shall be separately classified. Trenching operations conducted by specialty contractors in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction shall be assigned to the corresponding construction classification. 6218(1) 6220(1) * * * * * Recommendation Amend Classifications 5484/5485, Plastering or Stucco Work, to increase the hourly wage threshold from $25.00 per hour to $27.00 per hour based on the results of the WCIRB s 2013 wage level study. PROPOSED PLASTERING OR STUCCO WORK employees whose regular hourly wage does not equal or exceed $ per hour PLASTERING OR STUCCO WORK employees whose regular hourly wage equals or exceeds $ per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $ per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $ per hour shall be classified as 5484, Plastering or Stucco Work. * * * * * 46

47 Recommendation Amend Classifications 6307/6308, Sewer Construction, to increase the hourly wage threshold from $26.00 per hour to $30.00 per hour based on the results of the WCIRB s 2013 wage level study. PROPOSED SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage does not equal or exceed $ per hour SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage equals or exceeds $ per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $ per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $ per hour shall be classified as 6307, Sewer Construction. * * * * * Recommendation Amend Classifications 6315(1)/6316(1), Water Mains or Connections Construction, to increase the hourly wage threshold from $26.00 per hour to $30.00 per hour based on the results of the WCIRB s 2013 wage level study. PROPOSED WATER MAINS OR CONNECTIONS CONSTRUCTION including tunneling at street crossings employees whose regular hourly wage does not equal or exceed $ per hour 6315(1) This classification does not apply to the construction of aqueducts, cross-country pipelines or hydroelectric projects. All tunneling other than at street crossings shall be separately classified. WATER MAINS OR CONNECTIONS CONSTRUCTION including tunneling at street crossings employees whose regular hourly wage equals or exceeds $ per hour 6316(1) Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $ per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $ per hour shall be classified as 6315(1), Water Mains or Connections Construction. This classification does not apply to the construction of aqueducts, cross-country pipelines or hydroelectric projects. All tunneling other than at street crossings shall be separately classified. * * * * * 47

48 Item CR Draft Report on Dual Wage Construction or Erection Classifications Time Card Verification of Hourly Wage Executive Summary Objective As part of an ongoing comprehensive review of the dual wage construction classifications, the WCIRB evaluated several provisions of the California Worker s Compensation Uniform Statistical Reporting Plan 1995 (USRP) pertaining to construction or erection work, including: 1. Time Cards Whether the use of collective bargaining agreements (CBAs) should be permitted to validate an employee s hourly wage rate. 2. Division of a Single Employee s Payroll Whether the rules pertaining to construction or erection work should be amended to reference the Division of a Single Employee s Payroll Rule. 3. Uniform Break Period Documentation Whether the requirements for documenting uniform break periods are properly referenced in all pertinent areas of the rules pertaining to construction or erection work. 4. Calculation of Hourly Wages Whether the rules pertaining to construction or erection work should be amended to specify that an employee s hourly wage rate be calculated on a per pay period basis. Findings Time Cards To fully assess the relevant issues and evaluate potential solutions, WCIRB staff contacted construction industry associations representing union and nonunion employers, labor, insurers, brokers, and the California Department of Industrial Relations (DIR). Based on the feedback received from these stakeholders, the WCIRB determined the following: 1. CBAs are binding contracts that mandate payment of specified hourly wage rates for a particular classification of employees, e.g., Journeyman Painter $37.48 (Appendix 3, Exhibit 1). Most labor unions regularly audit employers to ensure compliance with the CBA. 2. The use of CBAs may add complexity to the completion of premium audits for insurers. 3. Most of those surveyed favor permitting insurer auditors to use CBAs to validate an employee s hourly wage rate. Division of a Single Employee s Payroll The provisions of the Division of a Single Employee s Payroll Rule should be clarified in the rules pertaining to construction or erection work. Uniform Break Period Documentation The requirements for documenting uniform break periods should be referenced in all pertinent areas of the rules pertaining to construction or erection work. 48

49 Calculation of Hourly Wages The examples in the USRP regarding the calculation of an hourly wage rate should be incorporated into the text of the rule. Recommendation Amend Part 3, Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work, of the USRP to (1) permit the use of CBAs to validate an employee s hourly wage rate for audits on policies with an expiration date on or after January 1, 2014; (2) include pertinent provisions of the Division of a Single Employee s Payroll Rule; (3) reference the uniform break period exception in all pertinent areas; and (4) specify that hourly wage calculations are computed on a per pay period basis in accordance with established procedure. 49

50 Introduction As part of an ongoing comprehensive review of the dual wage construction classifications, the WCIRB evaluated several provisions of Rule 2, Construction or Erection Work (Rule 2) 1 of Part 3, Section IV, Special Industry Classification Procedures, of the California Worker s Compensation Uniform Statistical Reporting Plan 1995 (USRP) including: 1. Time Cards Whether the use of collective bargaining agreements (CBAs) should be permitted to validate an employee s hourly wage rate. 2. Division of a Single Employee s Payroll Whether Rule 2 should be amended to reference the Division of a Single Employee s Payroll Rule. 3. Uniform Break Period Documentation Whether the requirements for documenting uniform break periods are properly referenced in all pertinent areas of Rule Calculation of Hourly Wages Whether Rule 2 should be amended to specify that an employee s hourly wage rate shall be calculated on a per pay period basis. Background 1. Time Cards Effective January 1, 2008, Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work, Subrule a, Determination of Dual Wage Construction or Erection Classification, of the USRP, was amended to specify that the assignment of a high wage construction classification is contingent upon the availability of records necessary to reconcile the number of hours worked against actual time cards or time sheets that document the operations performed, the total hours worked each day, and the times the employee started and ended each work period throughout the workday. 2 Although the recording of start and stop times for each work period throughout the workday is a recordkeeping requirement mandated by the Department of Industrial Relations (DIR), 3 insurers report that there have been several disputes pertaining to the reclassification of workers from high wage to low wage construction classifications at the time of final audit due to time cards not bearing all required information. Specifically, the WCIRB s Test Audit Program has found differences where construction employers did not have the proper recordkeeping requirements as outlined in Rule 2. In these instances, insurers protested the WCIRB s findings since the insurer verified the employee s hourly wage rate with CBAs. In 2012, the WCIRB conducted several outreach and information gathering sessions involving labor, employers, insurers and producers as part of its comprehensive review of the dual wage construction classifications. During this process, a question arose regarding the use of time cards or time book entries as the sole source of records to verify hourly wage rates for the purpose of validating the assignment of high wage classifications. Several constituencies suggested that CBAs should be used in lieu of time cards or time book entries. In response, the Classification and Rating (C & R) Committee asked the WCIRB to study this approach and make a recommendation. 2. Division of a Single Employee s Payroll In 2012, the WCIRB commenced an extensive review of the Advisory Rulings and Interpretations (R & I) companion to the USRP, which provides guidance regarding a variety of topics including classification procedure for industries and operations, underwriting, and auditing procedures. Coincident with the 2008 revision to the USRP mentioned above, the WCIRB established an R & I entry that provides examples to 1 See Appendix 1 for Rule 2 in its entirety. 2 Effective January 1, 2013, Rule 2 was amended to provide that recording the start and stop times of a uniform break period is not required at job locations where all of the employer s operations cease for a uniform unpaid period. 3 Reference is made to DIR Industrial Welfare Commission Order No

51 clarify the procedure for (1) dividing an employee s payroll among two or more construction or erection classifications, and (2) determining if the employers records satisfy the payroll division requirements for allocating a single employee s payroll among two or more classifications. As a result of the WCIRB s review of the R & I, this entry was eliminated and no amendments were made to Rule 2 since it was believed that the examples in the R & I entry were sufficiently illustrated in Rule 2 (shown in Appendix 1). However, the WCIRB was directed by the C & R Committee to further evaluate Rule 2 to determine if the Division of Single Employee s Payroll Rule should be more clearly referenced in Rule Uniform Break Period Documentation As a result of the WCIRB s review of the R & I entry noted above, Rule 2 was amended to provide that an employee s unpaid meal break does not need to be recorded in time cards or time books if the meal period represents a time in which all of the employer s operations at the job site cease for a uniform unpaid break period. The WCIRB was directed by the C & R Committee to evaluate Rule 2 to ensure that this exception to the time card requirement is referenced in all pertinent parts of the Rule. 4. Calculation of Hourly Wages As a result of the WCIRB s 2012 review of the R & I entry noted above, the WCIRB decided to evaluate Rule 2 to determine if the Rule should be amended to specify that an employee s hourly wage rate be calculated on a per pay period basis. Currently, this provision is only reflected in examples in Rule 2. Analysis and Recommendations 1. Time Cards CBAs Rule 2, Subrule a(1), Records of Payroll, provides as follows: For all employees, other than salaried employees, determination of the regular hourly wage must be supported by original time cards or time book entries for each employee. Original records must include the operations performed, the total hours worked each day and, except as provided below, the times the employee started and ended each work period throughout the workday. At job locations where all of the employer s operations cease for a uniform unpaid meal period, recording the start and stop times of the uniform break period is not required. (Emphasis added.) Rule 2, Subrule a(3), Regular Hourly Wage Calculation, also provides that the number of hours worked for one or more pay periods shall be verified by reconciling the indicated hours worked with original time cards or time book entries that record the time the employee started and ended each work period throughout the workday, and the total hours worked each day. Rule 2 also contains examples that illustrate the use of time cards to validate hourly wage rates. The time card requirements were established effective January 1, 2008 to clarify the procedure for calculating an employee s regular hourly wage and reduce the potential for the misreporting of payroll and loss data into a high wage (low rate) construction classification. The time card recordkeeping requirements are consistent with the payroll recordkeeping requirements mandated by the Department of Industrial Relations (DIR), Industrial Welfare Commission Order No , which requires all construction employers to maintain precise records of hours worked each day for each employee including the time when an employee begins and ends each work period. Nevertheless, since 2008, there have been several disputes pertaining to the reclassification of workers from high wage to low wage construction classifications at the time of final audit solely due to time cards not bearing all required information, e.g., start and stop times for each work period throughout the workday. Many instances have involved employers that operate pursuant to CBAs. Many employers have argued that the WCIRB should permit the use of CBAs to validate employee wage rates when time cards do not contain all of the required elements. 51

52 CBAs A CBA 4 is a binding agreement between an employer, union, district or local union chapter and/or trade association and regulates the terms and conditions of employees in the workplace, their duties and the duties of the employer. While each CBA may differ in terms of content, format and level of detail, all CBAs set forth employment procedures, subcontracting provisions, wage and fringe benefit schedules, workday/workweek agreements, schedule of dues, working conditions, and similar contractual information. While there are no statutory requirements for the content of a CBA, most CBAs in the construction industry are filed with the DIR pursuant to Labor Code Section (e)(1) for purposes of determining prevailing wage. In addition, the union or contractor s association that negotiated the CBA can verify whether a specific employer is a signatory of the CBA if there is any question as to whether the employer is a union employer. The wage and fringe schedules 5 in a CBA list the job title, classification of employee, base hourly wage rate, union dues and various deductions (pension, training, etc.). Each job title listed follows a wage schedule by classification of the job title, e.g., Apprentice, Foreman Class A, Foreman Class B, Journeyman, etc. The wage and fringe schedules of CBAs are expressly detailed and easily located since the wage and fringe schedule is often a separate document as an appendix to the CBA. If a contractor wishes to deviate from a CBA wage rate schedule, an exception request must be submitted to the union for approval. The WCIRB has been advised that schedule deviations are rarely approved but, when they are, the approvals are filed with the union. Some unions conduct audits of member employers to ensure the proper wage and hours worked comply with the provisions of the CBA. Some trade associations have programs in place to ensure that member employers conform to hourly wage rate and work hour schedules. This is more strictly enforced when a trust fund is involved that includes wage deductions for pension, health and welfare benefits. Such audits are administered annually on a random sampling of 25% 33% of the membership per year. Members are typically audited once every 3-5 years. Use of CBAs to Validate Hourly Wage Rates Advantages CBAs are binding contracts that mandate payment of specified hourly wage rates for classifications of employees. There is an inherent check-and-balance because CBAs are enforced by labor unions and employer trade associations that periodically audit employers to ensure adherence to the provisions of the CBAs. In addition, employees have access to the CBA and, therefore, can compare their hours worked and wages paid on their paystub to the wage schedule in the CBA to ensure they are being paid the correct wage. CBAs have a schedule of hours that employees are expected to work. The hours outlined in the CBA are generally adhered to and require approval from the union to deviate from the work schedule. The associations contacted by the WCIRB indicated that requests to deviate from the standard work schedules are typically denied. Unionized employers typically have copies of their CBAs onsite for examination by the insurer auditor. If the employer does not have the entire CBA available for reference, the wage schedule is usually a separate document that is readily available at request. Most insurers, brokers, employers and labor representatives the WCIRB spoke with are in favor of permitting insurer auditors to use CBAs to validate an employee s hourly wage rate. 4 See Appendix 2 for an example of an official CBA. 5 See Appendix 3 for wage schedule samples. 52

53 Use of CBAs to Validate Hourly Wage Rates Disadvantages CBA compliance audits of employers by labor unions and employer trade associations are not performed annually; therefore, the existence of a CBA does not guarantee that the employer is paying its employees correct hourly wages. The use of CBAs may add complexity to the completion of premium audits by insurers. That is, CBA wage schedules may be complex, containing additional information that affects the wage determination, such as the area in which an employee is employed, the period in which the employee is classified 6 and, for employees with the job title of Foreman, the number of employees that report to the foreman has an impact on the wage rate for the foreman (see Appendix 3, Exhibit 1). In such cases, it may be more burdensome to determine proper hourly wage rates using a CBA. Recommendation The WCIRB recommends that Part 3, Section IV, Rule 2 be amended to provide for the use of collective bargaining agreements to validate an employee s hourly wage rate for audits on policies with an expiration date on or after January 1, Division of a Single Employee s Payroll The WCIRB was directed by the C & R Committee to review Rule 2 to determine if it should be amended to more clearly reference Rule 3, Division of a Single Employee s Payroll, which is found in Part 3, Section V, Payroll Remuneration, of the USRP. Rule 3 provides, in pertinent part: 3. Division of Single Employee s Payroll When any location of an employer s business is classified on a divided payroll basis in accordance with the provisions contained herein, the remuneration of any one employee may be divided between two or more classifications, provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee, except such division SHALL NOT BE ALLOWED: a. In connection with the Standard Exception classifications, which must be assigned in accordance with the specific rules under this Plan. b. If the division is contrary to classification phraseology. Rule 3 provides that when the payroll of a single employee is divided between two or more classifications, the payrolls allocated to each classification must be shown separately, both by individual employee and in summary by operations performed. If the employer s records do not show payroll in summary by operations performed, the payrolls for the various operations performed by the single employee must be assigned to the highest rated classification. That is, when payrolls are not summarized by operations performed, the insurer auditor is not required to summarize the payrolls by reviewing each employee time card to tally the payrolls developed under each classifiable operation. 6 Apprentices are classified by 6-month periods, i.e., 1 st Period Apprentice, 2 nd Period Apprentice, etc. 53

54 Part 3, Section IV, Rule 2, provides in pertinent part: This rule applies to the construction and erection classifications listed in Appendix II, Construction and Erection Classifications. Division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. Operations for which separate records of payroll are not maintained shall be assigned to the highest rated classification applicable to the job or location. Operations that normally prevail in connection with a classification shall not be subject to division of payroll, but shall be assigned to such classification, whether or not separate records of payroll are kept. While Rule 2 provides that [d]ivision of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained, it does not specifically provide that when the payroll of a single employee is divided between two or more classifications, the payrolls allocated to each classification must be shown separately, both by individual employee and in summary by operations performed. Accordingly, disputes could arise if the insurer assigns all payroll of a single employee to the highest rated classification of work performed in cases where the employer did not prepare payroll summaries. Recommendation The WCIRB recommends that Part 3, Section IV, Rule 2 be amended to clarify the recordkeeping requirements for dividing a single employee s payroll between two or more construction or erection classifications. 3. Uniform Break Period Documentation Effective January 1, 2013, Part 3, Section IV, Rule 2a(1) of the USRP was amended to clarify that [a]t job locations where all of the employer s operations cease for a uniform unpaid meal period, recording the start and stop times of the uniform break period is not required. The WCIRB was directed by the C & R Committee to evaluate Rule 2 to ensure that this exception to the time card requirement is referenced in all pertinent parts of the Rule. A review of Rule 2 finds that Subrule a(3)(a), Regular Hourly Wage Calculation, provides the required documentation for time cards or time book entries; however, the uniform break period exception is not included. (3) Regular Hourly Wage Calculation (a) Except as provided below, an employee s regular hourly wage shall be calculated by dividing each employee s total remuneration by the number of hours worked. As necessary, the number of hours worked for one or more pay periods shall be verified by reconciling the indicated hours worked with original time cards or time book entries that record the time the employee started and ended each work period throughout the workday, and the total hours worked each day. Recommendation For clarity and consistency, amend Subrule a(3)(a), Regular Hourly Wage Calculation, to reference Section IV, Rule 2a(1), Records of Payroll, which includes the uniform break period exception. 4. Calculation of Hourly Wages The WCIRB reviewed Rule 2 to determine if it should be amended to specify that an employee s hourly wage rate shall be calculated on a per pay period basis. The provisions for calculating an employee s hourly wage rate are contained in Subrule a(3)(a), shown above, and in Subrule a(3)(c), shown below. 54

55 (3) Regular Hourly Wage Calculation (c) For salaried employees, the regular hourly wage shall be determined by dividing the total annual remuneration by 2,000 hours. If an employee is salaried for less than 12 months, the regular hourly wage shall be calculated for the salaried period on a prorated basis. Examples 1 and 2 in Rule 2 (Appendix 1) refer to the pay period in the calculation of hourly wage rates; however, Subrule a(3)(a) does not clearly state that the hourly wage rate is to be determined by dividing the employee s total remuneration by the number of hours worked in the pay period. Recommendation Amend Subrule a(3)(a) to clarify that the regular hourly wage calculation is computed on a per pay period basis. 55

56 Recommendation Amend Section IV, Special Industry Classification Procedures, Rule 2a(1), Records of Payroll, to provide for the use of collective bargaining agreements to validate an employee s hourly wage rate for audits on policies with an expiration date on or after January 1, PROPOSED Section IV Special Industry Classification Procedures 2. Construction or Erection Work a. Determination of Dual Wage Construction or Erection Classification A classification that requires the regular hourly wage to equal or exceed a specified amount may be used only upon verification that the employee is paid an hourly wage that equals or exceeds the specified amount. (1) Records of Payroll For all employees, other than salaried employees, determination of the regular hourly wage must be supported by one of the following sources: i. ooriginal time cards or time book entries for each employee. Original records must include the operations performed, the total hours worked each day and, except as provided below, the times the employee started and ended each work period throughout the workday. At job locations where all of the employer s operations cease for a uniform unpaid meal period, recording the start and stop times of the uniform break period is not required. ii A valid collective bargaining agreement that shows the regular hourly wage rate by job classification of worker. If using a collective bargaining agreement, the records must include an employee roster by job classification that permits the reconciliation of individual employees to the job classifications set forth in the collective bargaining agreement. For all employees, other than salaried employees, the payroll for which an hourly wage determination cannot be reconciled to time cards or time book entries or collective bargaining agreements as specified above shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount. For the purpose of administering this rule, a salaried employee is an employee who is remunerated at an established level of compensation on a weekly, monthly or annual basis, without regard to hours worked, sales volume, production levels or similar variables. (In addition to a base salary, salaried employees may also receive bonuses or commissions.) * * * * * 56

57 Recommendation Amend Section IV, Rule 2, Construction or Erection Work, to clarify the procedure applicable to dividing a single employee s payroll between two or more construction or erection classifications. PROPOSED Section IV Special Industry Classification Procedures 2. Construction or Erection Work This rule applies to the construction and erection classifications listed in Appendix II, Construction and Erection Classifications. Division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. When the operations at a job or location are classified on a divided payroll basis, the remuneration of any one employee may be divided between two or more classifications, provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee. Operations for which separate records of payroll are not maintained shall be assigned to the highest rated classification applicable to the job or location if payrolls are kept separately by job within the policy period; otherwise, the highest rated classification shall be assigned based on the entire policy period. Operations that normally prevail in connection with a classification shall not be subject to division of payroll, but shall be assigned to such classification, whether or not separate records of payroll are kept. * * * * * Recommendation Amend Subrule a(3)(a), Regular Hourly Wage Calculation, to provide that the regular hourly wage calculation is computed on a per period basis, reference Section IV, Rule 2a.(1), Records of Payroll, and for clarity and consistency, PROPOSED Section IV Special Industry Classification Procedures 2. Construction or Erection Work 57

58 a.determination of Dual Wage Construction or Erection Classification (3) Regular Hourly Wage Calculation (a) Except as provided below, an employee s regular hourly wage shall be calculated by dividing each employee s total remuneration by the number of hours worked during the pay period. As necessary, the number of hours worked for one or more pay periods shall be verified by reconciling the indicated hours worked with original time cards or time book entries that record the time the employee started and ended each work period throughout the workday, and the total hours worked each day regular hourly wage shall be reconciled with other records in accordance with Rule 2a(1), Records of Payroll. (b) An employee s regular hourly wage may be separately calculated and payroll separately classified for work performed in connection with: (i) Each job that is subject to federal, state, or local prevailing wage laws; and (ii) Each separate and distinct type of construction or erection operation that is specifically described by a classification. (c) For salaried employees, the regular hourly wage shall be determined by dividing the total annual remuneration by 2,000 hours. If an employee is salaried for less than 12 months, the regular hourly wage shall be calculated for the salaried period on a prorated basis. 58

59 Appendix 1 USRP, Part 3, Section IV, Rule 2 2. Construction or Erection Work This rule applies to the construction and erection classifications listed in Appendix II, Construction and Erection Classifications. Division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. Operations for which separate records of payroll are not maintained shall be assigned to the highest rated classification applicable to the job or location. Operations that normally prevail in connection with a classification shall not be subject to division of payroll, but shall be assigned to such classification, whether or not separate records of payroll are kept. In addition, the remuneration of employees assigned to construction and erection classifications is subject to the following: a. Determination of Dual Wage Construction or Erection Classification A classification that requires the regular hourly wage to equal or exceed a specified amount may be used only upon verification that the employee is paid an hourly wage that equals or exceeds the specified amount. (1) Records of Payroll For all employees, other than salaried employees, determination of the regular hourly wage must be supported by original time cards or time book entries for each employee. Original records must include the operations performed, the total hours worked each day and, except as provided below, the times the employee started and ended each work period throughout the workday. At job locations where all of the employer s operations cease for a uniform unpaid meal period, recording the start and stop times of the uniform break period is not required. For all employees, other than salaried employees, the payroll for which an hourly wage determination cannot be reconciled to time cards or time book entries as specified above shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount. For the purpose of administering this rule, a salaried employee is an employee who is remunerated at an established level of compensation on a weekly, monthly or annual basis, without regard to hours worked, sales volume, production levels or similar variables. (In addition to a base salary, salaried employees may also receive bonuses or commissions.) (2) Total Remuneration for Regular Hourly Wage Calculation The remuneration used to calculate a regular hourly wage shall be determined as follows: (a) The following remuneration shall be used to determine the hourly wage, without regard to whether such payments are included as payroll: (i) Hourly wages (ii) Piecework (iii) Salary (iv) Commissions and incentive payments that are calculated and paid each pay period (v) Fringe benefit payments made by the employer. However, when such payments are excludable from payroll, they shall be excluded from the hourly wage calculation. (See Section V, Payroll Remuneration.) 59

60 Appendix 1 (b) The following remuneration shall not be used to determine the hourly wage, without regard to whether such payments are included as payroll: (i) Allowances (ii) Reimbursed business expenses (iii) Premium portion of overtime pay (iv) Compensation, such as quarterly or annual bonuses, that is not calculated and paid each pay period (3) Regular Hourly Wage Calculation (a) Except as provided below, an employee s regular hourly wage shall be calculated by dividing each employee s total remuneration by the number of hours worked. As necessary, the number of hours worked for one or more pay periods shall be verified by reconciling the indicated hours worked with original time cards or time book entries that record the time the employee started and ended each work period throughout the workday, and the total hours worked each day. (b) An employee s regular hourly wage may be separately calculated and payroll separately classified for work performed in connection with: (i) Each job that is subject to federal, state, or local prevailing wage laws; and (ii) Each separate and distinct type of construction or erection operation that is specifically described by a classification. (c) For salaried employees, the regular hourly wage shall be determined by dividing the total annual remuneration by 2,000 hours. If an employee is salaried for less than 12 months, the regular hourly wage shall be calculated for the salaried period on a prorated basis. Example 1 Combination Hourly Pay and Piecework An employee of a roofing contractor is paid as follows: $15.00 per hour for work performed at the contractor s equipment yard; $25.00 per hour tearing off old roofs; and piecework rates when installing or repairing roofing. The employer maintains time cards for each employee indicating the operations performed, the time the employee started and ended each work period throughout the workday, the total daily hours worked, and remuneration earned by each employee. During the pay period the employee worked 16 hours in the yard, 4 hours performing roofing tear off, and 20 hours installing or repairing roofs. The roofing piecework totaled $585. Weekly Payroll Journal: J. Smith Day Activity Hours Hourly Rate Piece Units Piece Rate Earnings 25-Feb Yard 8 $15.00 n/a n/a $ Feb Yard n/a n/a Feb Tear-off n/a n/a Roof bitumen 4 n/a 4 $ Feb Roof tile 8 n/a Mar Roof shingle 3 n/a Roof patch 5 n/a Total 40 $

61 Appendix 1 Determination of the regular hourly wage: Employee Gross Pay Hours Worked Regular Hourly Wage J. Smith $ $23.13 Example 2 Commission An employee of a plumbing repair company is paid commissions based on billed hours and product sales. The employee earns 20% of the billed hours (hourly rate charged the customer) for each repair completed. The employer s labor rate billed to customers is $80 per hour. The employee earns 40% commission on the sale of water heaters and plumbing fixtures. The employer maintains time cards for each employee indicating the operations performed, the time the employee started and ended each work period throughout the workday, the total daily hours worked, and remuneration earned by each employee. During the pay period the employee worked 65 hours, although only 43 hours were billed to customers. The employee also sold plumbing fixtures totaling $1,500. Bi-Weekly Payroll Journal: M. Jackson Day Hours Worked Billed Hours Commission on Billed Hours Fixture Sales Commission on Sales Earnings 18-Mar 0 19-Mar 8 5 $80.00 $ $40.00 $ Mar Mar Mar Mar Mar Mar 0 26-Mar Mar Mar Mar Mar 0 31-Mar 0 Total $ $ $ $ Determination of the regular hourly wage: Employee Gross Pay Hours Worked Regular Hourly Wage M. Jackson $ $

62 Appendix 1 Note that in the above example, if the hourly wage calculation were based, incorrectly, on billable hours, the regular hourly wage would be overstated. Therefore, if time cards or time book entries to verify the hours worked are not available, the payroll shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount. It is incorrect to base the regular hourly wage calculation on billed hours. Example 3 Salary An employee of a sheet metal contractor is retained as project supervisor at an annual salary of $60,000. The employee was retained for only three months during the policy period. As the employee was salaried for 3 of 12 months or 25% of the annual salary period, the regular hourly wage is calculated based on the prorated salary ($60,000 x 25% = $15,000), divided by the prorated number of hours (2,000 x 25% = 500). The regular hourly wage calculation is $15,000 / 500 = $30.00 per hour. b. Governing Classification (Construction or Erection) The governing classification shall be determined on the basis of the job within the policy period if payrolls are kept separately by job within the policy period; otherwise, on the basis of the entire policy period. Two classifications distinguishable only by the regular hourly wage of employees shall be combined to determine the governing classification. c. Miscellaneous Employees (Construction or Erection) If the construction or erection operations at any location are assigned to two or more classifications, the payroll of all miscellaneous employees who cannot properly be assigned to specific classifications shall be assigned to the governing classification, except that when the governing classification is determined to be the combination of two classifications distinguishable only by the regular hourly wage of employees, the payroll of a miscellaneous employee shall be assigned based on the regular hourly wage of such employee. Miscellaneous employees include, but are not limited to, supervisors, watchpersons, traffic control flagpersons, drivers, construction or safety engineers, construction debris cleanup employees and job-site equipment maintenance and repair employees. d. Executive Level Supervisors Executive level supervisors oversee the insured s construction operations through second level (or higher) supervisors. In addition, on job sites where the insured subcontracts all operations to licensed subcontractors, executive level supervisors may oversee operations through subcontractors. Notwithstanding any other provisions contained herein, it is not permissible to divide a single employee s payroll, within a single policy period, between Classification 5606, Contractors executive level supervisors, and any other classification. Executive level supervisors over construction operations wherein the insured develops payroll in one or more construction or erection classifications shall be eligible for Classification 5606 provided not less than two levels of supervision, as defined below, are retained between the executive level supervisor and the workers performing the actual construction operations. (1) First level supervisors generally work at a job site with a single crew of workers performing a single trade and do not travel between concurrent job sites to supervise different crews. While first level supervisors may engage in construction activities alongside the crew, as supervisors they have the authority to direct and control the crew s work. This control includes training, evaluating, and disciplining crewmembers. Employees who assist with training or leading a crew, but who do not have the authority to direct and discipline crewmembers, or are not accountable for the work performed by the crew, are not considered first level supervisors. 62

63 Appendix 1 (2) Second level supervisors generally have broad authority over the work crews at one or more job sites. Second level supervisors direct and control the work of first level supervisors. The duties of second level supervisors are exclusively supervisory in nature. e. Idle Time, Strike Pay, or Other Payroll Paid for Hours Not Worked If an employee s payroll is segregated among classifications based upon the hours worked in each operation, the payroll for idle time, strike pay, or other payroll paid for hours not worked shall be apportioned among the classifications applicable to the employee s payroll based on the earnings for time actually worked in those classifications. Example A construction worker engages in fence construction and conduit construction. The worker is paid $12 per hour for fence work and $15 per hour for conduit work. The number of hours recorded for fence work, conduit work and idle time is shown below. The earnings for time actually worked in Classification 6400 is 63.8% of the payroll for Classifications 6400 and 6325 combined ($ / $ = 63.8%). The idle time apportioned to Classification 6400 is therefore 5.1 hours (8 hours idle time x 63.8% = 5.1 hours), the payroll for idle time in this classification is $61.22 (5.1 hours x $12 per hour idle time = $61.22), and the total payroll in this classification is $ ($ payroll + $61.22 idle time payroll = $325.22). The earnings for time actually worked in Classification 6325 is 36.2% of the payroll for Classifications 6400 and 6325 combined ($ / $ = 36.2%). The idle time apportioned to Classification 6325 is therefore 2.9 hours (8 hours idle time x 36.2% = 2.9 hours), the payroll for idle time in this Classification is $34.78 (2.9 hours x $12 per hour idle time = $34.78), and the total payroll in this Classification is $ ($ payroll + $34.78 idle time payroll = $184.78). Work Record Operation Hours Rate per Hour Payroll % of Payroll for Hours Worked Fence Construction Classification $12.00 $ % Conduit Construction Classification $ % Subtotal 32 N/A $ % Idle Time 8 $ N/A Total 40 N/A $ N/A Apportionment Operation Hours Rate per Hour Payroll % of Payroll for Hours Worked Idle Time fence 5.1 N/A $ % Idle Time conduit 2.9 N/A % Total 8.0 N/A $ % Reconciliation Classification 6400 Payroll Classification 6325 Payroll Payroll for hours worked $ Payroll for hours worked $ Idle time payroll Idle time payroll Total fence construction payroll: $ Total conduit construction payroll: $ Total Payroll ($ $184.78) = $

64 Appendix 2 NORTHERN CALIFORNIA PAINTERS MASTER AGREEMENT BETWEEN DISTRICT COUNCIL 16 AND NORTHERN CALIFORNIA PAINTING AND FINISHING CONTRACTORS ASSOCIATION June 1, June 30,

65 Appendix 2 Table of Contents SUBJECT: ARTICLE: PAGE: Administration of Fringe Benefits Article Agreement Modifications Article 1, Section 3 1 Apprenticeship Article 9 6 Authority to Execute Article Designated Days Off Article 11, Section 3(a) 14 Drug Testing Article Drywall Finishing Article 20, Section 1(b) 29 Dues Check-off Article 16, Section 1 18 Duration Article 1 1 Employers Article Foreman Wages Article 10, Section 3 8 Free Flow of Manpower Article 7, Section 2(e) 5 Grievance & Arbitration Article High Time Article 10, Section 7 10 Hiring Practices Article 7 4 Holidays Article 11, Section 3 14 Joint Apprenticeship Training Committee Article 8 5 Labor Management Cooperation Committee Article 2 1 Labor Management Cooperation Initiative Article 16, Section 6 20 Non-Union Jobsites Article 21, Section 5 31 Out of Area Work Article 5, Section 3 4 Overtime Article 11, Section 2 13 Payment of Wages Article 10, Section Picketing Article 21, Section 2 31 Preservation of Work Clause Article Recognition Article 3 1 Scope of Work Article 4 2 Separabilty and Savings Clause Article Shift Work Article 11, Section 4 14 Show Up Pay Article 10, Section Stewards Article Subsistence Article 10, Section Territorial Jurisdiction Article 5 3 Travel Expense Article 10, Section Travel Time Article 10, Section Union Security Article 6 4 Violations Article Wages & Payment of the Same Article 10 7 Work Preservation Fund Article 16, Section 7 20 Work Stoppages Article Working Conditions Article

66 Appendix 2 ARTICLE 1 DURATION Section 1. This Agreement is made and entered into this first day of June 2011, between the Northern California Painting and Finishing Contractors Association or their Successor, thereof, and/or Individual Employers who are signatory or may become signatory to this Agreement, and are actively engaged in the Painting Industry, hereinafter referred to as the Employer and District Council 16, hereinafter referred to as the Union. This Agreement shall continue until June 30, Thereafter, this Agreement shall continue from year to year, commencing as of 12:01 a.m., July 1st, unless notice is given by one of the bargaining parties of its desire to effect changes in hours, wages or working conditions. Section 2. During the month of January of the year of expiration of this Agreement, any party signatory hereto may give written notice, by certified mail to the Union and the Employers that said party wishes to withdraw from this Agreement. Should such notice be given, such party shall no longer be bound to this Agreement as of July 1st. The Agreement shall continue as to all parties giving no such notice. Further, said notice of withdrawal eliminates said party from participation in any negotiations regarding this Agreement. The notice herein provided for is the sole means by which a party may withdraw from or cancel this Agreement. Section 3. AGREEMENT MODIFICATIONS - The parties to this Agreement recognize the necessity of assuring the competitive position of the parties within the industry during the term of this Agreement. Consistent with that recognition, the parties will continually monitor the effectiveness of the Agreement relative to specific geographic or market areas and will endeavor, by mutual agreement, to initiate such modifications to the Agreement during its term as may be necessary to assure work opportunities for the employees and maintain or improve the competitive position of the individual employers. The Union will notify the Northern California Painting & Finishing Contractors Association regarding any and all negotiations of an Addendum to this Agreement and provide the Northern California Painting & Finishing Contractors Association with the final Addendum language. ARTICLE 2 LABOR MANAGEMENT COOPERATION COMMITTEE The parties agree to mutually support the formation of a Labor Management Cooperation Committee to improve labor relations, safety, worker qualifications, and to prevent disputes. In addition, the parties agree to provide a mechanism for the joint approval of official Wage Schedule A s and this Agreement. The Union will provide the current list of signatory contractors to the Northern California Painting and Finishing Contractors Association upon request and whenever there is an addition. ARTICLE 3 RECOGNITION Each Individual Employer recognizes, acknowledges and agrees that it has satisfied itself that District Council 16 represents a majority of its employees employed to perform all bargaining unit work covered under this Agreement and that the Union is that collective bargaining representative for such employees. The Employer specifically agrees that the Union has demonstrated its majority status and it has properly 1 66

67 Appendix 2 established a collective bargaining relationship within the meaning of Section 9(a) of the National Labor Relations Act by this Agreement and/or by the execution of previous Agreements. ARTICLE 4 SCOPE OF WORK COVERED BY THIS AGREEMENT Section 1. The terms and conditions of this Agreement shall apply to all covered work. Covered work shall be and mean the following materials and application methods: paints, pigments, oils, turpentine, japan dryers, thinners, varnishes, lacquers, shellac, stains, fillers, waxes, cement, joint cement, water and other vehicles; mediums that may be mixed and applied to the surfaces of materials and buildings, edifices, structures, monuments and the appurtenances thereto, of every type and description in their natural state of condition, or constructed or fabricated of any material or materials whatsoever and provided; work or services pertaining to: The application of texture, acoustic, plaster and stucco materials of all types and thickness on all surfaces. (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Work or services pertaining to the painting, of all drywall and thin wall type surfaces, flushing or concrete surfaces, caulking and sealants between sheet rock walls and/or ceilings and floors of other materials. Work or services pertaining to the application of wallpapers, wall fabrics and all types of coverings or coatings whether decorative or protective and all preparations necessary before said application. Work or services pertaining to the application of protective coatings or products of similar nature whether they are plastic, vinyl, acrylics, epoxies, esters, urethanes, etc., or any new products of this nature including the application to floor surfaces. Work or services pertaining to the applications of bond breaker, water repellant, damproofing and/or waterproofing materials of all types. Work or services pertaining to the finishing and surface preparation on all hardwood or softwood floors and furniture at jobsites. Work or services pertaining to the priming and finish coats on fabricated metal or steel products. Work or services pertaining to the application of all fire retardant, fire proofing and/or insulation materials used on structural items or as architectural finishes. Work or services pertaining to the cleaning, polishing and refinishing of metal and masonry surfaces. Work or services pertaining to steeplejack work. Work or services pertaining to surface preparation and decoration of all types; Including drywall repairs and incidental repair related skimming, sandblasting, steam cleaning, building washing, hydro blasting, water blasting and all the methods used in the removal of previously painted surfaces; including caulking, tuck pointing, spackling and wood dough work. 2 67

68 Appendix 2 (k) (l) (m) (n) Work or services pertaining to the application of hypolan, neoprene, and all similar products. Work or services pertaining to lead removal and encapsulation. Work or services pertaining to painting of lines, arrows, bumpers, curbs, etc.; on parking lots, airfields, highways, game courts (both indoor and outdoor) and other such surfaces; installation and maintenance thereof, including lines of metal, plastic or composition materials used instead of paint. All products and methods of application which have or may be awarded to the Painters International through jurisdictional procedures. Section 2. The operation of all tools and equipment used by painting contractors and journeyman painters, including paperhangers, sandblasters and all other facets as outlined in the utilizers as listed above, the above includes the control of all compressors, boom trucks, aerial lifts, forklifts and other specialty equipment, it is the clear intent that all equipment and tools of the trade are under the custody and control of the contractor and/or the Employer. ARTICLE 5 TERRITORIAL JURISDICTION OF AGREEMENT & OUT OF AREA WORK Section 1. The territorial jurisdiction covered by this Agreement shall comprise the counties of: Alameda, Alpine, Amador, Butte, Calaveras, Colusa, Contra Costa, El Dorado, Fresno, Glenn, Kings, Lake, Lassen, Madera, Marin, Mariposa, Mendocino, Merced, Modoc, Monterey, Napa, Nevada, Placer, Plumas, Sacramento, San Benito, San Francisco, San Joaquin, San Mateo, Santa Clara, Santa Cruz, Solano, Siskiyou, Shasta, Sierra, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Tuolumne, Yolo and Yuba. Section 2. The Employer party hereto shall, when engaged in work outside the geographic jurisdiction of the Union party to this Agreement, comply with all of the lawful clauses of the Collective Bargaining Agreement in effect in said other geographic jurisdiction and executed by the Employers of the industry and the affiliated Local Unions in that jurisdiction, including but not limited to, the wages, hours, working conditions, fringe benefits and procedure for settlement of grievances set forth therein; provided however, that as to employees employed by such Employer from within the geographic jurisdiction of the Union party to this Agreement and who are brought into an outside jurisdiction, such employee shall be entitled to receive the wages and conditions effective in either the home or outside jurisdiction, whichever are more favorable to such employees, and fringe benefit contributions on behalf of such employees shall be made solely to their home funds in accordance with their governing documents. This provision is enforceable by the Local Union or District Council in whose jurisdiction the work is being performed, both through the procedure for settlement of grievances set forth in its applicable Collective Bargaining Agreement and through the courts, and is also enforceable by the Union party to this Agreement both through the procedure for settlement of grievances set forth in this Agreement and through the courts. 3 68

69 Appendix 2 Section 3. OUT-OF-AREA WORK - When engaged in work outside the geographical jurisdiction of this Agreement, the Employers agree, subject to their rights to reject any applicant for cause, that not less than 50% of the workers employed on such work will be residents of the area where the work is performed, or who are customarily employed a greater percentage of their time in such area, and further provided that these men are qualified to meet the job requirements. Section 4. Employers from outside the jurisdictional area of this Agreement shall employ not less than 50% of the workers from the Local Union having the work and area jurisdiction of the jobsite. All jobs must maintain at least 50% - 50% ratio. Section 5. OUT-OF-AREA EMPLOYEES - When an employer outside the jurisdictional area of this Agreement brings steady employees from outside the area, the employees shall not go to work until they have a referral slip from the Local Union where the work is being performed. Section 6. The signatory Employer shall not attempt to engage in any work covered by this Agreement in any area outside the geographical jurisdiction of the Agreement through the use or device of another business or corporation which such Employer controls or through the use or device of a joint venture with another Employer or contractor in any outside area without first consulting with the IUPAT for the purpose of establishing to the IUPAT's satisfaction that the use of such device is not for the purpose of taking advantage of lower wages or conditions that are in effect in the home area of such Employer, and if the IUPAT is not so satisfied, the Union party has the option of canceling the Agreement. ARTICLE 6 UNION SECURITY All present employees who are members of the Union on the effective date of this Agreement or on the date of execution of this Agreement, whichever is the latter, shall remain members of the Union in good standing as a condition of employment. All present employees who are not members of the Union and all employees who are hired hereafter, who perform covered work as defined under Article 4 Scope of Work", shall become and remain members in good standing of the Union as a condition of employment on and after the eighth (8 th ) day following the beginning of their employment, or on and after the eighth (8 th ) day following the effective date of this Agreement or the date of execution of this Agreement, whichever is the latter. ARTICLE 7 HIRING PRACTICES Section 1. There shall be no discrimination in hiring and/or promotion and/or any other aspects of employment because of race, creed, color, sex, national origin or age. Section 2. REFERRAL - The Employer shall call the Local Union where the job is located when any additional manpower is needed, and the Union agrees to refer employees to the Employer within forty eight (48) hours, if available. Upon receipt of such notice, the Union shall use its best efforts to furnish the required number of qualified and competent workers. 4 69

70 Appendix 2 (a) (b) (c) (d) (e) REQUESTS - Notwithstanding the above, a Painter who is in good standing with the Union may seek his own job and the Employer may have referred to it any applicant (who is registered on the Unions out-of-work list) by submitting a written request by name to the Union. REQUIREMENTS - The Employer shall require each new employee to present a written referral from the Union prior to putting the new employee to work. RECLASSIFICATION - When the Union, employee and Employer agree to reclassify an employee the Employer shall require the employee to present a written referral from the Union prior to putting the employee to work at the new classification. VIOLATION - In the event the employer fails to comply with these hiring practices the Union may utilize the grievance procedures set forth in this Agreement, and may resort to such economic and legal remedies as it sees fit with respect to such Employer. Any economic action taken will not be considered a violation of this Agreement. FREE FLOW OF MANPOWER - There shall be a free flow of manpower within the jurisdiction of District Council 16. New hires shall come from the Local having jurisdiction over the area of where the work is being performed. Section 3. SHOP PERSON - One (1) shop person per minimum of eight (8) person shop. Shop person shall be utilized to maintain equipment, trucks, etc.; clean-up shop, yard, pick up supplies from the supplier and make deliveries. Shop Person shall perform no painting work nor perform any work covered by the Scope of Work in this Agreement. Section 4. SEVEN DAY CLAUSE - Any workers employed by employers for a period of thirty (30) working days continuously or accumulatively within the unit covered by this Agreement, and any workers working for any one employer on or after the thirtieth (30th) day following the date of his/her employment or the effective date of this Agreement, whichever is later, shall as a condition of employment become members of the Union by tendering the full and uniform fees in effect, and all workers accepted into membership shall thereafter maintain their continuous good standing in the Union as a condition of employment by paying regular dues. In the event that a worker fails to tender the required fees or dues in accordance with this Section, the Union shall notify the Employer in writing, and the Employer shall discharge the worker within forty-eight (48) hours (Saturday, Sunday and holidays excepted). Notwithstanding anything to the contrary in this Article it is agreed that the thirty (30) day period referred to in this section shall be reduced to seven (7) days for all employees of an employer engaged primarily in the Building and Construction industry, so that such employees will be required as a condition of employment to become members of the Union after the seventh (7 th ) day following the beginning of such employment or the effective date of this agreement whichever is later, and all such employees accepted into membership shall thereafter maintain their continuous good standing in the Union as a condition of employment. ARTICLE 8 PAINTERS JOINT APPRENTICESHIP TRAINING COMMITTEE Section 1. In the territorial jurisdiction of this Agreement there shall be one (1) Painters Joint Apprenticeship Training Committee (JATC) of ten (10) members of whom five (5) shall be appointed by NCPFC and five (5) shall be appointed by the Union. The Committee shall oversee the apprentice 5 70

71 Appendix 2 and journeyman training under the control of the Trustees of the District Council 16 Northern California Journeyman & Apprentice Training Trust Fund. Section 2. The JATC shall conduct for the benefit of journeyman and apprentices certification courses for CPR, First Aid, Respirator Use and Fit, Hazard Communication/Awareness, Lead Abatement, Fall Protection and Confined Space Entry and any and all other training deemed necessary by the JATC. Section 3. The JATC shall maintain a four (4) year apprenticeship training program. ARTICLE 9 APPRENTICESHIP Section 1. First year apprentices shall be steadily employed unless circumstances prevail which are beyond the control of the Employer, subject to the approval of the JATC. Section 2. An employer of five (5) or more Journeypersons is to employ at least one (1) Apprentice unless his or her right to train Apprentices has been revoked by the JATC. This shall not limit the obligation of the Employer to train Apprentices in the proper ratio to the total number of Journeypersons in the shop, as outlined in this Agreement or in the Apprenticeship and Training Standards nor shall it be construed to replace Journeypersons in a shop when substantial unemployment exists in the area of the Local Union or District Council. Section 3. No employer shall be permitted to employ more than one (1) apprentice to each three (3) journeymen. Section 4. The apprenticeship training shall be in accordance with Standards approved by the State Division of Apprenticeship Standards. Section 5. No apprentice with less than two (2) years experience on the job shall be permitted to work on a job unless a journeyman is working on said job. Section 6. All apprentices, after serving one and one-half (1 1/2) years of their apprenticeship, shall have the right to elect, subject to the approval of the JATC, to engage for two six month periods in any specialized phases of the Painting Industry. Apprentices who are approved for the specialized instruction shall be indentured for the two six month periods as outlined above to employers who are engaged in the special field selected. (a) (b) This specialized on the job training shall not conflict with the existing apprentice program governing school attendance, class instruction, or other programs of the JATC. No apprentice shall be allowed to drop his apprentice card and take out or apply to the Union for a Journeyman s Card, unless permission has been granted by the JATC. Section 7. No apprentice shall be sent to out-of-town work that will interfere or prohibit him from attending school classes or appearing before the JATC after due notice has been given. Section 8. Apprentices shall be indentured only to Employers operating under a State of California Painting Contractor s License (now classified C-33) and which engage in general painting; except when 6 71

72 Appendix 2 indentured for the specialized phase instruction provided for elsewhere in this Article, or when indentured to the JATC. This section is not intended, however, to exclude municipal or political institutions and sub-divisions. Section 9. An automatic penalty of five hundred dollars ($500.00) will be imposed on any Employer who does not allow an apprentice to attend school and works said apprentice during the week assigned to him/her. If there is a second offense by the same Employer, they will not be allowed to have a new apprentice for a period of twelve (12) months. Money generated by such penalties will revert to the District Council 16 Northern California Journeyman & Apprentice Training Trust Fund. Section 1. JOURNEYMAN WAGES: ARTICLE 10 WAGES & PAYMENT OF THE SAME (a) (b) (c) (d) The hourly minimum rate of wages for all Journeyman Painters working in Alameda, Contra Costa, Lake, Marin, Mendocino, Monterey, Napa, San Benito, San Mateo, Santa Clara, Santa Cruz, Solano and Sonoma Counties shall be paid in accordance with the attached Wage Schedule A and receive a one dollar ($1.00) per hour increase to the Total Package on January 1, 2012, one dollar and twenty five cents ($1.25) per hour increase to the Total Package on January 1, 2013 and one dollar and fifty cents ($1.50) per hour increase to the Total Package on January 1, The hourly minimum rate of wages for all Journeyman Painters working in San Francisco County shall be paid in accordance with the attached Wage Schedule A and receive a one dollar ($1.00) per hour increase to the Total Package on January 1, 2012, one dollar and twenty five cent ($1.25) per hour increase to the Total Package on January 1, 2013 and one dollar and fifty cent ($1.50) per hour increase to the Total Package on January 1, 2014, The annual increases called for each January 1 of this Agreement shall first be utilized to pay the deficit reduction contributions required by the Bay Area Painters & Tapers Pension Plan, Preferred Rehabilitation Schedule, pursuant to Article 17, Section 2(a). Secondly, the annual increase required each January 1 of this Agreement shall be utilized to cover any hourly cost increase in Health & Welfare. Any remaining annual increase amount that was not utilized to fund Pension and/or Health & Welfare shall be allocated directly to Taxable Net Wages. Regular employees of each Employer shall be paid in accordance with the appropriate Wage Schedule A, which shall be determined based upon the county in which the Employer s place of business is located (home county). Regular employees who are brought into counties which are within the jurisdiction of the Union party to this Agreement but are covered under a different Wage Schedule (outside county), shall be entitled to receive the wages and conditions effective in either the home or outside county, whichever is more favorable to such regular employees. Members referred directly from the Union to a specific project shall be referred at the county rate based upon the projects location. Regular Employee is defined as any employee who has maintained employment with the same Employer beyond the initial project referral. (1) Notwithstanding the above, the San Francisco County Wage Schedule A referred to in Section (b) above shall only apply to work performed in San Francisco County. 7 72

73 Appendix 2 Employees who regularly work for Employers located in San Francisco County and are assigned by the Employer to work anywhere outside of San Francisco County shall be paid in accordance with the Bay Area Wage Schedule A referred to in Section (a) above. Section 2. SUPERINTENDENTS WAGES - Superintendents shall receive Journeyperson hourly Taxable Net Wage Rate plus six dollars ($6.00) per hour. (a) Superintendents shall be required to attend and satisfactorily complete at least sixteen (16) hours of STAR Program Training annually of which at least eight (8) hours shall be Supervisor Certification Training. Effective July 1, 2013 any Superintendent who failed to attend and/or satisfactorily complete their annual sixteen (16) hours of STAR Program Training and/or eight (8) hours of Supervisor Certification Training, during the preceding STAR training year ending June 30, shall no longer be eligible to act as a Superintendent for any Employer until such time as he or she completes the required training. Section 3. FOREMAN WAGES - When four (4) or more employees covered under this Agreement are on a job of five (5) days' duration or more, one (1) Journeyman Painter in good standing with the Union shall be the designated Foreman, for the duration of the job. The definition of "Duration of the Job" is the primary contract and does not include change orders or call backs, providing that none of the exceptions require four (4) or more employees for five (5) days or more on each separate operation. The duties and responsibilities of the Foreman shall include handling the Employer s paperwork on the job, assigning and supervising work, maintaining performance requirements, conducting liaison with the general contractors or owner's representative, maintaining communications with the Employer and maintain safe working conditions and practices throughout the course of the job. Further, it shall be the duty of the Foreman to return the Employer s unused material and equipment to the Employer. Foreman shall receive Journeyperson hourly Taxable Net Wage Rate plus: (a) (b) (c) (d) (e) Two dollars ($2.00) per hour when in charge of three (3) or more employees covered under this Agreement who are on a job of five (5) days' duration or more. Four dollars ($4.00) per hour when in charge of five (5) or more employees covered under this Agreement who are on a job of five (5) days' duration or more. Six dollars ($6.00) per hour when in charge of ten (10) or more employees covered under this Agreement who are on a job of five (5) days' duration or more. Foremen wages and premium to be based on the highest wage classification on the job they are supervising. Foreman shall be required to attend and satisfactorily complete at least sixteen (16) hours of STAR Program Training annually of which at least eight (8) hours shall be Supervisor Certification Training. Effective July 1, 2013 any Foreman who failed to attend and/or satisfactorily complete their annual sixteen (16) hours of STAR Program Training and/or eight (8) hours of Supervisor Certification Training, during the preceding STAR training year ending June 30, shall no longer be eligible to act as a Foreman for any Employer until such time as he or she completes the required training. 8 73

74 Appendix 2 Section 4. NEW APPLICANT (a) New Applicants shall be paid a progressive increasing scale of Taxable Net Wages based upon their respective percentage of Journeyperson Taxable Net Wage as follows: First Year... 70% Second Year... 80% Third Year... 90% (b) (c) (d) (e) Full fringe benefit contributions shall be made on behalf of all New Applicants with the exception of Pension, Annuity and Vacation/Holiday; such contributions shall be based on their respective percentage of Journeyperson contributions. New Applicants cannot replace Journeypersons. In no case will New Applicants be allowed to work on prevailing wage projects. No new Applicant shall suffer a reduction in Taxable Net Wages as a result of the implementation of this Agreement. Section 5. APPRENTICE WAGES: (a) Apprentices shall be paid a progressive increasing scale of Taxable Net Wages based upon their respective percentage of Journeyperson Taxable Net Wage as follows: 1 st six (6) months: 50% 5 th six (6) months: 70% 2 six (6) months: 55% 6 th six (6) months: 75% 3 six (6) months: 60% 7 th six (6) months: 80% 4 six (6) months: 65% 8 th six (6) months: 90% (b) (c) Full fringe benefit contributions shall be made on behalf of all Apprentices with the exception of Pension, Annuity and Vacation/Holiday; such contributions shall be based on their respective percentage of Journeyperson contributions. No Apprentice shall suffer a reduction in Taxable Net Wages as a result of the implementation of this Agreement. Section 6. PRE-APPRENTICE WAGES: (a) (b) (c) Pre-Apprentices shall be paid an hourly Taxable Net Wage based upon thirty percent (30%) of the Journeyperson Taxable Net Wage. Full fringe benefit contributions shall be made on behalf of all Pre-Apprentices with the exception of Pension, Annuity and Vacation/Holiday. Pre-Apprentices shall have no contributions made on their behalf towards Pension, Annuity and Vacation/Holiday during their term of Pre-Apprenticeship. The Pre-Apprenticeship term shall last for no longer than six (6) months. 9 74

75 Appendix 2 (d) (e) The entire Pre-Apprenticeship period shall be considered probationary and employment may be discontinued at any time at the sole discretion of the employer. In no case will Pre-Apprentices be allowed to work on prevailing wage projects. Section 7. HIGH TIME - Employees shall be entitled to high time premium whenever the work performed requires personal fall restraints to be worn by the employee. The amount of the premium shall be determined by the following height schedule: (a) (b) (c) When working over fifty (50) feet above ground or water level the employee shall be paid an additional two dollars ($2.00) per hour for all such work; When working from one hundred (100) to one hundred eighty (180) feet above ground or water level the employee shall be paid an additional four dollars ($4.00) per hour for all such work; When working over one hundred eighty (180) feet above ground or water level the employee shall be paid an additional six dollars ($6.00) per hour for all such work. Section 8. SPRAY WORK - Employees spraying, sandblasting, water blasting or steam cleaning on Industrial Work shall receive fifty cents ($0.50) in addition to the Taxable Net Wage Rate plus any other high time or premium pay. Section 9. INDUSTRIAL PAINTING - Employees performing painting work on industrial projects shall be paid an additional twenty five cents ($0.25) per hour above the Taxable Net Wage Rate in addition to any other high time or premium pay. Section 10. WALLCOVERING - Employees applying wallcovering shall receive one dollar ($1.00) in addition to the Taxable Net Wage Rate plus any other high time or premium pay. Section 11. EXOTIC MATERIALS - Employees applying any materials or coatings where the application must be certified by the manufacturer, shall be paid an additional seventy five cents ($0.75) per hour above the Taxable Net Wage Rate in addition to any other high time or premium pay. Section 12. PAYMENT OF WAGES - All wages are due and payable either in lawful currency or negotiable check, together with a receipt or check stub showing employee s and employer s name, rate of pay, pay period and hours worked, all deductions made and the amount due. Said payments shall conform with all the provisions pertaining to the employees as required by Federal and State Laws. Violation of this clause shall be deemed sufficient reason for removal of employees by the Union Representative. (a) (b) Wage claims and claims for payment of fringe benefit contributions need not be submitted to the District Council or to arbitration, but may be submitted by the Union directly to the Labor Commissioner of the State of California. In the event of controversy regarding the proper payment of wages or merits of the period of waiting time, the employer shall place the disputed amount of wages and/or waiting time involved in escrow, pending resolution. Claims for such disputed compensation must be filed within 10 75

76 Appendix 2 fourteen (14) days from the date the disputed claim occurred and is to pertain to any form of compensation covered by this Agreement. Claims are limited to the last thirty (30) calendar days worked. The thirty (30) day limit does not apply to fringe benefit contributions. (c) Wages earned shall be due and payable on the last day of each work week on the job at quitting time and shall include all wages earned up to and including Tuesday night; except that by application to the District Council, the Employer may obtain special permission to include on his payroll only such wages as were earned up to and including Monday night. This exception, which must first be approved by the Union, is intended to be allowed only in those instances where the preparation of large and/or scattered job payrolls cannot reasonably be accomplished in time to meet the Tuesday night provision. When a holiday falls on a Friday or is a Designated Day Off, all wages earned up to and including Monday night shall be due and payable on Thursday on the job at quitting time. (d) Employees laid off or discharged must be paid in full at the time of dismissal. Section 13. SUBSISTENCE - If one employee is required to live away from his or her place of residence, said employee shall be paid seventy-five dollars ($75.00) per day, for room and board, or actual reasonable room and board cost, whichever is greater. In addition, they shall receive the negotiated rate of pay and fringe benefits for all hours worked. (a) (b) Round trip airfare, mileage, or transportation shall be provided by the Employer on all jobs in which subsistence is required. Employees shall receive Travel Time, from the point of dispatch to the jobsite and return, on all jobs in which subsistence is required. Section 14. TRAVEL TIME - Employees who jobsite report more than forty (40) miles from the point of dispatch (Union dispatch Office, employee s home or individual Employer s shop) as determined by the individual Employer, shall receive their Taxable Net Wage Rate for all time spent traveling beyond forty (40) miles from the point of dispatch to the jobsite and return. Employees reporting in their private vehicles to a jobsite more than forty (40) miles from the point of dispatch, shall also receive mileage at the current IRS rate per mile for all miles traveled outside of the forty (40) miles. Mileage and drive time is to be based on Microsoft MapPoint latest available version. Mileage will be paid on a per vehicle basis. This system is based on employees reporting to their jobsite at their regular start time and working on the job until their regular quitting time. Travel from jobsite to jobsite in a private vehicle shall be considered as hours worked and mileage will be reimbursed at the current IRS rate per mile. All travel commencing after being required to report to the Employers shop to and from the jobsite will be considered as hours worked and use of the employee s vehicle will be reimbursed at the current IRS rate per mile

77 Appendix 2 (a) The following Travel Time Calculation Sheet shall be used in conjunction with Microsoft MapPoint in order to determine Travel Time Reimbursement. Microsoft MapPoint setting for Driving Speeds shall be; Interstate Highways 65 mph, Limited Access Highways 60 mph, Other Highways 50 mph, Arterial Roads 35 mph, Streets 20 mph. Travel Time Calculation Sheet (Formulas) From: Starting Address Employee Name Actual Commute (One Way) Adjusted Commute (One Way) Round Trip Daily Travel Time/Mileage Reimbursement: Total Daily Reimbursement To: Destination Address Minutes Miles Minutes Per Mile (Enter minutes as per MapPoint) Calculation = (Adjusted Commute Miles x Minutes Per Mile) Calculation = (Adjusted Commute Minutes x 2) Calculation = Taxable Net Wage Rate/60 X Adjusted Commute Minutes) (Enter miles as per MapPoint) Calculation = (Actual Commute Miles 40) Calculation = (Adjusted Commute Miles x 2) Calculation = (Round Trip Miles x Current IRS Mileage Reimbursement Rate) Calculation = Daily Travel Time Reimbursement + Daily Mileage Reimbursement Calculation = (Minutes Miles) Travel Time Calculation Sheet (Example) From: 123 Any Street, San Francisco, CA John Doe To: 456 Main Street, Fremont, CA Minutes Miles Minutes Per Mile Actual Commute (One Way) Adjusted Commute (One Way) Round Trip Daily Travel Time/Mileage Reimbursement: $14.75 $8.90 Total Daily Reimbursement $23.65 Section 15. TRAVEL EXPENSE - Whenever employees report to the jobsite, the employee shall be paid or reimbursed for all parking, bridge tolls and public transportation costs. Parking and bridge toll reimbursement shall be subject to the following criteria; in the event that free parking is not available within a quarter mile of the jobsite, the employer will provide such facilities or shall have the right to designate the areas to be used for reimbursable parking. When free parking is not available the employer shall reimburse the driver of the vehicle for the cost of such parking up to twenty dollars 12 77

78 Appendix 2 ($20.00) per day upon being presented with a receipt or voucher certifying the cost thereof. The employer will reimburse the driver for his or her bridge tolls upon a showing of receipts for such on a weekly basis. Public transportation costs shall be reimbursed if the employee chooses to utilize public transportation and such reimbursement is more economical than reimbursing parking and bridge tolls. Section 16. SHOW UP PAY - Unless given notice individually within five (5) hours after their regular shift, that their services are not required the following regular work day, all employees reporting for work, shop or jobsite at their regular starting time shall be paid four (4) hours pay, except when weather, natural conditions, or emergency situation beyond the control of the Employer prohibits the Employer from proceeding with work that day. As a condition to being entitled to receive pay under this Section, the employee must have his current telephone number and address on file with the Employer. The prior notice to the employee provided for in this Section may be given in person, writing, by telephone or voice mail. Section 17. Employees shall not report to any shop earlier than thirty (30) minutes or to any job earlier than twenty (20) minutes before starting time. These provisions shall apply only to work within forty (40) miles from the point of dispatch. Reporting to work on jobs beyond forty (40) miles from the point of dispatch shall be in accordance with the provisions of Travel Time heretofore defined. Section 18. INCENTIVE PAY - Employer may issue Incentive Paycheck to employee four (4) times each year. Section 19. SAFETY INCENTIVE - Safety incentive paycheck issued in accordance with the Employer s written safety program, shall not be counted as incentive pay, and payment of such shall be allowed as provided in the Employer s written safety program. ARTICLE 11 WORKING CONDITIONS Section 1. REGULAR WORK WEEK - Eight (8) hours shall constitute a regular work day between the hours of 6:00 a.m. and 5:30 p.m.. Employees shall take a ten (10) minute rest period in the morning and a ten (10) minute rest period in the afternoon as well as a thirty (30) minute unpaid lunch. Rest periods and lunch shall be taken as close to the middle of each work period as practical. The regular work week shall be forty (40) hours made up of five (5) consecutive regular work days Monday through Friday. Starting and finish times shall be determined on a job by job basis and shall not be changed during any regular work week. By mutual agreement between the Union and the Employer four (4) ten (10) hour days, consecutive, (Monday through Friday), may be worked to equal a regular forty (40) hour work week. An Employee shall be allowed a five (5) minute personal clean-up prior to lunch period. Section 2. OVERTIME - All work performed before or after the regular work day, before or after the regular work week including Saturdays, and Designated Days Off, shall be paid at the overtime rate of one and one-half (1 ½) times the Taxable Net Wage. All work performed on Sundays and all holidays listed in Article 11, Section 3, shall be paid at two (2) times the Taxable Net Wage. (a) If inclement weather forces a job to be shut down during the regular work week, Monday through Friday, then the Employer can work his crew, on a voluntary basis, on Saturday at straight time. A Saturday straight time day will only apply if inclement weather forces a job to shut down 13 78

79 Appendix 2 during the regular current work week (Monday through Friday). The Employer can work only that crew which is already on the jobsite at the time that inclement weather forced the shutdown or the equivalent number of replacements for such crew members who are unable to work. (b) No work shall be performed at any time other than during the regular work day except by notification of the Local Union in the area where work is to be performed. Application for any and all work at any time other than during the regular work day stipulated herein shall be applied for any time prior to starting said work. Notification for Saturday and Sunday work, recognized holidays and all Designated Days Off, must be made no later than 4:30 p.m. of the last regular workday of the week. Except in emergency situations, notification may be given in person, in writing, by telephone, facsimile or . Section 3. HOLIDAYS - The recognized holidays shall be: New Years Day, Martin Luther King Day, President s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Eve and Christmas Day. When a holiday falls on a Saturday, the preceding Friday shall be observed as a holiday. When a holiday falls on a Sunday the Monday following shall be observed as a holiday. No work shall be performed during any hour of the twenty four (24) hours of Labor Day. (a) DESIGNATED DAYS OFF - In addition to the foregoing recognized holidays, there shall be eight (8) designated days off per contract year: June 17, 2011, July 1, 2011, September 2, 2011, November 11, 2011, November 25, 2011, April 6, 2012, May 25, 2012, June 15, 2012, August 31, 2012, November 12, 2012, November 23, 2012, December 31, 2012, February 15, 2013, March 29, 2013, May 24, 2013, June 14, 2013, July 5, 2013, August 30, 2013, November 11, 2013, November 29, 2013, February 14, 2014, April 18, 2014, May 23, 2014 and June 13, Section 4. SHIFT WORK - Shift Work is work performed outside the regular work day, Monday through Friday. When the Employer wishes to schedule employees to work any portion of their work day outside their regular work day, the employees shall be paid fifteen percent (15%) above their Taxable Net Wage for all such hours worked outside their regular work day. Employers scheduling Shift Work must notify the Director of Service of District Council 16 in writing by in advance of starting Shift Work. Overtime rates shall be paid for all hours worked outside the regular work day if the employer fails to notify the Union as described above. Section 5. FLEXTIME - Flexible start times, Monday through Friday, may be established at the straight time hourly Taxable Net Wage for work that cannot be performed during the regular work day due to customer restrictions or requirements. Flextime shall only be applicable on jobs working five (5) consecutive days or less. Employers wishing to schedule employees to work under Flextime must obtain a permit from the Union. The Employer shall submit a request for a Flextime Permit in writing by to the Director of Service of District Council 16 at least one (1) business day in advance. The Director of Service of District Council 16 shall forward a written response by to the requesting Employer within one (1) business day of the request. Overtime rates shall be paid for all hours worked outside the regular work day if no Flextime permit has been issued. Section 6. On all new construction and in shops where employees report to work, the employer shall furnish adequate toilet facilities and drinking water, unless provided by others. Section 7. No employee shall be required to wash out brushes in any material other than that approved by the State Health and Accident Commission

80 Appendix 2 Section 8. Employees may be required by the employers to sign for brushes or special tools and shall be held accountable for same. (a) Employees will be held accountable for intentional damage to equipment or property. Section 9. Employers shall be required to furnish sterilized rags for use on every job for the use of the worker as may be required. (a) (b) (c) (d) (e) Employers shall furnish to all employees all protective apparels necessary to safeguard painters from all health hazards, such as, gloves, rubber pants, boots, hoods, respirators and creams as prescribed for in the Safety Health Orders by the State of California. Employers shall furnish protective gloves to be used when washing brushes or equipment where solvents or chemicals are used that may be injurious to the skin. Individual employers shall supply equipment approved by the State of California Division of Industrial Safety to all employees. It shall be mandatory for all employees to use safety equipment as required. The Safety Orders of the Division of Industrial Safety are incorporated herein, and made part hereof as if set forth in full. It shall be considered grounds for instant dismissal for any employee to willfully refuse to obey safety regulations. The employee, so discharged, shall receive wages only for actual time worked. Section 10. TOOLS - Tools used in any phase of painting, papering and all other facets of the trade shall be at the sole discretion of the employer. Journeyperson painters shall report to work with the usual tools of the trade, consisting of duster, putty knife, broad knife, hammer, screwdriver, pliers, white work clothes, and special tools and equipment issued by the employer. The Employer shall verify that all Journeypersons have a valid driver s license and may participate in the B.I.T. program. Employees shall not be allowed to attach any artificial equipment such as stilts, arms or legs to their bodies in any manner whatsoever. Section 11. Employees shall not work on a piecework basis, nor be permitted to contract or subcontract. Section 12. An employee shall not be allowed to use his/her car or truck to transport materials in excess of fifty (50) pounds or equipment of any type for employer at any time. Section 13. No employee shall furnish to an employer for rent or otherwise, any car or truck, rigging or tools, except as provided under this Agreement. Section 14. Paperhangers may supply straight edge, paperhanger trestles and the usual paperhanger s tools. Section 15. SAFETY TRAINING - Employees will be required to attend up to twenty four (24) hours per year of Owner, General Contractor, State, or Federal required Safety Training. This training is exclusive of any specialized or job specific training

81 Appendix 2 Section 16. It is recognized that the foregoing Working Rules cannot reasonably be so worded as to cover any and all contingencies that may arise because of other than ordinary circumstances. It is, therefore, agreed that a contingency not specifically provided for in this Agreement shall be classified under the category of an Exceptional Condition, and an employer may make a request to the Union for a permit issued under the Exceptional Condition clause so long as the issuance shall not endanger the health and safety of the persons who perform the work. (a) The Employer shall submit a request for an Exceptional Condition permit in writing by to the Director of Service of District Council 16. The Director of Service of District Council 16 shall forward a written response by to the requesting Employer within two (2) business days of the request. ARTICLE 12 STEWARDS Section 1. District Council 16 shall be empowered to appoint all Shop Stewards and Job Stewards. District Council 16 shall also be empowered to remove Stewards for just cause. District Council 16 shall notify the Employer in writing of the appointment and removal of its Stewards. Stewards shall be appointed from among the current work crew of the Employer. Section 2. DUTIES - To check all working cards of foremen, workers and apprentices and to check all applications, working permits, and to report the same by the use of Steward s Report to the Business Representative of the District Council in the area where work is performed. The steward, as a working Journeyperson, shall be allowed a reasonable amount of time to perform his/her steward duties that cannot be performed outside of working hours. Section 3. The Steward shall report to the Business Representative of the District Council and the employer or his representative, all violations of the working agreement. Section 4. All matters of consequence pertaining to jurisdiction, alleged grievances due to unfair treatment by the Employer, are to be reported to the District Council or the Business Representative in the area, for action as may be deemed necessary. Section 5. The Steward shall be the last worker laid off, provided he/she is qualified and able to do the job available to him/her, except foremen, touch-up and specialty men. ARTICLE 13 DRUG TESTING When a customer or owner requires drug testing as a condition of employment on a jobsite or project it is agreed that employees covered under this Agreement shall comply with drug testing policies for that jobsite or project

82 Appendix 2 ARTICLE 14 VIOLATIONS Section 1. Any employer who fails to pay his contributions for insurance coverage herein provided for shall be held personally responsible and liable to any employee covered by this Agreement for the benefits which would have been provided by such insurance coverage. Section 2. Employees shall not enter or remain in the employ of any employer who willfully neglects or refuses to stand trial or after due trial refuses to abide by a decision rendered pursuant to the provisions of this Agreement. Section 3. No party to this Agreement, whether employer or employee, shall work for or with, or employ on any job a person as employer or employee, who is acting in violation of this Agreement or who has failed or refused to comply with any decision of the appropriate organization rendered pursuant to the provisions of this Agreement. Section 4. Business Representatives of the District Council shall be informed immediately of any violation. Business Representatives shall not be allowed to remove Journeyperson Painters and Apprentices from any and all jobs unless the contract violation involves failure to pay proper wages, failure to pay Fringe Benefits, failure to meet all financial obligations provided for by this Agreement, safety reasons, working overtime without a permit and a non-union person on the job. Employees removed from any job for such violations shall be paid by the contractor the amount at the rate of straight time to compensate them for the inconvenience and loss of time due to said violations. Said waiting time shall not exceed five (5) days. It shall be a violation of the Agreement for failure to report violations of the Agreement. Section 5. Union to police own forces with penalties for working open shop. ARTICLE 15 GRIEVANCE & ARBITRATION Section 1. For all purposes of this Agreement, a grievance is any dispute or controversy between the Employer, the Union and any employee covered by this Agreement, involving the meaning, interpretation or application of the provisions of this Agreement. Section 2. Such grievances shall be handled in the following manner: (a) (b) The aggrieved employee or Union Representative shall present the grievance in writing to the designated representative of the Employer and shall meet with that representative within ten (10) working days to discuss the grievance. If no settlement or resolution is reached within ten (10) working days after the meeting referenced above, it may be submitted, at the request of either party to arbitration by written notice to the other party within fifteen (15) working days from the date of the above referenced meeting. Section 3. ARBITRATOR - If the parties cannot reach agreement on an impartial arbitrator, either the Union or the Employer may request the California State Conciliation Service to submit a list of five (5) arbitrators to the parties. The list shall contain only established arbitrators in the state of California

83 Appendix 2 Each party shall alternately scratch two (2) names from the list, the first scratch being selected by lot, and the person remaining shall be the arbitrator. Section 4. HEARING - The impartial arbitrator shall hold a hearing as soon as practicable, and shall issue an award which shall be final and binding upon the Union, the Employer and any employee involved in the grievance or dispute. Section 5. AMEND AGREEMENT - The arbitrator shall have no authority to amend, add to or subtract from this Agreement, except where specifically authorized to do so by this Agreement. The Arbitrator shall have the authority to fashion a remedy. Section 6. EXPENSE FOR ARBITRATION - The party losing the arbitration shall pay the arbitrator's charges. Cost of the hearing room shall be shared by both of the parties. The cost of the transcript if requested by both parties shall be shared equally. If there is any question who lost the arbitration, the arbitrator shall decide who shall pay the expenses of the arbitrator whether in whole or in part. Section 7. FOURTEEN DAY LIMIT - Matters not presented to the Employer or the Union in writing within a period of fourteen (14) working days after the action, lack of action or condition constituting the basis of the complaint occurs, shall be deemed waived and shall not be subject to the grievance procedure or arbitration procedure as set forth above. Section 8. UNION ECONOMIC OR LEGAL ACTION - In the event of a failure by the Employer to pay the wages or fringe benefits required by this Agreement, and the Employer raises no question concerning the interpretation or operation of this Agreement or concerning his obligations to pay remedies as it sees fit with respect to the Employer, and any economic action taken will not be considered a violation of this Agreement. However, the Union may, if it so desires, utilize the provisions of this Article with respect to the Employer. Before resorting to any economic remedy as above permitted, the Union must give the Employer involved two (2) business days written notice of its intention to take such economic action. No economic action may be taken by the Union if prior to the taking of such action the Employer has raised a question concerning the interpretation, application or operation of this Agreement or concerning his obligation to pay wages or fringe benefits in dispute, and had deposited the full amount in dispute with the appropriate Trust Fund to be held by the Trust until the matter is resolved under the procedures set forth herein. The provisions for notice in this paragraph shall not apply to any action taken by the Union pursuant to Article 14. ARTICLE 16 OTHER FUNDS Section 1. DUES CHECK-OFF - During the term of this Agreement, and any extensions thereof, each individual Employer agrees to deduct from the Taxable Net Wages of all employees, covered by this Agreement, Dues Check-Off in the amounts specified in the attached Wage Schedule A. Said Dues Check-Off shall be remitted to the Trust Fund Administrator s office on forms provided by the Trust Funds Administrator, or other appropriate depository designated by the Union, not later than the fifteenth (15th) day of each and every calendar month for such deductions made during the preceding calendar month

84 Appendix 2 (a) (b) Each Employer agrees that, at the commencement of employment of all employees covered by this Agreement, such Employer shall secure from said employee a work referral slip which shall include dues check-off authorization signed by said employee. The Union shall indemnify the Employer against any and all liability for the remittance of Dues Check-Off pursuant to the provisions of this Section. Section 2. NORTHERN CALIFORNIA PAINTING AND FINISHING CONTRACTORS INDUSTRY FUND - During the term of this Agreement and any extension thereof, every Employer signatory to this Agreement shall pay Industry Fund contributions based upon all covered employee hours worked or required to be paid for in the amount of twenty-five cents ($.25) per hour. Said Industry Fund contributions shall be remitted to the Trust Funds Administrator s office on forms provided by the Trust Funds Administrator, or other appropriate depository designated by the Northern California Painting and Finishing Contractors (NCPFC), not later than the fifteenth (15th) day of each and every calendar month for all hours worked during the preceding calendar month. Said Industry Fund contributions shall be forwarded to the NCPFC designated account. The Industry Fund contribution rate to the NCPFC will be monitored and adjusted if necessary by the NCPFC. Section 3. VOLUNTARY PAYROLL DEDUCTION OF POLITICAL CONTRIBUTIONS - Each Member hereby authorizes and directs the employers to deduct from their pay the sum of five cents ($0.05) for each hour worked, as a contribution to the Political Action Together -Political Committee (PAT-PC) of the International Union of Painters and Allied Trades. Each Employer agrees to make payments to the Political Action Together -Political Committee (PAT-PC) of the International Union of Painters and Allied Trades for each employee covered by this Agreement, as follows: (a) (b) (c) For each hour or portion thereof, for which an employee receives pay, the Employer shall make a contribution of five cents ($0.05) to PAT-PC. For the purpose of this Article, each hour paid for, including hours attributable to show up time, and other hours for which pay is received by the employee in accordance with this Agreement, shall be counted as hours for which contributions are payable. Contributions shall be paid on behalf of any employee starting with the employee's first day of employment in a job classification covered by this Agreement. This includes, but is not limited to, apprentices, trainees, and probationary employees. Section 4. IUPAT-FTI - Five cents ($0.05) per hour to be remitted to the IUPAT Finishing Trades Institute (IUPAT-FTI). Section 5. STAR PROGRAM - There has been created a separate and independent entity, the STAR (Skills, Safety, Supervisor & Survival Training Awards Recognition) Program, Inc., ("STAR Program") organized pursuant to the laws of the State of California, as a non-profit California Corporation. The purposes for which this corporation is formed are to promote a high performance, high value culture within the workforce covered under this Agreement through the utilization of a reward based training program. The STAR Program shall fund all STAR Program training and all rewards granted to employees whom annually meet the required goals as established by the STAR Program. These purposes are consistent with those established under the authority of the Labor-Management Cooperation Act of 1978, U.S.C. Section 175(a) and 29 U.S.C. Section 186(c)(9)

85 Appendix 2 (a) (b) The affairs of the STAR Program are governed by a Board of Directors comprised of equal members representing labor and management. The Employer shall be required to remit twenty-five cents ($0.25) per hour for each hour paid or portion thereof on each employee covered under this Agreement. Contributions shall be made pursuant to the provisions of Article 17. Section 6. LABOR MANAGEMENT COOPERATION INITIATIVE - We hereby establish a contribution to the Labor Management Cooperation Initiative (LMCI) effective the date of this working agreement and any renewals or extensions thereof. (a) (b) (c) For each hour or portion thereof, for each employee covered under this Collective Agreement, the Employer shall pay five cents ($0.05) payable to the District Council 16 Northern California Health & Welfare Trust Fund. Such contributions shall be forwarded to the LMCI Trust Fund. For the purpose of this Article, each hour paid for, including hours attributed to show up time, and other hours for which pay is received by the employee in accordance with this Agreement, shall be counted as hours for which contributions are payable. Contributions shall be paid on behalf of any employee starting with the first (1 st ) day of employment in a job classification covered by this Agreement. Section 7. WORK PRESERVATION FUND - There has been created a separate and independent entity, the Work Preservation Fund organized pursuant to the laws of the State of California, as a nonprofit California Corporation. The purposes for which this corporation is formed are to expand the work and job opportunities available to signatory Employers and employees, and to advance and preserve the industry by promoting high standards and fair competition. These purposes are consistent with those established under the authority of the Labor Management Cooperation Act of 1978, USC Section 175(a) and 29 USC Section 186(c)(9). The affairs of the Work Preservation Fund are governed by a Board of Directors comprised of equal members representing labor and management. (a) (b) (c) The Employer shall be obligated to pay the Work Preservation Fund eight cents ($0.08) on each employee covered under this Agreement for each hour worked. Pursuant to and under the terms of this Agreement, the Trust Funds Administrator shall collect such contributions for the Work Preservation Fund and shall thereafter each month forward said monies to the Work Preservation Fund. Appropriate records shall be kept and maintained by both the Trust Funds Administrator and the Work Preservation Fund as to the collection, transmittal and amounts of funds collected on forms to be provided exclusively by the Trust Funds Administrator. The parties agree that the contributions shall be transmitted to the Trust Funds Administrator. The contribution rate shall be set forth in Wage Schedule A and shall be paid on all hours worked

86 Appendix 2 ARTICLE 17 PAYMENTS TO TRUST FUNDS Section 1. TRUST FUNDS - Current Trust Funds - This Agreement requires contributions to be made on behalf of all employees of the Employer performing work covered under the terms of this Agreement in accordance with Wage Schedule A to the following jointly administered Trust Funds: District Council 16 Northern California Health & Welfare Trust Fund Bay Area Painters & Tapers Pension Trust Fund Bay Area Painters & Tapers Pension Trust Fund The Annuity Plan District Council 16 Northern California Journeyman & Apprentice Training Trust Fund IUPAT - Finishing Trades Institute Painters & Allied Trades Labor Management Cooperation Initiative Section 2. TRUST AGREEMENTS - The Trust Agreements of each of the Trust Funds as in effect on the date of this Agreement are incorporated herein by reference and made a part of this Agreement. Amendments to those Trust Agreements which are duly adopted after the date of this Agreement shall automatically be incorporated herein and made a part of this Agreement. Should any of the Trust Funds merge into or with another jointly-administered Trust Fund or Funds, then the Trust Agreement resulting as a consequence of that merger shall automatically be incorporated herein and made a part of this Agreement. (a) Whereas, the Bay Area Painters and Tapers Pension Plan has been certified by its actuary to be in critical status as of January 1, 2009, under Code Section 432(b) and ERISA Section 305(b) and consequently the Board of Trustees has provided the collective bargaining parties with its Rehabilitation Plan dated June 26, 2009 and updated effective February 11, 2011, including schedules that contain benefit reductions and increases in contribution rates as required by Code Section 432(e) and ERISA Section 305(e). Therefore, District Council 16 and the Northern California Painting and Finishing Contractors and/or the Individual Employer Signatory to this Agreement hereby adopt the benefit reductions and contribution rates set forth in the Recommended Schedule of the Rehabilitation Plan adopted by the Board of Trustees on June 26, 2009 and the update effective February 11, 2011, and incorporate said Recommended Schedule into this Agreement as though it was set forth in its entirety. The hourly Journeyperson contribution rates shall be as follows: 21 86

87 Appendix 2 Effective Date January 1, 2012 January 1, 2013 January 1, 2014 January 1, 2015 January 1, 2016 January 1, 2017 Journeyperson Contributions Providing Benefit Accrual Credit $3.70 $3.70 $3.70 $3.70 $3.70 $3.70 Additional Contributions Not Providing Benefit Accrual Credit $1.50 $1.98 $2.46 $2.94 $3.42 $3.90 (b) Those classifications contained in this Agreement that provide for contribution rates that are different from the contribution rates set forth above, then the Employer shall pay additional contributions that do not provide benefit accrual credit which are proportional to the above rates. The above contribution rates shall be in effect for the duration of this Agreement. Section 3. TRUSTEES - Each Employer does hereby designate the Board of Trustees of the Trust Funds referred to above, including any trust funds created as a result of a merger, as trustees for all proper and lawful purposes as provided in the various trust agreements and as required by law. District Council 16 of the International Union of Painters and Allied Trades shall appoint all Union Trustees in accordance with its bylaws. The Northern California Painting & Finishing Contractors Association shall appoint their Trustees in accordance with their bylaws. Section 4. PAYMENTS TO TRUST FUNDS AND OTHER FUNDS (a) (b) Other Funds - The Individual Employer agrees to make the payroll deductions and remittance thereof, of the Work Preservation Fund, Industry Fund, DC 16 STAR Fund, Administrative Dues Check-Off, Wage Equality Dues Check-Off, Organizing Dues Check-Off, Unity Action Dues Check-Off, Vacation/Holiday Fund and of the IUPAT PAT-PC deductions pursuant to the attached Wage Schedule A s of this Agreement. The consequences of any and all delinquent remittance of these deductions and/or contributions shall be the same as those provided by the Trust Agreement of the District Council 16 Northern California Health & Welfare Trust Fund. Due Date - All payroll deductions and contributions based on hours worked in a particular month shall be payable under this Agreement on or before the fifteenth (15th) day of the following month (the "due date") and will be deemed delinquent if not received by the end of the month, at which time liquidated damages shall be incurred and interest assessed as of the first day of the next month

88 Appendix 2 (c) (d) (e) (f) Liquidated Damages and Interest Assessments - Because of the difficulty of determining the actual expense of collection or of damage resulting when a monthly payment is delinquent, liquidated damages, as well as interest, shall be assessed against both delinquent contributions and payroll deduction remittances, referred to in this Article, together with reasonable attorneys fees and any other expenses incurred in connection with the delinquency. The amount of liquidated damages shall be the greater of twenty percent (20%) of the delinquent contributions and payroll deductions or one hundred fifty dollars ($150.00) per month, or the interest accrued until those contributions and payroll deductions are paid, whichever is greater. However, if the delinquencies are paid prior to the filing of a lawsuit, liquidated damages shall be the greater of ten percent (10%) of the delinquent contributions and payroll deductions or one hundred fifty dollars ($150.00), not to exceed seven hundred fifty dollars ($750.00) per month. Interest shall be assessed on delinquent contributions and payroll deductions at such rate as the Trustees of the Trust Funds may determine. The amount of the assessments on delinquent payroll deduction remittances shall be the same as is established by the Trustees of the District Council 16 Northern California Health & Welfare Trust Fund. Economic Action - If the required contribution and liquidated damages owed by the delinquent Employer to any or all of the Funds, or the payroll deductions and/or other contributions referred to in this Article, are not received by the last day of the month in which they are due and payable, then in addition to the foregoing it shall not be a violation of this Collective Bargaining Agreement for the Union to withdraw employees from the job or shop of such delinquent Employer. Any employee withdrawn from the job or shop of the delinquent Employer, pursuant to this Section shall be paid by such Employer the sum of one (1) days' wages and fringes for each day of work lost by the employee being so withdrawn up to a maximum of five (5) days to compensate the employee for the inconvenience and loss of time due to said delinquency. Such payment shall be in addition to all wages due the employees for time actually worked prior to their withdrawal from the job or shop of the delinquent Employer. In addition the Union shall have such further remedies as set forth in this Agreement. Rights and Remedies - The rights and remedies against a delinquent Individual Employer as set forth above are not exclusive but are cumulative and nothing in this Article shall in any way limit any one's right to enforce the collection of contributions or payroll deductions by any legal means. The Board of Trustees of each Trust Fund may compel and enforce the payment of the contributions in any manner in which they may deem proper; and the Board of Trustees may make such additional rules and regulations to facilitate and enforce the collection and payment thereof as they may deem appropriate. The Board of Trustees may, in the event of repeated delinquencies by the same Employer, make special rules applicable to such Employer s contributions, including rules requiring bond or other security and rules with respect to the due and/or delinquent date of said Employer s contributions. Failure of an Employer to pay the contributions required hereunder within fifteen (15) days after the date due shall be a violation of the collective bargaining agreement between the said Employer and the Union, as well as a violation of the Employer s obligations hereunder. Nonpayment by an Employer of any contributions when due shall not relieve any other Employer from his obligations to make payments. Place of Payments - All contributions and payroll deductions referred to in this Article shall be paid at the place or places designated by the Trusts, NCPFC and the Union, and on such forms as they may require

89 Appendix 2 (g) (h) (i) (j) (k) Minimum Contribution Rates - The Employer and the Union party to this Agreement recognize and acknowledge the Trustees' rights to set minimum contribution rates for participation in their respective Funds. Should the total wage package not be sufficient to provide minimum rates required, the parties recognize that the Trusts specified in the Agreement cannot continue to provide such benefits and other arrangements will have to be made to provide them. Payroll Inspection - The Administrator of the Trust Funds referred to in Section 1 above, the Administrator s C.P.A. or C.P.A. designated by the Union shall be allowed to inspect the payroll records of any Employer or the Union, with reasonable written notice to ascertain if the provisions of this Agreement are being complied with. Time Records - Employers shall keep weekly time cards or time records on which shall clearly appear the employee s full name and the last four (4) digits of the employees social security number, the job or job s names, the hours worked each day on each job and total hours worked each week, showing total straight time hours, total overtime hours and the type of work performed. The employee shall sign the time card or time record, except where such records are kept electronically. Electronic Record Keeping - Where time records are maintained electronically, upon the request of the Trust Funds or their agents, auditors, administrators or attorneys, the Employer shall provide a detailed description of the procedure for the maintenance of such electronic time records, including but not limited to the method and procedure by which the time, job and type of work is reported, recorded and secured from alterations as of the date of input or thereafter. This Section shall be applicable to any audit of an Employer s payroll records which is scheduled or in process at the effective date of this Agreement. Checks and Check Stubs - Each pay check and each stub or copy shall clearly indicate the date of payment, pay period covered, company name, and shall include: (1) Total straight time hours worked and the rate of pay; (2) Total overtime worked and overtime rate; (3) Total gross wages paid, including pay for Travel Time; (4) Deductions itemized; and (5) Net pay for period. (l) Failure to Keep Records - If an Employer fails to keep time cards or time records as required above, said Employer is required to pay fringe benefit contributions as if any sums paid to individuals by such Employer were wages for work covered by this Agreement. In addition, there shall be a rebuttable presumption, at the option of the Trusts, that any employee who worked in a given week for whom complete, signed, time cards or time records, were not made available for review by the Trusts representative, shall be deemed to have performed covered journeyman work for a minimum of eight (8) hours per day, totaling forty (40) hours for that week. Section 5. AUDITS OF RECORDS - The Board of Trustees, or their authorized representatives, may require any Association, any Employer, the Union, any labor organization or any beneficiary to submit 24 89

90 Appendix 2 to it any information relevant to the administration of the Trust. Upon notice in writing from the Trust Funds, an Employer must permit an accountant, or agent of an accountant, of the Board of Trustees to enter upon the premises of such Employer or the Union during business hours to examine and copy records including but not limited to, the following: (a) (b) (c) (d) (e) (f) (g) (h) Canceled checks and check stubs showing all monies paid to each employee of the Employer. Canceled checks, check stubs and business records of the Employer showing all sums paid to persons other than employees for work performed such as subcontractors, independent contractors, suppliers, relatives, partners and joint ventures of the Employer. The individual earnings records of each employee of the Employer showing the name and address of employee, social security number, wage rate, hours worked, gross pay, amounts withheld and net amount paid for each employee. Copies of all fringe benefit returns of the Employer s prepared for filing with the Trust Funds for each month. Those canceled checks showing sums actually paid by Employer to the Trust Funds for each month. Copies of the Employer s Quarterly Federal Tax Return (Form 941) for each quarter, as well as the State Quarterly Wage and Withholding Report (Form DE 6). Individual employee s time records including but not limited to all Travel Time Calculation Sheets as required by Article 10, Section 14(a) for each employee of Employer. Records of each job involving application work covered by this Agreement, to the extent that such records exist, including: (1) Name and address of owner of property where work covered by this Agreement was performed; (2) Name and address of the general contractor for whom the work was performed; (3) Street address where work covered under this Agreement was performed; (4) Total payroll cost of each job; (5) Name and address of each person who performed work covered by this Agreement on each job; and (6) Total material cost of each job. (i) (j) (k) Copies of Federal Forms W-2 and W-3 prepared by the Employer for each employee. Disbursement Journal of the Employer. Payroll Journal of the Employer

91 Appendix 2 Employee records are to be maintained by the Employer for a period of at least four (4) years or in accordance with State and Federal requirements. In the event that such an examination of such Employer s records reveals that such Employer is not making full and prompt payments of all sums required to be paid by him/her to the Trust Funds, then such Employer shall pay to the Trust Funds such costs, including accountant fees, as may have been reasonably incurred in making such determination. Upon the written request of the Board of Trustees, or their duly authorized representative, such Employer may be requested to bring or send his/her records for auditing to the Trust Fund Office or to the office of the designated accountant. Whenever an employee appears on work as defined in this Agreement and he/she appears as an employee or subcontractor for other work on the Employer s records, fringe benefits shall be paid. The hours due shall be computed at the rate of a journeyperson painter s wages per hour when lump sums have been paid, or on the labor portion of an itemized invoice. Any bonuses, expenses or sums of monies paid to an Employee other than as provided by this Agreement shall be specifically identified in the Employer s records and on the employee s check. Section 6. BONDING (a) (b) Each Employer shall, within ten (10) days of the mailing of notice by the Administrator of the Trust Funds, provide a bond in a sum equal to the greater of five thousand dollars ($5,000.00) or twice the monthly average of the wages and contributions made or due under the terms of this Agreement, or the Agreement immediately preceding this Agreement, by such Employer in the six (6) month period just prior to the mailing of said notice. Such amounts are to be determined by the said Administrator. Such bond or cash in lieu of bond is not in any way to be construed in lieu of payments required pursuant to this Agreement. All such bonds shall be deposited with the Trust Funds and all bonds shall be in a form acceptable by the Board of Trustees and shall be enforceable throughout the term of this Agreement. Each Employer must comply with the bonding provisions of this Agreement if the Employer has more than one (1) delinquency within a twelve (12) consecutive rolling month period as shall be determined by the Trustees. The Trustees may, within their sole discretion, require such Employers to file report forms and make contribution payments at more frequent intervals than is required of other Employers. When an Employer, after having deposited said bond, attains a record of twelve (12) consecutive months of prompt, timely and proper payment of wages and Trust Fund Contributions, he/she may have said bond returned upon proper application to the said Administrator and the approval of the Trustees. If the Bond must be used to make any payment of wages or contributions to said Trust Funds, the money shall first be applied to the payment of wages of employees working under this Agreement and the balance shall be prorated among the amounts due by the Employer to the various Trust Funds. In the event an Employer fails to deposit a satisfactory bond within the time provided and the notice herein provided for has been given, all employees shall be withdrawn from the job or shop of the Employer and all employees withdrawn pursuant to this Section shall be paid by such Employer the sum of one (1) days' wages and fringes for each day of work lost by the employee being so withdrawn up to a maximum of five (5) days to compensate for the inconvenience and loss of time due to the Employers failure to post bond. Such payment shall be in addition to all wages due the employees for time actually worked prior to being withdrawn from the job or shop of the Employer. In addition the Union shall have such further remedies as set forth in this Agreement

92 Appendix 2 Section 7. TRANSFER OF MONEY FROM BENEFIT FUNDS TO WAGES (a) (b) During the term of this Agreement the Union and/or Trustees may request in writing an increase or decrease in the contributions required by the Employer to a particular benefit fund or funds. Such request shall be made in writing at least thirty (30) days prior to the proposed effective date of the change. The Employer will honor such request effective upon the date set forth in a Memorandum Of Understanding (Wage Schedule A) between NCPFC and the Union. Any increase or decrease in the required contributions by the Employer to the particular benefit fund or funds shall in no way result in a decrease in the Taxable Net Wage of the then current Wage Schedule A. Section 8. ERRONEOUS PAYMENTS - An Employer shall be entitled to credit against future employer contributions or refund of money paid to specified Trust Funds by reason of clerical or administrative error or mistake as to the amount owing to the Trust Funds, in accordance with the Trust Funds policy on overpayments of contributions, including but not limited to the following conditions: (a) (b) (c) (d) (e) (f) DC 16 Health & Welfare Trust: Where hours paid were reported at a rate higher than required, the amount of overpayment shall be refunded or credited to the Employer. Written application for refund or credit must be made within four (4) years from the due date of the report containing the erroneous payment; but an audit report may be considered a written request for refund. Refund or credit may be made within six (6) months after the Plan Administrator determines that the improper rate was paid by mistake. Any amounts found to be over reported and overpaid for the purpose of providing coverage to persons not eligible for coverage shall be offset from any other amounts repayable to the Employer, or if no offset is available, billed to the Employer for repayment to the Trust Fund. Defined Benefit Pension Plan: Where contributions were made to the Bay Area Painters and Tapers Pension Plan for hours reported in excess of those for which the employee worked, overpayments shall be credited or refunded to the Employer, and the hours backed out of the employees account. Refunds or credits shall be allowed as provided above so long as the Trust Funds have made no disbursements on behalf of employees based upon the erroneous contributions; and The Boards of Trustees of the Trust Funds have determined that the erroneous contributions were made due to a mistake of fact or law and can properly be returned, without interest or earnings, pursuant to ERISA section 403(c). Any erroneous payments found on an audit shall be reported immediately to the Employer and credited or offset against amounts found due on audit, if any, in accordance with Trust s policy. No other refunds or credits shall be given with respect to Vacation/Holiday, Bay Area P & D Annuity, District Council 16 Journeyman & Apprentice Training Trust Fund, or other entities or payroll deduction remittances, except by direction of the Trustees. Section 9. FRINGE BENEFIT COVERAGE FOR OTHER EMPLOYEES - Each of the Trust Funds may adopt rules allowing employees not covered by this Agreement to participate in those Trust Funds to the extent permitted by law. The rules for the participation of those employees shall be set 27 92

93 Appendix 2 forth in a written participation agreement between the Trust Fund and the employer, which may incorporate the rules of this Article by reference. ARTICLE 18 SEPARABILITY AND SAVINGS CLAUSE Section 1. In any Section, paragraph or Article of this Agreement should be held invalid by operation of law or by any tribunal of competent jurisdiction, or if compliance or enforcement of any section, paragraph or Article should be restrained by such tribunal pending a final determination as to its validity, the remainder of this Agreement or the application of such section, paragraph or Article to persons or circumstances other than those as to which it has been held invalid or as to which compliance with or enforcement of has been restrained, shall not be affected thereby. Section 2. In the event that any Section, paragraph or Article is held invalid or enforcement of or compliance with any section, paragraph or Article has been restrained, as set forth above, the parties affected thereby shall enter into collective bargaining negotiations within five (5) working days, upon the request of either party, for the purpose of arriving at a mutually satisfactory replacement for such Section, paragraph or Article, during the period of invalidity or restraint. If the parties do not agree within a period of sixty (60) days on a mutually satisfactory replacement, either party shall be permitted all legal or economic resources in support of its demands not withstanding any provision in this Agreement to the contrary. Section 3. It is understood and agreed that at such time as existing Federal Laws containing restrictions on the form of union recognition and union security provisions may be amended so as to make legal conditions and requirements other than those contained in this Agreement, then and in that event, either party to this Agreement may upon thirty (30) days notice, in writing given to the other party, re-open Articles 3 and 6 of this Agreement for the purpose of negotiating changes in these Articles. ARTICLE 19 PRESERVATION OF WORK CLAUSE Section 1. To protect and preserve, for the employees covered by this Agreement, all work they have performed and all work covered by this Agreement, and to prevent any device or subterfuge to avoid the protection and preservation of such work, it is agreed as follows: If the Employer performs on-site construction work of the type covered by this Agreement, under its own name or the name of another, as a corporation, company, partnership or other business entity, including a joint venture, wherein the Employer, through its officers, directors, partners, owners or stockholders, exercises directly or indirectly (through family members or otherwise) management, control or majority ownership, the terms and conditions of this Agreement shall be applicable to all such work. Section 2. All charges of violation of Section 1 of this Article shall be considered as a dispute and shall be processed in accordance with the provisions of this Agreement on the handling of grievances and the final and binding resolutions of disputes. As a remedy for violations of this Article, the Arbitrator shall be able at the request of the Union, to require an Employer to pay; 1) effected employees covered by this Agreement, including registered applicants for employment, the equivalent of wages those employees have lost because of the violations, and 2) into the effected Joint Trust Funds to which this Agreement requires contributions, any delinquent contributions that resulted from the violations. The Arbitrator 28 93

94 Appendix 2 shall be able to also provide any other appropriate remedies, whether provided by law or this Agreement. The Union shall enforce a decision of the Arbitrator under this Article only through arbiter, judicial or governmental (for example, the National Labor Relations Board) channels. Section 3. If, after an Employer has violated this Article, the Union and/or the Trustees of one or more Joint Trust Funds to which this Agreement requires contributions, institute legal action to enforce an award by an Arbitrator remedying such violation, or defend an action that seeks to vacate such award, the Employer shall pay any accountants and/or attorneys fees incurred by the Union and/or the Joint Trust Funds plus costs of the litigation, that have resulted from such legal action. This Section does not effect other remedies, whether provided by law or this Article that may be available to the Union and/or the Joint Trust Funds. ARTICLE 20 EMPLOYERS Section 1. The employer shall have a duly issued and effective State Contractors License, shall carry Workers Compensation Insurance, and shall comply with all Federal, State and Municipal Laws pertaining to the Painting Industry and all health and safety regulations and rules. (a) (b) Specialty Contractors, other than Painters and Decorators, who possess a State Specialty License, now classified as C-61 or C-9, in any of the following categories: Steam cleaning, Wallboard Taping, Paint Burning, Parking Lot Striping or Sandblasting, and whose operations in the painting industry are confined strictly within the limits allowed under their Specialty license. DRYWALL FINISHING - Refer to Northern California Drywall Finishers Master Agreement All Employers signatory to this Agreement and/or interim Agreement doing drywall finishing work shall pay the negotiated drywall finisher scale. At no time shall a drywall finisher Employer use this Agreement in place of the Northern California Drywall Finishers Master Agreement. Section 2. It is understood that District Council 16 will continue their organizing efforts including production and maintenance, and Agreements will be signed with employers in said fields, establishing terms and conditions for production and maintenance painting. Employers signatory hereto doing production and maintenance painting will be requested to execute agreements relating to said work, and any work done will be covered by the terms of each executed agreement, and, if none, by this Agreement. Any agreement so signed shall be copied to the Northern California Painting and Finishing Contractors. Section 3. The Employer shall permit duly accredited representatives of the District Council to visit the shop or job any time where work is being performed in order to determine whether the shop is being conducted in accordance with this Agreement. Section 4. The Employer warrants, asserts and agrees that this document is executed by him/her with full authority to represent and bind the Employer, partnership, corporation or association of which he/she is a partner, officer, representative or member. Should the Union enter into a contract with any Employer; the NCPFC will be provided with a copy upon request

95 Appendix 2 (a) This Agreement shall apply to all present and subsequently acquired operations of the Employer and to all accretions to the bargaining unit, including, but not limited to, newly established or acquired operations. Section 5. If this Agreement is signed by a member of a partnership, it shall apply to them and each of them individually. In the event of a dissolution or termination of said partnership or in the event of a merger, consolidation or other legal change whatsoever, with respect to employer, any obligations hereunder shall be binding upon any assign, successor, legal representatives or lessee of such employer. Section 6. After this Agreement takes effect any employer may become a party hereto if this Agreement is executed by him/her. This Agreement shall take effect as to such new Employer at such time as said party signs this Agreement. Section 7. Each Employer may designate no more than two (2) owners, partners or persons holding proprietary interest in the business as Owner Members of the Union. Owner Members may perform work covered by this Agreement and the Employer shall not be required to make Trust Fund contributions on behalf of Owner Members. Section 8. No two (2) or more contractors shall work for each other on any contract, except that a contractor may sublet a contract to a signatory contractor. Section 9. It shall be a violation of this Agreement for the Employer or the Employer s agent to establish production quotas or piece work systems. Section 10. The Employers shall have the right to manage their business in all respects without limitation except as expressly provided in this Agreement. Section 11. The Employer agrees that he/she will not contract work covered under the scope of this Agreement to anyone not signatory to a collective bargaining agreement with the International Union of Painters & Allied Trades. If the Union cannot supply a licensed, qualified subcontractor within fortyeight (48) hours, then the contractor can hire from any source. Section 12. All Employers doing drywall work must register each drywall job with District Council 16 on forms provided. Section 13. Employers signatory to this Agreement shall, before commencing to perform work on any competitively bid job in which four hundred eighty (480) hours or more of covered work will be performed, register the job with District Council 16 on forms provided. Section 14. There may be established Project Labor Agreements to cover the scope of work outlined in this Agreement and in connection with Building Trades Agreements. The NCPFC will be provided with a copy upon request. Section 15. The bargaining parties expressly agree that the San Francisco Paid Sick Leave Ordinance shall not apply to employees covered by the Northern California Painters Master Agreement

96 Appendix 2 ARTICLE 21 WORK STOPPAGES Section 1. PERMITTED WORK STOPPAGE - There shall be no stoppages of work either by strike or lockout by the parties hereto, except as provided for elsewhere in this Agreement. Section 2. PICKETING - It shall not be a violation of this Agreement for employees to refuse to pass through or work behind a legitimate picket line recognized by the Building and Construction Trades Council in the area where the work is being performed. Section 3. No employee shall work for any signatory Employer that has failed, neglected or refused to pay his employees the wages, fringes or other compensation provided for in this Agreement. A District Council or Local Union may take such economic action by strike, picket line or boycott, as it may see fit, against any Employer so failing, neglecting or refusing to pay his/her employee the wages, fringes or other compensation provided for in this Agreement. Section 4. Employees covered by this Agreement shall have the right to respect any legal primary picket line validly established by any bona fide labor organization, and the Union party to this Agreement has the right to withdraw employees covered by this Agreement whenever the Employer party to the Agreement is involved in a legitimate primary labor dispute with any bona fide labor organization. Section 5. NON-UNION JOBSITES - Furthermore, recognizing the Special problems in the construction industry based upon the close relationship between contractors and subcontractors at the jobsite of the construction, alteration, painting, or repair of a building, or other such work and the friction that is created when union and non-union employees are required to work side-by-side, it shall not be a violation of this Agreement and it shall not be a cause for disciplinary action or discharge in the event an employee refuses to enter upon any such construction site where non-union employees are employed and which would require the employee to work shoulder-to-shoulder or alongside the nonunion employee or employees, or refuses to remain on such jobsite when non-union employees are engaged in such construction on the jobsite. This clause shall apply only to jobsites where the Union s members are working, whether it is on a construction site of the Employer or at any other jobsite. ARTICLE 22 AUTHORITY TO EXECUTE Section 1. The undersigned Employer warrants, asserts, and agrees that this document is executed by him/her with full authority to represent and bind the Employer. Section 2. If any provision of this Agreement is declared invalid, or the applicability thereof to any person, circumstances or thing is held invalid, the validity of the remainder of the Agreement and/or the applicability thereof to any other person, circumstance or thing shall not be affected thereby. Section 3. INTENT AND PURPOSE It is the clear understanding, intent and purpose of the signatories to this Agreement that is not over burdensome with unnecessary language. If any legal language needs to be added to any portion of this Agreement, it is agreed that this legal language will become part of this Agreement providing the legal language does not alter or change the intent and negotiated portion so effected

97 Appendix 2 WE HEREBY AGREE TO THE TERMS AND CONDITIONS STATED HEREIN: District Council 16: Company Name (Print) Business Representative (Print) Employer Name (Print) Business Representative (Sign) Date: Employer Name (Sign) Date: 32 97

98 Appendix 3 Exhibit 1 98

99 Appendix 3 Exhibit 2 99

100 Appendix 3 Exhibit 3 100

101 Appendix 3 Exhibit 4 101

102 Appendix 3 Exhibit 5 102

103 Appendix 3 Exhibit 6 103

104 Appendix 3 Exhibit 7 104

105 Appendix 3 Exhibit 8 105

106 Item CR Draft Report on the Dual Wage Threshold for the Painting Industry 5474(1)/5482(1), Painting Decorating or Paper Hanging 5474(2)/5482(2), Waterproofing 5474(3)/5482(2), Painting oil or gasoline storage tanks Executive Summary Objective In 2011, the WCIRB began a comprehensive multi-year study of the dual wage thresholds to address concerns regarding the appropriateness of the current dual wage thresholds in light of recent economic events in California. Of the eight dual wage construction classifications studied in 2011, the WCIRB s findings for the data reported in Classifications 5474/5482, Painting, Decorating or Paper Hanging including shop operations, exhibited anomalies in comparison to the other construction classifications studied. Since the findings for Classifications 5474/5482 were dissimilar from the data from other dual wage construction classifications, the Classification and Rating Committee (C & R) directed the WCIRB to further study the wage thresholds for Classifications 5474/5482. For the study conducted in 2011, the anomalies exhibited by the data for Classifications 5474/5482 are as follows: The proportion of payroll assigned to the low wage classification (5474) has been steadily increasing for several years. The loss cost differential is lower for smaller employers than larger employers in the painting industry. For other construction industries, large employers tend to have a lower loss cost differential than smaller employers. The rate differential between the high wage and the low wage is decreasing. Findings The WCIRB met with associations that represent painting contractors and the general consensus was that the data collected for the 2011 study does not accurately represent the typical wages paid for painting jobs as the wages reported were collected during a time of recession (2010). The industry is currently showing signs of increased business and is expecting the painting industry to trend upward in the approaching years. Recommendation The WCIRB recommends there be no increase in the wage threshold for the dual wage painting classification and that the matter be re-evaluated again in 2-3 years. 106

107 Background Effective January 1, 1986, the Dual Classification by Wage Level Program (Program) was adopted by the California Insurance Commissioner for six construction classifications. The Program was adopted following a WCIRB study initiated in response to employer concerns about the potential inequities in premiums paid due to variations in wage levels for construction employees. The study showed that in certain construction classifications, high wage paying employers were, on average, paying more premium per loss dollar than low wage paying employers. As a result, the Program was established for six construction classifications that met the following criteria: 1. The classification is large enough to be segregated into two statistically credible classifications. 2. There is a significant variation in wages paid by employers. 3. A significant disparity in claim costs per $100 of payroll by wage level exists. In reviewing the impact of wage inflation on a classification threshold, the WCIRB monitors a number of wage inflation indicators and the distribution of reported payroll between high wage and low wage classifications. Threshold increases are periodically recommended to ensure that each classification still meets the criteria outlined above, and the experience assigned to the low wage and the high wage classifications remain credible. From , the C & R Committee recommended $1 increases in the dual wage thresholds based on wage inflation. The Governing Committee reviewed the recommendations and suggested further study of the dual wage construction classifications. In 2011, the WCIRB commenced a multi-year comprehensive review of wage thresholds for the construction classifications currently segregated based on hourly wage. In 2011, eight pairs of dual wage classifications were studied, including Classifications 5474/5482. The findings of the study indicated that the wage thresholds for the dual wage classifications studied should be increased by levels of $2 to $5. Due to concerns about the viability of the dual wage system, the Governing Committee deferred recommending any changes to the threshold values, and instead, directed the WCIRB to continue the study of dual wage thresholds and to conduct a comprehensive study on the viability of the Program in The wage threshold for five additional pairs of dual wage classifications were studied in 2012 and the C & R Committee supported the WCIRB s recommendation to increase certain wage thresholds. Given the findings for certain dual wage classifications, the C & R Committee directed the WCIRB to conduct additional studies. The study of Classifications 5474/5482 revealed anomalies in the data when compared to other dual wage classifications. The WCIRB was directed to study the dual wage threshold for these classifications to include outreach to the painting industry Study In 2011, the WCIRB surveyed 488 employers in the painting and waterproofing industry to determine if it is still appropriate to split the classification and if the current threshold continues to be appropriate. The surveys involved contacting trade associations related to the painting and waterproofing industry to advise of the upcoming wage level surveys. A sample of employers was selected based on unit statistical data that reported payroll in Classifications 5474/5482. During February 2011, WCIRB field staff visited the selected policyholders to gather employee hourly wage information for the week of October 4-8, Wage information was obtained for over 6,000 employees, loss information was based on the unit statistical reports that the WCIRB evaluated for the employers selected. The payroll and loss information was compiled and is presented in several tables presented below. 107

108 Table 1 summarizes survey results for the distribution of hourly wages representing 488 employers with 6,012 employees. 1,200 Table 1 Number of Surveyed Employees by Hourly Wage Level Based on Sample of 488 Employers Number of Employees in Hourly Wage Range 1, Hourly Wage Range Based on the survey data, there is a credible volume of experience in the painting classifications both below (64% of surveyed employees) and above (36% of surveyed employees) the current threshold. Approximately 9% of the total sample distribution is within one dollar of the current wage threshold of $24. The largest concentration of employees, 1,065 (18%), occurs in the $13 to $15 wage range followed by 880 employees (15%) in the $0 to $12 range. In the high wage classification, the greatest concentration of employees is in the $30 range (5%). 108

109 Payroll by Employer Average Wage Table 2 shows the percentage of surveyed employers whose average wage for all painting employees falls within a particular range (e.g., the $20 label represents a range from $20.00 to $20.99). This table demonstrates that the employer average wage distribution is somewhat skewed to the lower wage range across the wage intervals. In a dual wage classification system, the percentage of employer average wages generally should be consistent across all wage intervals. Table 2 Percentage of Total Employers by Employer Average Wage Level 20.00% Percent of Surveyed Employers 15.00% 10.00% 5.00% 0.00% Average Hourly Wage 109

110 Employers Payroll by Employer Average Wage Table 3 shows, for each wage range, the total painting payroll of all surveyed employers whose average wage falls within that range, as a percentage of the total painting payroll of all surveyed employers. This table illustrates there is somewhat of a spread between the low wage and high wage employers with 49% of the wages falling in the range between $13 per hour and $20 per hour for low wage employers and 29% of the wages falling in the range $25 per hour to $32 per hour for high wage employers. Table 3 Percent of Survey Payroll by Employer Average Wage Level 24% % 20% 18% 16% Average Hourly Wage 14% 12% 10% 8% 6% 4% 2% 0% Percent of Survey Payroll 110

111 Loss Cost Per $100 of Payroll Differential Table 4 depicts, for each wage range, the loss cost per $100 of payroll for all surveyed employers whose average wage falls within that range, relative to the average loss cost per $100 of payroll for all of the surveyed employers. Please note the losses used in this analysis are developed and limited to $100,000 to mitigate the extremes caused by large losses when classification data is reviewed at the more granular levels presented herein. The loss cost per $100 of payroll of the surveyed employers with average wages below the current threshold of $24 is approximately 100% of that of the surveyed employers at or above the threshold based on one year of experience and 119% based on two years of experience. The highest loss cost per $100 of payroll is observed in the $24 to $28 wage interval. For a dual wage classification system, the loss cost per $100 of payroll should generally decrease as the employer s average wage increases. Table 4 Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range 111

112 Based on the survey data, at the current wage threshold of $24, the differential between the losses per $100 of payroll among employers with average wages below the threshold and those with average wages above the threshold has eroded indicating that the threshold amount could potentially be increased. WCIRB staff reviewed alternate threshold values and determined that there is a significant differential in loss costs per $100 of payroll between employers paying average wages at or above a $29 threshold as shown in Table 5. The loss cost per $100 of payroll of the surveyed employers with average wages below a threshold of $29 is 260% of that of surveyed employers at or above a $29 threshold; however, the sample percentage of payroll at or above a $29 threshold declines to 19%, which is below the level usually targeted in creating the dual wage classifications Table 5 Alternate $29 Threshold Loss Costs per $100 as Percentage of Class Average by Employer Average Wage Level Developed and Limited to $100,000 per Loss Loss Costs as % of Class Average Hourly Wage Range 112

113 Staff also reviewed the loss cost differentials by the size of the surveyed painting employers. Table 6 shows the loss cost differential by employer size. In this table, employer size is defined by the number of employees, rather than by total payroll or total premium. Usually, larger employers have lower relative loss costs. For these classifications, this situation is reversed. Table 6 Classifications 5474/5482 Size of Employer: Number of Painting, Decorating, or Paper Hanging Employees Loss Cost Differential 0 to % 11 to % 21 to % 31 and over 120.5% Pure Premium Rate Differential Table 7 reflects the advisory January 1, 2013 pure premium rates for Classifications 5474 and As shown, employees who are shifted from the high wage Classification 5482 to the low wage Classification 5474 would be subject to a higher pure premium rate. The pure premium rate relativity between the two classifications was 222% in 1992 when the rates were first predicated on data reported in each of the two painting dual wage classifications. Table 7 Comparison of Advisory January 1, 2013 Pure Premium Rates 5474 vs Classification Relativity % 2011 Study Summary Findings and Recommendations WCIRB staff found that at the current threshold of $24 for Classifications 5474/5482, Painting: (a) the volume of experience in both dual wage classifications remains statistically credible with only two years of experience in spite of the large percentage of survey employees assigned to the low wage classification (64%), (b) there is a relatively small concentration of wages (9%) within one dollar of the threshold, and (c) the differential in losses per $100 of payroll between employers with average wages below the threshold and those with average wages at or above the threshold is 100% based on one year of experience and 119% based on two years of experience. Staff did not find an alternative threshold that improved on the overall performance of the current threshold. 1 As a result, staff recommended no change to the current threshold and that further study be conducted in 2013 with consideration given to combining the dual wage classifications. 1 A lower threshold improves the distribution of employees by hourly wage but not the loss cost differential. A higher threshold improves the loss cost differential but reduces the percentage of payroll at or above a $29 threshold to 19%, which is below the level usually targeted in creating the dual wage classifications. 113

114 Current Action On January 30, 2013, the WCIRB held a meeting with associations that represent painting contractors to discuss the findings for the painting industry as part of the studies conducted in 2011 and The WCIRB met with representatives of California Professional Association of Specialty Contractors, Associated General Contractors, Painting and Decorating Contractors Association of California, Norcal Painting and Finishing Contractors Association and the Union of Painters and Allied Trades. WCIRB staff updated the loss cost differentials to reflect two more recent years of data for policy years 2009 and preliminary 2010 and presented the findings of the study conducted in 2011 with a specific focus on the anomalies found in the data for Classifications 5474/5482 as described below: The proportion of payroll assigned to the low wage classification (5474) has been steadily increasing for a number of years. The loss cost differential is higher for larger employers than smaller employers in the painting industry. The rate differential between the high wage and the low wage is decreasing. The WCIRB specified that there was concern with the data for the employees within the higher wage range of employees ($24-$28/hour) since this range reported a high loss cost relativity. The industry association representatives provided the following scenarios to explain the spike in losses for this particular range of employees: a) Smaller contractors are laying off employees and becoming owner-operators, hiring workers on an as-needed basis without reporting payroll or paying workers legally. b) Workers that are anticipating unemployment are filing claims prior to unemployment. c) Higher skilled, laid off workers may be searching for work on their own and paying higher wages to lower skilled workers. The lower skilled workers are paid higher wages but do not have the proper training on safety. Therefore, this group may be incurring more losses. d) Owners and principals of businesses that in the past have supervised operations are now conducting the work themselves and sustaining injuries. It was also noted that the painting industry has relatively low start-up costs and may be particularly prone to some of these phenomena in the current recession. The association representatives also mentioned that the data collected for the 2011 study does not accurately represent the current wages paid for painting jobs as the wages reported were collected during a time of recession (2010). Staff inquired if the industry is currently showing signs of increased business. Association representatives stated that the painting industry will be trending upward during Following this discussion, the WCIRB presented the following options to association representatives in regards to the dual wage classifications for painting: 1. Gradually increase the threshold from $24.00 to $29.00 by recommending a $2.00 incremental increase per year until the recommended threshold of $29.00 is reached. 2. Establish a three tiered classification system for the painting industry. 3. Create a single classification for the painting industry. 4. Conduct another study of the painting industry in 2-3 years to collect data that is more representative of a robust market for painting. Gradual Increase of Threshold to $29.00 Association representatives felt that the data collected for the 2011 study, representing wages during the third quarter of 2010, did not accurately represent a normal economic environment for the painting industry. Thus, the associations maintained that raising the threshold to $29 was excessive. Furthermore, the loss cost per $100 of payroll of the surveyed employers with average wages below a threshold of $29 is 260% of that of surveyed employers at or above a $29 threshold and the sample percentage of payroll 114

115 at or above a $29 threshold declines to 19%, which is below the level usually targeted in creating the dual wage classifications. Three Tiered Classification System for Painting As shown in the Table 8 below, establishing a three tiered classification system for painting based on wage level would not benefit the industry since the pure premium rates for low wage and mid-range wage tiers would not produce a significant disparity in claim costs per $100 of payroll. Table Pure Premium Rates for a Three Tier Rating System Rates per $100 of Payroll Single Classification for Painting As shown in Table 9 below, establishing a single classification for the painting industry would result in an advisory pure premium rate of $9.11, resulting in a $2.61 decrease in the advisory pure premium rate for the low wage Classification 5474 and a $2.17 increase in the advisory pure premium rate for high wage Classification Association representatives did not favor this option since it would increase the advisory pure premium rate for employers that paid higher wages and had safety programs in place. The employers who engaged in better training, retained employees with longer tenure, and maintained a better safety environment, would be subsidizing the employers who did not display any of the aforementioned characteristics. 115

116 Table 9 Painting 2013 Comparison of Advisory Pure Premium Rates Low Wage High Wage $29 Low Wage $29 High Wage Combined Study the Painting Dual Wage Classifications at a Later Date Association representatives expressed that the painting industry is starting to experience increased business and projects and that the economic environment for the painting industry will encounter growth in the next few years. The general consensus of the associations is to conduct a study of the industry in a few years to re-assess the painting industry in an economic environment that is expected to trend upward. There was an additional emphasis on the 2014 audit requirement that will require each policy producing a final premium of less than $10,000 and developing exposure in a high wage dual wage construction or erection classification to be physically audited at three year intervals. Association representatives felt that it would be favorable to observe the data compiled once the audit requirement is established. Association representatives favored the option to delay the wage threshold increase. Conclusion and Recommendation Given the concerns brought up by the industry, the WCIRB recommends no increase in wage threshold for the dual wage painting classifications at this time and studying the industry again in 2-3 years when the economic environment for the painting industry is expected to be robust and the data collected will more accurately represent conditions that are more typical for the painting industry. 116

117 Item CR Draft Report on Farmers Markets and Amusement Parks or Exhibitions 9016(1), Amusement Parks or Exhibitions all employees other than those engaged in the operation or maintenance of merry-go-rounds, swings, roller coasters or other amusement devices and ticket collectors connected therewith including care, custody and maintenance of premises; operation of elevators or heating, lighting or power apparatus including police, watchpersons, musicians, box office employees, ticket sellers or gate attendants 9180(1), Amusement Parks or Exhibitions operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified including ticket collectors connected therewith Executive Summary Objective At the request of the California Department of Insurance (CDI), the WCIRB studied farmers markets to determine if (1) the industry meets the criteria for the establishment of a new classification; or (2) the industry should be reassigned from Classification 9016(1), Amusement Parks or Exhibitions employees engaged in the care, custody and maintenance of the premises, including elevator attendants, to Classification 8006(2), Stores fruit or vegetables retail. As part of this review, the WCIRB categorized and reviewed all types of employers assignable to Classification to determine if this classification is comprised of employers whose operations are relatively homogenous in nature and, if necessary, to recommend changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP). Findings As a result of this review, the WCIRB finds the following: 1. Classification 9016 includes three basic groups of employers: (1) operators of amusement parks/recreational facilities, which includes employers assigned to Classifications 9016(2), Dog Shows, and 9016(3), Horse Shows, (2) operators of farmers markets, flea markets and swap meets (event markets), art and antique fairs or festivals, and trade shows, and (3) boat rental and marina operators; 2. Operators of event markets, festivals or trade shows represent an identifiable industry whose operations are distinct and relatively homogenous. As a group, these employers generate enough data to develop a statistically credible advisory pure premium rate; and 3. Boat rental and marina operators represent a distinct and identifiable industry whose operations are relatively homogenous. As a group, these employers generate enough data to develop a statistically credible advisory pure premium rate. Recommendation In view of the above, the WCIRB recommends the following: 1. Establish a new classification for event market, festival or trade show operators; 2. Establish a new classification for boat rental and marina operators; and 3. Amend Classifications 9016(1) and 9180(1) for consistency and clarity. 1 Classification 9016 contains three alternative phraseologies: 9016(1), Amusement Parks or Exhibitions; 9016(2), Dog Shows; and 9016(3), Horse Shows. 117

118 Introduction At the request of the CDI, the WCIRB studied the farmers markets industry in 2012 to determine if (1) the industry meets the criteria for the establishment of a new classification; or (2) the industry should be reassigned from Classification 9016(1), Amusement Parks or Exhibitions employees engaged in the care, custody and maintenance of the premises, including elevator attendants, to Classification 8006(2), Stores fruit or vegetables retail. The 2012 study found that although the operations of farmers markets are identifiable and relatively homogenous, the industry did not generate enough data to produce a statistically credible advisory pure premium rate (see Exhibit 1); and (2) it would not be proper to assign farmers markets to Classification 8006(2). WCIRB staff recommended that an alternate wording to Classification 9016(1), Amusement Parks or Exhibitions, be established for operators of farmers markets. Staff s findings and recommendations were reviewed by representatives of certified farmers market trade associations, who asked that further study be performed to determine if an alternate classification procedure could be developed for certified farmers market operators. The WCIRB studied Classification 9016 further to determine if there are other employers that operate similar to farmers markets that could be grouped with farmers markets to create a new, statistically credible classification for the industry. Classification History The history of Classification 9016 is as follows: 1915: Classification 9016, Amusement Parks or Exhibitions employees engaged in the care, custody and maintenance of the premises, including elevator attendants, was established to apply to the care, custody, and maintenance of the premises of amusement parks or exhibitions, and companion Classification 9180, Amusement Parks or Exhibitions operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified, was established to apply to the operation and maintenance of rides and attractions such as merry-go-rounds, roller coasters or other mechanical amusement devices at amusement parks or exhibitions. 1935: Classification 9015, assignable to dog and horse shows, was eliminated and dog and horse shows were reassigned to Classifications 9016(2), Dog Shows operation, care, custody and maintenance of premises; and 9016(3), Horse Shows operation, care, custody and maintenance of premises; respectively. 1972: A study of boat dealers was conducted, which resulted in the assignment of boat rental operators to Classification 9016(1). 1975: The footnotes to Classification 9016(1), 9016(2) and 9016(3) were amended to direct that restaurants and retail stores shall be separately classified. 1982: Classification 9016(3) was amended to include ticket sellers. 1998: Classification 9016(4), Skating Rinks, was eliminated and Classification 9092(3), Skating Centers, was established. 2005: Classification 9016(1) was amended to refer to companion Classification 9180(1) and to clarify that division of a single employee s payroll between companion classifications is permitted provided the employer maintains records documenting such division. Description of Operations Classification 9016(1), Amusement Parks or Exhibitions, and a summary of the operations assigned thereto follow. 118

119 AMUSEMENT PARKS OR EXHIBITIONS all employees other than those engaged in the operation or maintenance of merry-go-rounds, swings, roller coasters or other amusement devices and ticket collectors connected therewith including care, custody and maintenance of premises; operation of elevators or heating, lighting or power apparatus including police, watchpersons, musicians, box office employees, ticket sellers or gate attendants The operation or maintenance of amusement devices, restaurants and retail stores shall be separately classified. Pari-mutuel employees shall be separately classified as 8810(1), Clerical Office Employees. Also refer to companion Classification 9180(1), Amusement Parks or Exhibitions operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified including ticket collectors connected therewith. If an employee who performs duties described by Classification 9016(1) also performs duties described by Classification 9180(1), the payroll of that employee may be divided between Classifications 9016(1) and 9180(1), provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule (1) Classification 9016(1) applies to the operation of an amusement park or exhibition and contemplates the care, custody and maintenance of grounds, buildings and structures on the property and the operation of elevators and heating, lighting or power apparatus. Amusement parks typically retain security personnel, musicians, ticket sellers, admissions or gate attendants, parking lot attendants, box office employees and similar staff. Employees who operate and maintain mechanical amusement devices at amusement parks are assigned to companion Classification 9180(1), Amusement Parks or Exhibitions operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified including ticket collectors connected therewith. Amusement parks include family fun centers and recreational facilities such as miniature golf courses, batting cages, bumper car facilities, archery ranges, water excursions/tours, laser tag facilities, and water parks. Operators of event markets, festivals, and trade fairs or trade shows organize events and rent and assign spaces to vendors that sell products to customers or provide information to customers. Such employers retain employees to manage the events, which includes enforcing event rules and regulations, managing traffic and attendance, addressing problems that arise and collecting rent for space. These events operate on a non-continuous or sporadic basis and are often held at locations that are owned or operated by other concerns. This group of employers includes farmers markets, flea markets, swap meets, art and antique fairs and festivals, and trade shows. Classification 9016(1), Amusement Parks or Exhibitions, has two alternate wordings, which are shown below with a summary of the operations assigned thereto. DOG SHOWS operation, care, custody and maintenance of premises; operation of elevators or heating, lighting or power apparatus including police, watchpersons, musicians, box office employees, ticket sellers or gate attendants Kennel employees shall be separately classified as 8831(3), Kennels. The operation or maintenance of amusement devices, restaurants and retail stores shall be separately classified. 9016(2) The WCIRB s library of inspection reports contains one report for an employer 2 assigned to Classification 9016(2), Dog Shows. This employer provides superintendents for dog shows operated by the American Kennel Club Association, a separate concern. The superintendents determine that all American Kennel 2 The WCIRB s records contain no evidence of current coverage for this employer. 119

120 Club rules and regulations are being followed by each participant. These employees also record the final statistics and send the information to the American Kennel Club Association. Employees who care for dogs are separately classified as 8831(3), Kennels. HORSE SHOWS operation, care, custody and maintenance of premises; operation of elevators or heating, lighting or power apparatus including police, watchpersons, musicians, box office employees, ticket sellers or gate attendants The operation or maintenance of amusement devices, restaurants and retail stores shall be separately classified. 9016(3) Classification 9016(3), Horse Shows, is assignable to the operators of horse shows, rodeos and polo matches. Horse shows provide an arena for riders to test and display their skills in areas such as but not limited to horse jumping, cross country riding, dressage and hunting. Riders participating in their particular event receive points based on performance as determined by judges. Employers conducting horse shows employ individuals to oversee the event, register competitors, collect gate fees, provide security, maintain the premises, clean up debris and handle issues that arise during the event. Employees who stable and attend to horses are separately classified as 7207(3), Horse Shows stable employees. Rodeos provide an arena for contestants to display their athletic skills in handling horses and other livestock. Contestants participate and are judged in events such as tie-down roping, team roping, steer wrestling, bronc riding, bull riding and barrel racing. Employees are retained to oversee the event, register competitors, collect gate fees, provide security, maintain the premises, clean up debris and handle issues that arise during the event. As required, separate concerns are engaged as announcers, clowns, pick up men who remove contestants from horses, and bullfighters. Polo is a team sport played on horseback. Operators of polo grounds employ individuals for the care and upkeep of the polo lawn fields and surrounding landscapes, maintenance of fences, janitorial work and removal of debris from the property. Employees set up and tear down polo playing goals, guest seating, tables, fence lines and stands for the individual polo game matches. Employees who stable and attend to horses are separately classified as 7207(3), Horse Shows stable employees. The facilities also may be used to host horse shows. Classification 9180(1), Amusement Parks or Exhibitions, and a summary of the operations assigned thereto follow. AMUSEMENT PARKS OR EXHIBITIONS operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified including ticket collectors connected therewith Baths, billiard halls, bowling centers, dance halls, restaurants, retail stores, skating rinks and theaters shall be separately classified. Also refer to companion Classification 9016(1), Amusement Parks or Exhibitions all employees other than those engaged in the operation or maintenance of merry-go-rounds, swings, roller coasters or other amusement devices and ticket collectors connected therewith. If an employee who performs duties described by Classification 9180(1) also performs duties described by Classification 9016(1), the payroll of that employee may be divided between Classifications 9180(1) and 9016(1), provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule (1) Classification 9180(1) contemplates that portion of an amusement park or exhibition involving the operation and maintenance of amusement devices such as merry-go-rounds, roller coasters, and Ferris wheels. This classification also includes ticket collectors in connection with the amusement devices. 120

121 Analysis of WCIRB Inspection Reports The WCIRB s library of inspection reports contains 763 reports that assign Classification 9016(1). The operations described within these reports have been grouped under three categories Amusement Parks/Recreational Facilities, Event Markets, Festivals or Trade Shows, and Other, which includes boat rental and marina operators. In the case of amusement parks, when applicable, the reports also assigned Classification 9180(1) to the operation and maintenance of amusement devices; Classification 9079(1), Restaurant or Taverns, to the operation of a restaurant; and Classification 8017(1), Stores retail, to the operation of retail stores or arcades, in accordance with the footnote to Classification 9016(1) that provides [t]he operation or maintenance of amusement devices, restaurants and retail stores shall be separately classified. Amusement Parks/Recreational Facilities Amusement Parks/Recreational Facilities (160 reports): This category includes employers that operate amusement parks or theme parks that include amusement rides and devices such as roller coasters and Ferris wheels as well as a variety of games for which patrons win prizes such as stuffed animals. It also includes family fun centers and recreational facilities such as miniature golf courses, batting cages, bumper car facilities, archery ranges, water excursions/tours, laser tag facilities, and water parks that include water slides and swimming pools. Driving Ranges and Golf Lessons (72): This category includes firms that maintain golf driving ranges and putting greens for use by the public. These firms sell a bucket of balls to patrons who wish to practice their golf game. Golf pros may be retained to provide lessons to patrons. Race Track Operation (50): This category includes firms that operate automobile race tracks, go-kart race tracks and animal race tracks. Zoos and Animal Refuges (44): This category includes zoos and animal refuges that offer admittance to the general public to view animals. Indoor Playhouses (36): This category includes indoor child play centers that typically have bounce houses, inflatable play structures, slides and similar play devices for use by the public for a fee. These firms do not operate as day care centers for children. Nature Tours (10): This category includes firms that offer tours of various parks and other public areas for a fee. Tour or hiking guides lead patrons through parks and public areas and describe various attributes of the areas being toured. Horse Shows, Rodeos, Polo Matches and Dog Shows (11): This category includes employers that operate horse shows (6), rodeos (2), polo matches (2) and dog shows (1). Nordic Ski Resorts (3): This category includes ski resorts that offer Nordic (cross-country) skiing exclusively. Alpine ski resorts and resorts with both Alpine and Nordic skiing are assignable to Classification 9184, Ski Resorts alpine. Event Markets, Festivals and Trade Shows Farmers Markets (12): This category includes certified farmers market operators that rent spaces to farmers who sell their produce, i.e., produce grown by the farmers, directly to consumers. This category also includes non-certified farmers market operators 3 that rent spaces to farmers and other vendors who sell agricultural products and additional merchandise to consumers. Flea Markets (21) and Swap Meets (44): This category includes firms that rent spaces to vendors to sell their goods to the general public. Flea markets and swap meets may take place at outdoor locations, 3 In accordance with the California Code of Regulations, Title 3, Section , a certified farmers market may only sell agricultural products and the sale of such products must be made directly to the consumer by the farmers who produced the products. 121

122 such as public streets, sidewalks or parking lots, or may be held indoors. One flea market featured a Ferris wheel and merry-go-round operation that was separately assigned to Classification 9180(1). Art and Antique Fairs and Festivals (7): This category includes firms that organize art and antique fairs or festivals where vendors display and/or sell art works and antique pieces. These fairs and festivals take place both indoors and outdoors. Trade Shows and Special Event Planning (38): This category includes firms that organize and operate trade shows and special events for separate concerns on a fee basis. Trade shows and special events may have an industry theme or they may be produced for a specific client. Attendance may be open to the public or may be limited to industry members or invitees. Other Boat Rental and Boat Marinas (235): This category includes firms that rent boats and/or operate boat marinas. These firms typically occupy a dock or boat slip area as well as surrounding buildings. Boats are stored directly in the water or in buildings. Some firms rent only boat slips for customers to store a boat while other firms rent boats for customer use. These employers typically retain employees to engage in boat and marina maintenance activities, sell and dispense gas, fill out rental contracts, oversee the boat slip and marina area and similar duties. Athletic Parks (13): This category includes firms that operate athletic parks for use by separate concerns. In addition to athletic teams using these parks, the parks may be rented to firms that hold concerts or other similar events. Convention Center Operation (8): This category includes firms that operate convention centers that are rented to commercial concerns and the general public for corporate meetings, trade shows, social functions, community conferences and similar events. Classification Analysis Based on a review of the above operations, WCIRB staff analyzed (1) the difference in the operations of firms that operate amusement parks/recreational facilities versus those that operate event markets, festivals or trade shows, and (2) the extent to which Classification 9016(1) encompasses separate and distinct industries. Amusement Parks/Recreational Facilities vs. Event Markets, Festivals or Trade Shows Firms that operate amusement parks and recreational facilities provide an amusement or recreation activity to customers for a fee. These operations are performed at a fixed location. 4 Amusement parks and recreational facilities typically employ the following staff who are assigned to Classification 9016(1): security staff, ticket sellers, gate attendants, building and ground maintenance employees, and employees who operate and maintain elevators and heating, lighting or power apparatus. Employees who operate and maintain mechanical amusement devices are assigned to companion Classification 9180(1). Included in the amusement park/recreational facilities group are operators of dog shows, which are assignable to Classification 9016(2), Dog Shows, and operators of horse shows, rodeos and polo matches, which are assignable to Classification 9016(3), Horse Shows. Included under the event markets, festivals and trade shows category are farmers markets, flea markets, swap meets, art and antique fairs and festivals and trade fairs/shows. These firms provide a short-term or temporary venue for attendees to view or purchase products from vendors or to gather information about a specific product or industry. These firms coordinate and negotiate rental or use contracts with facility owners, and agreements with the vendors (separate concerns, not employees of the market or exhibition operator) that sell merchandise or provide information about specific products at the events. These employers retain employees to facilitate the events, which includes enforcing event rules and regulations, 4 Amusement-type operations that are performed by mobile or traveling carnivals or circuses are assigned to Classification 9185, Carnivals or Circuses. 122

123 addressing problems that arise, and collecting rent for space. These employers typically do not engage in the care, custody and maintenance of the premises, which is a significant operation that is performed by typical amusement park and recreational facility operators. 5 The operations of amusement parks/recreational facilities and event markets, festivals and trade shows differ significantly, and each operation is distinct and clearly identifiable. The payroll and loss data that is developed by each group is presented in the Statistical Analysis section of this report. Boat Rental and Boat Marinas Firms that rent boats and/or operate boat marinas represent a distinct and identifiable industry that, according to the number of inspection reports, appears to be of significant size. Accordingly, the payroll and loss data for this industry was identified to determine if the industry generates enough data to produce a statistically credible advisory pure premium rate. This data is presented in the Statistical Analysis section of this report. Statistical Analysis The WCIRB isolated the payroll and loss data developed by event markets, festivals or trade shows operators that are currently assigned to Classification 9016(1). These firms were identified from the WCIRB s library of inspection reports and from information provided by the California Department of Food and Agriculture (CDFA). 6 The data is reflected below in Table 1, Event Markets, Festivals or Trade Shows (Exhibit 2): Year Table 1: Event Markets, Festivals or Trade Shows Loss to Payroll Ratio at Policy Year 2013 Level Number of Employers Payroll Losses Loss to Payroll Ratio ,262, , ,607,075 1,368, ,937, , ,789, , ,683, , ,279,395 4,444,750 Selected (Unlimited) Loss to Payroll Ratio In the CDI s request for the WCIRB to review the classification procedure for operators of farmers markets, the WCIRB was asked to consider the propriety of assigning such firms to Classification 8006(2), Stores fruit or vegetables retail. Classification 8006(2) applies to retail stores that sell fresh fruits and vegetables to the general public. An operator of a farmers market does not sell goods; rather, the operator organizes and manages the venue and rents space to vendors that sell goods. Accordingly, while Classification 8006(2) typically applies to vendors, it does not apply to operators of farmers markets. 6 See Exhibit 1 for more information. 123

124 Indemnity Statistical Credibility 7 Medical The statistical credibility of the payroll and loss data generated by operators of event markets, festivals or trade shows is within the range the WCIRB considers sufficient to create an advisory pure premium rate. The WCIRB isolated the payroll and loss data for boat rental and marina operators that are assigned to Classification 9016(1). This data is shown below in Table 2, Boat Rental and Marina Operators (Exhibit 3): Year Table 2: Boat Rental and Marina Operators Loss to Payroll Ratio at Policy Year 2013 Level Number of Employers Payroll Losses Loss to Payroll Ratio ,038,399 2,951, ,199,571 1,143, ,691, , ,311,633 1,460, ,495,457 1,812, ,736,438 8,274,107 Selected (Unlimited) Loss to Payroll Ratio Indemnity Statistical Credibility Medical The statistical credibility of the payroll and loss data generated by boat rental and marina operators is within the range the WCIRB considers sufficient to create an advisory pure premium rate. The Loss to Payroll Ratio at Policy Year 2013 Level for Classification 9016 is shown in Table 3 below (Exhibit 4). 7 The relativity, or "Selected (Unlimited) Loss to Payroll Ratio", for each classification in the upcoming policy year is determined based on a weighted average of that classification s actual losses per $100 of payroll and the ratio of losses per $100 of payroll underlying the current pure premium rate, using credibilities as weights. The credibilities assigned to a classification are the statistical weights assigned to that classification s experience as a predictor of future claim experience relative to the loss per $100 of payroll underlying the classification s current pure premium rate. The predictability or credibilities assigned to a classification s recent historical experience depends on the volume of indemnity and medical claims incurred during the experience period. The WCIRB strives to have classifications that are fully, or 100%, statistically credible based on historical experience over five or fewer years, which means that the classification s relativity in the upcoming policy year can be best estimated using only the loss per $100 of payroll experience from the latest two-, three-, four- or five-year periods. The WCIRB generally will not recommend the establishment of a new classification if the credibility factors are less than one-half (< 0.50). 124

125 Table 3: Classification 9016 Loss to Payroll Ratio at Policy Year 2013 Level Year Payroll Losses Loss to Payroll Ratio ,079,399 16,697, ,881,266 17,024, ,056,960,665 33,722,636 Selected (Unlimited) Loss to Payroll Ratio Statistical Credibility Indemnity Medical Impact Analysis In view of the finding that operators of event markets, festivals or trade shows are identifiable, perform operations that are relatively homogeneous, and develop enough data to produce a statistically credible advisory pure premium rate, staff evaluated the impact that would result if a unique classification was established for this group of employers. Table 4 compares the current selected (unlimited) loss to payroll ratio for Classification 9016 to the selected (unlimited) loss to payroll ratio for the event markets, festivals or trade shows study group: Table 4: Classification 9016 vs. Event Markets, Festivals or Trade Shows Study Group Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2013 Level Classification 9016 Event Markets, Festivals or Trade Shows Study Group (9016) Difference (-12.0%) In view of the finding that operators of boat rental firms and marinas are identifiable, perform operations that are relatively homogeneous, and develop enough data to produce a statistically credible advisory pure premium rate, staff evaluated the impact that would result if a unique classification was established for this group. Table 5 compares the selected (unlimited) loss to payroll ratio for Classification 9016 to the selected (unlimited) loss to payroll ratio for the boat rental and marina study group: Table 5: Classification 9016 vs. Boat Rental and Marina Operators Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2013 Level Classification 9016 Boat Rental and Marina Operators (9016) Difference (+23.1%) 125

126 Table 6 compares the selected (unlimited) loss to payroll ratio for Classification 9016 to the selected (unlimited) loss to payroll ratio for Classification 9016(1) after removing both the event markets, festivals or trade shows and boat rental and marina operators study groups. Table 6: 9016 vs less Event Markets, Festivals or Trade Shows and Boat Rental and Marina Operators Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2013 Level Classification 9016 Residual of Classification 9016 Difference (+0.1%) Conclusion Based upon a review of Classification 9016, the WCIRB concludes the following: 1. Classification 9016 includes three basic groups of employers: (1) operators of amusement parks/recreational facilities, which includes employers assigned to Classifications 9016(2), Dog Shows, and 9016(3), Horse Shows, (2) operators of event markets, festivals or trade shows, and (3) boat rental and marina operators; 2. Operators of event markets, festivals or trade shows represent an identifiable industry whose operations are relatively homogenous. As a group, these employers generate enough data to develop a statistically credible advisory pure premium rate; and 3. Boat rental and marina operators represent a distinct and identifiable industry whose operations are relatively homogenous. As a group, these employers generate enough data to develop a statistically credible advisory pure premium rate. Recommendations In view of the above, the WCIRB recommends the following: 1. Establish a new classification for event market, festival or trade show operators; 2. Establish a new classification for boat rental and marina operators; and 3. Amend Classifications 9016(1) and 9180(1) for consistency and clarity. 126

127 Recommendation Establish Classification XXXX, Event Market, Festival or Trade Show Operation all employees N.O.C., for operators of farmers markets, flea markets, swap meets, art and antique fairs and festivals, and trade shows. PROPOSED EVENT MARKET, FESTIVAL OR TRADE SHOW OPERATION ALL EMPLOYEES N.O.C. This classification applies to firms that organize events and rent spaces to vendors that sell products or provide information to customers. Such events operate on a non-continuous or sporadic basis and include but are not limited to farmers markets, flea markets, swap meets, art or antique fairs or festivals and trade shows (public or private). Vendors, restaurants and retail stores shall be separately classified. XXXX * * * * * Recommendation Establish Classification XXXX, Boat Marina and Boat Rental Operation, for boat marina and boat rental operations. PROPOSED BOAT MARINA AND BOAT RENTAL OPERATION This classification applies to boat marina and boat rental operators and includes, but is not limited to, the maintenance of marina facilities, maintenance and repair of rental boats, fuel sales, and the rental of boat slips and dry storage space. Fee based instruction and guided expeditions shall be separately classified as 9180(1), Amusement Parks or Recreational Facilities. The operation of restaurants and retail stores shall be separately classified. Boat dealers shall be assigned to Classification 8057, Boat Dealers all operations. Boat repair facilities shall be assigned to Classification 6834, Boat Building or Repairing. Yacht clubs shall be assigned to Classification 9061, Clubs. XXXX 127

128 Recommendation Amend Classification 9016(1), Amusement Parks or Exhibitions, for clarity and consistency. PROPOSED AMUSEMENT PARKS OR EXHIBITIONS RECREATIONAL FACILITIES N.O.C. all employees other than those engaged in the operation or maintenance of merry-go-rounds, swings, roller coasters or other amusement devices and ticket collectors connected therewith including care, custody and maintenance of premises; operation of elevators or heating, lighting or power apparatus including police, watchpersons, musicians, box office employees, ticket sellers or gate attendants This classification applies to the operation of amusement parks and recreational facilities such as but limited to miniature golf courses, batting cages, bumper car facilities, archery ranges, water excursions/tours, laser tag facilities, and water parks. This classification contemplates the care, custody and maintenance of premises and the operation of elevators and heating, lighting or power apparatus. The operation or maintenance of amusement devices, restaurants and retail stores shall be separately classified. Pari-mutuel employees shall be separately classified as 8810(1), Clerical Office Employees. 9016(1) Employers that operate boat marinas and boat rental facilities shall be assigned to Classification XXXX, Boat Marina and Boat Rental Operation. Also refer to companion Classification 9180(1), Amusement Parks or Exhibitions Recreational Facilities N.O.C. operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified including ticket collectors connected therewith. If an employee who performs duties described by Classification 9016(1) also performs duties described by Classification 9180(1), the payroll of that employee may be divided between Classifications 9016(1) and 9180(1), provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule

129 Recommendation Amend Classification 9180(1), Amusement Parks or Exhibitions, for clarity and consistency. PROPOSED AMUSEMENT PARKS OR EXHIBITIONSRECREATIONAL FACILITIES N.O.C. operation and maintenance of merry-go-rounds, swings, roller coasters or other amusement devices not specifically classified including ticket collectors connected therewith This classification includes the operation and maintenance of amusement devices at amusement parks or recreational facilities, batting cage operation, rafting and kayaking expeditions, wilderness expeditions, motorsports operations, ski instructors, and ski patrol personnel and employees engaged in ski trail grooming at ski resort locations that exclusively provide Nordic or cross-country skiing activities. Baths, billiard halls, bowling centers, dance halls, restaurants, retail stores, skating rinkscenters and theaters shall be separately classified. Employers that operate boat marinas and boat rental facilities shall be assigned to Classification XXXX, Boat Marina and Boat Rental Operation. Also refer to companion Classification 9016(1), Amusement Parks or ExhibitionsRecreational Facilities N.O.C. all employees other than those engaged in the operation or maintenance of merry-go-rounds, swings, roller coasters or other amusement devices and ticket collectors connected therewith. If an employee who performs duties described by Classification 9180(1) also performs duties described by Classification 9016(1), the payroll of that employee may be divided between Classifications 9180(1) and 9016(1), provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule (1) 129

130 Exhibit 1 As part of the 2012 study, the WCIRB met with members of the farmers market industry including representatives from the Pacific Coast Farmers Market Association (PCFMA), the Southern California Certified Grange Chapter, the City of Santa Monica Farmers Market, the Ventura County Certified Farmers Market and the Sustainable Economic Enterprises of Los Angeles to discuss the operations of farmers markets and the requirements for establishing a unique classification. The representatives indicated that the California Department of Food and Agriculture (CDFA) maintained a list of employers licensed to operate a farmers market in California. This list was obtained from the CDFA. To establish a unique classification for an industry, it must be (1) comprised of a distinct and clearly identifiable group of employers; (2) engage in operations that are relatively homogeneous; and (3) of sufficient size, i.e., generate enough experience, to develop a statistically credible advisory pure premium rate. With respect to point number 3, the WCIRB isolated the payroll and loss data for farmers markets based on the list of employers provided by the CDFA and the WCIRB s library of inspection reports. The CDFA s list included 781 sponsored farmers market locations, not individual operators. The WCIRB identified 401 of these locations in its coverage records, 1 which represented only 131 farmers market operators. The WCIRB found four additional employers in its library of inspection reports. Table 1 shows the payroll and loss experience and related statistical credibility 2 developed under Classification 9016(1), by firms in the farmers market industry: Year Table 1: Loss to Payroll Ratio at Policy Year 2012 Level Number of Employers Payroll Losses Loss to Payroll Ratio ,735,468 61, ,177, ,581, , ,146,657 10, ,643,743 6, ,285, , Credibility Indemnity Medical Several of the employers provided by the CDFA were public entities that most-likely are self insured. 2 The relativity, or "Selected (Unlimited) Loss to Payroll Ratio", for each classification in the upcoming policy year is determined based on a weighted average of that classification s actual losses per $100 of payroll and the ratio of losses per $100 of payroll underlying the current pure premium rate, using credibilities as weights. The credibilities assigned to a classification are the statistical weights assigned to that classification s experience as a predictor of future claim experience relative to the loss per $100 of payroll underlying the classification s current pure premium rate. The predictability or credibilities assigned to a classification s recent historical experience depends on the volume of indemnity and medical claims incurred during the experience period. The WCIRB strives to have classifications that are fully, or 100%, statistically credible based on historical experience over five or fewer years, which means that the classification s relativity in the upcoming policy year can be best estimated using only the loss per $100 of payroll experience from the latest two-, three-, four- or five-year periods. The WCIRB generally will not recommend the establishment of a new classification if the credibility factors are less than one-half (< 0.50). 130

131 Exhibit 1 As shown in Table 1, a relatively small number of farmers market operators had payroll and losses reported by their insurers in Classification 9016(1). While the operations of farmers markets are identifiable, the industry is not large enough to generate a statistically credible advisory pure premium rate. 131

132 Exhibit 2 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: XXXX RHG: 3 NAICS: 71 ILDG: 3 MLDG: 2 CLASS: EVENT MARKETS POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,262,473 30,607,075 37,937,061 36,789,785 40,683, , , ,751 95, , ,140 1,109, , , , ,051 1,368, , , , ,279, ,011, ,882 3,433,485 4,444,750 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: -10.6% Relativity to Statewide Average Loss to Payroll Ratio: 206.6% 2012 WCIRB California. All rights reserved. 132

133 Exhibit 3 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: XXXX RHG: 3 NAICS: 71 ILDG: 3 MLDG: 2 CLASS: BOAT POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- MEDICAL- INDEMNITY MEDICAL SERIOUS ONLY TOTAL ADJ. LOSS TO P/R (00s) ,038,399 37,199,571 36,691,378 36,311,633 35,495, , , , , ,338 2,037, , ,306 1,011,545 1,185,762 2,951,587 1,143, ,383 1,460,080 1,812, ,736, ,403,979 2,691,052 5,583,054 8,274,107 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Indicated (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 28.2% Selected Loss to Payroll Ratio (Restricted to 25% Change): Relativity to Statewide Average Loss to Payroll Ratio: 288.8% 2012 WCIRB California. All rights reserved. 133

134 Exhibit 4 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 9016 RHG: 3 NAICS: 71 ILDG: 3 MLDG: 2 CLASS: AMUSEMENT PARKS OR EXHIBITIONS - MAINTENANCE OF PREMESIS POLICY ADJ. LOSS YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES TO P/R (00s) SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ,079, ,470,760 12,227,231 16,697, ,881, ,996,385 12,028,261 17,024, ,056,960, ,789 7,307,996 9,467,145 24,255,492 33,722,636 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 1.6% Relativity to Statewide Average Loss to Payroll Ratio: 234.7% 2012 WCIRB California. All rights reserved. 134

135 Item CR Draft Report on Concrete Sawing or Drilling Industry 3724(1), Millwright Work N.O.C. erection or repair of machinery or equipment 3724(2), Electrical Machinery or Auxiliary Apparatus installation or repair including incidental wiring 3724(3), Concrete Sawing or Drilling N.O.C. Executive Summary Objective In 2012, WCIRB staff began a two-year comprehensive review of the Advisory Rulings and Interpretations (R & I) Companion to the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) to determine whether information from the R & I should be formally incorporated into the USRP. In connection with this review, Classification 3724(3), Concrete Sawing or Drilling N.O.C., was established as an alternate wording to Classifications 3724(1), Millwright Work N.O.C., and 3724(2), Electrical Machinery or Auxiliary Apparatus installation or repair including incidental wiring, for contractors engaged in concrete sawing or drilling for other concerns. At that time, it was noted that based on the WCIRB s library of inspection reports, a significant number of contractors engage in concrete sawing or drilling; therefore, the Classification and Rating Committee directed WCIRB staff to further study Classification 3724(3) to determine if firms engaged in concrete sawing or drilling develop sufficient payroll and loss data to develop a statistically credible advisory pure premium rate. Findings Based upon a review of the available data for California employers engaged in concrete sawing or drilling for other concerns, the WCIRB finds: 1. The operations of employers engaged in concrete sawing or drilling are identifiable and different from those assignable to Classifications 3724(1) and 3724(2). 2. The statistical credibility of the payroll and loss data generated by concrete sawing or drilling contractors is within the range the WCIRB considers sufficient to create an advisory pure premium rate. 3. During the period of , the payroll developed by this industry decreased significantly each year. Based on this trend, the statistical credibility of the industry s data most likely will decline in the next few years. Recommendation The WCIRB recommends that (1) a new classification be established for concrete sawing and drilling contractors; however, due to the credibility of the payroll and loss data and the downward trend of the payroll for the industry, (2) the new classification be combined with Classification 3724 for ratemaking purposes. The WCIRB will periodically review the payroll and loss data developed by this industry to determine if a unique advisory premium rate can be established in the future. 135

136 Introduction To establish a unique classification for a group of employers, the following conditions must exist: The operations performed by members of the group are unique and identifiable from the operations described by an existing classification. The operations performed by members of the group are relatively homogenous. The payroll and loss data developed by the group is statistically credible. In 2012, specialty contractors engaged in concrete sawing and drilling were identified as a homogenous and identifiable group of employers and Classification 3724(3), Concrete Sawing or Drilling N.O.C., was established as an alternate wording to Classifications 3724(1), Millwright Work N.O.C., and 3724(2), Electrical Machinery or Auxiliary Apparatus installation or repair including incidental wiring. An initial review of inspection reports indicated that such employers represented a sizable group; accordingly, the WCIRB was directed to study this industry to determine if it develops sufficient payroll and loss data to warrant its own standard classification. Classification History Classification 3724(1), Millwright Work, was established in 1915 to apply to contractors engaged in the installation, service and repair of machinery or equipment. Effective January 1, 2013, Classification 3724(3), Concrete Sawing or Drilling N.O.C., was established as an alternate wording for contractors engaged in concrete sawing or drilling for other concerns. Description of Operations Following are brief summaries of the operations currently assigned to Classifications 3724(1), 3724(2) and 3724(3). MILLWRIGHT WORK N.O.C. erection or repair of machinery or equipment 3724(1) This classification is not available for division of payroll of employees of an employer engaged in millwright work on the premises both occupied and operated by the employer. Such payroll shall be included in the governing classification. Classification 3724(1) contemplates a wide array of machinery installation and repair operations performed on a fee basis at customers locations. As Classification 3724(1) is an N.O.C., (not otherwise classified) classification it applies to the outside installation and repair of machinery when such activities are not specifically described by another classification. This classification does not apply to the installation or repair of machinery or equipment used by the employer. Examples of operations assigned to Classification 3724(1) include the installation or repair of pumps (such as gasoline, oil and water), sawmill equipment, conveyer systems, food processing equipment, printing presses, automated pick and place machinery, industrial laundry equipment, filling and bottling equipment, industrial scales and air compressors. Installation activities entail placing the equipment into position, after which it is leveled and bolted into position. As required, the system components are installed, connected to a power source, calibrated and tested to complete. ELECTRICAL MACHINERY OR AUXILIARY APPARATUS installation or repair including incidental wiring This classification is not available for division of payroll of employees of employers engaged in the installation or repair of electrical apparatus on the premises both occupied and operated by the employer. Such payroll shall be included in the governing classification. 3724(2) The erection of poles, stringing of wires, installation of service transformers on poles or on the outside of buildings, or the making of service connections shall be separately classified. 136

137 Classification 3724(2) contemplates the installation or repair of industrial electrical equipment, such as transformers, generators and control panels at customer locations. Operations entail bolting the electrical apparatus in to position, installing necessary components, making electrical wiring connections and testing to complete. This classification includes the installation of electrical wiring when performed incidental to the installation of the electrical machinery or equipment. CONCRETE SAWING OR DRILLING N.O.C. 3724(3) This classification is not available for division of payroll when the concrete sawing or drilling is in support of a construction activity performed by the employer. Such concrete sawing or drilling shall be assigned to the appropriate construction classification. Classification 3724(3) is assignable to contractors engaged in the cutting and drilling of concrete for other concerns. The operations involved in the cutting and drilling of concrete are different than those assignable to Classifications 3724(1) and 3724(2) and include, but are not limited to, cutting and drilling of concrete streets, roads, walls, floors and other structures and surfaces on a fee basis as requested by the customer. The drilling or cutting may be performed in areas to create openings for, or access to electrical wiring or plumbing piping, HVAC and mechanical work, seismic anchors, structural beams and similar items. Such activities are performed using portable gasoline driven concrete cutting diamond saws and diamond core drills. This classification is not available for division of payroll when the concrete sawing or drilling is in support of another construction activity performed by the employer. Staff contacted the Concrete Sawing and Drilling Association (CSDA) to obtain general information about the industry, its potential for growth and future business direction. The CSDA considers the concrete sawing and drilling operations to be a specialty operation in the construction industry. The association advised that there are approximately 100 specialty contractors engaged in concrete sawing and drilling in California. The WCIRB was able to locate 84 inspection reports for employers that conduct concrete sawing or drilling operations for other concerns on a fee basis. Of the 84 employers, over 70% conduct no other construction activities. Payroll and Loss Data Shown in Table 1 is the Classification Relativity data at policy year 2013 level for the concrete sawing or drilling industry (Exhibit 1). Table 1: Concrete Sawing or Drilling Relativity Data at Policy Year 2013 Level Year No. of Reports Payroll Losses Loss to Payroll Ratio 44,279,175 41,352,232 38,651,476 30,176,986 26,675,236 4,427,996 2,684,043 1,568,416 1,887,174 1,946, Total 181,135,105 12,514,

138 Indicated (Unlimited) Loss to Payroll Ratio Selected Loss to Payroll Ratio (Restricted to 25% Change) Indemnity Credibility 2 Medical The payroll and loss experience for the concrete sawing or drilling industry is within the range the WCIRB considers sufficient to create an advisory pure premium rate; however, the year-to-year payrolls are declining significantly. Based on this trend, the statistical credibility of the industry s data most likely will decline in the next few years. Based on the current statistical credibility and declining payrolls, the WCIRB does not recommend that a unique advisory premium rate for concrete sawing and drilling be established at this time. Rather, the WCIRB should periodically monitor the industry s payroll and loss data to determine if a unique advisory pure premium rate can be established in the future. Staff discussed the lack of statistical credibility and downward payroll trend with the CSDA. The CSDA advised that they are currently seeing increased payroll for concrete sawing and drilling firms and an increase in sales of the equipment used in such operations. The CSDA supports the WCIRB s intent to periodically review the industry s payroll and loss data to determine if a unique advisory premium rate can be established for the industry in the future. The CSDA is currently engaged in an alliance with OSHA and has implemented safety and training programs that they believe will improve the industry s future loss experience. For informational purposes, presented below are the classification relativities for Classification 3724 and Classification 3724 less concrete sawing or drilling and comparisons of loss to payroll ratios. Table 2 shows Classification 3724 classification relativity data at policy year 2013 level (Exhibit 2). 1 Classification relativity changes are limited to an annual increase or decrease of 25%. If concrete sawing and drilling had not been combined with Classification 3724 for ratemaking purposes, its 2013 Selected Loss to Payroll Ratio would have been 5.230, not the indicated unlimited amount of The relativity, or "Selected (Unlimited) Loss to Payroll Ratio", for each classification in the upcoming policy year is determined based on a weighted average of that classification s actual losses per $100 of payroll and the ratio of losses per $100 of payroll underlying the current pure premium rate, using credibilities as weights. The credibilities assigned to a classification are the statistical weights assigned to that classification s experience as a predictor of future claim experience relative to the loss per $100 of payroll underlying the classification s current pure premium rate. The predictability or credibilities assigned to a classification s recent historical experience depends on the volume of indemnity and medical claims incurred during the experience period. The WCIRB strives to have classifications that are fully, or 100%, statistically credible based on historical experience over five or fewer years, which means that the classification s relativity in the upcoming policy year can be best estimated using only the loss per $100 of payroll experience from the latest two-, three-, four- or five-year periods. The WCIRB generally will not recommend the establishment of a new classification if the credibility factors are less than one-half (< 0.50). 138

139 Table 2: Classification 3724 Classification Relativity Data at Policy Year 2013 Level Year Payroll Losses Loss to Payroll Ratio ,046,318,461 33,572, ,001,047,357 33,193, Total 2,047,365,818 66,765,490 Selected (Unlimited) Loss to Payroll Ratio 4.91 Indemnity Credibility Medical Table 3 depicts the Classification 3724 at policy year 2013, with the data for concrete sawing or drilling removed (Exhibit 3). Table 3: Classification 3724 Less Concrete Sawing or Drilling Loss to Payroll Ratio at Policy Year 2013 Level Year Payroll Losses Loss to Payroll Ratio ,016,141,475 31,685, ,372,121 31,246, Total 1,990,513,596 62,931,332 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical

140 Table 4 depicts the first year impact on concrete sawing or drilling policyholders if a separate classification relativity and thus an advisory pure premium rate is established for contractors engaged in concrete sawing or drilling. In this Table, the classification relativity for concrete sawing and drilling is limited to a 25% increase. Table 4: Classification 3724 vs. Concrete Sawing or Drilling Comparison of Selected (Limited) Loss and Payroll Ratios at Policy Year 2013 Level Classification 3724 Concrete Sawing or Drilling Study Group Limited to 25% Change Difference (6.52%) In Table 5, the classification relativity for concrete sawing or drilling is not limited to a 25% increase. This comparison depicts the possible ultimate impact on concrete sawing or drilling policyholders. Table 5: Classification 3724 vs. Concrete Sawing or Drilling (Unlimited) Comparison of Indicated Loss and Payroll Ratios at Policy Year 2013 Level Classification 3724 Concrete Sawing or Drilling Study Group (Unlimited) Difference (64.03%) Table 6 shows the impact on policyholders assigned to Classification 3724 if a separate relativity and advisory pure premium rate is established for concrete sawing or drilling. Table 6: Classifications 3724 vs. Classification 3724 Excluding Concrete Sawing or Drilling Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy year 2013 Level Classification 3724 Residual of Classification 3724 Difference (-2.79%) Conclusion and Recommendation The operations of employers engaged in concrete sawing or drilling are identifiable and different from those assignable to Classifications 3724(1) and 3724(2). The classification relativity for concrete sawing or drilling is significantly different than that of Classification 3724; however, the statistical credibility of the industry s payroll and loss data is not optimal and year-to-year payrolls have decreased significantly. In view of the above, the WCIRB recommends that (1) a new classification be established for concrete sawing and drilling contractors, and (2) the new classification be combined with Classification 3724 for ratemaking purposes. The WCIRB will periodically monitor the industry s payroll and loss data to determine if such data can be used to establish an advisory pure premium rate in the future. 140

141 Recommendation Establish Classification XXXX, Concrete Sawing or Drilling N.O.C., for employers engaged in concrete sawing and drilling for other concerns on a contract basis. PROPOSED CONCRETE SAWING OR DRILLING N.O.C. This classification is not available for division of payroll when the concrete sawing or drilling is in support of a construction activity performed by the employer. Such concrete sawing or drilling shall be assigned to the appropriate construction classification. XXXX 141

142 Exhibit 1 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: XXXX RHG: 5 NAICS: 81 ILDG: 2 MLDG: 2 CLASS: CONCRETE SAWING OR DRILLING POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,279,175 41,352,232 38,651,476 30,176,986 26,675, ,815,916 1,197, , ,151 1,255,381 2,612,081 1,486, ,515 1,108, ,603 4,427,996 2,684,043 1,568,416 1,887,174 1,946, ,135, ,509,904 5,786,876 6,727,737 12,514,613 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Indicated (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 92.5% Selected Loss to Payroll Ratio (Restricted to 25% Change): Relativity to Statewide Average Loss to Payroll Ratio: 270.4% 2012 WCIRB California. All rights reserved. 142

143 Exhibit 2 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 3724 RHG: 5 NAICS: 81 ILDG: 2 MLDG: 2 CLASS: MILLWRIGHT WORK POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,046,318, ,157 13,645,370 19,926,974 33,572, ,001,047, ,868,201 20,324,945 33,193, ,047,365, ,022 18,331,327 26,513,571 40,251,919 66,765,490 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 17.4% Relativity to Statewide Average Loss to Payroll Ratio: 253.8% 2012 WCIRB California. All rights reserved. 143

144 Exhibit 3 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 3724 RHG: 5 NAICS: 81 ILDG: 2 MLDG: 2 CLASS: MILLWRIGHT WORK LESS CONCRETE SAWING OR DRILLING POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,016,141, ,120 12,866,219 18,818,951 31,685, ,372, ,612,820 19,633,342 31,246, ,990,513, ,965 17,099,062 24,479,039 38,452,293 62,931,332 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 14.1% Relativity to Statewide Average Loss to Payroll Ratio: 246.8% 2012 WCIRB California. All rights reserved. 144

145 Item CR Draft Report on Retail Dry Cleaning or Laundries, Commercial Laundries and Dry Cleaning or Dyeing 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises 2585, Laundries N.O.C. all employees including cash and carry departments on plant premises 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises 2586(2), Yarn or Thread Dyeing or Finishing no yarn or thread manufacturing 2586(3), Hide or Fur Cleaning, Processing or Preserving Executive Summary Objectives This study addresses two objectives: 1. Review dry cleaning and laundry operations currently assigned to Classifications 2589, Dry Cleaning or Laundry retail, and 2586(1), Dry Cleaning or Dyeing N.O.C., to determine (a) the line of demarcation between these two classifications, and (b) depending on the findings, whether Classification 2589 should be revised to accurately describe the operations assignable to this classification. 2. In view of the lack of full statistical credibility for Classification 2586, review the operations assigned to this classification to determine if the classification should be eliminated and its constituents be reassigned to one or more classifications. Findings Based on its review, the WCIRB has determined that: 1. The dry cleaning of garments and similar articles is performed in the same manner (i.e., same types of machinery and processes) irrespective of whether performed for (a) the general public (Classification 2589), or (b) commercial customers, such as hotels, restaurants and retail cash and carry (drop off) stores (Classification 2586); 2. The laundering of garments and similar articles that are owned by the general public is performed in the same manner (i.e., same types of machinery and processes) irrespective of whether performed by (a) firms that operate store front laundry facilities where garments are received by walk-in trade, or (b) firms that operate laundry facilities that are located in commercial or industrial locations where garments are brought to the facilities by route drivers; 3. The primary operations assigned to Classification 2586 consist of dyeing garments, yarn or thread. The machinery, equipment and processes involved in these operations are comparable to those associated with commercial laundries, which are assigned to Classification 2585; 4. Classification 2586 also includes firms engaged in hide or fur cleaning, processing or preserving. The WCIRB is aware of two companies that process hides in California. If Classification 2586 is eliminated, these operations shall be assigned by analogy to another classification most representative of the process and hazard on a case by case basis. 145

146 Recommendation In view of the above, the WCIRB recommends the following actions: 1. Eliminate Classifications 2586(1), 2586(2) and 2586(3); 2. Amend Classification 2589 to reflect its applicability to locations at which more than 50% of gross receipts is derived from the dry cleaning or laundering of garments, linens and other household items that are owned by the general public; 3. Establish Classification 2589 (2) as an alternate wording to Classification 2589 for employers engaged in dry cleaning that is not otherwise classified; 4. Establish Classification 2585 (2) as an alternate wording to Classification 2585 for employers engaged in dyeing; and 5. Assign employers engaged in hide or fur cleaning, processing or preserving by analogy to classifications most representative of the process and hazard. 146

147 Introduction At its meeting on July 31, 2012, the Classification and Rating (C & R) Committee decided that (1) Classifications 2586(1), Dry Cleaning or Dyeing N.O.C., and 2589, Dry Cleaning or Laundry retail, should be separated for ratemaking purposes so that each classification could develop unique advisory pure premium rates; and (2) Classification 2586(1) should be amended to remove the qualifying term walk-in since retail dry cleaning and laundering services are often provided for the general public who do not enter dry cleaning and laundering establishments. These changes were made effective January 1, Additionally, the C & R Committee directed the WCIRB to (1) study dry cleaning and laundry operations currently assigned to Classifications 2589 and 2586(1) to determine (a) the line of demarcation between retail and commercial dry cleaning and laundry operations, and (b) depending on the findings, whether Classification 2589 should be revised to accurately describe the operations assignable to this classification; and (2) in view of the lack of full statistical credibility for Classification 2586, review the operations assigned to this classification to determine if the classification should be eliminated and its constituents be assigned to one or more classifications. Classification History The history of Classifications 2585, 2586(1), 2586(2), 2586(3) and 2589 is provided in the report on Commercial Dry Cleaning or Dyeing and Retail Dry Cleaning or Laundry, Underwriting Working Group meeting held on April 11, 2012, attached as Appendix 1. Description of Operations Following are the classification phraseologies, footnotes and relevant summaries of operations currently assigned to Classifications 2589, Dry Cleaning or Laundry retail, 2585, Laundries N.O.C., 2586(1), Dry Cleaning or Dyeing N.O.C., 2586(2), Yarn or Thread Dyeing or Finishing no yarn or thread manufacturing, and 2586(3), Hide or Fur Cleaning, Processing or Preserving. DRY CLEANING OR LAUNDRY retail including repairing or pressing, and cash and carry departments on premises This classification applies to those retail establishments engaged primarily (in excess of 50% of gross receipts) in the dry cleaning or laundering of garments, linens and other household items for the general public. This classification also applies to coin-operated laundries that retain attendants to perform fluff and fold activities. Cash and carry facilities, situated away from the dry cleaning or laundry location, that solely engage in the receipt and distribution of items to be cleaned shall be classified as 8017(1), Stores retail N.O.C. This classification does not apply to diaper service companies or uniform and linen rental or service companies. Such firms shall be classified as 2585, Laundries, or 2586(1), Dry Cleaning or Dyeing Retail dry cleaning or laundry firms operate in two general manners: (a) firms that operate store front dry cleaning and laundry facilities where garments and linens are received by the walk-in trade and cleaned, and (b) firms that operate dry cleaning and laundry facilities that are located in commercial or industrial locations and the garments are brought to the facilities by the firm s route drivers for cleaning. In either case, the cleaning operations are the same. The garments and linens are individually tagged, sorted and spot cleaned as needed. Soiled items to be dry cleaned are placed into dry cleaning machines along with solvents. Soiled items to be laundered are placed into industrial washing machines along with detergents. Cleaned items are removed from the machines and placed into industrial dryers. Cleaned items are removed from the dryers, inspected and pressed. As needed, items are repaired or altered. Cleaned items are individually hung, covered with plastic and set aside for customer pick-up or delivery. Some employers operate cash and carry or drop off store locations where garments and linen are received from the walk-in trade; however, no cleaning is performed. The garments are transferred to the 147

148 cleaning facility, cleaned and returned to the store by route drivers. Cash and carry store locations are assignable to Classification 8017(1), Stores retail N.O.C. LAUNDRIES N.O.C. all employees including cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general public shall be classified as 2589, Dry Cleaning or Laundry retail Commercial laundry firms provide laundry services to commercial concerns. Typically, route drivers pick up soiled items such as towels, sheets, table cloths, napkins and uniforms from commercial, industrial and institutional concerns and transport the soiled items to the laundry facility. Items are unloaded and sorted according to type. The items are not individually tagged as is done with items owned by the general public. The soiled items are spot cleaned and placed into large industrial washing machines along with detergents. Commercial launderers typically use tunnel washers that consist of a long metal cylinder with separate compartments. Laundry is moved from one compartment to another where they are rinsed or washed with varying detergents and chemicals. The washed items are removed from the tunnel washer or washing machines and placed into industrial dryers. Cleaned items are removed from the dryers, repaired or altered if necessary, pressed, folded, stacked, packaged in a bulk manner, set on pallets and made ready for delivery to the customer by route drivers. DRY CLEANING OR DYEING N.O.C. including repairing or pressing, and cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general public shall be classified as 2589, Dry Cleaning or Laundry retail. 2586(1) Dry Cleaning Commercial dry cleaning firms provide dry cleaning services for hotels, restaurants, spas, hospitals, janitorial companies and similar clients, as well as from drop off storefront locations operated by separate concerns. Typically, route drivers pick up soiled garments and linens from commercial locations and transport the soiled garments to the dry cleaning facility. Garments are unloaded, sorted and individually tagged. The garments are spot treated and loaded into industrial dry cleaning machines along with solvents. The cleaned garments are repaired or altered, if necessary, and pressed. The individual garments are hung on hangers, covered in plastic and delivered to customers. Dyeing Classification 2586(1) also contemplates the dyeing of garments for clothing manufacturers. Garments are received and sorted by size or sets consisting of large batches. Garments are bulk loaded into garment machines and fabrics are bulk loaded into jet dyeing machines along with water, chemicals, and dyes and submersed for a prescribed amount of time. Examples of garment machines include batch washers that can wash 800 pounds per hour; and washer-extractors that can wash 25 pounds to 700 pounds per hour. The items are pulled and placed into extraction systems such as hydroextractors to remove excess dye solution. Wet materials are placed in the extractor which has a wall of perforated metal, generally stainless steel, and the drum rotates at high speed throwing out the water contained in it. In some cases, garments such as denim jeans may be tumbled with pumice to soften and condition the fabric through stone washing. Sometimes a tenter frame is used to spread the fabric that is then dried in an oven. The dyed items are folded and packaged into a buggy or rolled up onto an A-frame and set aside for delivery. 148

149 YARN OR THREAD DYEING OR FINISHING no yarn or thread manufacturing 2586(2) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 2586(2) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. Firms that specialize in dyeing yarn and thread receive raw yarn and thread in skein form (wound on a reel) or loose. Loose yarn or thread is wrapped around a spool and referred to as a package. Each package typically weighs 2 to 3 pounds and is eight to ten inches wide. Operations involve stacking the skeins on a spindle, bleaching or mercerizing the yarn or thread in order to strengthen the fibers and make the yarn or thread more receptive to dyes. Packages are secured to perforated tubes. Water, chemicals and dyes are added and the yarn or thread is submersed for a prescribed amount of time. After dyeing, the yarn or thread is placed into a hydroextractor to remove excess dye solution. Infrared dryers, continuous dryers or heated rooms are used to dry the yarn or thread. The dyed yarn or thread is packaged and set aside for delivery. HIDE OR FUR CLEANING, PROCESSING OR PRESERVING 2586(3) Hide processing involves receiving raw animal hides, typically purchased from slaughterhouses. Hides are graded by size and color and washed to remove loose blood and soil. The hides are placed into a salt solution or brine, which acts as a preservative, for a prescribed amount of time. The brined hides are removed from the brine tanks and placed into fleshing machines that remove excess flesh and fats from the hides. The processed hides are folded, stacked and compressed to remove moisture. The hides are transferred to a climate-controlled area where they are stored pending shipment to tanneries. Fur processing involves sorting pelts by animal type and size, removing excess flesh and placing them in tumblers to soak in a mild acid solution that softens the skin. Pelts are also soaked in preservative chemicals for a prescribed amount of time. Some pelts are oiled to further soften and condition the skin. The oiled pelts are placed into tumblers along with sawdust to remove the excess oil. The furs are groomed and sheared for uniformity. A heated press is used to stretch the fur and the skin is buffed smooth. The processed furs are transferred to a climate-controlled area where they are stored pending shipment. Classification Analysis Laundries The line of demarcation between retail and commercial laundering of garments and linens is the nature of the items and the manner in which the items are cleaned and processed, which in most cases is determined by the owner of the items. Items owned by the general public are typically garments that are individually processed. Items owned by commercial concerns typically are linens such as towels, sheets, table cloths and napkins that are processed in bulk. In most cases, Classification 2589 (retail laundries) and Classification 2585 (commercial laundries) are administered in this manner. However, Classification 2589 should be amended to clarify that this classification applies to employers that launder garments, linens and other household items that primarily are owned by the general public. Dry Cleaning Currently, the commercial dry cleaning of garments and linens (Classification 2586(1)) and the retail dry cleaning of garments and similar items (Classification 2589) are separately classified based on whether the insured is engaged primarily in the dry cleaning of such items for commercial accounts, such as retail drop off stores operated by other concerns, or the general public. However, this study has found that the dry cleaning of garments whether assigned to Classification 2589 or 2586 is performed in the same manner (i.e., same types of machinery and processes). That is, in most cases, the garments are owned by the general public and, in all cases, the garments are cleaned and individually processed in the same manner. Therefore, consideration should be given to assigning all dry cleaning operations to 149

150 Classification It is noted that according to the WCIRB s library of inspection reports, there are less than 20 commercial dry cleaners in California. Dyeing The dyeing of garments and linens (Classification 2586(1)) involves the use of large washing machines and laundry equipment such as batch washers and washer-extractors, extraction systems and dryers of the types that are used by commercial laundries, which are assigned to Classification Dry cleaning machinery is not used. The dyeing process includes the use of water, detergents and chemicals. Garments are typically dyed in large batches and are not processed individually. Accordingly, dyeing operations are similar to commercial laundry operations. That is, each operation is a wet process that employs the same type of washing and drying machinery to wash or dye and otherwise process large batches of garments and linens on a commercial basis. Therefore, consideration should be given to assigning the dyeing of garments and linens and commercial laundries to Classification Yarn or Thread Dyeing Classification 2586(2) contemplates yarn or thread dyeing operations. These operations are a wet process that employs large batch machinery that is similar to that used by commercial laundries. Accordingly, consideration should be given to reassigning the dyeing of yarn or thread to Classification Hide or Fur Cleaning or Processing Classification 2586(3) contemplates a broad range of operations including cleaning, processing and preserving of animal hide or fur. These are unique operations that involve the use of conveyor systems, fleshing machines or tumblers. The WCIRB is aware of two companies that perform these operations in California. The first employer receives green cattle hides from slaughter houses, removes tails and ears, processes them in fleshing machines, soaks them in salt water tanks and presses them to remove all moisture. This employer operates similarly to that of a leather goods manufacturer, which is assignable to Classification 2688, Leather Goods Mfg. N.O.C. The second employer receives animal pelts from customers which have already had excess flesh removed and been dried and salted. The pelts are soaked in oil and/or chemicals, placed in tumblers, stretching machines and cleaned for taxidermists, museums and universities. This employer operates similarly to that of a taxidermist, which is assignable to Classification 4038(2), Taxidermist. The WCIRB recommends all hide or fur cleaning or processing operations be assigned by analogy to the classification most comparable based on hazard and risk to the business of the employer. Operational Analysis Summary The determination of the laundry classification (2589 retail vs commercial) should be based on the ownership of the items to be cleaned. All dry cleaning operations currently assigned to Classification 2586(1) should be assigned to Classification 2589; and The dyeing of garments, linens, yarn and thread that is currently assigned to Classifications 2586(1) and 2586(2) should be assigned to Classification

151 Statistical Analysis The following tables present classification relativity data at policy year 2013 level. Table 1 presents the classification relativity data for all cleaning and dyeing operations currently assignable to Classifications 2586(1), 2586(2) and 2586(3) (Exhibit 2). Year Number of Employers Table 1: All of Classification 2586 Payroll Losses Loss to Payroll Ratio ,864,606 2,385, ,289,406 2,373, ,045,733 2,334, ,239,244 3,773, ,723,036 3,588, Total 253,162,025 14,455,184 Selected (Unlimited) Loss to Payroll Ratio Indemnity Credibility 1 Medical Table 2 presents the classification relativity data for dry cleaning operations currently assignable to Classification 2586(1) (Exhibit 3). Table 2: Dry Cleaning Operations (Subset of Classification 2586(1)) Year Number of Employers Payroll Losses Loss to Payroll Ratio ,413, , ,893, , ,192,298 64, ,840, , ,319,773 27, Total 29,659, ,114 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical The relativity for each classification in the upcoming policy year is determined based on a comparison of that classification s actual losses per $100 of payroll and the ratio of losses per $100 of payroll underlying the current pure premium rate. The credibilities assigned to a classification are the statistical weights assigned to that classification s experience as a predictor of future claim experience relative to the loss per $100 of payroll underlying the classification s current pure premium rate. The predictability or credibilities assigned to a classification s recent historical experience depends on the volume of indemnity and medical claims incurred during the experience period. The WCIRB strives to have classifications that are fully, or 100%, statistically credible based on historical experience over five or fewer years, which mean that the classification s relativity in the upcoming policy year can be best, estimated using only the loss per $100 of payroll experience from the latest two-, three-, four- or five-year periods. The WCIRB generally will not recommend the establishment of a new classification if the credibility factors are less than one-half (< 0.50). 151

152 Table 3 presents the classification relativity data for all dry cleaning and retail laundry operations currently assignable to Classification 2589 (Exhibit 4). Year Number of Employers Table 3: All of Classification 2589 Payroll Losses Loss to Payroll Ratio , ,761,256 4,618, , ,023,467 5,021, , ,255,877 4,403, , ,196,160 5,251, Total 693,236,760 19,295,338 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical Table 4 presents the classification relativity data for Dry Cleaning assigned to Classification 2586(1) combined with Classification 2589, Dry Cleaning or Laundry retail (Exhibit 5). Year Table 4: Dry Cleaning (Subset of Classification 2586(1)) Combined with Classification 2589 Number of Employers Payroll Losses Loss to Payroll Ratio , ,654,449 4,970, , ,215,765 5,111, , ,096,111 4,509, , ,515,933 5,278, Total 716,482,258 19,869,838 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical

153 Table 5 presents the classification relativity data for garment dyeing operations assignable to Classification 2586(1) and yarn and thread dyeing operations assignable to Classification 2586(2) (Exhibit 6). Year Table 5: Garment Dyeing (Classification 2586(1)) and Yarn or Thread Dyeing (Classification 2586(2)) Number of Employers Payroll Losses Loss to Payroll Ratio ,502,247 1,111, ,789,922 1,180, ,323,525 1,534, ,673,150 2,652, ,801,585 2,802, Total 144,090,429 9,281,387 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical Table 6 presents the classification relativity data for Classification 2585 (commercial laundering operations, Exhibit 7). Year Number of Employers Table 6: All of Classification 2585 Payroll Losses Loss to Payroll Ratio ,259,940 26,491, ,110,176 24,302, Total 833,370,116 50,794,664 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical

154 Table 7 presents the classification relativity data for the garment, yarn and thread dyeing operations combined with Classification 2585, Laundries N.O.C. operations (Exhibit 8). Table 7: Garment Dyeing (Classification 2586(1)) and Yarn or Thread Dyeing (Classification 2586(2)) Combined with Classification 2585 Year Number of Employers Payroll Losses Loss to Payroll Ratio ,933,090 29,407, ,911,761 27,498, Total 905,844,851 56,906,732 Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical Impact Analysis The following tables present classification relativity data at policy year 2013 level. Table 8 depicts the impact on Classification 2589 if the experience of dry cleaners that are currently assigned to Classification 2586 is combined with Classification Table 8: Dry Cleaning Operations (Classification 2586) Combined with Classification 2589 vs. Classification 2589 Classification 2589 Classification 2589 and 2586 Dry Cleaning Operations Difference (.26%) Table 9 depicts the impact on Classification 2585 if the experience of employers engaged in the dyeing of garments, yarn and thread is combined with Classification Table 9: Dyeing (Classifications 2586(1) and 2586(2)) Combined with Classification 2585 vs. Classification 2585 Comparison of Selected (Unlimited) Loss to Payroll Ratios at Policy Year 2013 Level Classification 2585 Classification 2585 and Dyeing Operations Difference (3.14%) As shown above, the combination of the experience of (1) dry cleaners (subset of Classification 2586) with Classification 2589 has little (-0.26%) impact on Classification 2589, and (2) the experience of employers engaged in the dyeing of garments, yarn and thread with Classification 2585 has a +3.14% impact on Classification

155 Table 10 depicts the impact on Dry Cleaning Operations that are currently assigned to Classification 2586(1) if such employers are reassigned to Classification Table 10: Dry Cleaning Operations (Classification 2586) Combined with Classification 2589 vs. Classification 2586 Classification 2586 Classification 2589 and 2586 Dry Cleaning Operations Difference (-47.16%) As shown in Table 10, the Selected (Unlimited) Loss to Payroll Ratio for dry cleaners (subset of Classification 2586) Classification 2589 combined is 47.16% less than that of Classification Table 11 depicts the impact on Dyeing Operations currently assigned to Classifications 2586(1) and 2586(2) if such employers are reassigned to Classification Table 11: Dyeing Operations (Classification 2586) Combined with Classification 2585 vs. Classification 2585 Classification 2586 Classification 2585 and 2586 Dyeing Operations Difference (15.76%) As shown in Table 11, the Selected (Unlimited) Loss to Payroll Ratio for dyeing operations (subset of Classification 2586) and Classification 2585 combined is 15.76% greater than that of Classification Findings and Conclusions Based on its review of Classifications 2589, 2586(1), 2586(2), 2586(3) and 2585, the WCIRB finds that: 1. The dry cleaning of garments and similar articles is performed in the same manner irrespective of whether the customers are the general public or commercial customers; 2. The laundry of garments and similar articles that are owned by the general public is performed in the same manner (i.e., same types of machinery and processes) as that performed by (a) firms that operate store front laundry facilities where garments are received by walk-in trade, and (b) firms that operate laundry facilities that are located in commercial or industrial locations where garments are brought to the facilities by route drivers; 3. In addition to dry cleaning, firms assigned to Classification 2586 engage in the dyeing of garments, yarn or thread. The machinery, equipment and processes involved in these operations are comparable to those associated with commercial laundries, which are assigned to Classification 2585; 4. Classification 2586 also includes firms engaged in hide or fur cleaning, processing or preserving. The WCIRB is aware of two companies that process hides in California. If Classification 2586 is eliminated, these operations shall be assigned by analogy to another classification most representative of the process and hazard on a case by case basis. 155

156 5. If the experience pertaining to dry cleaning (subset of Classification 2586) is reassigned to Classification 2589, (1) the Selected (Unlimited) Loss to Payroll Ratio for Classification 2589 would decrease by 0.26%, and (2) the Selected (Unlimited) Loss to Payroll Ratio for dry cleaners and Classification 2589 combined would be 47.16% less than that of Classification 2586; and 6. If the experience pertaining to dyeing of garments, yarn or thread (subset of Classification 2586) is reassigned to Classification 2585, (1) the Selected (Unlimited) Loss to Payroll Ratio for Classification 2585 would increase by 3.14%, and (2) the Selected (Unlimited) Loss to Payroll Ratio for dyeing and Classification 2585 combined would be 15.76% greater than that of Classification Recommendation In view of the above, the WCIRB recommends the following actions: 1. Eliminate Classifications 2586(1), 2586(2) and 2586(3); 2. Amend Classification 2589 to reflect its applicability to locations at which more than 50% of gross receipts is derived from the dry cleaning or laundering of garments, linens and other household items that are owned by the general public; 3. Establish Classification 2589 (2) as an alternate wording to Classification 2589 for employers engaged in dry cleaning that is not otherwise classified; 4. Establish Classification 2585 (2) as an alternate wording to Classification 2585 for employers engaged in dyeing of garments; and 5. Assign employers engaged in hide or fur cleaning, processing or preserving by analogy to classifications most representative of the process and hazard. These amendments are recommended to be included in the WCIRB s January 1, 2014 regulatory filing. 156

157 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Classification 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises, to add a suffix and remove the reference to Classification 2586(1), Dry Cleaning or Dyeing, for consistency with changes made elsewhere in this Section, and provide that this classification applies to those locations at which more than 50% of gross receipts is derived from the dry cleaning or laundering of garments, linens and other household items that are owned by the general public. PROPOSED DRY CLEANING OR LAUNDRY retail including repairing or pressing, and cash and carry departments on premises This classification applies to those retail establishments engaged primarily (in excess oflocations at which more than 50% of gross receipts) in is derived from the dry cleaning or laundering of garments, linens and other household items forthat are owned by the general public. This classification also applies to coin-operated laundries that retain attendants to perform fluff and fold activities. Cash and carry facilities, situated away from the dry cleaning or laundry location, that solely engage in the receipt and distribution of items to be cleaned shall be classified as 8017(1), Stores retail N.O.C. This classification does not apply to diaper service companies or uniform and linen rental or service companies. Such firms shall be classified as 2585, Laundries N.O.C, or 2586(1), Dry Cleaning or Dyeing. 2589(1) * * * * * Recommendation Eliminate Classification 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises, and reassign dry cleaning operations to proposed Classification 2589(1), Dry Cleaning N.O.C. including repairing or pressing, cash and carry departments on plant premises, and dyeing operations to proposed Classification 2585(2), Dyeing including yarn or thread dyeing or finishing no yarn or thread manufacturing. PROPOSED DRY CLEANING OR DYEING N.O.C. including repairing or pressing, and cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general public shall be classified as 2589, Dry Cleaning or Laundry retail. Commercial laundry operations, including the rental and laundering of towels, linens, diapers and similar items shall be classified as 2585(1), Laundries N.O.C. 2586(1)2589(2) * * * * * 157

158 Recommendation Eliminate Classification 2586(2), Yarn or Thread Dyeing or Finishing no yarn or thread manufacturing, and reassign employers engaged in dyeing yarn or thread to proposed Classification 2585(2), Dyeing including yarn or thread dyeing or finishing no yarn or thread manufacturing. PROPOSED YARN OR THREAD DYEING OR FINISHING no yarn or thread manufacturing 2586(2) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 2586(2) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. * * * * * Recommendation Eliminate Classification 2586(3), Hide or Fur Cleaning, Processing or Preserving, and reassign employers engaged in hide or fur cleaning, processing or preserving to classifications most representative of the process and hazard. PROPOSED HIDE OR FUR CLEANING, PROCESSING OR PRESERVING 2586(3) * * * * * Recommendation Amend Classification 2585, Laundries N.O.C. all employees including cash and carry departments on plan premises, to add a suffix ; provide that locations at which more than 50% of gross receipts are derived from the cleaning of garments, linens and other household items that are owned by the general public be assigned to Classification 2589(1), Dry Cleaning or Laundry retail, and provide that the dyeing of textile fabrics, not finished garments, be assigned to Classification 2413, Textiles bleaching, dyeing, mercerizing, finishing new goods not cleaning and dyeing of garments. PROPOSED LAUNDRIES N.O.C. all employees including cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess oflocations at which more than 50% of gross receipts) are derived from in the cleaning of garments, linens and other household items forthat are owned by the general public shall be classified as 2589(1), Dry Cleaning or Laundry retail. Dyeing of textile fabrics, not finished garments, shall be assigned to Classification 2413, Textiles bleaching, dyeing, mercerizing, finishing new goods not cleaning and dyeing of garments. 2585(1) * * * * * 158

159 Recommendation Establish Classification 2585(2), Dyeing including yarn or thread dyeing or finishing no yarn or thread manufacturing, to apply to employers engaged in dyeing. PROPOSED DYEING including yarn or thread dyeing or finishing no yarn or thread manufacturing 2585(2) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 2585(2) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. 159

160 Meeting Minutes for July 31, 2012 Exhibit 1 Item CR Report on Commercial Dry Cleaning or Dyeing and Retail Dry Cleaning or Laundry 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises 2586(2), Yarn or Thread Dyeing or Finishing no yarn or thread manufacturing 2586(3), Hide or Fur Cleaning, Processing or Preserving 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises 2585, Laundries N.O.C. all employees including cash and carry departments on plant premises The Classification and Rating Committee reviewed a draft WCIRB report on the procedure of combining, for ratemaking purposes, the experience of Classification 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises, and Classification 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises. In attendance were two representatives of the California Cleaners Association (CCA), a trade group that represents dry cleaners in California. The Committee was informed that Classifications 2586(1) and 2589 were combined for ratemaking purposes in 1997 following a study of the classification procedure for retail dry cleaning establishments that also perform laundering activities. To determine whether the current ratemaking procedure should be continued, WCIRB staff reviewed the operations and the classification experience (payroll and losses) pertaining to each classification. The review determined that Classifications 2586(1) and 2589 are clearly defined and apply to separate groups of employers and each classification develops sufficient payroll and losses to produce advisory pure premium rates; however the statistical credibility of Classification 2586(1), while adequate for ratemaking purposes, is less than 100%. In view of the fact that Classification 2586(1) does not develop sufficient data to achieve full statistical credibility, the operations and classification experience of Classification 2586(1) (commercial dry cleaners) were compared to those of Classification 2585, Laundries N.O.C. (commercial laundries) to determine if these classifications should be combined for ratemaking purposes. The comparison revealed a similarity in operations of firms assigned to Classifications 2586(1) and 2585; however, the classification experience for each classification was not similar. That is, if Classifications 2586(1) and 2585 were combined, the advisory pure premium rate for Classification 2586(1) would increase significantly. Accordingly, the WCIRB recommended that Classifications 2586(1) and 2585 not be combined for ratemaking purposes and that separate advisory pure premium rates be developed for Classifications 2586(1) and 2589 effective January 1, Staff noted that Classification 2586(1) would be reviewed periodically and appropriate action would be taken if the statistical credibility of the classification fell below acceptable standards. The representatives of the CCA expressed their support of the WCIRB s recommendations; however, the CCA asked that the footnote to Classification 2586(1), Dry Cleaning or Dyeing, which defines retail dry cleaning and laundering establishments, be amended to remove the qualifying term walk-in since dry cleaning and laundering services are often provided to the general public who do not enter the dry cleaning and laundering premises. An example was cited of firms that employ route drivers who pick up and deliver articles that are cleaned for the general public. The Committee was informed that, if it agreed with the amendment proposed by the CCA, the same change should be made to classifications 2589 and 2585 for consistency

161 Meeting Minutes for July 31, 2012 Exhibit 1 After reviewing the WCIRB s report and considering the CCA s request, the Committee voted unanimously to approve the recommendation that Classifications 2586(1) and 2589 be permitted to develop their own advisory pure premium rates effective January 1, 2013, and that the proposed revisions (deletion of walk-in ) to Classifications 2586(1), 2589 and 2585 be included in the WCIRB s January 1, 2013 Pure Premium Rate Filing

162 Meeting Minutes for July 31, 2012 Exhibit 1 Item CR Report on Commercial Dry Cleaning or Dyeing and Retail Dry Cleaning or Laundry 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises 2586(2), Yarn or Thread Dyeing or Finishing no yarn or thread manufacturing 2586(3), Hide or Fur Cleaning, Processing or Preserving 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises 2585, Laundries N.O.C. all employees including cash and carry departments on plant premises Executive Summary Objective The WCIRB reviewed the procedure of combining, for ratemaking purposes, the experience of Classification 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises, and Classification 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises. Findings Based on its review, the WCIRB has determined that: 1. The operations contemplated by Classification 2586 are separate, distinct and easily identifiable from those contemplated by Classification 2589; 2. Classification 2589 develops sufficient data to produce a fully credible advisory pure premium rate; 3. Classification 2586 develops sufficient data to produce an advisory pure premium rate; however, the classification relativity data is not fully credible; 4. Based on experience at the 2012 policy year level, Classification 2586 has a Selected (Limited) Loss to Payroll Ratio that is 33.1% greater, and an Indicated (Unlimited) Loss to Payroll Ratio that is 44.7% greater, than the current Selected (Unlimited) Loss to Payroll Ratio for Classifications 2586 and 2589 combined; 5. Based on experience at the 2012 policy year level, Classification 2589 has a Selected (Unlimited) Loss to Payroll Ratio that is 18.8% less than the current Selected (Unlimited) Loss to Payroll Ratio for Classifications 2586 and 2589 combined; 6. In view of the fact that Classification 2586 lacks full statistical credibility, the operations and statistical data for Classifications 2586, Dry Cleaning or Dyeing N.O.C., were compared with those of Classification 2585, Laundries N.O.C., to determine if these classifications should be combined for ratemaking purposes. The review found that: a. The operations performed by employers assigned to Classifications 2586 and 2585 are similar; b. The summaries of Unit Statistical Reports (USR) and inspection reports reveal that commercial laundry operations (Classification 2585) and commercial dry cleaning (Classification 2586) are not usually performed by the same employer; and c. The Selected (Unlimited) Loss to Payroll Ratio for Classifications 2585 and 2586 combined is 77.1% greater than the current Loss to Payroll Ratio for Classification 2586, and

163 Meeting Minutes for July 31, 2012 Exhibit 1 7. The footnotes to Classifications 2586(1), 2589 and 2585 include the qualifying term walk-in that is not needed and could be subject to misinterpretation. Recommendation The WCIRB does not recommend that Classifications 2586 and 2585 be combined for ratemaking purposes for the following reasons: (1) such action would have a substantial impact on firms (commercial dry cleaners) currently assigned to Classification 2586; (2) although Classification 2586 does not develop enough data to produce a fully credible (100% indemnity and medical) advisory pure premium rate, sufficient data exists to produce an advisory pure premium rate that is not considered to be low credibility by WCIRB actuarial standards; and (3) recent year to year ( ) payrolls and losses for commercial dry cleaners are increasing. In view of the lack of full statistical credibility, the WCIRB will periodically review the ratemaking data developed by commercial dry cleaners and recommend appropriate action if the statistical credibility of Classification 2586 falls below acceptable levels. The WCIRB recommends that separate advisory pure premium rates be developed for Classifications 2586(1) and 2589 effective January 1, 2013, and that Classifications 2586(1), 2589 and 2585 be amended to delete the conditional term walk-in

164 Meeting Minutes for July 31, 2012 Exhibit 1 Report on Commercial Dry Cleaning or Dyeing and Retail Dry Cleaning or Laundry 2586(1), Dry Cleaning or Dyeing N.O.C. including repairing or pressing, and cash and carry departments on plant premises 2586(2), Yarn or Thread Dyeing or Finishing no yarn or thread manufacturing 2586(3), Hide or Fur Cleaning, Processing or Preserving 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises 2585, Laundries N.O.C. all employees including cash and carry departments on plant premises Introduction The WCIRB has reviewed the procedure of combining, for ratemaking purposes, the experience of Classification 2586(1), Dry Cleaning or Dyeing N.O.C., and Classification 2589, Dry Cleaning or Laundry retail. Typically, classifications are combined for ratemaking purposes for the following reasons: 1. Similarity in Operations Classifications are combined for ratemaking purposes when the proper classification may be difficult to determine due to a significant similarity in operations, for example, a clear line of delineation does not exist between the two classifications. 2. Low Statistical Credibility The experience of two or more classifications is combined for ratemaking purposes when one or more of the classifications lack statistical credibility. Although the classifications may be clearly defined, due to insufficient statistical credibility, the classifications are combined based on similarity in industry type and operations. 3. Temporary Variance in Experience There is a temporary dissimilarity in the relative experience of two related classifications that results in a relationship between the relativities for the classifications that is not expected to continue into the future. Classification History Following is the history of Classifications 2586 and 2589: 1915: Classification 2583, Cleaning and Dyeing, was established to contemplate cleaning or dyeing of garments and linens for customers on a fee basis. 1949: Classification 2583 was eliminated and Classification 2586(1), Cleaning and Dyeing including repairing or cash and carry departments on plant premises, was established. 1970: Classification 2416, Yarn or Thread Dyeing, was eliminated and Classification 2586(2), Yarn or Thread Dyeing, was established as a cross reference to Classification 2586(1). 1997: The Classification and Rating Committee (Committee) reviewed a study of the classification procedure for retail dry cleaning establishments that also perform traditional laundering activities. This resulted in the establishment of Classification 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on plant premises, and Classification 2586 was amended to include the term dry cleaning. The removal of the retail businesses from Classification 2586 due to the establishment of Classification 2589 resulted in low statistical credibility for Classification 2586; therefore, Classifications 2586 and 2589 were combined for ratemaking purposes. This ratemaking procedure has not been reviewed since

165 Meeting Minutes for July 31, 2012 Exhibit : Classifications 2623(1), Tanning; 2623(2), Fur Manufacturing, and 2623(3), Hide Processing or Preserving, were eliminated due to low statistical credibility and Classification 2586(3), Hide or Fur Cleaning, Processing or Preserving, was established as a cross reference to Classification Following is the history of Classification 2585, Laundries N.O.C.: Prior to 1918: There were three separate classifications for laundry operations: Classification 2580, Laundries wet wash, no flat work, ironing or operating power ironing machinery; Classification 2581, Laundries N.O.C., and Classification 2582, Laundries no machinery. 1918: Classification 2580 was eliminated. 1937: Classification 2582 was eliminated. 1945: Classification 2581 was amended to read, Laundries N.O.C including cash and carry departments at laundry premises. 1947: Classification 2581 was amended to change the code number to conform with national standards and to change the phraseology to read as follows, Classification 2585, Laundries all kinds all employees including cash and carry departments at laundry premises. 1949: Classification 2585 amended to read, Laundries N.O.C all employees including cash and carry departments on plant premises. Description of Operations Following are the classification phraseologies, footnotes and relevant summaries of operations for Classification 2586(1), Dry Cleaning or Dyeing N.O.C. and Classification 2589, Dry Cleaning or Laundry retail including repairing or pressing, and cash and carry departments on premises. DRY CLEANING OR DYEING N.O.C. including repairing or pressing, and cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general walk-in public shall be classified as 2589, Dry Cleaning or Laundry retail. 2586(1) Commercial dry cleaning firms provide professional dry cleaning services for commercial concerns such as hotels, restaurants, spas, hospitals, janitorial companies and similar clients that utilize a high volume of linens and uniforms. Typically, route drivers pick up soiled linens from commercial concerns and transport the soiled linens to the commercial dry cleaning facility. Linens are unloaded and sorted according to item type. The linens are spot treated and loaded into large industrial dry cleaning machines along with chemical cleaning agents and solvents. The cleaned linens are repaired or altered if necessary before being pressed. The linens are then hung on hangers or folded, wrapped in plastic and delivered to customers. Classification 2586(1) also contemplates the dyeing of garments for clothing manufacturers. Garments are received and sorted by size or sets consisting of large batches. The items are loaded into dyeing machines along with water, chemicals, and dyes and submersed for a prescribed amount of time. The items are pulled, placed into hydroextractors to remove excess dye solution and placed into dryers. The dyed items are packaged and set aside for delivery. 1 1 The cross-references to Classification 2586 include Classification 2586 (2), Yarn or Thread Dyeing or Finishing, and Classification 2586(3), Hide or Fur Cleaning, Processing or Preserving

166 Meeting Minutes for July 31, 2012 Exhibit 1 DRY CLEANING OR LAUNDRY retail including repairing or pressing, and cash and carry departments on premises This classification applies to those retail establishments engaged primarily (in excess of 50% of gross receipts) in the dry cleaning or laundering of garments, linens and other household items for the general walk-in public. This classification also applies to coin-operated laundries that retain attendants to perform fluff and fold activities. Cash and carry facilities, situated away from the dry cleaning or laundry location, that solely engage in the receipt and distribution of items to be cleaned shall be classified as 8017(1), Stores retail N.O.C. This classification does not apply to diaper service companies or uniform and linen rental or service companies. Such firms shall be classified as 2585, Laundries, or 2586(1), Dry Cleaning or Dyeing Retail dry cleaning or laundry firms provide laundry services to the general walk-in public. For dry cleaning operations, soiled garments or linens are received from customers, tagged, sorted and spotcleaned as needed. The soiled items are placed into a dry cleaning machine along with dry cleaning solvents. Clean items are removed from the machine, pressed and then hung. The cleaned and pressed items are repaired or altered if necessary, wrapped in plastic and set aside for customer pick-up. Retail laundry operations involve the receipt of soiled garments and linens from customers. The soiled items are tagged, spot cleaned and placed into industrial washing machines along with detergents. The washed items are removed from the washing machines and placed into industrial dryers. Cleaned items are removed from the dryers, repaired or altered if necessary, pressed, folded, or hung and set aside pending customer pick-up. Classification Analysis Classifications 2586 and 2589 Classification 2586 applies to firms that provide commercial or industrial dry cleaning and dyeing services, whereas Classification 2589 applies to firms that provide retail dry cleaning and laundry. The crossreference classifications to 2586 apply to firms engaged in yarn or thread dyeing and hide or fur processing and preserving operations that are significantly different from those contemplated by Classification Accordingly, the operations assignable to Classifications 2586 and 2589 are separate, distinct and clearly identifiable. Below is a summary of 2008 policy year Unit Statistical Reports (USR) that shows the number of employers for which payroll was reported in Classifications 2586 and Table 1: 2008 USR Summary Number of Employers For Which Payroll Was Reported in Classifications 2586 and 2589 Classification Employers with Payroll Reported in Indicated Classification Employers with Payroll Reported in Both Classifications Percent Payroll only Reported in Indicated Classification Percent Payroll Reported in Both Classifications % 1.7% , % 0.2% As shown above, 98.3% of the employers that reported payroll in Classification 2586 did not report payroll in Classification In addition, 99.8% of the employers that reported payroll in Classification 2589 did not report payroll in Classification

167 Meeting Minutes for July 31, 2012 Exhibit 1 Below is a summary of WCIRB inspection reports that assign Classifications 2586 and Table 2: Number of Employers Assigned by the WCIRB to Classifications 2586 and 2589 Classification Employers Assigned to Indicated Classification Employers Assigned to Both Classifications Percent Employers Assigned only to Indicated Classification Percent Employers Assigned to Both Classifications % 0.2% % 0.6% As shown above, 99.8% of the employers assigned to Classification 2586 were not assigned to Classification In addition, 99.4% of the employers assigned to Classification 2589 were not assigned to Classification This information indicates that the two industries have little commonality in operations. Each classification is clearly defined and the potential for misclassification of payroll is low. Therefore, from a classification perspective, there appears to be no compelling reason to continue to combine Classifications 2586 and 2589 for ratemaking purposes. It is noted that the footnotes to Classifications 2586(1) and 2589 that describe retail dry cleaning and laundering establishments include the qualifying term walk-in. This term is not needed and may be subject to misinterpretation as dry cleaning and laundering services may be provided to the general public who do not enter the dry cleaning and laundering premises. That is, some firms employ route drivers who pick up and deliver articles that are cleaned for the general public. Statistical Analysis Table 5 presents the classification relativity data for Classifications 2586 and 2589 combined at policy 2012 level under the current procedure of combining Classifications 2586 and 2589: Year Table 5: Commercial Dry Cleaning or Dyeing (2586) and Retail Dry Cleaning or Laundry (2589) Classification Relativity Data at Policy Year 2012 Level Number of Employers Payroll Losses Loss to Payroll Ratio , ,900,609 6,157, , ,050,662 5,829, , ,074,855 6,396, , ,027,657 7,071, Total 8, ,053,783 25,455, Selected (Unlimited) Loss to Payroll Ratio

168 Meeting Minutes for July 31, 2012 Exhibit 1 Credibility 2 Indemnity Medical Tables 6 and 7 present the classification relativity data at the policy year 2012 level for each classification independently: 3 Year Table 6: Commercial Dry Cleaning or Dyeing (2586) Classification Relativity Data at Policy Year 2012 Level Number of Employers Payroll Losses Loss to Payroll Ratio ,264,078 1,831, ,156,756 2,007, ,289,406 2,208, ,051,388 2,307, ,559,647 3,095, Total 1, ,321,275 11,450, Indicated (Unlimited) Loss to Payroll Ratio Selected Loss to Payroll Ratio (Restricted to 25% Change) Credibility Indemnity Medical The relativity for each classification in the upcoming policy year is determined based on a comparison of that classification s actual losses per $100 of payroll and the ratio of losses per $100 of payroll underlying the current pure premium rate. The credibilities assigned to a classification are the statistical weights assigned to that classification s experience as a predictor of future claim experience relative to the loss per $100 of payroll underlying the classification s current pure premium rate. The predictability or credibilities assigned to a classification s recent historical experience depends on the volume of indemnity and medical claims incurred during the experience period. The WCIRB strives to have classifications that are fully, or 100%, statistically credible based on historical experience over five or fewer years, which means that the classification s relativity in the upcoming policy year can be best estimated using only the loss per $100 of payroll experience from the latest two-, three-, four- or five-year periods. The WCIRB generally will not recommend the establishment of a new classification if the credibility factors are less than one-half (< 0.50). 3 The Classification Relativities shown in Tables 6 and 7 each require five years of data to achieve statistical credibility; the Classification Relativity [combined] shown in Table 5 requires four years of data to achieve statistical credibility. 4 Classification relativity changes are limited to an annual increase or decrease of 25%. If Classification 2586 had not been combined with Classification 2589 for ratemaking purposes, its 2012 Selected Loss to Payroll Ratio would have been 4.041, not the indicated unlimited amount of

169 Meeting Minutes for July 31, 2012 Exhibit 1 Year Table 7: Retail Dry Cleaning or Laundry (2589) Classification Relativity Data at Policy Year 2012 Level Number of Employers Payroll Losses Loss to Payroll Ratio , ,761,044 4,117, , ,743,853 4,149, , ,761,256 3,620, , ,023,467 4,089, , ,468,010 3,976, Total 9, ,757,630 19,953, Selected (Unlimited) Loss to Payroll Ratio Credibility Indemnity Medical As shown above, Classification 2589 develops sufficient payroll and loss data to produce a fully credible advisory pure premium rate. Although its classification relativity data is not fully credible (Indemnity.60, Medical.74), Classification 2586 develops sufficient data to produce an advisory pure premium rate. Therefore, from a ratemaking perspective, there appears to be no compelling reason to continue to combine Classifications 2586 and 2589 for ratemaking purposes. Impact Analysis Classifications 2586 and 2589 Table 8 depicts the first year impact on policyholders assigned to Classification 2586 if separate classification relativities and thus advisory pure premium rates are established for Classifications 2586 and In this table, the classification relativity for Classification 2586 is limited to a 25% increase. Table 8: Classifications 2586 and 2589 Combined (Current Relativity) vs. Classification 2586 (Limited) Comparison of Selected Loss to Payroll Ratios at Policy Year 2012 Level Classifications 2586 and 2589 Classification 2586 limited to 25% change Difference (+33.1%)

170 Meeting Minutes for July 31, 2012 Exhibit 1 In Table 9, the classification relativity for Classification 2586 is not limited to a 25% increase. This comparison depicts the ultimate impact on policyholders assigned to Classification Table 9: Classifications 2586 and 2589 Combined vs. Classification 2586 (Unlimited) Comparison of Indicated Loss to Payroll Ratios at Policy Year 2012 Level Classifications 2586 and 2589 Classification 2586 Unlimited Difference (+44.7%) Table 10 depicts the impact on policyholders assigned to Classification 2589 if separate classification relativities and thus advisory pure premium rates are established for Classifications 2586 and Table 10: Classifications 2586 and 2589 Combined vs. Classification 2589 Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2012 Level Classifications 2586 & 2589 Classification 2589 Difference (-18.8%) As shown above, based on experience at the 2012 policy year level, Classification 2586 has a Selected (Limited) Loss to Payroll Ratio that is 33.1% greater, and an Indicated (Unlimited) Loss to Payroll Ratio that is 44.7% greater, than the Selected (Unlimited) Loss to Payroll Ratio for Classifications 2586 and 2589 combined; and Classification 2589 has a Selected (Unlimited) Loss to Payroll Ratio that is 18.8% less than the Selected (Unlimited) Loss to Payroll Ratio for Classifications 2586 and 2589 combined. Classification Analysis Classifications 2586 and 2585 As noted above, Classification 2586(1), Dry Cleaning or Dyeing N.O.C., lacks full statistical credibility (100% indemnity and medical). Since employers assigned to Classifications 2585, Laundries N.O.C., and 2586 provide garment and linen cleaning services to the commercial trade, the operations and statistical data for these classifications were compared to determine if they should be combined for ratemaking purposes. Following is the phraseology for Classification 2585: LAUNDRIES N.O.C. all employees including cash and carry departments on plant premises 2585 Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general walk-in public shall be classified as 2589, Dry Cleaning or Laundry retail Operations Classification 2585 Commercial laundry firms provide professional laundry services to commercial concerns. Typically, route drivers pick up soiled garments and linens from commercial concerns and transport the soiled items to the commercial laundry facility. Items are unloaded and sorted according to item type. The soiled items are tagged, spot cleaned and placed into industrial washing machines along with detergents. The washed items are removed from the washing machines and placed into industrial dryers. Cleaned items are removed from the dryers, repaired or altered if necessary, pressed, folded or hung and set aside pending delivery to the customer by route drivers

171 Meeting Minutes for July 31, 2012 Exhibit 1 It is noted that the footnote to Classification 2585 includes the qualifying term walk-in, which is not needed for the reasons described above. Operations Classification 2586 Commercial dry cleaning firms provide professional dry cleaning services for commercial concerns such as hotels, restaurants, spas, hospitals, janitorial companies and similar clients that utilize a high volume of linens and uniforms. Typically, route drivers pick up soiled linens from commercial concerns and transport the soiled linens to the commercial dry cleaning facility. Linens are unloaded and sorted according to item type. The linens are spot treated and loaded into large industrial dry cleaning machines along with chemical cleaning agents and solvents. The cleaned linens are repaired or altered if necessary before being pressed. The linens are hung on hangers or folded, wrapped in plastic and delivered to customers. Although the operations performed by commercial laundry firms (Classification 2585) and commercial dry cleaners (Classification 2586) are similar, the two operations involve different cleaning agents and machinery. To determine whether commercial laundry and dry cleaning are commonly performed by the same employer, staff reviewed the 2008 policy year USR that show the number of employers for which payroll was reported in Classifications 2585 and Table 11: 2008 USR Summary Number of Employers For Which Payroll Was Reported in Classifications 2585 and 2586 Classification Employers with Payroll Reported in Indicated Classification Employers with Payroll Reported in Both Classifications Percent Payroll only Reported in Indicated Classification Percent Payroll Reported in Both Classifications % 23.9% % 17% As shown above, 76.1% of the employers that reported payroll in Classification 2585 did not report payroll in Classification In addition, 83% of the employers that reported payroll in Classification 2586 did not report payroll in Classification In like manner, staff reviewed the number of inspection reports that assign Classifications 2585 and Table 12: Number of Employers Assigned by the WCIRB to Classifications 2585 and 2586 Classification Employers Assigned to Indicated Classification Employers Assigned to Both Classifications Percent Employers Assigned only to Indicated Classification Percent Employers Assigned to Both Classifications % 9.0% % 11.4%

172 Meeting Minutes for July 31, 2012 Exhibit 1 As shown above, 91% of the employees assigned to Classification 2585 were not assigned to Classification In addition, 88.6% of the employers assigned to Classification 2586 were not assigned to Classification The summaries of USR reports and inspection reports indicate that commercial laundry operations (Classification 2585) do not normally prevail in the operations of commercial dry cleaners (Classification 2586). This observation was corroborated by a review of the 376 inspection reports that assigned Classification 2585 but did not assign Classification The review confirmed that operators of commercial laundries (Classification 2585) do not perform dry cleaning operations. 5 While there may be similarities between the operations performed by commercial dry cleaners and commercial laundries, the USR and inspection report analysis demonstrates that the operations assignable to Classification 2585 and 2586 are separate, distinct, and clearly identifiable. Statistical Analysis Table 13 presents the classification relativity data for Classification 2585 at policy year 2012 level. Year Table 13: Commercial Laundry (2585) Classification Relativity Data at Policy Year 2012 Level Number of Employers Payroll Losses Loss to Payroll Ratio ,861,252 22,453, ,921,250 20,375, Total ,782,502 42,829, Selected (Unlimited) Loss to Payroll Ratio Indemnity Credibility Medical Table 14 presents the classification relativity data for Classifications 2585 and 2586 combined at policy year 2012 level: Table 14: Commercial Laundry (2585) and Commercial Dry Cleaning or Dyeing (2586) Classification Relativity Data at Policy Year 2012 Level Year Number of Employers Payroll Losses Loss to Payroll Ratio ,912,640 24,761, ,480,897 23,471, Total ,393,537 48,233, Selected (Unlimited) Loss to Payroll Ratio That is, the review ruled out the possibility that some commercial laundry operators also perform commercial dry cleaning and Classification 2586 could not be assigned due to the provisions of the Multiple Enterprises Rule

173 Meeting Minutes for July 31, 2012 Exhibit 1 Credibility Indemnity Medical Impact Analysis Classifications 2585 and 2586 In a similar manner as above, the WCIRB compared the statistical data for Classification 2585 and Table 15 compares the Selected (Unlimited) Loss to Payroll Ratio of Classification 2585 to the Selected (Limited) Loss to Payroll Ratio of Classification Table 15: Classification 2585 vs. Classification 2586 (Limited) Comparison of Selected Loss to Payroll Ratio at Policy Year 2012 Level Classification 2585 (Laundry) Classification 2586* (Dry Cleaning) Difference (32.0%) *Classification 2586 is limited to a 25% change Table 16 compares the Selected and Indicated (Unlimited) Loss to Payroll Ratios for Classifications 2585 and Table 16: Classification 2585 vs. Classification 2586 Comparison of Indicated (Unlimited) Loss to Payroll Ratio at Policy Year 2012 Level Classification 2585 (Laundry) Classification 2586 (Dry Cleaning) Difference (21.4%) As shown above, based on experience at the 2012 policy year level, Classification 2585 has a Selected (Unlimited) Loss to Payroll Ratio that is 32% greater, than the Selected (Limited) Loss to Payroll Ratio for Classification 2586; and a Selected (Unlimited) Loss to Payroll Ratio that is 24% greater than the Selected (Unlimited) Loss to Payroll Ratio for Classification Table 17 displays the impact on affected policyholders if Classification 2586 (current procedure) was combined with Classification 2585 to produce a single classification relativity and thus advisory pure premium rate. Table 17: Classifications 2585 and 2586 Combined vs. Classification 2586 and 2589 Combined (Current Procedure) Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2012 Level Classifications 2585 & 2586 Classification 2586/2589 (Current Procedure) Difference (77.1%)

174 Meeting Minutes for July 31, 2012 Exhibit 1 In a similar manner, Table 18 compares the 2012 advisory pure premium rates for Classifications 2585 and Table 18: 2585 vs Comparison of 2012 Advisory Pure Premium Rates Classification 2585 Classification 2586 Difference (+76.9%) As shown above, based on experience at the 2012 policy year level, Classification 2585 and 2586 combined has a Selected (Unlimited) Loss to Payroll Ratio that is 77.1% greater than the Selected (Unlimited) Loss to Payroll Ratio for Classification 2586 (current procedure) and the advisory pure premium rate for Classification 2585 is 76.9% greater, than the advisory pure premium rate for Classification 2586 (current procedure). Accordingly, the combination of Classifications 2585 and 2586 would substantially impact firms currently assigned to Classification In view of (1) the wide disparity between the Loss to Payroll Ratios for Classifications 2585 and 2586; (2) the fact that commercial dry cleaners (Classification 2586) develop sufficient data to produce an advisory pure premium rate that is not considered to be low credibility by WCIRB actuarial standards; and (3) recent year to year ( ) payrolls and losses for commercial dry cleaners are increasing, the WCIRB does not recommend that Classifications 2585 and 2586 be combined for ratemaking. Nevertheless, in view of the lack of full statistical credibility, staff will periodically review the ratemaking data developed by commercial dry cleaners and will recommend appropriate action if the statistical credibility of Classification 2586 falls below acceptable levels. Conclusion Based on its review of the procedure of combining Classifications 2586 and 2589 for ratemaking purposes, the WCIRB finds that: 1. The operations contemplated by Classification 2586 are separate, distinct and easily identifiable from those contemplated by Classification 2589; 2. Classification 2589 develops sufficient data to produce a fully credible pure premium rate; 3. Although its relativity data is not fully credible, Classification 2586 develops sufficient data to produce an advisory pure premium rate; 4. Based on experience at the 2012 policy year level, Classification 2586 has a Selected (Limited) Loss to Payroll Ratio that is 33.1% greater, and an Indicated (Unlimited) Loss to Payroll Ratio that is 44.7% greater, than the current Selected (Unlimited) Loss to Payroll Ratio for Classifications 2586 and 2589 combined; 5. Based on experience at the 2012 policy year level, Classification 2589 has a Selected (Unlimited) Loss to Payroll Ratio that is 18.8% less than the current Selected (Unlimited) Loss to Payroll Ratio for Classifications 2586 and 2589 combined; and 6. In view of the fact that Classification 2586 lacks full statistical credibility, the operations and statistical data for Classifications 2586, Dry Cleaning or Dyeing N.O.C., were compared with those of Classification 2585, Laundries N.O.C., to determine if these classifications should be combined for ratemaking purposes. The review found that

175 Meeting Minutes for July 31, 2012 Exhibit 1 a. The operations performed by employers assigned to Classifications 2586 and 2585 are similar; b. The summaries of USR reports and inspection reports reveal that commercial laundry operations (Classification 2585) and commercial dry cleaning (Classification 2586) usually are not performed by the same employer; and c. Based on experience at the 2012 policy year level, the Selected (Unlimited) Loss to Payroll Ratio for Classification 2585 and 2586 combined is 77.1% greater than the current Loss to Payroll Ratio for Classification The footnotes to Classifications 2586(1), 2589 and 2585 include the qualifying term walk-in that is not needed and could be subject to misinterpretation. Recommendation The WCIRB recommends discontinuing the combination of the experience of Classifications 2586 and 2589 for ratemaking purposes and allowing each classification to develop its own advisory pure premium rate. The WCIRB does not recommend that Classifications 2586 and 2585 be combined for ratemaking purposes for the following reasons: (1) such action would have a substantial impact on firms (commercial dry cleaners) currently assigned to Classification 2586; (2) although the data for Classification 2586 does not develop enough data to produce a fully credible (100% indemnity and medical) advisory pure premium rate, sufficient data exists to produce an advisory pure premium rate that is not considered to be low credibility by WCIRB actuarial standards; and (3) recent year to year ( ) payrolls and losses for commercial dry cleaners are increasing. In view of the lack of full statistical credibility, the WCIRB will periodically review the ratemaking data developed by commercial dry cleaners and recommend appropriate action if the statistical credibility of Classification 2586 falls below acceptable levels. The WCIRB recommends that its January 1, 2013 Pure Premium Rate Filing include proposed revisions to Classifications 2586(1), 2589 and 2585 to delete the term walk-in

176 Exhibit 1 Classification and Rating Committee Meeting Minutes for July 31, 2012 Proposed Changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Classifications 2586 (1), Dry Cleaning or Dyeing N.O.C., 2589, Dry Cleaning or Laundry retail, and 2585, Laundries N.O.C., to remove the conditional term walk in for clarity and consistency. PROPOSED DRY CLEANING OR DYEING N.O.C. including repairing or pressing, and cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general walk-in public shall be classified as 2589, Dry Cleaning or Laundry retail. 2586(1) DRY CLEANING OR LAUNDRY retail including repairing or pressing, and cash and carry departments on premises This classification applies to those retail establishments engaged primarily (in excess of 50% of gross receipts) in the dry cleaning or laundering of garments, linens and other household items for the general walk-in public. This classification also applies to coin-operated laundries that retain attendants to perform fluff and fold activities. Cash and carry facilities, situated away from the dry cleaning or laundry location, that solely engage in the receipt and distribution of items to be cleaned shall be classified as 8017(1), Stores retail N.O.C. This classification does not apply to diaper service companies or uniform and linen rental or service companies. Such firms shall be classified as 2585, Laundries, or 2586(1), Dry Cleaning or Dyeing LAUNDRIES N.O.C. all employees including cash and carry departments on plant premises Retail dry cleaning and laundering establishments engaged primarily (in excess of 50% of gross receipts) in the cleaning of garments, linens and other household items for the general walk-in public shall be classified as 2589, Dry Cleaning or Laundry retail

177 Exhibit 2 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 2586 RHG: 4 NAICS: 31 ILDG: 2 MLDG: 3 CLASS: DRY CLEANING OR DYEING POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,864,606 43,289,406 45,045,733 56,239,244 55,723, , , ,661 1,116,464 1,073,286 1,484,375 1,535,521 1,536,482 2,657,053 2,515,416 2,385,198 2,373,625 2,334,142 3,773,517 3,588, ,162, ,606,705 4,726,338 9,728,847 14,455,185 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Indicated (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 62.2% Selected Loss to Payroll Ratio (Restricted to 25% Change): Relativity to Statewide Average Loss to Payroll Ratio: 292.0% INCLUDES 2623 D WCIRB California. All rights reserved. 177

178 Exhibit 3 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: XXXX RHG: 4 NAICS: 31 ILDG: 2 MLDG: 3 CLASS: COMMERCIAL DRY CLEANING POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,413,727 5,893,193 6,192,298 5,840,234 5,319, ,004 56,423 19,268 30,373 2,130 75, ,498 44,896 75,797 25, , ,922 64, ,169 27, ,659, , , , ,114 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: -7.8% Relativity to Statewide Average Loss to Payroll Ratio: 215.4% 2012 WCIRB California. All rights reserved. 178

179 Exhibit 4 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 2589 RHG: 3 NAICS: 81 ILDG: 3 MLDG: 2 CLASS: DRY CLEANING OR LAUNDRY - RETAIL POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,761, ,023, ,255, ,196, ,573,819 1,923,538 1,512,595 1,920,706 3,044,622 3,098,191 2,891,080 3,330,787 4,618,441 5,021,729 4,403,675 5,251, ,236, ,641,321 6,930,658 12,364,680 19,295,338 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: -14.1% Relativity to Statewide Average Loss to Payroll Ratio: 200.7% 2012 WCIRB California. All rights reserved. 179

180 Exhibit 5 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 2589 RHG: 3 NAICS: 81 ILDG: 3 MLDG: 2 CLASS: DRY CLEANING OR LAUNDRY - RETAIL POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,654, ,215, ,096, ,515, ,636,880 1,948,387 1,543,988 1,922,941 3,333,843 3,163,162 2,965,039 3,355,598 4,970,723 5,111,548 4,509,027 5,278, ,482, ,760,055 7,052,196 12,817,642 19,869,838 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: -14.3% Relativity to Statewide Average Loss to Payroll Ratio: 200.2% 2012 WCIRB California. All rights reserved. 180

181 Exhibit 6 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: XXXX RHG: 4 NAICS: 31 ILDG: 2 MLDG: 3 CLASS: COMMERCIAL DYEING OPERATIONS POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,502,247 20,789,922 26,323,525 34,673,150 37,801, , , , , , , , ,986 1,859,839 1,997,024 1,111,648 1,180,446 1,534,871 2,652,198 2,802, ,090, ,359,717 2,985,004 6,296,383 9,281,387 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Indicated (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 64.0% Selected Loss to Payroll Ratio (Restricted to 25% Change): Relativity to Statewide Average Loss to Payroll Ratio: 292.0% 2012 WCIRB California. All rights reserved. 181

182 Exhibit 7 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 2585 RHG: 2 NAICS: 81 ILDG: 4 MLDG: 4 CLASS: LAUNDRIES POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,259, ,112 8,701,392 17,790,523 26,491, ,110, ,557,739 16,745,010 24,302, ,370, ,934 12,057,464 16,259,131 34,535,533 50,794,664 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 3.0% Relativity to Statewide Average Loss to Payroll Ratio: 425.2% 2012 WCIRB California. All rights reserved. 182

183 Exhibit 8 WCIRB January 1, 2013 Pure Premium Rate Filing CLASSIFICATION RELATIVITY REVIEW SHEET Effective January 1, 2013 Code: 2585 RHG: 2 NAICS: 81 ILDG: 4 MLDG: 4 CLASS: LAUNDRIES POLICY YEAR PAYROLL (P/R) CLAIM COUNTS ADJUSTED LOSSES SERIOUS NON- SERIOUS MEDICAL- ONLY INDEMNITY MEDICAL TOTAL ADJ. LOSS TO P/R (00s) ,933, ,205 9,572,644 19,835,345 29,407, ,911, ,489,234 19,009,509 27,498, ,844, ,112 13,631,142 18,061,878 38,844,854 56,906,732 Adjusted Loss to Payroll Ratio: Expected Unlimited Loss to Payroll Ratio: Expected Limited Loss to Payroll Ratio (adjusted for NAICS diff.): Credibility: Indicated Limited Loss to Payroll Ratio: Limit Factor: Selected (Unlimited) Loss to Payroll Ratio: Indicated Relativity Change: 6.2% Relativity to Statewide Average Loss to Payroll Ratio: 438.5% 2012 WCIRB California. All rights reserved. 183

184 Item CR Reporting of Penalty Amounts Background As part of the amended January 1, 2013 Pure Premium Rate Filing, the WCIRB proposed changes to the unit statistical reporting requirements in the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) to provide instructions on the reporting of new cost components created by Senate Bill No. 863 (SB 863), such as independent medical review and independent bill review. During the discussion of this recommendation at the September 5, 2012 Governing Committee meeting, a member of the Committee questioned the inclusion of claim-related penalties in Unallocated Loss Adjustment Expense (ULAE), which is included in advisory pure premium rates, and suggested that it may be appropriate to exclude the cost of such penalties from pure premium rates. Staff agreed to study the USRP reporting requirements related to all claim-related penalties Special Committee Review of Reporting Requirements for Claim-Related Penalties In 1999, a Special Committee for Clarifying Claims Reporting evaluated, among other issues, the reporting of claim-related penalties. At that time, the USRP provided that automatic increases for late indemnity payments required pursuant to California Labor Code Section 4650 were to be reported as loss. The Special Committee noted that Labor Code Sections 5814 and 4622 provide for increases in payments that are delayed and recommended that the USRP also specify how those penalties should be reported as well. The Special Committee reviewed the practice of other jurisdictions and noted that some jurisdictions differentiated whether to report these costs as loss or expense, depending upon whether the penalty was within the insurer s control. If the penalty was not within the insurer s control, the penalty was to be reported as loss and if the penalty was within the insurer s control, it was to be reported as expense particularly ULAE in most jurisdictions. The Special Committee ultimately concluded that since the penalties can be both within and beyond the insurer s control and it would be a relatively small number of penalties that would be beyond the insurer s control, it was preferable to exclude all penalties from loss and include them as expense. Some members of the Special Committee opined that the penalties should be included as Allocated Loss Adjustment Expense (ALAE) since the penalties are an award that is part of the claim; however, a majority of the Special Committee ultimately recommended that the penalties be included as ULAE. This recommendation was approved by the Insurance Commissioner and incorporated into the USRP effective January 1, Current USRP Requirements Part 4, Unit Statistical Report Filing Requirements, Section II, Definitions, Rule 19, Loss Adjustment Expenses, Subsection b, Unallocated Loss Adjustment Expense, states: 19. Loss Adjustment Expense(s) Loss adjustment expense(s) are comprised of two components, Allocated Loss Adjustment Expense(s) and Unallocated Loss Adjustment Expense(s), each of which is defined below: b. Unallocated Loss Adjustment Expense(s) The costs of an insurer, in connection with the handling of claims, which are not defined as Allocated Loss Adjustment Expenses, indemnity loss or medical loss. These include, but are not limited to: 184

185 (1) Fees, salary and overhead (including support staff) of individuals hired primarily or predominantly to perform the function of claim operations. This includes costs incurred by in-house personnel or outside services. EXCEPTION: Costs related to individuals whose primary or predominant function is to perform legal services or field investigations related to the compensability of claims, potential fraud or the potential for future subrogation shall be considered as Allocated Loss Adjustment Expenses (see Subrule 19a, above). (2) The costs of medical cost containment programs that cannot be allocated to a particular claim. (The costs of medical cost containment programs that can be allocated to a particular claim shall be reported as allocated loss adjustment expenses.) (3) The cost of benefit increases or penalty awards made pursuant to California Labor Code Sections 4650, 5814, , and (4) The cost of the reimbursement to the lien claimant of the lien filing fee or lien activation fee when ordered or awarded by the Workers Compensation Appeals Board (WCAB) or arbitrator pursuant to Labor Code Section With respect to the benefit increases and penalty awards specifically referenced in Subsection (b)(3) above, Labor Code Section 4650 provides for a 10% increase under specific circumstances when either temporary or permanent disability payments are not timely paid; it also provides for the employer to reimburse the insurer for the amount of the increase if the late payment is due less than seven days after the insurer receives the completed claim form from the employer. Labor Code Section 5814 allows the Workers Compensation Appeals Board to increase an award by 25% or up to $10,000, whichever is less, when payment of compensation has been unreasonably delayed or refused, either prior or subsequent to an award; it also allows the employer to pay a self-imposed penalty of 10% of the amount unreasonably delayed or refused. Labor Code Section provides the process for payment of medical bills and provides for an increase of 15%, together with interest at the same rate as civil judgments, if a properly documented list of medical services has been provided to the employer but not paid with the required 45-day time period at the rates in effect under Labor Code Section Labor Code Section provides the procedure for independent medical review and provides that if an employer fails to timely pay for treatment that has been determined to be medically necessary, the employer is subject to administrative penalties payable to the Workers Compensation Administration Revolving Fund. Finally, Labor Code Section 4622 provides for a 10% increase, along with 7% interest, if the amount owed for medical-legal expenses is not paid on a timely basis. Treatment of Penalty Payments in Other Jurisdictions and for Other Purposes The majority of other jurisdictions classify claim-related penalties (a) as loss when the insurer is liable for the penalty for reasons beyond its control and the penalties accrue as benefits to the injured worker or their dependents and (b) as expense, usually ULAE, when the penalties are within the insurer s control. The National Association of Insurance Commissioners (NAIC) annually collects certain financial data from insurers. There is no clear guidance in the NAIC s Annual Statement instructions for the reporting of claim-related penalties. An informal survey of insurers indicated that the reporting of penalty amounts for NAIC purposes can vary depending on the insurer and the type of penalty. The California Department of Insurance (CDI) workers compensation rate filing form includes a specific entry for penalties, fines and bad faith judgments that can be included in the calculation of underwriting expense, but provides no further guidance as to how to report, in particular, claim-related penalties that may be incurred. 185

186 Impact of Claim-Related Penalty Payments on Advisory Pure Premium Rates The WCIRB, as part of its annual Expense Call, requires the reporting of penalties imposed by the CDI, Department of Industrial Relations or any state agency pertaining to or arising from California workers compensation business, including the reporting of penalty payments. Shown below is a table summarizing the total private insurer penalty amounts reported for the last three years on the WCIRB s call. As shown, reported penalty amounts are an extremely small percentage of total incurred losses. Data Call Year Penalties Total Incurred Penalties as % of Total Incurred 2010 $ 785,761 $7,089,224, % 2011 $2,502,191 $7,728,119, % 2012 $2,308,234 $8,964,403, % Summary and Recommendations In summary, the WCIRB notes the following: 1. Current USRP requirements specify that all claim-related penalties be included in ULAE and thereby excluded from experience rating and any insurer loss-sensitive rating plans. 2. Unit statistical requirements in a number of other jurisdictions distinguish whether claimrelated penalties are within the insurer s control for purposes of determining whether to report them as loss or loss adjustment expenses. 3. The treatment of claim-related penalties within other systems (e.g., NAIC) vary significantly. 4. Claim-related penalties in California are an insignificant component of total costs. With respect to data reporting requirements, unless there is a compelling reason to deviate, the WCIRB strives for consistency with national standards and practices. Some jurisdictions treat claimrelated penalties as a component of loss-related costs (either loss or loss adjustment expense). While many jurisdictions differentiate the treatment of claim-related penalties between loss and loss adjustment expense depending on whether the insurer was primarily responsible for the penalty, it can often be difficult to assess the extent to which the delay in claim payments or other activity giving rise to the claim-related penalty was within the insurer s control. The WCIRB, therefore, does not recommend differentiating the reporting requirements for claim-related penalties in California based on any criteria used to evaluate responsibility. In summary, given (a) the limited amount of these penalties, (b) the fact that such penalties are currently not reflected in California losses or ALAE and are therefore excluded from experience rating and other insurer loss-sensitive plans, and (c) that such penalties are generally not excluded from claim-related costs in other systems, the WCIRB does not recommend changing the current USRP requirements to specify that claim-related penalties be excluded from all loss and loss adjustment expense components. 186

187 Item CR Payroll Remuneration Each year, WCIRB staff reviews current wage and payroll limits in the California Worker s Compensation Uniform Statistical Reporting Plan 1995 (USRP) to ensure their accuracy. The WCIRB is projecting that wage inflation for 2014 will be approximately 2.4%. This wage inflation projection is based on the UCLA Anderson All Industries Wage Forecast as of March Based on this projection, the WCIRB recommends the following revisions to the USRP. Executive Officers, Partners, Individual Employers and Members of a Limited Liability Company WCIRB staff reviewed the minimum and maximum reportable payrolls to be used for executive officers, partners, individual employers, and members of a limited liability company, so that these thresholds in the USRP reflect prospective economic conditions. To reflect the projected 2014 wage inflation of approximately 2.4%, staff recommends that the current maximum remuneration of $106,600 ($2,050 per week) be revised to $109,200 ($2,100 per week) and the current minimum of $41,600 ($800 per week) be revised to $42,900 ($825 per week). Classification 9181, Athletic Teams or Parks all players on salary list of insured, whether regularly played or not including umpires WCIRB staff reviewed the salary limitation for athletic teams that is contained in the footnote to Classification 9181, Athletic Teams or Parks. To reflect the projected 2014 wage inflation of approximately 2.4%, staff recommends that the maximum for Classification 9181 from $106,600 to $109,200. Classification 9610, Motion Pictures production Classification 7610, Radio, Television or Commercial Broadcasting Stations Classification 9156, Theaters dance, opera and theater companies Classification 9151, Theaters music ensembles WCIRB staff reviewed the payroll limitations for performers in the entertainment classifications with a view toward adjusting the limitations to account for inflation and to remain consistent with adjustments to the payroll limitations for executive officers, partners and individual proprietors. To reflect the projected 2014 wage inflation of approximately 2.4%, staff recommends that the payroll limitations for the entertainment classifications referenced above be increased from $106,600 per annum to $109,200 per annum ($2,100 per week). Classification 7365, Taxicab Operations all employees WCIRB staff reviewed the minimum payroll per taxicab that is contained in the footnote to Classification 7365, Taxicab Operations all employees. To reflect the projected 2014 wage inflation of approximately 2.4%, staff recommends that the minimum payroll per taxicab be increased from $29,800 per year to $30,

188 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Part 3, Section V, Payroll Remuneration, Rule 1, Payroll Remuneration, Subrule j, Executive Officers, Subrule k, Partners, Subrule l, Individual Employers, and Subrule m, Members of a Limited Liability Company, to adjust the minimum and maximum payroll limitations for executive officers, partners, individual employers, and members of a limited liability company to reflect wage inflation since the minimum and maximum payroll limitations were last amended in PROPOSED Section V Payroll Remuneration 1. Payroll Remuneration j. Executive Officers The entire remuneration earned by each executive officer during the policy period shall be used as the payroll, subject to a minimum remuneration of $41,60042,900 per annum and a maximum remuneration of $106,600109,200 per annum for each executive officer covered under the policy. This provision also applies to executive officers of a corporation while the corporation is covered as a member of a partnership or joint venture operation and to executive officers of a limited liability company. k. Partners If the policy covers one or more partners as employee(s) during the policy period, the entire remuneration earned by such partner(s) during such coverage (including the annual amount of wages, salary, emoluments or profits of each such partner) shall be included in the payroll, subject to a minimum remuneration of $41,60042,900 per annum and a maximum remuneration of $106,600109,200 per annum for each partner so included. This provision also applies to partners of a partnership while such partnership is covered as a member of another partnership or joint venture. l. Individual Employers If an individual employer is covered under the policy, the entire remuneration earned by such person during the policy period (including the annual amount of wages, salary, emoluments or profits of such person) shall be included in payroll, subject to a minimum remuneration of $41,60042,900 per annum and a maximum remuneration of $106,600109,200 per annum for such person. 188

189 m. Members of a Limited Liability Company If the policy covers one or more members as employee(s) during the policy period, the entire remuneration earned by such member(s) during such coverage (including the annual amount of wages, salary, emoluments or profits of each such member) shall be included in the payroll, subject to a minimum remuneration of $41,60042,900 per annum and a maximum remuneration of $106,600109,200 per annum for each member so included. This provision also applies to managers of a limited liability company when the limited liability company is manager-managed. Examples for subrules j, k, l and m A person joined a partnership as a partner effective week 27 of a 52-week policy period. The person did not work as an employee prior to becoming partner. The partner drew only $400 per week as partner, and no other earnings were distributed to the partner. ($400 x 26, or $10,400, was drawn during the policy period.) The prorated weekly minimum payroll for partners based upon Subrule k, above, is more than $10,400 ($41,60042, x 26 = $20,80021,450). The reportable payroll for this partner must therefore be increased by $10,40011,050 to equal the prorated minimum remuneration for this person s 26 weeks as partner ($10,400 + $10,40011,050 = $20,80021,450). An employee is promoted to an executive officer position effective week 40 during a 52-week policy period. The individual was paid an annual salary of $150,000 for the policy period. Payroll for weeks 1 through 39 is $112,500. The earnings for the 13-week period ($37,500) as executive officer are reduced to the prorated executive officer maximum remuneration based upon Subrule j above ($106,600109, x 13 = $26,65027,300). The total reportable payroll for this individual is $112,500 + $26,65027,300 = $139,150139,800. * * * * * * * Recommendation Amend Classification 9181, Athletic Teams or Parks all players on the salary list of employer, whether regularly played or not, to increase the annual payroll limitation for players from $106,600 to $109,200 per year per person to reflect wage inflation since the payroll limitation was last amended in PROPOSED ATHLETIC TEAMS OR PARKS all players on salary list of employer, whether regularly played or not including umpires The entire remuneration of each player shall be included, subject to a maximum of $106,600109,200 per season. When a player works for two or more teams in the same sport during the season, the maximum of $106,600109,200 per person shall be prorated. Season shall include preseason and postseason exposure. Also refer to companion Classification 9182, Athletic Teams or Parks all employees other than players or umpires. If an employee who performs duties described by Classification 9181 also performs duties described by Classification 9182, the payroll of that employee may be divided between Classifications 9181 and 9182, provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule

190 * * * * * * * Recommendation Amend Classification 9610, Motion Pictures production, to increase the annual payroll limitation for actors, musicians, producers and the motion picture director from $106,600 to $109,200 per person to reflect wage inflation since the payroll limitation was last amended in PROPOSED MOTION PICTURES production in studios and outside all employees 9610 The actual remuneration of actors, musicians, producers and the motion picture director must be included, subject, however, to a maximum of $106,600109,200 per year per person. When such employees do not work the entire year, the payroll limitation shall be prorated based upon the number of weeks in which such employees worked during the policy period. This classification applies to firms that specialize in the production of motion pictures, television features, commercials, music videos or industrial films that are recorded on motion picture film stock, videotape, digital or other media. Employees engaged exclusively in the electronic editing of digital files using computerized editing equipment are assignable to Classification 8810(1), Clerical Office Employees, provided they otherwise meet the definition of Clerical Office Employees as contained in Part 3, Section III, Rule 4. Employees that create animation using computer or digital applications are assignable to Classification 8810(1), Clerical Office Employees, provided they otherwise meet the definition of Clerical Office Employees as contained in Part 3, Section III, Rule 4. The payroll limitation of this classification is applicable to the director responsible for all aspects of production. The payroll for all other directors such as assistant and associate directors is not subject to limitation. The payroll limitation also applies to motion picture producers responsible for overseeing the financial, administrative and creative aspects of a motion picture. * * * * * * * Recommendation Amend Classification 7610, Radio, Television or Commercial Broadcasting Stations all employees, to increase the annual payroll limitation for players, entertainers or musicians from $106,600 to $109,200 per person to reflect wage inflation since the payroll limitation was last amended in PROPOSED RADIO, TELEVISION OR COMMERCIAL BROADCASTING STATIONS all employees including Clerical Office Employees and Outside Salespersons The actual remuneration of players, entertainers or musicians shall be subject to a maximum of $106,600109,200 per year per person. When such employees do not work the entire year, the payroll limitation shall be prorated based upon the number of weeks in which such employees worked during the policy period. Motion picture production shall be separately classified * * * * * * * 190

191 Recommendation Amend Classification 9156, Theaters dance, opera and theater companies, to increase the annual payroll limitation for performers and directors of performers from $106,600 to $109,200 per person to reflect wage inflation since the payroll limitation was last amended in PROPOSED THEATERS dance, opera and theater companies all performers and directors of performers N.O.C. The actual remuneration of performers and directors of performers must be included, subject, however, to a maximum of $106,600109,200 per year per person. When such employees do not work the entire year, the payroll limitation shall be prorated based upon the number of weeks in which such employees worked during the policy period. This classification shall apply to those firms engaged in the production of dance, opera, dramatic, musical, comedic or other theatrical presentations before a live audience. This classification includes all stage performers, directors and musicians in connection therewith. Also refer to companion Classification 9154, Theaters not motion picture all employees other than performers and directors of performers. If an employee who performs duties described by Classification 9156 also performs duties described by Classification 9154, the payroll of that employee may be divided between Classifications 9156 and 9154, provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule * * * * * * * Recommendation Amend Classification 9151, Theaters music ensembles, to increase the annual payroll limitation for performers and directors of performers from $106,600 to $109,200 per person to reflect wage inflation since the payroll limitation was last amended in PROPOSED THEATERS music ensembles all performers and directors of performers 9151 The actual remuneration of performers and directors of performers must be included, subject, however, to a maximum of $106,600109,200 per year per person. When such employees do not work the entire year, the payroll limitation shall be prorated based upon the number of weeks in which such employees worked during the policy period. This classification shall apply to those firms that primarily retain professional musicians for the provision of musical entertainment before a live audience. This includes, but is not limited to, orchestras, touring bands and casual or steady engagement music groups. Also refer to companion Classification 9154, Theaters not motion picture all employees other than performers and directors of performers. If an employee who performs duties described by Classification 9151 also performs duties described by Classification 9154, the payroll of that employee may be divided between Classifications 9151 and 9154, provided the employer maintains accurate records supported by time cards or time book entries that show such division. Refer to Part 3, Section V, Rule 3. * * * * * * * 191

192 Recommendation Amend Classification 7365, Taxicab Operations all employees, to increase the minimum annual payroll per taxicab from $29,800 per year to $30,500 to reflect wage inflation since the threshold was last amended in PROPOSED TAXICAB OPERATIONS all employees 7365 Payroll shall include the entire remuneration earned by all taxicab drivers during the policy period. In the event an employer does not keep verifiable payroll records for all taxicab drivers, the minimum remuneration for taxicab drivers shall not be less than $29,80030,500 per annum per taxicab dispatched by or operated under the auspices of the insured. The minimum payroll amount is in consideration of vehicle down-time, vacation time or other periods during which the vehicle is not in operation. The per annum payroll amount shall be prorated only when the vehicle is not dispatched by or under the auspices of the insured or registered for the full policy period or when the policy period is less than one year. 192

193 Item CR Filing Process for Regulatory Changes As discussed at the March 5, 2013 Classification and Rating Committee meeting, the WCIRB and CDI are developing a procedure to bifurcate the regulatory filing and pure premium rate filing processes to provide more time for insurers to file and implement the regulatory changes. Since the pure premium rates, expected loss rates and credibility values must reflect the most current data, they must be part of the pure premium rate filing process. However, these amounts each have a regulatory component. Specifically, the pure premium rates are in Appendix I, Pure Premium Rate Section Effective January 1, 2013, of the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP), and the expected loss rates and credibility values are included in Table II, Expected Loss Rates and Full Coverage D-Ratios, and Table III, Credibility Primary and Credibility Excess Values, respectively, in the California Workers Compensation Experience Rating Plan 1995 (ERP). Since the pure premium rates, expected loss rates and credibility values will not be known until the decision on the pure premium rate filing is issued, the appendix/tables that include these amounts will need to be eliminated from the Plans in order to implement the bifurcated rate filing process. However, the WCIRB will continue to publish these amounts in easily accessible, downloadable files on the WCIRB s website upon receipt of the pure premium rate filing decision. In addition, Table I, Primary Values of Actual Losses, in the ERP should also be eliminated. This Table merely references the rule that details the methodology for determining the primary value of actual losses and was amended effective January 1, 2010 when changes to the methodology for experience rating were approved and the values in the Table were eliminated. Table I was retained only to prevent any confusion that could have arisen from renumbering Tables II and III. However, since Tables II and III are being eliminated as a result of the bifurcation, it is no longer necessary to maintain Table I in the ERP at this time. Further, for consistency with these changes, Part 3, Section VI, Rule 4, Audit of Payroll, of the USRP and Section II, Rule 10, Pure Premium Rates, in the ERP will need to be amended to eliminate the reference indicating that the pure premium rates are contained in the USRP. Section VI, Tabulation of Experience, Rule 4, Losses, and Rule 6, Contract Medical Losses, and Section VII, Rating Procedure, Rule 2, Credibility Primary (Cp) Value, Rule 4, Actual Excess (Ae) Losses, Rule 5, Credibility Excess (Ce) Value, and Rule 7, Expected (E) Losses in the ERP will also need to be amended to reflect the elimination of Tables. The WCIRB proposes that the following changes to the USRP and ERP to effectuate this change in the filing process be included in the January 1, 2014 regulatory filing. 193

194 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work, to change the reference to Appendix II, Construction and Erection Classifications, as Appendix II is being renumbered a result of the elimination of Appendix I. PROPOSED Section IV Special Industry Classification Procedures 2. Construction or Erection Work This rule applies to the construction and erection classifications listed in Appendix II, Construction and Erection Classifications. Division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. Operations for which separate records of payroll are not maintained shall be assigned to the highest rated classification applicable to the job or location. Operations that normally prevail in connection with a classification shall not be subject to division of payroll, but shall be assigned to such classification, whether or not separate records of payroll are kept. * * * * * Recommendation Amend Part 3, Section V, Payroll Remuneration, Rule 1, Payroll Remuneration, to change the footnote referencing Appendix III, Payroll/Remuneration Table, as Appendix III is being renumbered as a result of the elimination of Appendix I. Section V Payroll Remuneration PROPOSED 1. Payroll Remuneration 1 1 See Appendix III for a table that indicates whether various types of compensation should be considered payroll for statistical reporting purposes. * * * * * 194

195 Recommendation Amend Part 3, Section VI, Administration of Classification System, Rule 4, Audit of Payroll, to eliminate the reference indicating that the pure premium rates are contained in the USRP. PROPOSED 4. Audit of Payroll The audit and assignment of payroll shall be governed by the rules, and classifications and pure premium rates contained herein and the approved pure premium rates, subject to the following specific requirements: * * * * * Recommendation Amend Part 3, Section VII, Standard Classifications, Rule 1, Classification Section, Subrule a, Industry Groups, to change the reference to Appendix II, Construction and Erection Classifications, as Appendix II is being renumbered as a result of the elimination of Appendix I. PROPOSED Section VII Standard Classifications 1. Classification Section This section contains an alphabetical listing of classifications that describe most occupations, employments, industries and businesses. The classifications are organized as follows: a. Industry Groups Some classifications are grouped alphabetically under industry groupings to assist users in identifying and assigning classifications within similar industries. Construction-related classifications are listed in Appendix II, Construction and Erection Classifications. The following other industry groups are incorporated into the classifications listed below: * * * * * 195

196 Recommendation Amend Classification 8227, Construction or Erection Permanent Yards, to change the reference to Appendix II, Construction and Erection Classifications, as Appendix II is being renumbered as a result of the elimination of Appendix I. PROPOSED CONSTRUCTION OR ERECTION PERMANENT YARDS for maintenance of equipment or storage of material This classification shall apply only to a permanent yard maintained by a construction or erection contractor (see Appendix II, Construction and Erection Classifications) for the maintenance of equipment or the storage of materials or equipment. It is not available for division of payroll at the place where construction operations are conducted, or when the specific construction or erection classification includes storage, shop or yard activities. Mill operations or fabrication shall be separately classified * * * * * Recommendation Amend Classification 5606, Contractors construction or erection, to change the reference to Appendix II, Construction and Erection Classifications, as Appendix II is being renumbered as a result of the elimination of Appendix I. PROPOSED CONTRACTORS construction or erection executive level supervisors no direct supervision division of a single employee s payroll with any other classification is not permitted This classification may be assigned only in connection with the construction or erection classifications listed in Appendix II, Construction and Erection Classifications, and must be confirmed by specific written approval from the WCIRB. This classification applies to executive level supervisors that exercise control through second level (or higher) supervisors. First level supervisors have authority and accountability over a crew of workers and report to second level supervisors. Second level supervisors have authority and accountability over one or more first level supervisors and report to executive level supervisors. This classification also applies to executive level supervisors when all construction operations are subcontracted to licensed contractors and no payroll is developed under any construction classification. In such instances, executive level supervisors exercise control exclusively through licensed subcontractors. On jobs where all construction operations are subcontracted to licensed subcontractors, Classification 9015(1), Building Operation all other employees, shall apply to job site cleanup and warranty repair conducted after construction is completed. Also refer to Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work * * * * * 196

197 Recommendation Eliminate Appendix I, Pure Premium Rate Section Effective January 1, 2013, as the pure premium rates will instead be published on the WCIRB s website upon receipt of the pure premium rate filing decision. PROPOSED 197

198 Appendix I Pure Premium Rate Section Effective January 1, 2013 Effective January 1, 2013 on new and renewal policies with anniversary rating dates on or after January 1, 2013 Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* *Pure Premium Rates are per $100 of payroll unless otherwise noted. Code No. P.P. Rate* 198

199 Appendix I Pure Premium Rate Section Effective January 1, 2013 (continued) Effective January 1, 2013 on new and renewal policies with anniversary rating dates on or after January 1, 2013 Legend: (A) See below Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* Code No. P.P. Rate* (A) (A) (A) *Pure Premium Rates are per $100 of payroll unless otherwise noted. (A) Firefighters, Police, Police Deputies, etc. Code No. Per Capita P.P. Rate 7707 Firefighters volunteers Police, Sheriffs volunteers Horse Racing Code No. Per Race P.P. Rate 8278 Jockeys employed at a rate per race (See Classification 8631, Racing Stables, for instructions) 199

200 Proposed Revisions to the California Workers Compensation Experience Rating Plan 1995 Recommendation Amend Section II, Definitions, Rule 10, Pure Premium Rates, to eliminate the statement that pure premium rates are contained in the USRP. PROPOSED Section II Definitions 10. Pure Premium Rates The California workers compensation insurance pure premium rates approved by the Insurance Commissioner and in force on the effective date of the experience modification. Pure premium rates are contained in the Uniform Statistical Reporting Plan. * * * * * Recommendation Amend Section VI, Tabulation of Experience, Rule 4, Losses, and Rule 6, Contract Medical Losses, and Section VII, Rating Procedure, Rule 2, Credibility Primary (Cp) Value, Rule 4, Actual Excess (Ae) Losses, Rule 5, Credibility Excess (Ce) Value, and Rule 7, Expected (E) Losses to reflect that Table II and Table III will be published by the WCIRB. PROPOSED Section VI Tabulation of Experience 4. Losses Incurred losses, paid and outstanding, shall be tabulated by policy year as follows: a. Unless otherwise noted, the indemnity and medical incurred on each claim shall be combined, and the total combined incurred cost, limited to the maximum loss value shown in Table III of this Plan published by the WCIRB, shall be listed for rating purposes in accordance with the procedure set forth in the following paragraphs, b to j inclusive, and also Rules 7 through 14 of this Section. 200

201 g. Death claims reported as clearly within the scope of the workers compensation laws of California shall be individually listed at the average death value shown in Table III of this Planpublished by the WCIRB. j. A claim reported in connection with a policy incepting on or after January 1, 2002 involving both employers liability and workers compensation coverages will be listed at a value reflecting the total incurred loss of the claim, limited to the maximum loss value shown in Table III of this Planpublished by the WCIRB. 6. Contract Medical Losses Where contract medical amounts are reported, the amount of loss included for experience rating purposes shall be the full contract medical amount reported and shall be apportioned to primary and excess based on the appropriate D-Ratio(s) for the classification(s) for which the contract medical amounts are reported. Contract medical losses are not subject to the maximum loss value shown in Table III of this Planpublished by the WCIRB. Section VII Rating Procedure 2. Credibility Primary (Cp) Value The Credibility Primary, or Cp Value, is the weight given to the risk s Actual Primary Losses relative to the average Expected Primary Losses for a similarly-sized risk in the same standard classification(s). It is intended to reflect the actuarial predictability of a risk s primary loss experience. The larger the risk is, the greater the weight is given to the primary loss experience and the greater the Cp. The complement of the Cp value, (1 Cp), is the weight given to the risk s Expected Primary Losses. The Cp vvalue varies with a risk s Expected Losses and is obtained from Table III of this Planpublished by the WCIRB. 3. Expected Primary (Ep) Losses The Expected Primary Losses are the portion of the Expected Losses that is considered primary, and are used in the experience rating formula in combination with the Actual Primary Losses. The Expected Primary Losses for a classification are determined by multiplying the Expected Losses for the classification by the classification D-ratio. Classification D-ratios, which represent the portion of the Expected Losses for the classification estimated to be primary, are obtained from Table II of this Planpublished by the WCIRB. 5. Credibility Excess (Ce) Value The Credibility Excess, or Ce Value, is the weight given to the risk s Actual Excess Losses relative to the average Expected Excess Losses for a similarly-sized risk in the same standard classification(s). It is intended to reflect the actuarial predictability of a risk s excess loss experience. The larger the risk is, the greater the weight is given to the excess loss experience and the great- 201

202 er the Ce. The excess experience of very small experience rated risks has essentially no predictive value and, as a result, the Ce for these risks may be 0. The complement of the Ce, (1 Ce), is the weight given to the risk s Expected Excess Losses. The Ce Value varies with a risk s Expected Losses and is obtained from Table III of this Planpublished by the WCIRB. 6. Expected (E) Losses The Expected Losses are the basis to which actual losses are compared in the experience rating formula. They are derived for each classification as the product of the payroll for the classification and the expected loss rate applicable to the classification. For other than per capita classifications, this product is then divided by 100. The Expected Loss Rate for a classification is the average rate of losses per $100 of payroll that is expected for the classification during an experience rating period. Expected Loss Rates are obtained from Table II of this Planpublished by the WCIRB. * * * * * Recommendation Eliminate Table I, Primary Values of Actual Losses, as it is no longer necessary. PROPOSED Table I Primary Values of Actual Losses Refer to Section VII, Rating Procedure, Rule 1, Primary Actual Losses, for methodology. * * * * * Recommendation Eliminate Table II Expected Loss Rates and Full Coverage D-Ratios, as the expected loss ratios will instead be published in easily accessible, downloadable files on the WCIRB s website upon receipt of the pure premium rate filing decision. PROPOSED 202

203 Table II Expected Loss Rates and Full Coverage D-Ratios Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio *Expected Loss Rates are per $100 of payroll unless otherwise noted. 203

204 Table II Expected Loss Rates and Full Coverage D-Ratios Legend: (A) See the next page. Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio (A) (A) (A) (A) (A) (A) *Expected Loss Rates are per $100 of payroll unless otherwise noted. 204

205 Table II Expected Loss Rates and Full Coverage D-Ratios Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio Code No. Expected Loss Rate* D- Ratio *Expected Loss Rates are per $100 of payroll unless otherwise noted. Per Capita Classifications Code No. Expected Loss Rate* D-Ratio Per Race Classification Code No. Expected Loss Rate* D-Ratio * * * * * Recommendation Eliminate Table III Credibility Primary and Credibility Excess Values, as the expected loss ratios will instead be published in easily accessible, downloadable files on the WCIRB s website upon receipt of the pure premium rate filing decision. PROPOSED 205

206 Table III Credibility Primary and Credibility Excess Values Maximum Loss Value $175,000 Average Death Value $175,000 Expected Losses Credibility Primary Credibility Excess Expected Losses Credibility Primary Credibility Excess Below 14, , , ,723 16, , , ,506 18, , , ,434 20, , , ,516 22, , , ,761 25, , , ,181 27, , , ,786 30, , , ,588 33, , , ,600 36, , , ,835 40, , , ,310 44, ,157-1,085, ,039 48, ,085,094-1,191, ,040 52, ,191,442-1,310, ,332 56, ,310,990-1,445, ,935 61, ,445,884-1,598, ,871 67, ,598,719-1,772, ,164 72, ,772,650-1,971, ,841 78, ,971,547-2,200, ,928 85, ,200,198-2,464, ,457 92, ,464,579-2,772, ,462 99, ,772,226-3,132, , , ,132,748-3,558, , , ,558,547-4,065, , , ,065,847-4,676, , , ,676,200-5,418, , , ,418,724-6,333, , , ,333,517-7,477, , , ,477,028-8,930, , , ,930,741-10,815, , , ,815,789-13,318, , , ,318,557-16,737, , , ,737,936-21,577, , , ,577,968-28,743, , , ,743,679-39,996, , , ,996,336-59,152, , , ,152,243-95,831, , , ,831, ,615, , , ,615,464 - & Over , ,

207 Item CR Electronic Data Reporting Requirements The California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) at Part 4, Unit Statistical Report Filing Requirements, sets forth the requirements for reporting unit statistical report data. The Workers Compensation Insurance Organizations (WCIO) 1 Workers Compensation Statistical Reporting Manual (WCSTAT) is a national standard of technical specifications for the reporting of unit statstical data to the data collection organizations. The WCIRB is recommending several changes to Part 4 of the USRP in an effort to provide greater clarity, create efficiencies and ensure consistency with the standard WCIO reporting requirements. To accomplish this goal, the WCIRB is proposing to incorporate the WCSTAT requirements, as applicable for California, into the USRP by reference. For any areas where the WCSTAT is not complete or additonal information is necessary, the USRP will contain an entry for that field to provide the appropriate information. The WCIRB is also proposing clarifying amendments for consistency with the terminology used in WCSTAT. In addition, the WCIRB is proposing amendments to amend the definition of Nontransferable Education- Related Vouchers and to add a new definition for Supplemental Job Displacement Benefit Vouchers, consistent with Sentate Bill No. 863 (SB 863) effective January 1, As a result of SB 863, supplemental job displacement vouchers are no longer limited to education-related retraining and/or skill enhancement. The WCIRB is also proposing to eliminate Appendix IV, Unit Statistical Report, as the hard copy unit statistical form is no longer necessary as all unit statistical data is reported via electronic submission, and to eliminate Appendix V, Required Loss Fields for Particular Injury Types and Types of Claims as this information is redundant and is being moved to a guidebook for electronic reporting.the WCIRB is proposing conforming amendments to Part 3, Section VI, Rule 4, Audit of Payroll to reflect the correct names and locations of the reporting fields identified in Part 4. Finally, amendments to the California Workers Compensation Experience Rating Plan 1995, Section VI, Rule 4, Losses, Rule 9, S Claims (Closed Compromise Death Claims), Rule 12, Closed Claims, and Rule 13, Revision of Losses, are being proposed for conformity with the proposed Part 4 amendments. In order to effectuate these changes, the WCIRB is proposing the following amendments to Part 4 be included in the January 1, 2014 regulatory filing. 1 The WCIO is a voluntary association of statutorily authorized or licensed rating, advisory, or data service organizations that collect workers compensation insurance information in one or more states, and is responsible for developing national standards for the electronic transmission of information between insurers and rating/advisory organizations. 207

208 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Part 4, Unit Statistical Report Filing Requirements, to require electronic submission of unit statistical reporting data in accordance with the Workers Compensation Insurance Organizations (WCIO) Workers Compensation Statistical Reporting Specifications (WCSTAT), to remove references to hard copy reporting, make conforming changes for consistency with WCSTAT, move all definitions to Section II, Definitions, eliminate the special reporting instructions for the reporting of foreign construction or erection projects and clarify the reporting of supplemental job displacement vouchers in accordance with the labor code as amended by Senate Bill No. 863 (2012). PROPOSED Part 4 Unit Statistical Reporting Filing Requirements Section I General Instructions 1. Scope Unit statistical report data for every workers compensation insurance policy extending coverage under the workers compensation laws of California, including California coverage by endorsement on a policy primarily covering another state, must be reported and filed withby electronic submission to the WCIRB in accordance with the provisions of this Plan and the reporting requirements for California described in the Workers Compensation Insurance Organizations (WCIO) Workers Compensation Statistical Reporting Specifications (WCSTAT). Each electronic submission must contain an Electronic Transmittal Record (ETR) as provided in the WCIO General Records Specifications. On multi-state policies, data pertaining only to California coverage shall be submitted. Data must be filed either electronically or on hard copy in accordance with the instructions contained in this Plan. 2. Letter of Transmittal A letter of transmittal shall be included with all unit statistical report submissions. The transmittal letter shall be in a form and submitted in a manner that is approved by the WCIRB. 3. Electronic Reporting Unit statistical report data filed electronically with the WCIRB shall be filed by electronic transmission and in a reporting format that has been approved in advance by the WCIRB. 4. Hard Copy Reporting The hard copy unit statistical report form, as found in Appendix IV, shall be used for all hard copy reporting unless otherwise authorized by the WCIRB Date of Valuation The date of valuation for losses shall be determined as follows: a. First Reports Losses included in the first reporting of a given policy shall be valued as of eighteen (18) months after the month of the inception date of the policy. 208

209 b. Second Reports Losses included in the second reporting of a given policy shall be valued as of thirty (30) months after the month of the inception date of the policy. c. Third Reports Losses included in the third reporting of a given policy shall be valued as of forty-two (42) months after the month of the inception date of the policy. d. Fourth Reports Losses included in the fourth reporting of a given policy shall be valued as of fifty-four (54) months after the month of the inception date of the policy. e. Fifth Reports Losses included in the fifth reporting of a given policy shall be valued as of sixty-six (66) months after the month of the inception date of the policy. f. Sixth Reports Losses included in the sixth reporting of a given policy shall be valued as of seventy-eight (78) months after the month of the inception date of the policy. g. Seventh Reports Losses included in the seventh reporting of a given policy shall be valued as of ninety (90) months after the month of the inception date of the policy. h. Eighth Reports Losses included in the eighth reporting of a given policy shall be valued as of one hundred two (102) months after the month of the inception date of the policy. i. Ninth Reports Losses included in the ninth reporting of a given policy shall be valued as of one hundred fourteen (114) months after the month of the inception date of the policy. j. Tenth Reports Losses included in the tenth reporting of a given policy shall be valued as of one hundred twentysix (126) months after the month of the inception date of the policy Date of FilingReporting Unit statistical report data shall be filed submitted as follows: a. First Reports The first reporting of exposure, premium and loss information is due in the WCIRB no later than twenty (20) months after the inception date of the policy. b. Second Reports The second reporting of losses is due in the WCIRB no later than thirty-two (32) months after the inception date of the policy. c. Third Reports The third reporting of losses is due in the WCIRB no later than forty-four (44) months after the inception date of the policy. d. Fourth Reports The fourth reporting of losses is due in the WCIRB no later than fifty-six (56) months after the inception date of the policy. 209

210 e. Fifth Reports The fifth reporting of losses is due in the WCIRB no later than sixty-eight (68) months after the inception date of the policy. f. Sixth Reports The sixth reporting of losses is due in the WCIRB no later than eighty (80) months after the inception date of the policy. g. Seventh Reports The seventh reporting of losses is due in the WCIRB no later than ninety-two (92) months after the inception date of the policy. h. Eighth Reports The eighth reporting of losses is due in the WCIRB no later than one hundred four (104) months after the inception date of the policy. i. Ninth Reports The ninth reporting of losses is due in the WCIRB no later than one hundred sixteen (116) months after the inception date of the policy. j. Tenth Reports The tenth reporting of losses is due in the WCIRB no later than one hundred twenty-eight (128) months after the inception date of the policy. Example For a policy that incepts on January 15, the first level unit statistical report is valued 18 months later (during July of the following year) and is due in the WCIRB no later than 20 months later (by the end of September of the following year). Report Number Report Level Date of Valuation (number of months after the month in which policy incepted) Date of FilingReporting (number of months after the month in which policy incepted) 1 First Level Second Level Third Level Fourth Level Fifth Level Sixth Level Seventh Level Eighth Level Ninth Level Tenth Level Excess Policies Unit statistical data on policies that provide coverage for specific excess or aggregate excess insurance shall not be filed withreported to the WCIRB. 210

211 8.5. Foreign Construction or Erection Projects Experience developed under construction or erection projects lasting more than 180 calendar days outside the United States, its Territories, or the Dominion of Canada, shall not be included with the regular submission of unit statistical report data, but shall be filed as a separate submission on hard copy unit statistical reports only. A notation Foreign shall be stated on the letter of transmittal accompanying the submission and on the unit statistical report form under Policy Conditions Reinsurance No deduction shall be made from final premiums and losses for, or on account of, reinsurance ceded. Final premiums and losses arising from reinsurance assumed shall be excluded Insolvent Insurers Unit statistical report data for a policy written by an insolvent insurer with a required month of valuation on or after the date of liquidation of the insolvent insurer shall not be filed withreported to the WCIRB. Section II Definitions The definitions set forth in this Section shall govern the construction and meaning of the terms and phrases used for the reporting of data under Part 4 of this Plan. 1. Accident Date a. For specific injuries, it is the date on which the accident or injury occurred. b. For cumulative injury or occupational disease cases, it is the date during the policy period to which the claim is assigned. 2. Allocated Loss Adjustment Expense(s) See Loss Adjustment Expense(s). 3. Audited Exposure Payroll or other basis of exposure reported from an audit conducted pursuant to Part 3, Section VI, Rule 4, Audit of Payroll. See also Part 1, Section II, General Definitions, for the definition of Audit and Exposure. 4. Catastrophe Any single accident resulting in a compensable injury to two or more persons. Accident includes incidents where multiple claims have been consolidated for hearing by the Workers Compensation Appeals Board. 5. Closed or Closed Claim Any claim for which final payment has been made. 6. Compromise and Release A settlement over the issues of compensability, extent of injury, and/or past, present and/or future benefits. 7. Compromised Death Claim A closed death claim that has been compromised over the sole issue of the applicability of the workers compensation laws of California Contract Medical The actual costs incurred by the insurer under medical contracts with physicians, hospitals, and others that cannot be allocated to a particular claim, e.g., a contract for medical services provided on a perhead or capitated basis. 211

212 8.9. Cumulative Injury or Cumulative Injury Claim(s) See Section V, Subsection C, Special Loss Reporting Instructions, Rule 5, Cumulative Injury Claims.An injury having occurred from repetitive mentally or physically traumatic activities extending over a period of time, the combined effect of which caused any disability or need for medical treatment Death or Death Claim Any industrial death claim, unless it has been established that the insurer incurred no liability for the death, the injured worker died from natural causes, or the claim was compromised over the sole issue of the applicability of the workers compensation laws of California. (See the definition for Compromised Death S Claim.) Employers Liability Claim(s) See Section V, Subsection C, Special Loss Reporting Instructions, Rule 6, Employers Liability Claims.A claim with an Allocated Loss Adjustment Expense or an incurred loss amount under the employers liability provision of the workers compensation insurance policy Final Premium(s) Reported in the Total Standard Premium Total field on the unit statistical report, this is the total premium charged to the policyholder, EXCEPT that it does not include the following: a. Reinsurance assumed, b. Adjustment for reinsurance ceded, c. Retrospective rating adjustments, d. Policyholder dividends, e. Application of deductible credits, f. Premium charges arising from the Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007, g. The costs incurred by the insurer in unsuccessfully attempting to perform a payroll audit that are reimbursable pursuant to Insurance Code Section , and h. Policy assessments, including but not limited to California Insurance Guarantee Association (CIGA) assessments, California Workers Compensation Revolving Fund assessments, California workers compensation fraud surcharges, Uninsured Employers Benefits Trust Fund assessments, Occupational Safety and Health Fund assessments, Labor Enforcement and Compliance Fund assessments, and Subsequent Injuries Benefits Trust Fund assessments. The following hypothetical examples illustrate how final premiums on two large policies are to be determined (assuming, for simplicity, that retrospective rating adjustments and policyholder dividends do not apply to these two policies, but a charge arising from the Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 does apply): 212

213 Example One Example Two (1) Subject Premium (Based on exposure and insurer s rates) $ 5,000 $ 200,000 (2) Experience Rating Credit 20,000 (3) Experience Rating Debit (4) Deductible Credit 50,000 (5) Premium Discount 10,000 (6) Expense Constant 50 (7) Other Credit Adjustments* 100 2,000 (8) Other Debit Adjustments** 75 3,000 (9) Charge for Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Program Reauthorization Act of ,500 (10) Actual Premium Charged [ (1) + (3) + (6) + (8) + (9) ] [ (2) + (4) + (5) + (7) ] 5, ,500 (11) Final Premium to be Reported [ (1) + (3) + (6) + (8) ] [ (2) + (5) + (7) ], or simply (10) + (4) (9) $ 5,025 $ 171,000 * schedule rating credits, merit rating credits, Insolvent Insurer Rating Adjustment Factor credits, etc., if applicable. ** schedule rating debits, surcharge for waiver of subrogation, surcharge for Coverage B increased limits, surcharge for policyholder audits authorized by Insurance Code Section 11665, additional premium estimated pursuant to Insurance Code Section , Insolvent Insurer Rating Adjustment Factor debits, etc., if applicable Findings and Award An award that has been issued by a workers compensation judge based on evidence presented in the process of litigation Incurred Indemnity The sum of all paid indemnity losses and the outstanding indemnity losses on a claim. (See the definitions for Indemnity Loss(es) and Outstanding Indemnity.) Incurred Loss(es) The sum of incurred indemnity and incurred medical losses. (See the definitions for Incurred Indemnity and Incurred Medical.) Incurred Medical The sum of all paid medical losses and the outstanding medical on a claim. (See the definitions for Medical Loss(es) and Outstanding Medical.) Indemnity Loss(es) All indemnity costs including, but not limited to: a. On a claim closed by a single sum settlement, that portion assignable to indemnity. (See the definition of for Single Sum Settlement as applicable to this Plan.) b. The following legal expenses for the claimant if they are included in the award to, or incurred on behalf of, a claimant: (1) Witness fees. EXCEPTION: Expert medical witness fees shall be included in medical loss. 213

214 (2) Attorney fees. (3) Other court costs. (4) Reimbursement for expenses incurred in attending a hearing or deposition, including interpreter fees. (5) Cost of copies of documents such as birth and death certificates. c. The cost of all nontransferable education-relatedsupplemental job displacement benefit vouchers as well as any additional vocational rehabilitation-type benefits (including those provided on a voluntary basis). d. Allocated Loss Adjustment Expenses incurred for employers liability claims. Note Indemnity losses do not include automatic increases to late indemnity payments made pursuant to California Labor Code Section 4650, penalties for unreasonable delay determined by the Workers Compensation Appeals Board pursuant to California Labor Code Section 5814, reimbursement of lien filing fee or lien activation fee made pursuant to California Labor Code Section or reimbursement of independent bill review fee made pursuant to California Labor Code Section (c) Insolvent Insurer Rating Adjustment Factors See definition of Insolvent Insurer Rating Adjustment Factor located in Part 1, General Provisions, Section II, General Definitions, of the Miscellaneous Regulations for the Recording and Reporting of Data, approved by the Insurance Commissioner of the State of California, Title 10, California Code of Regulations, Section Joint Coverage or Joint Coverage Claim(s) See Section V, Subsection C, Special Loss Reporting Instructions, Rule 3, Joint Coverage Claims.A claim for which it has been determined by adjudication that the coverage furnished by other than the one policy for which experience is being reported is pertinent to a division of the total incurred loss which usually results from the injured party having co-employers, overlapping coverage on the same employer, or the injury developing over an extended period. When an insurer has determined that the loss is chargeable to two or more employers insured by such insurer, or when a written agreement has been executed between two or more insurers which specifies a sum specific or percentage of contribution as to each insurer s liability for the claim, it shall be considered the equivalent of a determination by adjudication that the coverage furnished by other than the one policy for which experience is being reported is pertinent to the division of the total incurred loss Loss Adjustment Expense(s) Loss adjustment expense(s) are comprised of two components, Allocated Loss Adjustment Expense(s) and Unallocated Loss Adjustment Expense(s), each of which is defined below: a. Allocated Loss Adjustment Expense(s) Allocated Loss Adjustment Expenses shall be comprised of the following costs: (1) Fees, salary and overhead (including support staff) of individuals whose primary or predominant job function is to perform representation before the Workers Compensation Appeals Board or other legal services. This shall include costs incurred by outside or in-house counsel, non-attorney hearing representatives and their related support personnel. EXCEPTION: Costs associated with occasional or incidental legal work performed by individuals hired primarily or predominantly to perform the function of claim operations shall be considered as Unallocated Loss Adjustment Expenses (see Subrule 19b20b, below). (2) The cost of legal services incurred in pursuing subrogation recoveries. 214

215 EXCEPTION: If a subrogation reimbursement is obtained, the reported cost of legal services incurred in pursuing the recovery shall be reduced by the amount reimbursed. If the reimbursement exceeds the cost of such legal services, the excess shall be applied to reduce the reported incurred losses. (3) Court, alternate dispute resolution and other specific costs listed below that are not included in the award to or incurred on behalf of the claimant: (If any costs listed below are included in the award to or incurred on behalf of the claimant, they shall be reported as indemnity loss.) (a) Expert testimony. EXCEPTION: The cost of all expert testimony related to medical-legal shall be reported as medical loss. (b) Witnesses and summonses. (c) Copies of documents such as birth and death certificates. EXCEPTION: The cost of procuring copies of medical treatment records shall be reported as medical loss. (d) Alternate dispute resolution fees, such as arbitration fees. (e) Surveillance, including activity checks, performed by either in-house personnel or outside services. EXCEPTION: The cost of incidental surveillance or activity checks performed by individuals hired primarily or predominantly to perform the function of claim operations shall be considered as Unallocated Loss Adjustment Expenses (see Subrule 19b20b, below). (f) The cost of field investigations related to the compensability of claims, potential fraud or the potential for future subrogation, performed by either dedicated in-house personnel or outside services. EXCEPTION: The cost of incidental field investigations performed by individuals hired primarily or predominantly to perform the function of claim operations shall be considered as Unallocated Loss Adjustment Expenses (see Subrule 19b20b, below). (g) Court costs, such as appeal bond costs and appeal filing fees. (h) Interpreter fees. EXCEPTION: Interpreter fees related to medical-legal or medical treatment shall be reported as medical loss. Interpreter fees related to vocational rehabilitation or included in the award to, or incurred on behalf of, the claimant, other than those related to medicallegal or medical treatment, shall be reported as indemnity loss. (4) The cost of medical cost containment programs incurred with respect to a particular claim or which can be allocated to a particular claim, whether by an outside vendor or done internally by an employee, to ensure that only reasonable and necessary costs of services are paid, shall be included in the allocated loss adjustment expense amount. (The cost of medical cost containment programs that cannot be allocated to a particular claim shall be considered unallocated loss adjustment expenses.) These costs include, but are not limited to: (a) Bill auditing expenses for any medical services rendered, such as hospital bills, nursing home bills, physician bills, chiropractic bills, medical equipment charges, pharmacy charges, physical therapy bills and medical vendor bills. This includes fees and costs, 215

216 including the cost of procuring copies of medical records, associated with independent bill review conducted pursuant to Labor Code Section (b) Hospital and other treatment utilization reviews, including precertification/preadmission, and concurrent or retrospective reviews. This includes fees and costs, including the cost of procuring copies of medical records, associated with independent medical review conducted pursuant to Labor Code Sections and or (c) Access fees and other expenses incurred with respect to the utilization of managed care organizations, such as preferred provider networks/organizations (PPOs), medical provider networks (MPNs), and Health Care Organizations (HCOs). (d) Costs of medical management except for nurse case management or case management that directly interacts and is coordinated with the injured employee and others, who are all parties to the employee s need for medical care. b. Unallocated Loss Adjustment Expense(s) The costs of an insurer, in connection with the handling of claims, which are not defined as Allocated Loss Adjustment Expenses, indemnity loss or medical loss. These include, but are not limited to: (1) Fees, salary and overhead (including support staff) of individuals hired primarily or predominantly to perform the function of claim operations. This includes costs incurred by inhouse personnel or outside services. EXCEPTION: Costs related to individuals whose primary or predominant function is to perform legal services or field investigations related to the compensability of claims, potential fraud or the potential for future subrogation shall be considered as Allocated Loss Adjustment Expenses (see Subrule 19a20a, above). (2) The costs of medical cost containment programs that cannot be allocated to a particular claim. (The costs of medical cost containment programs that can be allocated to a particular claim shall be reported as allocated loss adjustment expenses.) (3) The cost of benefit increases or penalty awards made pursuant to California Labor Code Sections 4650, 5814, , and (4) The cost of the reimbursement to the lien claimant of the lien filing fee or lien activation fee when ordered or awarded by the Workers Compensation Appeals Board (WCAB) or arbitrator pursuant to Labor Code Section Major Permanent Partial Disability An injury resulting in a permanent partial disability, not constituting permanent total disability, which has been adjudicated to constitute a permanent disability rating of 25% or more (but less than 100%) or which, in the opinion of the insurer, will result in a permanent disability rating of 25% or more (but less than 100%) Medical Evaluation An examination of a worker s injury, performed by an independent medical examiner, agreed medical evaluator, treating physician, consulting physician or qualified medical evaluator, for purposes of assessing the worker s eligibility for benefits, ability to return to work, extent of permanent disability and/or need for new and further medical treatment. This does not include independent medical review conducted pursuant to Labor Code Sections and or or independent bill review conducted pursuant to Labor Code Section Medical Loss(es) All medical costs including, but not limited to: 216

217 a. On a claim closed by a single sum settlement, that portion assignable to medical. (See the definition for Single Sum Settlement.) b. The cost of all medical evaluations and medical-legal evaluations shall be included in the medical amount. This includes all evaluations to determine eligibility for benefits, such as ability to return to work, extent of permanent disability, and/or the need for new and further medical treatment. This also shall include the cost of procuring copies of medical records and interpreter fees related to medical evaluations and medical-legal evaluations. This does not include costs associated with independent medical review conducted pursuant to Labor Code Sections , and or or independent bill review conducted pursuant to Labor Code Section c. Contract medical. (See the definition for Contract Medical.) d. Interpreter fees related to medical treatment. e. All fees or costs related to Medicare Set-aside Arrangements. Note Medical losses shall not include increases due to late payments for medical and medical-legal services made pursuant to California Labor Code Sections or Medical Only A claim or injury for which no indemnity is incurred. In general, such claims include all compensable injuries in which the disability does not extend beyond the waiting period specified in the workers compensation laws of California Minor Permanent Partial Disability An injury resulting in a permanent partial disability, not constituting permanent total disability, which has been adjudicated to constitute a permanent disability rating of less than 25% (but greater than 0%) or which, in the opinion of the insurer, will result in a permanent disability rating of less than 25% (but greater than 0%) Non-Compensable Claim(s) Section V, Subsection C, Special Loss Reporting Instructions, Rule 4, Non-Compensable Claims. Any claim where: a. There is a ruling by the Workers Compensation Appeals Board (WCAB), or other court of competent jurisdiction, specifically holding that a claimant is not entitled to benefits under the workers compensation laws of California, even though the claimant may have been awarded reimbursement for expenses incurred by the claimant in presenting his/her case; b. The insurer rejects the claim for benefits under the workers compensation laws of California and the claim is dismissed by ruling by the WCAB or other court of competent jurisdiction, because of the claimant s failure to prosecute his/her claim; or c. The insurer rejects the claim for benefits and no application for adjudication of claim was filed during the period of limitation provided by the workers compensation laws of California Nontransferable Education-Related Voucher(s) See definition of Supplemental jjob ddisplacement bbenefits Voucher(s). in the form of nontransferable vouchers for education-related retraining and/or skill enhancement, pursuant to Labor Code Section Not Applicable in California Policy-, exposure-, premium- and loss-related fields that are not required to be reported to the WCIRB. If reported, the WCIRB will not capture or edit these fields. 217

218 28. Occupational Disease Any abnormal condition or disorder, other than one resulting from an occupational injury, caused by exposure to environmental factors associated with employment. It includes acute and chronic illnesses or disease that may be caused by inhalation, absorption, ingestion, or direct contact. 29. Open or Open Claim(s) Any claim that is not closed or resolved. 30. Optional in California Policy- and loss-related fields that are not required to be reported to the WCIRB. If reported, the data will be captured to identify incoming unit statistical data or verify reported data Outstanding Indemnity The insurer s individual case estimate of all future indemnity payments on the claim Outstanding Medical The insurer s individual case estimate of all future medical payments on the claim Partially Fraudulent Claim(s) Section V, Subsection C, Special Loss Reporting Instructions, Rule 2, Partially Fraudulent Claims. A claim where the Workers Compensation Appeals Board (WCAB) declares a portion of the claim costs invalid, unnecessary or excessive, such as, but not limited to, cases where medical liens are deemed excessive Permanent Total Disability An injury that has been adjudicated to constitute a permanent disability rating of 100% or which, in the judgment of the insurer, will result in a 100% permanent disability rating Resolved or Resolved Claim Any claim where an agreement between the parties has been reached, or where an award or judgment has been entered, reciting the specific terms of future indemnity and/or medical payments, but for which the final payment has not been made S Claim(s) See Section V, Subsection C, Special Loss Reporting Instructions, Rule 7, S Compromised Death Claims Single Sum Settlement The closing amount of a claim representing the discounted or commuted value of a specific award or benefit. These could include compromise and release settlements, stipulated awards, findings and awards or summary ratings Statistical Code A code, not a standard classification code, normally used by insurers to track report premium credits and debits resulting from rating plans, discounts, surcharges, etc., and to report such data on unit statistical reports submitted to other jurisdictions Stipulated Award An award that has been drawn up between the insurer and claimant and submitted to the Workers Compensation Appeals Board for review Subrogated, Subrogation or Subrogation Claim(s) See Section V, Subsection C, Special Loss Reporting Instructions, Rule 1, Subrogation Claims.A claim where an insurer received monetary reimbursement either in part or in whole under subrogation rights. 218

219 40. Supplemental Job Displacement Benefit Voucher(s) Supplemental job displacement benefits in the form of vouchers issued pursuant to Labor Code Sections and Temporary Total or Temporary Partial Disability A claim or compensable injury that is not classified as permanent and that extends beyond the waiting period specified in the workers compensation laws of California. 42. Trauma An injury resulting in disability or death that is traceable to a definite accident occurring during the worker s present or past employment and cannot be classified as either a cumulative injury or an occupational disease claim. 43. Unallocated Loss Adjustment Expense(s) See Loss Adjustment Expense(s). 44. Weekly Wage Amount Average weekly wages upon which the indemnity benefits are based pursuant to the California Labor Code (but not the maximum or minimum weekly earnings specified in the California Labor Code). Section III Policy Information (Header)Link Data and Header Record Information The following policy-related All link data and header record fields are toshall be reported as required for California in WCSTAT except as indicated below.unless identified as optional in California or not applicable in California. (See Section II, Definitions, for the definitions of Optional in California and Not Applicable in California as applicable to this Plan.) The fields listed below include, in parentheses, the field designations found on the hard copy report included as Appendix IV. 1. Exposure State Code Report code Policy Effective Date Report the inception date that corresponds exactly to that shown on the policy information page or the inception date changed by endorsement. a. Interstate Policies For interstate policies that are endorsed after the inception date to provide coverage for California, the effective date shall be the inception date of the interstate policy. b. Continuing Form Policies For each successive annual period, treat the policy in the same manner as though it were an annual policy effective in the same month and on the same day of the month as the inception date of the annual period. If there has been a first period of coverage, which has been treated as a short-term policy in accordance with Part 2, Section II, Rule 2, Continuing Form Policy or Fixed- Term Policy Written in Excess of One Year and Sixteen Days, of this Plan, such first period shall also be treated as a separate short term policy for reporting purposes under this Plan. c. Fixed Term Policies For each successive annual period, treat the policy in the same manner as though it were an annual policy effective in the same month and on the same day of the month as the inception date of the annual period. If there has been a first period or last period of coverage, which has been treated as a short-term policy in accordance with Part 2, Section II, Rule 2, Continuing Form Policy or Fixed-Term Policy Written in Excess of One Year and Sixteen Days, of this Plan, such 219

220 period shall also be treated as a separate short-term policy for reporting purposes under this Plan Report Level Code / Report Number (Report No.) Report the unit statistical report number code that corresponds to the report level based on the loss policy valuation date. (See Section I, General Instructions, Rules 62, Date of Valuation, and 73, Date of FilingReporting, to determine the policy valuation dates and required filing reporting dates.) Report Number Level 1 First Report 2 Second Report 3 Third Report 4 Fourth Report 5 Fifth Report 6 Sixth Report 7 Seventh Report 8 Eighth Report 9 Ninth Report A Tenth Report 2. Correction Sequence Number (Corr. No.) Report the sequential number that corresponds to the number of correction reports submitted within a particular report level. Report zero for original report level submissions. Example: Third correction to a first report should be reported with Report Level Code / Report Number = 1, Correction Sequence Number = 3. For the tenth through thirty-fifth corrections to a particular report, use A through Z, respectively. 3. Correction Type Code (Corr. Type) Report the alphabetic code that indicates the type of correction report being submitted. This field must be left blank for original report level submissions. Code H E L T M Description Header Record Correction Exposure Record Correction (First Reports Only) Loss Record Correction (includes associated Total corrections) Total Record Correction Only Corrections to Multiple Record Types 4. Replacement Report Code (Replace Rpt. Ind.) not applicable in California 5. Insurer Code (Carrier Code) Report the 5-digit insurer code number. 6. Policy Number Identifier (Policy Number) Report the 18-position alphanumeric code that uniquely identifies the policy under which the experience occurred. This number must be reported in the form that agrees exactly with the policy number originally shown on the information page of the policy (including all prefixes and suffixes). 7. Policy Effective Date (Policy Effective Date) Report the inception date that corresponds exactly to that shown on the policy information page or the inception date changed by endorsement. a. Interstate Policies For interstate policies that are endorsed after the inception date to provide coverage for California, the effective date shall be the inception date of the interstate policy. 220

221 b. Continuing Form Policies For each successive annual period, treat the policy in the same manner as though it were an annual policy effective in the same month and on the same day of the month as the inception date of the annual period. If there has been a first period of coverage, which has been treated as a short-term policy in accordance with Part 2, Section II, Rule 2, Continuing Form Policy or Fixed- Term Policy Written in Excess of One Year and Sixteen Days, of this Plan, such first period shall also be treated as a separate short-term policy for reporting purposes under this Plan. c. Fixed-Term Policies For each successive annual period, treat the policy in the same manner as though it were an annual policy effective in the same month and on the same day of the month as the inception date of the annual period. If there has been a first period or last period of coverage, which has been treated as a short-term policy in accordance with Part 2, Section II, Rule 2, Continuing Form Policy or Fixed-Term Policy Written in Excess of One Year and Sixteen Days, of this Plan, such period shall also be treated as a separate short-term policy for reporting purposes under this Plan Policy Expiration Date or Cancellation Date (Policy Expiration Date) Report the expiration date as the expiration date shown on the policy information page unless the policy is cancelled. In that event, the cancellation date shall be reported as the expiration date. a. Interstate Policies For interstate policies, report the expiration or cancellation date of the interstate policy. b. Continuing Form Policies For each successive annual period, treat the policy in the same manner as though it were an annual policy expiring twelve (12) months after the inception date shown, unless the policy is cancelled. In that event, the cancellation date shall be reported as the expiration date. 9. Exposure State Code (Expos. State) Report the numeric code 04 for California. 10. State Effective Date (State Effective Date) not applicable in California 11. Card Serial Number (Card Serial Number) hard copy only Report the card serial number assigned to the hard copy unit statistical report. 12. Risk ID Number (Risk ID Number) optional in California Report the 7-digit (maximum) WCIRB file number used by the WCIRB to identify a risk. 13. Page Number (Page No.) hard copy only Report the page number on each page of a multi-page hard copy report. 14. Last Page Number (Last Page No.) hard copy only Report the total number of pages of a multi-page hard copy report. 15. Insured Name (Insured s Name) Report the name of the person or business with whom an insurance contract is made and who is specifically designated by name in Item One of the policy information page or as endorsed. Use of the dba (doing business as) is permissible. Reporting all names in a copartnership is not required. 16. Insured Address (Insured s Address) optional in California Report the complete address of the insured as shown in Item One of the policy information page or as endorsed. 221

222 17. Federal Employer Identification Number (F.E.I.N.) optional in California Report the 9-digit FEIN as originally shown on the information page of the policy. The primary FEIN should be reported when multiple FEINs are shown on the policy information page. 18. Pending File Number (Pending File No.) not applicable in California 19. Policy Conditions Indicators (Policy Conditions) a. Three-Year Fixed Rate Policy Indicator (3-Yr F/R) not applicable in California b. Multistate Policy Indicator (Multi State Policy) not applicable in California c. Interstate Rated Policy Indicator (Inter State Rating) not applicable in California 5. d. Estimated Audit Code (Estimated Exposure) Report whether the exposure is audited or estimated. If an audit was not conducted pursuant to Part 3, Section VI, Rule 4, Audit of Payroll, the exposure shall be considered estimated. Report Estimated Audit Code U if estimate is due to an uncooperative policyholder; report Estimated Audit Code Y for all other reasons. Code Description N Exposure is audited U* Exposure is estimated due to an uncooperative policyholder Y** Exposure is estimated other * Where it is not possible to obtain audited exposure figures due to the policyholder s refusal to provide the insurer access to the payroll and other required records, the insurer shall use the Estimated Audit Code U. A U Estimated Audit Code means that the insurer has made a good faith effort to complete the audit and inform the policyholder of the possible consequences of not permitting the insurer to complete the final audit, which may result in the exclusion of the payroll from the policyholder s experience modification in accordance with Section III, Eligibility and Experience Period, Rule 3, Experience to be Used for Rating California Workers Compensation Insurance Risks, subrule g, of the Experience Rating Plan. ** Where it is not possible to obtain audited exposure figures, for reasons other than an uncooperative policyholder, the insurer shall submit a signed statement indicating the reasons why audited exposure figures cannot be obtained. (See Section II, Definitions, for the definition of Audited Exposure as applicable to this Plan.) e. Retrospective Rated Policy Indicator (Retro Policy) not applicable in California f. Cancelled Mid-Term Policy Indicator (Canceled Mid-Term) not applicable in California g. Managed Care Organization (MCO) Policy Indicator (MCO Indicator) not applicable in California h. Certified Health Care Network Policy Indicator not applicable in California 20. Policy Type ID Codes (Policy Type ID) Report the three 2-digit codes that correspond to the type of coverage, type of plan and type of nonstandard provisions of the policy. Report standard policy as No other entries are valid in California. a. Type of Coverage ID Code (Type Cov.) First set of 2-digit codes. Code Description 01 Standard Workers Compensation Policy b. Type of Plan ID Code (Plan Ind.) Second set of 2-digit codes. Code Description 222

223 01 Voluntary (policy was written voluntarily by insurer) c. Type of Non-Standard ID Code (Non-Std.) Third set of 2-digit codes. Code Description 01 Non-Standard ID Code does not apply 21. Deductible Type Codes (Deduct Type) Report the two 2-digit codes that identify the type of deductible being reported. For example, Deductible Type Code 0103 indicates that the deductible amount applies to medical losses only on a per policy basis. a. Losses Subject to Deductible Code (1) First set of 2-digit codes. Code Description 00 No Deductible 01 Medical Losses Only 02 Indemnity Losses Only 03 Medical and Indemnity Losses Deductible applies proportionately to the medical and indemnity portions of the loss. b. Basis of Deductible Calculation Code (2) Second set of 2-digit codes. Code Description 00 No Deductible 01 Per Claim Deductible Amount 02 Per Accident Deductible Amount 03 Per Policy Deductible Aggregate Limit 04 Percent of Claim Cost 05 Percent of Premium 06 Coinsurance Only Percent with Per Claim Amount Limit 07 Coinsurance Percent with Per Claim Deductible Amount and Coinsurance Limit 08 Coinsurance Percent with Per Accident Deductible Amount and Coinsurance Limit 09 Per Accident Deductible Amount with Per Policy Deductible Aggregate Limit 10 Per Claim Deductible Amount with Per Policy Deductible Aggregate Limit 11 Coinsurance Percent with Per Claim Deductible Amount Limit with Per Policy Aggregate Limit 12 Not Otherwise Described 22. Deductible Percentage (Deduct Percent) Report the whole percent of the deductible to be paid by the insured, if applicable, as defined by the deductible program. (Applicable only when the second two positions of the Deductible Type Code is 04 through 08 or 11.) 23. Deductible Amount Per Claim/Accident (Deductible Amount Per Claim/Accident) Report the loss amount by claim/accident to be paid by the insured, if applicable, as defined by the deductible program. 24. Deductible Amount Aggregate (Deductible Amount Aggregate) Report the maximum loss amount for all claims to be paid by the insured, if applicable, as defined by the deductible program. 25. Unit Format Submission Code (Reserved) Report an E for the Expanded ASWG reporting format. 223

224 Section IV Exposure and Premium Information The followingall exposure- and premium-related fields are toshall be reported as required for California in WCSTAT except as indicated below.unless identified as optional in California or not applicable in California. (See Section II, Definitions, for the definitions of Optional in California and Not Applicable in California as applicable to this Plan.) The fields listed below include, in parentheses, the field designations found on the hard copy report form included as Appendix IV. 1. Update Type Code (Upd. Type) Report the alphabetic code that identifies the activity of an exposure record. Subsequent reports and correction reports can be submitted using either the Previous/Revised method or the Add/Change/Delete method. Refer to Section VI, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 3, Reporting Methods, for instructions on using either the Previous/Revised or Add/Change/Delete method for reporting corrections to previously submitted reports. This field must be left blank on original first report submissions. 2. Exposure Act / Exposure Coverage Code (Exp. Cov.) Report the code that identifies the type of exposure coverage. Code Description 01 State Act 02 USL&H Coverage 1. Classification Code (Class Code) Report the appropriate 4-digit California standard classification code. All exposure entries records containing Exposure Amount must be assigned to a standard classification code developed in accordance with the provisions of this Plan. Statistical codes need not be reported. (See Section II, Definitions, for the definition of Statistical Code as applicable to this Plan.) 2. Experience Modification Effective Date Report the California experience modification effective date. When more than one modification applies to a single policy, report the corresponding standard classification codes and exposures for each experience modification period separately, with the appropriate effective date of each modification. If no experience modification applies to the policy, report the policy effective date. 3. Rate Effective Date Report the rate (exposure) effective date. If the rate effective date precedes the policy effective date, report the policy effective date Exposure Amount (Exposure Amount) Report the total audited exposure for each standard classification code. (See Section II, Definitions, for the definition of Audited Exposure as applicable to this Plan.) Report payroll dollars rounded to the nearest whole dollar amount. Report non-payroll exposures to the nearest tenth of a unit. Payrolls or other applicable exposure amounts reported shall be obtained in accordance with the provisions of this Plan. In those cases where it is not possible to obtain audited exposure figures, the insurer shall submit a signed statement indicating the reasons why audited exposure figures cannot be obtained. (See Section III, Policy Information (Header)Link Data and Header Record Information, Rule 205, for reporting the Estimated Audit Code.) For a number of standard classifications, this Plan provides for a basis of exposure other than payroll. A list of these standard classifications and the applicable unit of exposure is given in the table below. 224

225 Code No. Standard Classification Unit of Exposure 8278 Jockeys Per Race 7707 Fire Fighters, Volunteers Per Capita, Per Year 7722 Police, etc., Volunteers Per Capita, Per Year For each such standard classification that applies, report the total number of exposure units. Example Where coverage for volunteer police or fire fighters has been extended for less than the full unit indicated, count such fractional exposures to the nearest tenth of a unit. Thus, a volunteer fire fighter covered for four (4) months should be included in the total exposure for Classification 7707 at 0.3. Example For jockeys in Classification 8278, report the total number of races in whole units. Thus, a total of 23 jockey races should be included in the total exposure for Classification 8278 as For electronic submissions, there is an assumed decimal point between the last 2 digits of this 10-digit field. In the above examples, and shall be reported for Classifications 7707 and 8278, respectively. 5. Update Type Code Report the alphabetic code that identifies the activity of an exposure record. Exposure records can be reported using either the Previous/Revised method or the Add/Change/Delete method. Refer to Section VII, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 3, Reporting Methods, for instructions. Code A C D P R Description Add Record Change Record Delete Record Previously Reported Revised 3. Rate Effective Date (Rate Effective Date) Report the rate (exposure) effective date. If the rate effective date precedes the policy effective date, report the policy effective date. 4. Manual / Charged Rate (Manual Rate) not applicable in California 5. Premium Amount (Premium Amount) not applicable in California 6. Subject Premium Total (Total Subject Premium) not applicable in California 7. Experience Modification Effective Date (Mod Effective Date) Report the California experience modification effective date. When more than one modification applies to a single policy, report the corresponding standard classification codes and exposures for each experience modification period separately, with the appropriate effective date of each modification. If no experience modification applies to the policy, report the policy effective date. 8. Experience Modification Factor (Experience Mod) Report the California experience modification applicable to the policy. When more than one experience modification applies to a single policy, report the corresponding standard classification codes and exposures for each experience modification period separately, with the appropriate effective date of each modification. If no experience modification applies to the policy, report zero. Note Items 11 through 15 are unit total exposure data elements. 9. Total Modified Premium (Total Modified Premium) not applicable in California 225

226 10. Exposure Payroll Total (Total Standard Exposure) Report in whole dollars the sum of all payroll exposures. Do not include per capita or per race exposure units in this total. For multi-page hard copy unit statistical reports, report this total on the last page only. 11. Final Premium Total (Total Standard Premium) Report the whole dollar amount of the final premium for the policy. (See Section II, Definitions, for the definition of, and assistance in determining, Final Premium as applicable to this Plan.) 12. Premium Discount Amount (Premium Discount Amt.) not applicable in California This field is not required to be reported in California. However, the premium discount amount, if any, must be reflected in the Final Premium amount reported. (See Section II, Definitions, for the definition of Final Premium.) 13. Expense Constant Amount (Expense Constant Amt.) not applicable in California This field is not required to be reported in California. However, the expense constant amount, if any, must be reflected in the Final Premium amount reported. (See Section II, Definitions, for the definition of Final Premium.) Section V Loss Information A. General Loss Reporting Instructions 1. Reporting Losses Each All claims must be reported and each must be reported individually. All loss amounts are on a direct basis (excluding reinsurance assumed and adjustment for reinsurance ceded) and must be reported on a gross basis prior to the application of any deductibles. 2. Date of Valuation See Section I, General Instructions, Rule 62, Date of Valuation, to determine the valuation dates for losses. 3. Supplemental Claim Information 1 a. Except for Gross Incurred Amount Total, which is to be reported only for joint coverage, partially fraudulent, subrogated, or Injury Type 8 claims ( Compromised Death or S Claims) and Scheduled Indemnity Percentage of Disability which is to be reported only for joint coverage, partially fraudulent, subrogated or Injury Type 02, 03 or 04 claims, the loss data elements specified in Subrule 3b, below, shall be reported on claims that meet one or more of the following criteria: (1) Injury Type = 1, 2, 3, 4, 5 or 8 ( Compromised Death or S Claim); or (2) Claim is a joint coverage, partially fraudulent, or subrogated claim. (See Section II, Definitions, for the definitions of Joint Coverage Claims, Partially Fraudulent Claims, Subrogated Claims and Compromised Death Claims S Claims as applicable to this Plan.) b. The following loss data elements shall be reported on claims meeting the criteria specified in Subrule 3a, above: (1) Weekly Wage Amount (Average Weekly Wage) 1 See Appendix V for a table outlining the loss fields that must be reported for particular injury types and types of claims. 226

227 (2) Scheduled Indemnity Percentage of Disability (PD%) (3) Total Incurred Vocational Rehabilitation Amount (Voc. Incurred) (4) Total Gross Incurred Amount (Gross Incurred) B. Loss Data Elements Unless identified as optional in California, not applicable in California or otherwise specified in the description of each loss-related field, the following All loss-related fields are toshall be reported on all claims as required for California in WCSTAT except as indicated below. (See Section II, Definitions, for the definitions of Optional in California and Not Applicable in California as applicable to this Plan.) The fields listed below include, in parentheses, the field designations found on the hard copy report form included as Appendix IV. 1. Update Type Code (Upd. Type) Report the alphabetic code that identifies the activity of the loss record. Subsequent reports and correction reports can be submitted using either the Previous/Revised method or the Add/Change/Delete method. Refer to Section VI, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 3, Reporting Methods, for instructions on using either the Previous/Revised or Add/Change/Delete method for reporting corrections to previously submitted reports. This field must be left blank on original first report submissions. 2. Claim Number (Claim Number) Report the alphanumeric code that uniquely identifies the specific claim excluding blanks, punctuation marks and special characters. 3. Accident Date (Acc. Date) Report the accident date on which the injury occurred. (See Section II, Definitions, for the definition of Accident Date as applicable to this Plan.) 4. Claim Count (No. Claims) Report the claim count. For individually listed claims, report 0001 or For grouped claims, report the number of claims in the grouping. 5. Incurred Indemnity Amount (Incurred Indemnity) Report the incurred indemnity amount in whole dollars. (See Section II, Definitions, for the definition of Incurred Indemnity as applicable to this Plan.) For subrogation, partially fraudulent, joint coverage, and S claims, report the net incurred indemnity amount. Refer to Subsection C, Special Loss Reporting Instructions, below, to determine the net incurred indemnity amount. 6. Incurred Medical Amount (Incurred Medical) Report the incurred medical amount in whole dollars. (See Section II, Definitions, for the definition of Incurred Medical as applicable to this Plan.) For subrogation, partially fraudulent, joint coverage, and S claims, report the net incurred medical amount. Refer to Subsection C, Special Loss Reporting Instructions, below, to determine the net incurred medical amount. 1. Classification Code (Class Code) Report the 4-digit California standard classification code to which the claim has been assigned. With respect to contract medical, costs shall be apportioned by standard classification. (See Section II, Definitions, for the definition of Contract Medical as applicable to this Plan.) No claims may be assigned to any standard classification unless payroll or other appropriate exposure also has been reported for that standard classification. In cases where losses have been incurred under the benefits 227

228 of a state other than where the payroll is assigned, report the claim in the state where the payroll is assigned. 2. Weekly Wage Amount Report the whole dollar amount of the injured worker s weekly wage. (See Section II, Definitions, for the definition of Weekly Wage as applicable to this Plan.) 2.3. Injury Type Code (Injury Type) Report the 2-digit numeric code that identifies the injury type giving rise to the claim. See Section II, Definitions, for assistance in determining the Injury Code (Injury Type). All claims shall be assigned to an injury type even if the data in the file on the date of valuation is not sufficient to form a conclusive determination of the duration or extent of disability. Code Description 01 Death 02 Permanent Total Disability 03 Major Permanent Partial Disability 04 Minor Permanent Partial Disability 05 Temporary Total or Temporary Partial Disability 06 Medical Claims Only 07 Contract Medical or Hospital Allowance 08 Compromised Death or S Claim (See Section II, Definitions, for assistance in determining the Injury Type.) 4. Catastrophe Number Report the 2-digit sequential number for two or more claims resulting from the same occurrence. For each policy, all claims resulting from the first such occurrence shall be assigned a Catastrophe Number of 01, all claims resulting from the second occurrence shall be 02, etc. When an occurrence results in only one claim being reported, report zero. Example Claim No. Policy No. Date of Injury Cat. No. 123 WC-1 2/15/yy WC-1 2/15/yy WC-1 4/23/yy 789 WC-1 6/14/yy WC-1 6/14/yy 02 With respect to unit statistical report data with a required date of valuation on or after March 1, 2002, report Catastrophe Number 48 for all claims directly arising from the commercial airline hijackings of September 11, 2001 and the resulting subsequent events with accident dates of September 11, 2001 through September 14, (This applies to both single and multiple claims.) (See Section II, Definitions, for the definition of Catastrophe as applicable to this Plan.) 5. Update Type Code Report the alphabetic code that identifies the activity of the loss record. Loss records can be reported using either the Previous/Revised method or the Add/Change/Delete method. Refer to Section VII, 228

229 Subsequent Reports, Correction Reports, and Reporting Methods, Rule 3, Reporting Methods, for instructions. Code A C D P R 3. Claim Status Code (Status) Description Add Record Change Record Delete Record Previously Reported Revised Report the 1-digit numeric code that indicates the status of the claim. Code Status 0 Open 1 Closed 3 Resolved (See Section II, Definitions, for assistance in determining the Claim Status Code.) 4. Loss Condition Codes (Loss Conditions) Report the 2-digit code for each loss condition element described below. a. Loss Coverage Act (Act) Description 01 State Act 02 Federal (USL&H) Act b. Type of Loss (Type) Description 01 Trauma* 02 Occupational Disease* 03 Cumulative Injury** c. Type of Recovery (Recov) Description 01 No Recovery 03 Subrogation Only (Third Party)** 05 Joint Coverage Without Subrogation** 06 Joint Coverage With Subrogation** d. Type of Claim (Cov) Description 01 Workers Compensation Only 02 Employers Liability Only** 03 Workers Compensation and Employers Liability** 6. e. Type of Settlement (Settl) Description Report the code that identifies the certain settlement claim situation for the claim. Code Description 00 Open Claims 01 Non-Compensable Pursuant to California Labor Code Section Stipulated Award* 04 Findings and Award* 05 Non-Compensable* 06 Compromise and Release* 09 All Other Settlements includes any closed claim that did not involve a formal settlement mechanism * See Section II, Definitions, for definitions as applicable to this Plan. 5. Jurisdiction State Code (Jurisdic State) 229

230 Report the 2-digit state code of the governing jurisdiction that will administer the claim and whose statutes will apply to the claim adjustment process, when that state is not California. 6. Catastrophe Number (Cat. No.) Report the 2-digit sequential number for two or more claims resulting from the same occurrence. For each policy, all claims resulting from the first such occurrence shall be assigned a Catastrophe Number of 01, all claims resulting from the second occurrence shall be 02, etc. When an occurrence results in only one claim being reported, leave this field blank. Example Claim No. Policy No. Date of Injury Cat. No. 123 WC-1 2/15/yy WC-1 2/15/yy WC-1 4/23/yy 789 WC-1 6/14/yy WC-1 6/14/yy 02 With respect to unit statistical report data with a required date of valuation on or after March 1, 2002, report Catastrophe Number 48 for all claims directly arising from the commercial airline hijackings of September 11, 2001 and the resulting subsequent events with accident dates of September 11, 2001 through September 14, (This applies to both single and multiple claims.) (See Section II, Definitions, for the definition of Catastrophe as applicable to this Plan.) 7. Managed Care Organization Type Code (MCO Type) not applicable in California 8.7. Injury Description Codes (Part; Nature; Cause)Part of Body Report the three 2-digit codes that represent identifies the part of body injured, nature of injury and cause of injury for each claim. (See Appendix VI IV of this Plan for the applicable codes.) 8. Nature of Injury Report the code that identifies the nature of injury. (See Appendix IV of this Plan for the applicable codes.) 9. Cause of Injury Report the code that identifies the cause of injury. (See Appendix IV of this Plan for the applicable codes.) 9. Occupation Description (Occupational Description) optional in California Report a narrative description of the occupation of the claimant. 10. Vocational Rehabilitation Indicator (Voc.) Report whether or not costs for nontransferable education-related vouchers or any additional vocational rehabilitation-type benefits (including those provided on a voluntary basis) have been or, in the judgment of the insurer, will be paid on the claim. Code Description Y * Claim includes incurred costs for nontransferable education-related vouchers or vocational rehabilitation-type benefits 230

231 N Claim does not include incurred costs for nontransferable education-related vouchers or vocational rehabilitation-type benefits * If you report an amount in Total Incurred Vocational Rehabilitation Amount, a Y must be reported in this field. (See Rule 26, Total Incurred Vocational Rehabilitation Amount, below.) 11. Lump Sum Indicator (Lump) not applicable in California Fraudulent Claim Code (Fraud) Report the appropriate 2-digit code from the list below to indicate whether a claim is partially fraudulent or not. (See Subsection CSection II, Special Loss Reporting InstructionsDefinitions, Rule 2, Partially Fraudulent Claims, for the definition of Partially Fraudulent Claim(s) as applicable to this Plan.) Code Description 00 Not Partially Fraudulent 01 Partially Fraudulent 13. Deductible Indicator (Deduct) not applicable in California 14. Paid Indemnity Amount (Paid Indemnity) Report the whole dollar amount of paid indemnity losses for the claim as of the loss valuation date. (See Section II, Definitions, for the definition of Indemnity Losses as applicable to this Plan.) 15. Paid Medical Amount (Paid Medical) Report the whole dollar amount of paid medical losses for the claim as of the loss valuation date. (See Section II, Definitions, for the definition of Medical Losses as applicable to this Plan.) 16. Claimant s Attorney Fees Incurred Amount (Claimant s Attorney Fees) not applicable in California This field is not required to be reported in California. However, the amount of claimant s attorney fees incurred that is included in the award to, or incurred on behalf of, the claimant must be reflected in the Incurred Indemnity Amount. (See Section II, Definitions, for the definition of Indemnity Loss(es).) 17. Employer s Attorney Fees Incurred Amount (Employer s Attorney Fees) not applicable in California 18. Deductible Reimbursement Amount (Deductible Reimbursement) not applicable in California 19. Weekly Wage Amount (Average Weekly Wage) Report the whole dollar amount of the injured worker s weekly wage. (See Section II, Definitions, for the definition of Weekly Wage as applicable to this Plan.) This field is required ONLY on claims that meet one or more of the criteria set forth in Subsection A, General Loss Reporting Instructions, Rule 3, Supplemental Claim Information, above. 20. Scheduled Indemnity Percentage of Disability (PD%) Report the permanent disability rating upon which the claim has been adjudicated, expressed as a percent to the nearest whole percent. If the claim has not been adjudicated, the insurer s best estimate of the permanent disability rating shall be reported. This field is required ONLY on claims that meet one or more of the criteria set forth in Subsection A, General Loss Reporting Instructions, Rule 3, Supplemental Claim Information, above. 21. Total Incurred Vocational Rehabilitation Amount (Voc. Incurred) Report the whole dollar amount for the incurred amount of nontransferable education-related vouchers as well as any additional vocational rehabilitation-type benefits (including those provided on a voluntary basis). (See Section II, Definitions, for the definition of Nontransferable Education-Related Voucher(s) as applicable to this Plan.) 231

232 See Subsection B, Loss Data Elements, Rule 15, above, for reporting the Vocational Rehabilitation Indicator. This field is required ONLY on claims that meet one or more of the criteria set forth in Subsection A, General Loss Reporting Instructions, Rule 3, Supplemental Claim Information, above Total Gross Incurred Amount (Gross Incurred) Report the total gross incurred amount in whole dollars. This field is only required ONLYto be reported on claims that are either subrogated (Type of Recovery Code 03 ), partially fraudulent (Fraudulent Code 01 ), joint coverage (Type of Recovery Code 05 or 06 ), or Compromised Death or S claims (Injury Code (Injury Type) 08 ) (Injury Type = 8 ). For these four special types of claims, the gross incurred amounts shall be reported as follows: a. Subrogation Claims See Subsection C, Special Loss Reporting Instructions, Rule 1, Subrogation Claims, below. b. Partially Fraudulent Claims See Subsection C, Special Loss Reporting Instructions, Rule 2, Partially Fraudulent Claims, below. c. Joint Coverage Claims See Subsection C, Special Loss Reporting Instructions, Rule 3, Joint Coverage Claims, below. d. Compromised Death or S Claims See Subsection C, Special Loss Reporting Instructions, Rule 7, Compromised Death or S Claims, below. 23. Paid Allocated Loss Adjustment Expense (ALAE) Amount (ALAE Paid) Report the whole dollar amount of paid Allocated Loss Adjustment Expenses for the claim as of the valuation date. (See Section II, Definitions, for the definition of Allocated Loss Adjustment Expenses as applicable to this Plan.) For grouped claims, report the whole dollar amount of the sum of paid Allocated Loss Adjustment Expenses for the group of claims as of the valuation date. 24. Incurred Allocated Loss Adjustment Expense (ALAE) Amount (ALAE Incurred) not applicable in California Note Rules 30 through 38 below are unit total loss data elements. 25. Claim Count Total (Total No. Claims) Report the total number of claims reported as of the valuation date. In the case of subsequent reports and correction reports, the totals shown must be the revised totals. For multi-page hard copy reports, report the totals on the last page only. 26. Incurred Indemnity Amount Total (Total Incurred Indemnity) Report the sum of the amounts reported for Incurred Indemnity as of the valuation date. In the case of subsequent reports and correction reports, the totals shown must be the revised totals. For multipage hard copy reports, report the totals on the last page only. 27. Incurred Medical Amount Total (Total Incurred Medical) Report the sum of the amounts reported for Incurred Medical as of the valuation date. In the case of subsequent reports and correction reports, the totals shown must be the revised totals. For multi-page hard copy reports, report the totals on the last page only. 28. Paid Indemnity Amount Total (Total Paid Indemnity) not applicable in California 29. Paid Medical Amount Total (Total Paid Medical) not applicable in California 30. Claimant s Attorney Fees Incurred Amount Total (Total Claimant s Attny. Fees) not applicable in California 232

233 31. Employer s Attorney Fees Incurred Amount Total (Total Employer s Attny. Fees) not applicable in California 32. Paid Allocated Loss Adjustment Expenses (ALAE) Amount Total (Total ALAE Paid) not applicable in California 33. Incurred Allocated Loss Adjustment Expenses (ALAE) Amount Total (Total ALAE Incurred) not applicable in California C. Special Loss Reporting Instructions 1. Subrogation Claims A subrogation claim is a claim where an insurer has received monetary reimbursement either in part or in whole under subrogation rights. For a subrogation claim reported on a normal valuation of losses, the gross incurred shall be the estimated liability for the claim as of the normal valuation as if there had been no subrogation. For a subrogation claim reported on a correction filed between valuation dates, the gross incurred shall be the estimated liability for the claim at the time of subrogation reimbursement as if there had been no subrogation. In reporting subrogation claims, the net incurred amount is the sum of the net paid and net outstanding amounts. The net paid is equal to the gross paid less the amount of the subrogation reimbursement that exceeds the expense incurred in obtaining the subrogation. The net outstanding is equal to the gross outstanding less the subrogation credit allowed, and is subject to a minimum of zero. (In other words, Net Incurred = [Gross Paid - (Reimbursement - Expense Incurred in Obtaining Subrogation)*] + [Gross Outstanding - Subrogation Credit Allowed]*). *Amount is limited to be no less than zero. The following hypothetical examples illustrate how net and gross incurred on subrogation claims are to be determined: Example One Example Two Example Three Example Four (1) Total Paid (Gross) $ 15,000 $ 15,000 $ 15,000 $ 30,000 (2) Amount Reimbursed 12,000 15,000 6,000 30,000 (3) Expense Incurred in Subrogation 2,000 4,000 7,000 0 (4) Total Net Paid [(1) - ([2] [3])*] $ 5,000 $ 4,000 $ 15,000 $ 0 (5) Total Outstanding (Gross) $ 0 $ 20,000 $ 15,000 $ 20,000 (6) Credit Allowed $ 0 $ 10,000 $ 0 $ 20,000 (7) (8) (9) Total Net Outstanding [(5) - (6)]* Total Gross Incurred [(1) + (5)] Total Net Incurred [(4) + (7)] $ 0 $ 10,000 $ 15,000 $ 0 $ 15,000 $ 35,000 $ 30,000 $ 50,000 $ 5,000 $ 14,000 $ 30,000 $ 0 * Amount is limited to be no less than zero. When the allocation of the subrogation to indemnity and medical is not known, the subrogation shall be allocated as indicated below for purposes of reporting the net incurred. The amount by which the monetary reimbursement exceeds the expense incurred in obtaining the subrogation recovery, if any, 233

234 shall be apportioned to the paid indemnity and paid medical based on the ratios of gross paid indemnity and gross paid medical to the total gross paid, respectively. The credit allowed, if any, shall be apportioned to the outstanding indemnity and outstanding medical based on the ratios of the gross outstanding indemnity and the gross outstanding medical to total gross outstanding, respectively. The following hypothetical examples illustrate how recoveries are to be reflected in the net incurred indemnity and net incurred medical amounts. (1) Paid Indemnity (Gross) $ 15,000 (2) Paid Medical (Gross) 25,000 (3) Total Gross Paid [(1) + (2)] $ 40,000 (4) Outstanding Indemnity (Gross) $ 15,000 (5) Outstanding Medical (Gross) 15,000 (6) Total Gross Outstanding [(4) + (5)] $ 30,000 Example A Subrogation Reimbursement and Credits Medical Losses Only (7A) Amount Reimbursed Indemnity $ 0 (8A) Amount Reimbursed Medical 15,000 (9A) Expense Incurred in Subrogation 5,000 (10A) (11A) Net Paid Indemnity [(1) - (7A)] Net Paid Medical [(2) - ([8A] - [9A])*] $ 15,000 $ 15,000 (12A) Credit Allowed Indemnity $ 0 (13A) Credit Allowed Medical $ 10,000 (14A) (15A) (16A) (17A) Net Outstanding Indemnity [(4) - (12A)]* Net Outstanding Medical [(5) - (13A)]* Net Incurred Indemnity (10A) + (14A)] Net Incurred Medical [(11A) + (15A)] $ 15,000 $ 5,000 $ 30,000 $ 20,000 Example B Subrogation Reimbursement and Credits Apportionment to Medical and Indemnity Not Known 234

235 (7B) Amount Reimbursed (Unapportioned) $ 15,000 (8B) Expense Incurred in Subrogation 5,000 (9B) (10B) (11B) Total Net Reimbursement [(7B) - (8B)]* Net Paid Indemnity [(1) - ([9B] x [1]/[3])] Net Paid Medical [(2) - ([9B] x [2]/[3])] $ 10,000 $ 11,250 $ 18,750 (12B) Credit Allowed (Unapportioned) $ 10,000 (13B) (14B) (15B) (16B) Net Outstanding Indemnity [(4) - ([12B] x [4]/[6])]* Net Outstanding Medical [(5) - ([12B] x [5]/[6])]* Net Incurred Indemnity [(10B) + (13B)] Net Incurred Medical [(11B) + (14B)] $ 10,000 $ 10,000 $ 21,250 $ 28,750 * Amount is limited to no less than zero. 2. Partially Fraudulent Claims A claim may be declared partially fraudulent by the Workers Compensation Appeals Board when a portion of the claim cost is deemed invalid, unnecessary or excessive, such as, but not limited to, cases where medical liens are deemed excessive. In reporting partially fraudulent claims, report all loss details (i.e., medical costs, etc.) apportioned as existed in the gross loss. The gross incurred shall be the estimated cost of the claim if it had not been found to be partially fraudulent. The net incurred is the estimated cost of the claim after it is found to be partially fraudulent. 3. Joint Coverage Claims A joint coverage claim is one for which it has been determined by adjudication that the coverage furnished by other than the one policy for which experience is being reported is pertinent to a division of the total incurred loss. Such claims usually result from one of the following causes: a. The injured party has co-employers. b. There is overlapping coverage on the same employer. c. Injury developed over an extended period. When an insurer has determined that the loss is chargeable to two or more employers insured by such insurer, or when a written agreement has been executed between two or more insurers which specifies a sum specific or percentage of contribution as to each insurer s liability for the claim, it shall be considered the equivalent of a determination by adjudication that the coverage furnished by other than the one policy for which experience is being reported is pertinent to the division of the total incurred loss. In reporting joint coverage claims, report as the net incurred only that amount which has been apportioned to the claim of the policyholder. The amount apportioned to the claim of the particular policyholder shall be that proportion of the total incurred loss (gross incurred) assignable by adjudication to the policy for which the experience is being reported. All loss details shall be apportioned as existed in the gross incurred loss. The gross incurred shall be that amount for which the insurer would have been liable had the insurer incurred the entire loss. In 235

236 reference to the example below, if it is determined through adjudication or an executed written agreement that Insurer A is responsible for 40% of the claim and Insurer B is responsible for 60% of the claim, and each insurer s estimate of the total cost of the claim is as shown below, the gross and net incurred amounts are to be reported as follows: Insurer A Insurer B (1) Estimated Total Incurred Indemnity $ 50,000 $ 50,000 (2) Estimated Total Incurred Medical 50,000 70,000 (3) Gross Incurred to be Reported [(1) + (2)] $ 100,000 $ 120,000 (4) Share of Liability for Claim 40% 60% (5) Net Incurred Indemnity to be Reported [(1) x (4)] (6) Net Incurred Medical to be Reported [(2) x (4)] $ 20,000 $ 30,000 $ 20,000 $ 42, Non-Compensable Claims Loss amounts incurred on non-compensable claims are to be reported. (These loss amounts are not used in experience rating.) A claim is non-compensable if: a. There is a ruling by the Workers Compensation Appeals Board (WCAB), or other court of competent jurisdiction, specifically holding that a claimant is not entitled to benefits under the workers compensation laws of California, even though the claimant may have been awarded reimbursement for expenses incurred by the claimant in presenting his/her case; or b. The insurer rejects a claim for benefits under the workers compensation laws of California and the claim is dismissed by ruling by the Workers Compensation Appeals Board (WCAB), or other court of competent jurisdiction, because of the claimant s failure to prosecute his/her claim; or c. The insurer rejects a claim for benefits and no application for adjudication of claim was filed during the period of limitation provided by the workers compensation laws of California. 5. Cumulative Injury Claims A cumulative injury is an injury having occurred from repetitive mentally or physically traumatic activities extending over a period of time, the combined effect of which caused any disability or need for medical treatment. The incurred loss amounts reported for a cumulative injury claim shall not reflect the incurred loss amounts, if any, for benefits due to a specific injury. (Claims for benefits due to a specific injury shall be reported separately.) A cumulative injury claim with liability limited to a single employer covered by a single insurer during the period of liability shall be reported on the most current policy providing coverage during that period. 6. Employers Liability Claims An employer s liability claim is a claim with an Allocated Loss Adjustment Expense or an incurred loss amount under the employers liability provision of the workers compensation insurance policy. A claim involving both employers liability and workers compensation insurance coverage can be reported as a single claim or as two separate claims. If reported as separate claims, the claim values will be combined in experience rating. If reported as a single claim, an 03 shall be reported for Type of Claim in the Loss Condition Codes field. If reported as separate claims, an 02 shall be reported for Type of Claim in the Loss Condition Codes field. 236

237 7. Compromised Death or S Claims An S claim is a closed death claim that has been compromised over the sole issue of the applicability of the workers compensation laws of California. To report compromised death or S claims, the gross incurred shall be the amount for which the insurer would have been liable had there been no compromise over the applicability of the claim to the workers compensation laws of California. The net incurred indemnity and net incurred medical amounts shall be reported as the incurred indemnity and incurred medical amounts for which the insurer is liable. Section VI Unit Total Record Data All unit total fields shall be reported as required for California in WCSTAT except as indicated below 1. Exposure Payroll Total Report in whole dollars the sum of all payroll exposures. Do not include per capita or per race exposure units in this total. 2. Final Premium Total (Standard Premium Total) Report the whole dollar amount of the final premium for the policy. (See Section II, Definitions, for the definition of, and assistance in determining, Final Premium as applicable to this Plan.) 3. Incurred Indemnity Amount Total Report the sum of the amounts reported for Incurred Indemnity as of the valuation date. In the case of subsequent reports and correction reports, the totals shown must be the revised totals for all of the claims for the policy and not just the sum of the loss records being revised or added in the correction report. 4. Incurred Medical Amount Total Report the sum of the amounts reported for Incurred Medical as of the valuation date. In the case of subsequent reports and correction reports, the totals shown must be the revised totals for all of the claims for the policy and not just the sum of the loss records being revised or added in the correction report. Section VII Subsequent Reports, Correction Reports, and Reporting Methods 1. Subsequent Reports In order to reflect changes in loss records subsequent to the valuation date of the first report because of developments in the nature of the claims and departmental or judicial decisions, losses must be revalued, and subsequent reports filed, in accordance with Section I, General Instructions, Rule 62, Date of Valuation, and Rule 73, Date of FilingReporting. A subsequent (second through tenth) revaluation must be filed when one or more claims meet any of the following conditions as of the scheduled date of the valuation: a. previously reported as open or resolved at the most recent prior report level valuation, b. incurred but not reported at the most recent prior report level valuation, c. previously reported as closed at any prior report level valuation, but are now open or resolved, or d. previously reported as closed at any prior report level valuation, but have been subsequently reopened and reclosed with the incurred indemnity and/or incurred medical amounts different from the last reported amounts. The revaluation shall include a reporting of every claim described in a through d, above, in the same detail as set forth in Section V, Loss Information. Claims reported as closed on the earlier report level may be reported again on the revaluation. Second through tenth reports shall be identified by the 237

238 appropriate code in the Report Level Code / Report Number field (see Section III, Policy InformationLink Data and (Header) Information, Rule 13, Report Level Code / Report Number). 2. Correction Reports a. Policy Information (Header) Corrections (1) Corrections or changes involving key data elements ( Report Level Code / Report Number, Correction Sequence Number, Insurer Code, Policy Number Identifier, Policy Effective Date, Exposure State Code ) are to be made through a Header (Correction Type Code H ) correction by indicating all previous key data above. (2) Corrections or changes involving non-key data elements, such as Policy Expiration Date or Cancellation Date, Policy Conditions Indicators, etc., are also to be made using Header (Correction Type Code H ) corrections; however, only the changed non-key data elements along with all key data elements shall be reported. b. Exposure, Standard Classification, Experience Modification and Final Premium Corrections (1) Whenever exposure amounts, standard classification(s), experience modification(s), or the final premium previously reported is changed, a correction report must be submitted as soon as the revised figures are available. (2) A correction report must be filed if: (a) a final audit has been made of estimated figures previously submitted to the WCIRB; (b) a clerical error in the exposure or final premium has been discovered, either by the insurer or by the WCIRB; (c) a change in the experience modification has been made; (d) a revision in exposure has been made as a result of a test audit of a policyholder for which experience has been submitted; or (e) any other adjustment affecting previously reported exposure, final premium or standard classification. (3) Corrections to exposure amounts, standard classifications, experience modifications, and final premium are to be made through an Exposure (Correction Type Code E ) correction. Corrections only to the Final Premium Total field are to be made through a Total (Correction Type Code T ) correction. c. Loss Corrections (1) Subsequent to the first reporting, a loss correction, when required, must be filed between two valuation dates or within thirty (30) months after the final valuation of losses. Except for loss corrections due to mistake other than error of judgment, should a loss correction coincide with a normal valuation of losses, only the normal valuation of losses should be filed. If a loss correction is not required, losses shall be revalued, and subsequent reports filed, in accordance with Section I, General Instructions, Rule 62, Date of Valuation, and Rule 73, Date of FilingReporting. Notwithstanding the foregoing, if an employer notified its insurer that a claim is noncompensable pursuant to California Labor Code Section 3761 and such claim is determined to be non-compensable by the Workers Compensation Appeals Board, a loss correction shall be filed within ninety (90) days after final adjudication of the determination of non-compensability. (2) A loss correction must be filed under the following circumstances: (a) A loss record detail was incorrectly reported through mistake other than error of judgment. (b) One or more claims are non-compensable. 238

239 (c) The insurer has recovered in an action against a third party through subrogation or where a claim is determined to be partially fraudulent. (d) A death claim has been compromised over the sole issue of the applicability of the workers compensation laws of California, i.e., Compromised Death or S claim. (e) A claim is determined to be a joint coverage claim. (f) Exposure has been reassigned to another standard classification through the revision of an audit. A loss correction should be filed with the exposure correction, reassigning all claims to the appropriate standard classification. (g) A clerical error in either the standard classification assignment or the type of injury assignment of a given claim, or a group of claims, has been discovered by the insurer. (h) A clerical error in either the standard classification assignment or the type of injury assignment of a given claim has been discovered by the WCIRB. Under these circumstances, the insurer shall, when notified by the WCIRB, file a loss correction or make satisfactory explanation. (i) A correction is made in a standard classification assignment of a given claim, or a group of claims, as a result of a WCIRB test audit of a policyholder for which experience has been submitted. (3) Corrections to losses are to be made through a Loss (Correction Type Code L ) correction. Corrections only to loss totals are to be made through a Total (Correction Type Code T ) correction. 3. Reporting Methods Subsequent reports and correction reportsexposure and loss records can be submitted reported using either the Previous/ Revised method or the Add/Change/Delete method. a. Previous/Revised Method Revised reports shall show the items that were previously reported and the corresponding revised items. (1) Exposures and Losses When there is a change in any of the data previously reported for a particular exposure, or loss, the revised report shall indicate both changed and unchanged elements for the associated exposure or loss. (a) Additions To add a new exposure or loss, all applicable required data elements are to be reported on a record with Update Type Code R. (b) Deletions To eliminate exposure and loss information, the following keyall required data elements must be reported on a record with Update Type Code P :. The following key data elements are used for matching the record to existing data: (i) Existing eexposure Classification Code, Exposure Act / Exposure Coverage Code, and Exposure Amount and Rate Effective Date (if necessary). (ii) Existing claimloss Claim Number, Accident Date, Incurred Indemnity Amount, and Incurred Medical Amount. 239

240 (c) Changes To change an existing exposure or loss, both P and R all required data elements are to be reported on a set of two records one with Update Type Codes, along with their appropriate data elements, are to be reported. P and one with Update Type Code R. The record with Update Type Code P must include the data previously reported, including the key data for matching described above and the record with Update Type Code R must include the revised data. (2) Experience Modification If the revision involves a change in the experience modification, it shall be necessary to report the modification effective date if different from the policy effective date. (32) Totals The revised risk totals are required to be reported. The Exposure Payroll Total should be the sum of all payroll for the policy, not just the sum of the revised payroll records. To the extent that exposure records are revised, report the revised Final Premium based on the latest exposure information of the entire policy. The Incurred Indemnity Amount Total and Incurred Medical Amount Total should be the sum of incurred indemnity and incurred medical amounts for all of the claims for the policy as of the reported report level, not just the sum of the loss records being revised or added. b. Add/Change/Delete Method Revised reports shall indicate only the revised data. The data previously reported is not required for this method, and shall not be reported. (1) Exposure and Losses When there is a change in any of the data previously reported for a particular exposure or loss, the corrected report shall include both changed and unchanged elements for the associated exposure or loss. When split exposure periods are involved and exposure for a classification code in one of the periods is changing, the unchanged exposure in the other period for that particular standard classification code must also be reported. (a) Additions To add a new exposure or loss, all applicable required data elements are to be reported along on a record with Update Type Code A. (b) Deletions To eliminate existing exposure and loss information, the following keyall required data elements must be reported along on a record with Update Type Code D :. The following key data elements will be used for matching the record to existing data: (i) Existing eexposure Classification Code, Exposure Act / Exposure Coverage Code, and Exposure Amount, Rate Effective Date (if necessary). (ii) Existing claimloss Claim Number, Accident Date, Incurred Indemnity Amount, and Incurred Medical Amount. (c) Changes To change an existing exposure or loss, all applicable required data elements are to be reported on a set of two records one with Update Type Code CD and one with Update Type Code A. The record with Update Type Code D must contain the data previously 240

241 reported, including the key data for matching described above. The record with update Type Code A must contain the revised data. In order to accommodate key data element changes under this method, both A and D Update Type Codes, along with their associated data elements are to be reported as indicated above for additions and deletions.alternatively, to change an existing loss, all required data elements may be reported on a single record with Update Type Code C. Update Type Code C can only be used to change the details of an individual claim. Changes to the Claim Number of an individual claim, grouped claims or exposure records must be made using Update Type Codes D and A, as described above. Note: If more than one occurrence of the same standard classification code (exposure record) exists, D (delete) and A (add) Update Type Codes, rather than a C (change) Update Type Code, must be used for reporting changes. (2) Experience Modification If the revision involves a change in the experience modification, it shall be necessary to report the modification effective date if different from the policy effective date. (32) Totals The revised risk totals are required to be reported. The Exposure Payroll Total should be the sum of all payroll for the policy, not just the sum of the revised payroll records. To the extent that exposure records are revised, report the revised Final Premium based on the latest exposure information of the entire policy. The Incurred Indemnity Amount Total and Incurred Medical Amount Total should be the sum of incurred indemnity and incurred medical amounts for all of the claims for the policy as of the reported report level, not just the sum of the loss records being revised or added. 241

242 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Part 3, Standard Classification System, Section VI, Administration of Classification System, Rule 4, Audit of Payroll, for clarity and consistency with proposed changes to Part 4. PROPOSED Section VI Administration of Classification System 4. Audit of Payroll The audit and assignment of payroll shall be governed by the rules, classifications and pure premium rates contained herein, subject to the following specific requirements: a. The insurer shall audit the employer s records for the purpose of determining the payroll in accordance with the following: (1) Each policy producing a final premium of $10,000 or more shall be subject to a physical audit at least once a year. (See Part 1, Section II, General Definitions, for the definition Physical Audit and Part 4, Section II, Definitions, for the definition of Final Premium(s).) On policies subject to monthly, quarterly, or semiannual interim audits, voluntary audits may be accepted in lieu of interim physical audits. The last audit of the policy shall be a physical audit of the complete policy period. (2) Each policy producing a final premium of less than $10,000 shall be physically audited at sufficient intervals to ensure determination of proper payrolls. (See Part 1, Section II, General Definitions, for the definition Physical Audit and Part 4, Section II, Definitions, for the definition of Final Premium(s).) For each policy that is not physically audited, a voluntary audit shall be performed. (See Part 1, Section II, General Definitions, for the definition Voluntary Audit.) (3) Notwithstanding subsections (1) and (2), a physical audit shall be conducted on the complete policy period of each policy insuring the holder of a C-39 license from the Contractors State License Board. (4) In every instance, the audit report shall show the source or sources from which the payrolls were obtained. b. If a policy is not audited as required by this Rule, the insurer shall comply with the rules for reporting unaudited exposure on unit statistical reports found in Part 4, Section III, Rule 20d5, Estimated Audit Code (Estimated Exposure), and Section IV, Rule 4, Exposure Amount (Exposure Amount), of this Plan. * * * * * 242

243 Recommendation Eliminate Appendix IV, Unit Statistical Report, as the WCIRB will no longer be accepting hard copy unit statistical reports. PROPOSED 243

244 Appendix IV Unit Statistical Report 244

245 Recommendation Eliminate Appendix V, Required Loss Fields for Particular Injury Types and Types of Claims, as this information is already contained in the Plan and this information is being moved to a Guidebook and renumber all subsequent appendices. PROPOSED 245

246 Appendix V Required Loss Fields for Particular Injury Types and Types of Claims Loss Field / Injury Type and/or Type of Claim Injury Type 1 (Death) Injury Type 2 (Permanent Total) Injury Type 3 (Major) Injury Type 4 (Minor) Injury Type 5 (Temporary) Injury Type 6 (Medical Only) Injury Type 7 (Contract Medical) Joint Coverage, Partially Fraudulent, or Subrogation Claims (All Injury Types) Injury Type 8 ( S Claims) Update Type Code (Upd. Type) Claim Number (Claim Number) Accident Date (Acc. Date) Claim Count (No. Claims) Incurred Indemnity Amount (Incurred Indemnity) Incurred Medical Amount (Incurred Medical) Classification Code (Class Code) Injury Type (Injury) Claim Status Code (Status) Loss Condition Codes (Loss Conditions) Jurisdiction State Code (Jurisdic State) Catastrophe Number (Cat. No.) Managed Care Organization Type Code (MCO Type) (N/A in CA) Injury Description Codes (Part; Nature; Cause) Occupation Description (Occupational Description) (Optional in CA) Vocational Rehabilitation Indicator (Voc.) x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x 246

247 Loss Field / Injury Type and/or Type of Claim Injury Type 1 (Death) Injury Type 2 (Permanent Total) Injury Type 3 (Major) Injury Type 4 (Minor) Injury Type 5 (Temporary) Injury Type 6 (Medical Only) Injury Type 7 (Contract Medical) Joint Coverage, Partially Fraudulent, or Subrogation Claims (All Injury Types) Injury Type 8 ( S Claims) Lump Sum Indicator (Lump) (N/A in CA) Fraudulent Claim Code (Fraud) Deductible Indicator (Deduct) (N/A in CA) Paid Indemnity Amount (Paid Indemnity) Paid Medical Amount (Paid Medical) Claimant s Attorney Fees Incurred Amount (Claimant s Attorney Fees) (N/A in CA) Employer s Attorney Fees Incurred Amount (Employer s Attorney Fees) (N/A in CA) Deductible Reimbursement Amount (Deductible Reimbursement) (N/A in CA) Weekly Wage Amount (Average Weekly Wage) Scheduled Indemnity-Percentage of Disability (PD%) Total Incurred Vocational Rehabilitation Amount (Voc. Incurred) Total Gross Incurred Amount (Gross Incurred) Paid Allocated Loss Adjustment Expense (ALAE) Amount (ALAE Paid) Incurred Allocated Loss Adjustment Expense (ALAE) Amount (ALAE Incurred) (N/A in CA) x x x x x x x x x x x x x x x x x x x x x x x x x LOSS TOTALS Claim Count Total (Total No. Claims) x x x x 247

248 Loss Field / Injury Type and/or Type of Claim Injury Type 1 (Death) Injury Type 2 (Permanent Total) Injury Type 3 (Major) Injury Type 4 (Minor) Injury Type 5 (Temporary) Injury Type 6 (Medical Only) Injury Type 7 (Contract Medical) Joint Coverage, Partially Fraudulent, or Subrogation Claims (All Injury Types) Injury Type 8 ( S Claims) Incurred Indemnity Amount Total (Total Incurred Indemnity) Incurred Medical Amount Total (Total Incurred Medical) Paid Indemnity Amount Total (Total Paid Indemnity) (N/A in CA) Paid Medical Amount Total (Total Paid Medical) (N/A in CA) Claimant s Attorney Fees Incurred Amount Total (Total Claimant s Attny. Fees) (N/A in CA) Employer s Attorney Fees Incurred Amount Total (Total Employer s Attny. Fees) (N/A in CA) Paid Allocated Loss Adjustment Expenses (ALAE) Amount Total (Total ALAE Paid) (N/A in CA) Incurred Allocated Loss Adjustment Expenses (ALAE) Amount Total (Total ALAE Incurred) (N/A in CA) x x x x x x x x 248

249 Proposed Revisions to the California Workers Compensation Experience Rating Plan 1995 Recommendation Amend Section VI, Tabulation of Experience, Rule 4, Losses, Subrule h, Rule 9, S Claims (Closed Compromise Death Claims), Rule 12, Closed Claims, Subrule a, and Rule 13, Revision of Losses, Subrule b, for conformity with proposed changes to Part 4 of the USRP. PROPOSED Section VI Tabulation of Experience 4. Losses h. Any claim reported as a subrogation or a partially fraudulent claim, as well as all claims reported as closed death claims compromised over the sole issue of the applicability of the workers compensation laws of California ( Compromised Death or S Claims ), shall be individually listed in accordance with the provisions of Rule 8 or 9 of this Section. 9. S Claims (Closed Compromised Death or S Claims) Where a claim has been reported as a Compromised Death or S Claim pursuant to the rules of the Uniform Statistical Reporting Plan, the amount of loss included for experience rating purposes shall be such proportion of the average death value as the amount of the settlement bears to the total loss that would have resulted if the death had clearly been within the scope of the workers compensation laws of California and shall be apportioned to primary and excess in the same proportion as exists in the average death value. 12. Closed Claims Whenever a. a claim that has been used in an experience rating is subsequently reported as closed on or after January 1, 1998 pursuant to Part 4, Unit Statistical Report Filing Requirements, Section VII, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 1, Subsequent Reports, of the Uniform Statistical Reporting Plan; and 13. Revision of Losses 249

250 b. Notwithstanding paragraph a, or Section V, Rule 6, if an employer provides notification to its insurer pursuant to subdivision (b) of Section 3761 of the Labor Code that a claim is not compensable and such claim is determined by the Workers Compensation Appeals Board to be noncompensable, a loss correction shall be filed by the insurer with the WCIRB, and it shall be used to adjust each rating in which the claim was used. The loss correction shall be filed in accordance with Part 4, Unit Statistical Report Filing Requirements, Section VII, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 2c, Loss Corrections, subsection (1), of the Uniform Statistical Reporting Plan. 250

251 Item CR Report on the Advisory Rulings and Interpretations Companion to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Classification Matters Auctioneers Cable Television Contractors Cellular Concrete Floors Installation Clothing Manufacturing and Stores Clothing Concrete Construction Door Operators Electronic Product Design Firms Estimators Automobile Repair Foundry Sand Cores Manufacturing Greenhouse Erection Hospitals Landscape Gardening Limousine Transportation Lumberyards Building Material Dealers Metal Products Mobile Catering Service Mobile Crane and Hoisting Services Motion Pictures Municipal, State or Other Public Agencies Newspaper Publishing or Printing Nurseries Including Florists and Garden Supply Stores and Florists Nursing Homes Photographic Composing Plastic Goods Manufacturing Classifications Printing Operation Private Residence Employees Property Management Firms including Apartment or Condominium Complex Operation, Building Operation, Mobile Home Parks and Warehouses Residential Care Facilities Showroom Sales Samples Only Stores Lottery Ticket Sales Stores Manufacturing/Assembling Stores Preparation and Sale of Hot Food Storm Drain Construction Trenching Upholstering including Automobile Body Upholstering, Coffin or Casket Upholstering Work, Furniture Upholstering and Wheelchair Upholstering Wallboard Application Weighmasters and/or Dispatchers Miscellaneous Certificates of Insurance Out of State Coverage First Aid Claims Group Insurance Joint Ventures Samples of Selected Endorsement Forms 251

252 Introduction The Advisory Rulings and Interpretations (R & I) companion to the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) provides guidance regarding a variety of topics, including classification procedure for industries and operations, underwriting, submission of selfinsurance data, and endorsement forms. Most of the rulings and interpretations are based on decisions regarding individual risks that have broad application, classification studies of particular industries or operations, or established practices. The R & I does not bear the official approval of the Insurance Commissioner. WCIRB staff completed a comprehensive review of the R & I to determine whether information from the R & I should be formally incorporated into the USRP, the Miscellaneous Regulations for the Recording and Reporting of Data 1995, or the California Workers Compensation Experience Rating Plan The WCIRB intends to eliminate all of the R & I entries covered in this report and recommends, where appropriate, that related changes be made to one of the above referenced Plans. Following is an analysis of the referenced entries in the R & I. 252

253 Auctioneers The R & I entry shown below was established in 1986 in connection with a study of Classification 8090, Auctioneers, which resulted in the elimination of the classification due to low statistical credibility. The R & I entry clarifies the classification procedure for auctioneers that sell various types of merchandise that are not contemplated by the N.O.C. (not otherwise classified) stores classifications, 8017(1), Stores retail N.O.C., and 8018, Stores wholesale N.O.C. R & I Entry Auctioneers For classification purposes, auctioneers are defined as commissioned agents engaged in the sale of merchandise (of which they hold title to less than 50% of the items handled) by the process of soliciting bids. The operations of auctioneers shall be assigned to Classification 8017(1), Stores retail N.O.C., or Classification 8018, Stores wholesale N.O.C., depending upon whether the gross receipts are principally (more than 50%) from wholesale or retail sales, except for the following: 1. Art and rare book auctioneers 8071 Stores books retail 2. Automobile auctioneers other than yard or repair employees 8748 Automobile or Automobile Truck Salespersons 3. Automobile auctioneers yard or repair employees 8391 Automobile or Automobile Truck Dealers 4. Furniture auctioneers 8015 Stores furniture 5. Livestock auctioneers 8286(2) Livestock Auctioneers 6. Rug auctioneers 8042 Stores floor covering The current phraseologies for Classifications 8017, 8018, 8071, 8748, 8391, 8015, 8286(2) and 8042 are: STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES retail N.O.C. 8017(1) The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES wholesale N.O.C STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. 253

254 STORES books retail 8071 This classification shall apply to each separate store location at which the sale of books and magazines equals or exceeds 75% of the gross receipts and not less than 75% of the square footage devoted to the display and sale of merchandise is dedicated to books and magazines. AUTOMOBILE OR AUTOMOBILE TRUCK DEALERS vehicle salespersons 8748 Also refer to companion Classification 8391, Automobile or Automobile Truck Dealers all employees other than vehicle salespersons. AUTOMOBILE OR AUTOMOBILE TRUCK DEALERS all employees other than vehicle salespersons including estimators, service writers, vehicle maintenance and repair, accessory or spare parts sales and the transporting of vehicles that are owned by the employer This classification shall apply only to those employers having, in addition to proprietors, a regular sales force engaged exclusively in the demonstration and sale of vehicles and separate clerical staff. If these conditions do not exist, Classification 8391 does not apply. If Classification 8391 does not apply and the employer performs vehicle repair work, assign the applicable vehicle repair classification(s) and if the employer performs no vehicle repairing assign Classification 8392, Automobile or Automobile Truck Storage Garages or Parking Stations or Lots, to employees who perform activities such as cleaning and washing vehicles, changing tires and recharging batteries. Also refer to companion Classification 8748, Automobile or Automobile Truck Dealers vehicle salespersons. Towing, roadside assistance, and freeway service patrol operations when conducted on vehicles not owned by the employer shall be separately classified as 7227, Automobile or Automobile Truck Towing, Roadside Assistance or Freeway Service Patrol. Roadside assistance refers to services provided to the vehicle owner under an agreement with a third party (such as a motor club or law enforcement agency). Contemplated services include changing tires, jump-starting batteries, supplying a small amount of gasoline or performing minor vehicle repairs such as reattaching ignition wires or battery cables STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES furniture wholesale or retail 8015 The installation, service and repair of electrical household appliances shall be separately classified as 9519(1), Household Appliances. The application, laying or installation of linoleum, vinyl, carpet, rugs or asphalt or rubber tile performed within buildings shall be separately classified as 9521(2), Floor Covering installation. The installation of window coverings and associated hardware within buildings shall be separately classified as 9521(3), Window Covering installation. LIVESTOCK AUCTIONEERS including Inside Salespersons or Outside Salespersons, solicitors or appraisers 8286(2) STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. 254

255 STORES floor covering wholesale or retail carpet, rugs, vinyl or linoleum including showroom sales The application or laying of linoleum, vinyl, carpet, rugs or asphalt or rubber tile performed within buildings shall be separately classified as 9521(2), Floor Covering installation Analysis The R & I entry states that auctioneers are defined as commissioned agents engaged in the sale of merchandise primarily owned by others. While many auctioneers typically sell merchandise owned by their clients, this is not always the case. Additionally, some stores operate on a consignment basis, selling merchandise owned by clients. Ownership of the merchandise sold is not a determining factor for store classification purposes. The R & I entry clarifies that the sale of merchandise by auctioneers is assignable to the appropriate store or dealer classification based on the nature of sales (wholesale versus retail) and the type of merchandise sold. This is consistent with the USRP at Part 3, Section IV, Special Industry Classification Procedures, Rule, 5, Stores, Subrule b, that provides [t]he applicable store classification is determined based upon the type of merchandise sold and whether the operations are wholesale or retail... However, the rule does not include other types of sales transactions, such as lease, consignment or auction. Accordingly, the WCIRB recommends that Rule 5 be amended to include these types of transactions. The R & I entry clarifies that the sale of automobiles by auctioneers is assignable to Classification 8748, Automobile or Automobile Truck Dealers vehicle salespersons, and associated yard and repair employees are assignable to Classification 8391, Automobile or Automobile Truck Dealers. As 8748 and 8391 are not Stores classifications subject to Rule 5b, the WCIRB recommends that these classifications be amended to address the sale of automobiles by auctioneers. The R & I entry clarifies that the sale of livestock by auctioneers is assignable to Classification 8286(2), Livestock Auctioneers. As this classification describes the subject operations, the WCIRB does not think that an amendment to Classification 8286(2) is required. 255

256 Recommendation Amend Part 3, Section IV, Rule 5, Stores, to clarify that, in addition to being determined based upon the type of merchandise sold, the applicable store classification is also determined based upon the type of merchandise leased, consigned or auctioned. PROPOSED 5. Stores a. For store operations, the classification shall be separately determined for each type of store that is conducted as a separate operation without interchange of labor. b. The applicable store classification is determined based upon the type of merchandise sold, leased, consigned or auctioned and whether the operations are wholesale or retail. In the absence of specific instructions found in the classification phraseology or footnote, the following definitions apply when determining the applicable store classification. * * * * * Recommendation Amend Classification 8391, Automobile or Automobile Truck Dealers, to provide that this classification includes the operations of automobile or automobile truck auctioneers. PROPOSED AUTOMOBILE OR AUTOMOBILE TRUCK DEALERS all employees other than vehicle salespersons including estimators, service writers, vehicle maintenance and repair, accessory or spare parts sales and the transporting of vehicles that are owned by the employer This classification shall apply only to those employers having, in addition to proprietors, a regular sales force engaged exclusively in the demonstration and sale of vehicles and separate clerical staff. If these conditions do not exist, Classification 8391 does not apply. If Classification 8391 does not apply and the employer performs vehicle repair work, assign the applicable vehicle repair classification(s) and if the employer performs no vehicle repairing assign Classification 8392, Automobile or Automobile Truck Storage Garages or Parking Stations or Lots, to employees who perform activities such as cleaning and washing vehicles, changing tires and recharging batteries. Also refer to companion Classification 8748, Automobile or Automobile Truck Dealers vehicle salespersons. This classification also applies to yard and repair employees of employers that operate auctions for the sale of automobiles and automobile trucks. Auction salespersons who conduct no yard or repair-type operations shall be assigned to Classification 8748, Automobile or Automobile Truck Dealers vehicle salespersons

257 Towing, roadside assistance, and freeway service patrol operations when conducted on vehicles not owned by the employer shall be separately classified as 7227, Automobile or Automobile Truck Towing, Roadside Assistance or Freeway Service Patrol. Roadside assistance refers to services provided to the vehicle owner under an agreement with a third party (such as a motor club or law enforcement agency). Contemplated services include changing tires, jump-starting batteries, supplying a small amount of gasoline or performing minor vehicle repairs such as reattaching ignition wires or battery cables. * * * * * Recommendation Amend Classification 8748, Automobile or Automobile Truck Dealers vehicle salespersons, to provide that this classification includes the operations of automobile or automobile truck auctioneers. PROPOSED AUTOMOBILE OR AUTOMOBILE TRUCK DEALERS vehicle salespersons 8748 Also refer to companion Classification 8391, Automobile or Automobile Truck Dealers all employees other than vehicle salespersons. This classification also applies to vehicle salespersons of employers that operate auctions for the sale of automobiles and automobile trucks. 257

258 Cable Television Contractors Following an appeal to the C & R Committee by an employer performing services for cable television company operators, the R & I entry shown below was established in 1973 to clarify the classification procedure for the different types of installation work performed by contractors within the cable television industry. R & I Entry Cable Television Contractors 5195 Communications Cabling 6325 Conduit Construction 7601 Telephone, Telegraph or Fire Alarm Line Construction Cable television contractors performing services for cable television company operators shall be assigned as follows: The installation of television cables on existing utility poles and from the utility pole to the subscriber s structure shall be assigned to Classification 7601, Telephone, Telegraph or Fire Alarm Line Construction. The installation of television cables underground, including trenching and the placement of conduit, shall be assigned to Classification 6325, Conduit Construction. The installation of television cables within buildings shall be assigned to Classification 5195, Communications Cabling within buildings. The current phraseologies for Classifications 5195, 6325 and 7601 are: COMMUNICATIONS CABLING within buildings shop and outside 5195 This classification shall apply to those concerns engaged in the installation of low-voltage cable for voice or data transmission. CONDUIT CONSTRUCTION for cables or wires including tunneling at street crossings 6325 All tunneling other than at street crossings shall be separately classified. TELEPHONE, TELEGRAPH OR FIRE ALARM LINE CONSTRUCTION 7601 Analysis The R & I entry clarifies that contractors performing services for the cable television industry are assignable to Classifications 5195, 6325 and 7601 depending on the scope of the work. With respect to the installation of television cables within buildings, Classification 5195 describes these operations as television cables used for low-voltage data transmission. Accordingly, no amendment to Classification 5195 is recommended. It is noted that the technology used today varies greatly from those used when the R & I was established to clarify that the installation of television cables within buildings is assignable to Classification In the 1970 s, the installation of cable television service for a subscriber primarily consisted of installing coaxial cables within the subscriber s house or building, with little or no additional equipment. Today, the process may or may not include the installation of cables, but typically will include the installation of electronic equipment such as routers, descramblers, digital recorders, remote control systems and other 258

259 components. The installation of cable television equipment can be performed within a private residence, or at utility cabinets and vault boxes located at somewhere other than the residence. These operations are described by Classification 9516(1), Television, Video, Audio and Radio Equipment Installation, Service or Repair shop and outside, and the WCIRB does not recommend any changes to this classification. The installation of television cables underground is described by Classifications Accordingly, no amendment to Classification 6325 is recommended. The installation of television cables on existing utility poles is not described by Classification Further, it is noted that Classification 7601(1) describes telegraph line construction, which has not been performed for many years, and (2) does not specify that the work is performed above ground. Classification 7601 applies to the construction of aerial lines in connection with telephone, television, communication, data, fire alarm and similar low voltage or fiber optic networks. Accordingly, it is recommended that Classification 7601 be revised to (1) describe aerial line construction operations, and (2) provide that underground line construction be assigned to Classification 6325, Conduit Construction. 259

260 Recommendation Amend Classification 7601(1), Telephone, Telegraph or Fire Alarm Line Construction, to (1) describe aerial line construction operations, and (2) provide that underground line construction be assigned to Classification 6325, Conduit Construction. PROPOSED TELEPHONE, TELEGRAPH OR FIRE ALARMAERIAL LINE CONSTRUCTION not power lines 7601 This classification includes, but is not limited to, aerial line construction for telephone, television, communication, data, fire alarm and similar low voltage or fiber optic networks. Underground line construction shall be assigned to Classification 6325, Conduit Construction. 260

261 Cellular Concrete Floors Installation The R & I entry shown below was established following a 1970 appeal to the C & R Committee to clarify that the installation of lightweight cellular concrete soundproof floors is analogous to the operations assignable to Classification 5200, Concrete or Cement Work pouring or finishing of concrete sidewalks, driveways, patios, curbs or gutters. In 1992, Classification 5200 was replaced with dual wage Classifications 5201(1) and 5205(1) and the R & I entry was amended accordingly. R & I Entry Cellular Concrete Floors Installation 5201(1) Concrete or Cement Work sidewalks low wage 5205(2) Concrete or Cement Work sidewalks high wage 1 The installation of lightweight sound insulating cellular concrete floors involves the stapling of building paper to the sub-floor, after which a ready mixed grout or cement/sand slurry consisting of cement, sand, water, and a foaming agent is pumped into place, screeded to approximately 1-5/8 thickness, and darbied. It is then troweled to a smooth, flat finish suitable for interior or exterior coverings. These floors have no structural qualities, their sole purpose being the prevention of sound transmission. They are poured on existing floors of wood framed buildings of not more than three stories in height, which have been completely enclosed or framed. The operations do not involve the erection or removal of any forms, nor the use of any distribution apparatus other than the pumps. The subject operations shall be assigned to Classification 5201, Concrete or Cement Work, or Classification 5205, Concrete or Cement Work, depending on regular hourly wage of the employees. (See actual classification phraseologies.) The current phraseologies for Classifications 5201(1), 5201(2), 5205(1) and 5205(2) are: CONCRETE OR CEMENT WORK pouring or finishing of concrete sidewalks, driveways, patios, curbs or gutters including the making or stripping of forms employees whose regular hourly wage does not equal or exceed $24.00 per hour 5201(1) CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multi-story construction including the making or stripping of forms employees whose regular hourly wage does not equal or exceed $24.00 per hour This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multistory construction. 5201(2) 1 This suffix appears to be in error as it should reference Classification 5205(1), not Classification 5205(2). 261

262 CONCRETE OR CEMENT WORK pouring or finishing of concrete sidewalks, driveways, patios, curbs or gutters including the making or stripping of forms employees whose regular hourly wage equals or exceeds $24.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5201(1), Concrete or Cement Work. 5205(1) CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multi-story construction including the making or stripping of forms employees whose regular hourly wage equals or exceeds $24.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5201(2), Concrete or Cement Work. This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multistory construction. 5205(2) Analysis The R & I entry clarifies that the installation of cellular lightweight concrete flooring that has no structural qualities is assignable to Classifications 5201(1)/5205(1). Although this type of flooring is not described by Classifications 5201(1)/5205(1), the installation operations and the nature of the finished product are analogous to those associated with Classifications 5201/5205. Accordingly, this information should be added to the appropriate Concrete or Cement Work classifications. WCIRB staff thinks that Classifications 5201(2) and 5205(2) are more general in scope than Classifications 5201(1)/5205(1), and therefore recommends that these classifications be amended to include the subject information. 262

263 Recommendation Amend Classification 5201(2), Concrete or Cement Work pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction, to specifically include the pouring or finishing of nonstructural lightweight cellular concrete floors. PROPOSED CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction including the making or stripping of forms employees whose regular hourly wage does not equal or exceed $24.00 per hour This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either, and the pouring or finishing of nonstructural cellular lightweight concrete floors. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5201(2) * * * * * Recommendation Amend Classification 5205(2), Concrete or Cement Work pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction, to specifically include the pouring or finishing of nonstructural lightweight cellular concrete floors. PROPOSED CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction including the making or stripping of forms employees whose regular hourly wage equals or exceeds $24.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5201(2), Concrete or Cement Work. This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either, and the pouring or finishing of nonstructural cellular lightweight concrete floors. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5205(2) 263

264 Clothing Manufacturing and Stores Clothing The R & I entries shown below were established following a 1980 appeal to the Classification and Rating Committee by an employer who designed clothing, produced cut paper patterns and clothing samples, and distributed the finished product but subcontracted all production manufacturing to other concerns. The R & I entry clarifies that a clothing or apparel manufacturer maintains control over the garment being produced from design to shipping to customers and provides a list of functions typically performed by clothing or apparel manufacturers. R & I Entries Clothing Manufacturing 2501(1) Clothing Mfg Stores clothing, dry goods wholesale For classification purposes, a clothing or apparel manufacturer is defined as a firm which maintains control over the garment being produced from the designing or selecting of the styles to be manufactured through the shipping of the garments to the customer. Clothing or apparel manufacturers typically perform the following functions: 1. Design of garments; 2. Selection of fabrics; 3. Making of samples or subcontracting of sample making; 4. Production cutting of fabrics, or subcontracting of production cutting of fabrics; 5. Production assembling and sewing of garments, or subcontracting of production assembling and sewing of garments; 6. Labeling and pressing of garments; and 7. Shipping of garments to customers. Firms performing the above activities shall be assigned to Classification 2501(1), Clothing Mfg. Firms that do not create the garments, but purchase garments from clothing or apparel manufacturers, even though such firms may sew labels in the garments and refurbish or press the garments, are to be considered clothing wholesalers or jobbers and are assignable to Classification 8032, Stores clothing, wearing apparel or dry goods wholesale. If a clothing or apparel manufacturing firm maintains only a distribution center in California, then such firms will not be considered a California clothing or apparel manufacturer and shall be assigned to Classification Stores Clothing 8032 Stores clothing, dry goods wholesale See Classification 2501, Clothing Mfg. The phraseologies of Classifications 2501(1) and 8032 are: CLOTHING MFG. including embroidery manufacturing 2501(1) STORES clothing, wearing apparel or dry goods wholesale

265 Analysis The R & I entry defines a clothing manufacturer as a firm that maintains control over the garment being produced from the designing or selecting of the styles to be manufactured through the shipping of the garments to the customer, and includes a list of typical operations that may or may not be performed by such firms. As the listed operations are not determinative, the WCIRB does not recommend that they be included in Classification 2501(1); however, the WCIRB recommends that Classifications 2501(1) and 8032 be amended to provide that a clothing manufacturer that designs garments be assigned to Classification 2501(1) even though some or all of the production sewing or assembling is subcontracted. In addition, the R & I entry clarifies that (1) wholesale clothing firms that do not create the garments are assignable to Classification 8032, Stores clothing, wearing apparel or dry goods wholesale, and (2) a clothing manufacturer that only maintains a wholesale distribution center in California is assignable to Classification The WCIRB recommends that this information be incorporated into Classification 2501(1). 265

266 Recommendation Amend Classification 2501(1), Clothing Mfg. including embroidery manufacturing, to clarify that (1) this classification applies to clothing manufacturers that design garments even though some or all of the production sewing or assembling is subcontracted, (2) employers that do not manufacture or design the garments in California, but purchase garments for wholesale distribution, are assigned to Classification 8032, Stores clothing, wearing apparel or dry goods wholesale, and (3) clothing manufacturers that only maintain a distribution center in California are assigned to Classification 8032, Stores clothing, wearing apparel or dry goods wholesale. PROPOSED CLOTHING MFG. including embroidery manufacturing 2501(1) This classification includes clothing manufacturers that design garments, even if some or all of the production sewing or assembling operations are subcontracted. Employers that do not manufacture or design the garments in California, but purchase garments for wholesale distribution are assigned to Classification 8032, Stores clothing, wearing apparel or dry goods wholesale. Clothing manufacturers that only maintain a distribution center in California shall be assigned to Classification 8032, Stores clothing, wearing apparel or dry goods wholesale. * * * * * Recommendation Amend Classification 8032, Stores clothing, dry goods wholesale, to clarify that Classification 2501(1) applies to clothing manufacturers that design garments even though some or all of the production sewing or assembling is subcontracted. PROPOSED STORES clothing, wearing apparel or dry goods wholesale 8032 Clothing manufacturers that design garments, even if some or all of the production sewing or assembling operations are subcontracted, shall be assigned to Classification 2501(1), Clothing Mfg. including embroidery manufacturing. 266

267 Concrete Construction The R & I entry shown below was established in 1972 in connection with a study of concrete construction operations. The entry was amended in 1992 to reflect the dual wage classifications applicable to concrete flatwork operations. The entry clarifies the classification procedure for various concrete construction operations. R & I Entries Concrete Construction 5213 Concrete Construction foundations 5205(2) Concrete or Cement Work high wage 5201(2) Concrete or Cement Work low wage 5214 Concrete or Cement Work precast 5205(1) Concrete or Cement Work sidewalks high wage 5201(1) Concrete or Cement Work sidewalks low wage The payroll of employees engaged in concrete construction operations shall be assigned as follows: 1. The payroll of employees engaged in exterior site work, which is defined as the pouring or finishing of concrete sidewalks, gutters, curbs, patios and driveways, shall be assigned to Classification 5201(1), Concrete or Cement Work pouring or finishing of concrete sidewalks, or Classification 5205(1), Concrete or Cement Work pouring or finishing of concrete sidewalks, depending on the regular hourly wage of the employees. (See actual classification phraseologies.) If proper payroll records are maintained, these operations shall be assigned to Classifications 5201/5205, Concrete or Cement Work pouring or finishing of concrete sidewalks, even though other concrete operations are carried on simultaneously at the same job site. 2. For private residences that do not exceed three stories in height and garages in connection therewith, the payroll of employees engaged in the pouring of concrete foundations, footings and/or floor slabs shall be assigned to Classification 5201(2), Concrete or Cement Work pouring or finishing of concrete floor slabs, or Classification 5205(2), Concrete or Cement Work pouring or finishing of concrete floor slabs, depending on the regular hourly wage of the employees. (See actual classification phraseologies.) 3. For commercial buildings where the only concrete work involves the pouring or finishing of floor slabs (which may include an integrated footing) that are poured in place on the ground and at grade level, the payroll of employees engaged in these activities shall be assigned to Classification 5201(2) or 5205(2) depending on the regular hourly wage of the employees. (See actual classification phraseologies.) The payroll of employees pouring concrete columns, walls or floors, in addition to the slab, for commercial buildings shall be classified as defined below. 4. The payroll of employees engaged in the pouring or finishing of precast wall panels, precast floor slabs or precast roof slabs performed at ground level and at job site, and the pouring or finishing of the ground floor of a tilt-up pick-and-place or similar type of building, shall be assigned to Classification 5214, Concrete or Cement Work. All other concrete operations, except exterior site work, shall be assigned to Classification 5213, Concrete Construction N.O.C. This includes the pouring in place of floors above the ground floor, the pouring of support columns and other concrete work in connection with the installation of precast wall panels, precast floor slabs or precast roof slabs. The hoisting of the panels and subsequent welding or bolting of the wall panels into position is included in Classification 5213 when performed by the concrete construction contractor. 5. For all other types of commercial buildings, including poured in place concrete, masonry and structural steel buildings, the payroll of employees engaged in the pouring of concrete foundations, retaining walls, basement walls and/or footings shall be assigned to Classification 5213, Concrete 267

268 Construction N.O.C. This classification includes the subsequent pouring of the concrete slabs after the footing forms have been removed and any concrete floors and decks above ground level. Note For the purposes of this rule, the following definitions apply: A slab is a pouring of concrete on the ground at grade level where the perimeter of the slab is defined using wooden or other forms. The slab perimeter may contain below-grade integrated footings, the slab and footing having been constructed in a single pour. A footing is formed in an excavated trench in the shape of the structure s exterior perimeter, and extends above and below surface to create a low wall upon which a structure is subsequently constructed. Concrete piers are often utilized for structural support of the ground floor. A foundation is any other concrete substructure. Foundations often are constructed below ground level and contain a floor and walls below the surface. The foundation walls are typically reinforced with steel. The current phraseologies for Classifications 5205(1), 5201(1), 5205(2), 5201(2), 5213, and 5214 are: CONCRETE OR CEMENT WORK pouring or finishing of concrete sidewalks, driveways, patios, curbs or gutters including the making or stripping of forms employees whose regular hourly wage does not equal or exceed $24.00 per hour 5201(1) CONCRETE OR CEMENT WORK pouring or finishing of concrete sidewalks, driveways, patios, curbs or gutters including the making or stripping of forms employees whose regular hourly wage equals or exceeds $24.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5201(1), Concrete or Cement Work. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5205(1) CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction including the making or stripping of forms employees whose regular hourly wage does not equal or exceed $24.00 per hour This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5201(2) 268

269 CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction including the making or stripping of forms employees whose regular hourly wage equals or exceeds $24.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5201(2), Concrete or Cement Work. This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5205(2) CONCRETE CONSTRUCTION N.O.C. including foundations, or the making, setting up or taking down of forms, scaffolds, falsework or concrete distributing apparatus At a particular job or location, Classification 5213 shall not be used for division of payroll in connection with Classifications 5222(1), Concrete Construction bridges or culverts, 5040(2), Bridge Building metal, 6003(3), Bridge or Trestle Construction wood, or 5506 or 5507, Street or Road Construction. Excavation, reinforcing steel installation, pile driving and all work in connection with sewers, tunnels, subways, caissons or cofferdams shall be separately classified CONCRETE OR CEMENT WORK pouring or finishing of precast concrete wall panels, precast floor slabs or precast roof slabs at ground level and at job site including the making or stripping of forms This classification also applies to the pouring or finishing of ground floors of buildings for which precast concrete wall panels, floor slabs or roof slabs become an integral part. It does not apply to the subsequent erection and placement of panels and slabs; all concrete operations performed in connection therewith, including floors poured in place above the ground floor, shall be separately classified as 5213, Concrete Construction N.O.C. Reinforcing steel installation shall be separately classified Analysis The R & I entry provides broad information about the operations associated with the N.O.C. (not otherwise classified) concrete Classification 5213 and the specific concrete construction classifications 5201(1)/5205(1), 5201(2)/5205(2) and Much of the information regarding the operations associated with each classification is already included in the classifications or is addressed by the Special Industry Classification Procedures for construction and erection work found at USRP Part 3, Section IV, Rule 2, Construction or Erection Work. However, staff often receives requests for clarity regarding the classifications applicable to concrete foundations. Classifications 5201(2)/5205(2) directly describe (1) the pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multistory construction; and (2) concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height. The R & I entry clarifies that floor slabs can in fact be slab-type foundations, which include the slab and below-grade integrated footings that are constructed in a single pour. Classifications 5201(2)/5205(2) do not 269

270 specifically include slab-type foundations. The WCIRB thinks that the inclusion of this information would provide clarity. Classification 5213 Concrete Construction N.O.C., includes foundations without qualification. The R & I entry clarifies that Classification 5213 includes (1) the pouring of concrete foundations, retaining walls, basement walls and/or footings in connection with poured in place concrete, masonry and structural steel buildings, and the subsequent pouring of concrete slabs and any concrete floor and decks above ground level. The inclusion of this information in Classification 5213 would provide clarity. Further, it is recommended that Classification 5213 be amended to direct that the pouring or finishing of concrete floor slabs and concrete slab-type foundations for other than concrete buildings or structural steel buildings of multi-story construction, and the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height be separately classified as 5201(2), Concrete or Cement Work, or 5205(2), Concrete or Cement Work. 270

271 Recommendation Amend Classifications 5201(2)/5205(2), Concrete or Cement Work pouring or finishing of concrete floor slabs, poured in place and on the ground for other than concrete buildings or structural steel buildings of multi-story construction, to include the pouring or finishing of concrete slab-type foundations. PROPOSED CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground, and concrete slab-type foundations, for other than concrete buildings or structural steel buildings of multi-story construction including the making or stripping of forms employees whose regular hourly wage does not equal or exceed $24.00 per hour This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5201(2) CONCRETE OR CEMENT WORK pouring or finishing of concrete floor slabs, poured in place and on the ground, and concrete slab-type foundations, for other than concrete buildings or structural steel buildings of multi-story construction including the making or stripping of forms employees whose regular hourly wage equals or exceeds $24.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5201(2), Concrete or Cement Work. This classification also applies to the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height and garages in connection with either. This classification does not apply to the pouring or finishing of any floors of concrete buildings, nor to the foundations or any concrete floors poured in place of structural steel buildings of multi-story construction. 5205(2) * * * * * 271

272 Recommendation Amend Classification 5213, Concrete Construction N.O.C., to (1) include the pouring of concrete foundations, retaining walls, basement walls and/or footings in connection with poured in place concrete, masonry and structural steel buildings, and the subsequent pouring of the concrete slabs and any concrete floors and decks above ground level; and (2) direct that the pouring or finishing of concrete floor slabs and concrete slab-type foundations for other than concrete buildings or structural steel buildings of multi-story construction, and the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height be separately classified as 5201(2), Concrete or Cement Work, or 5205(2), Concrete or Cement Work. PROPOSED CONCRETE CONSTRUCTION N.O.C. including foundations, or the making, setting up or taking down of forms, scaffolds, falsework or concrete distributing apparatus At a particular job or location, Classification 5213 shall not be used for division of payroll in connection with Classifications 5222(1), Concrete Construction bridges or culverts, 5040(2), Bridge Building metal, 6003(3), Bridge or Trestle Construction wood, or 5506 or 5507, Street or Road Construction. Excavation, reinforcing steel installation, pile driving and all work in connection with sewers, tunnels, subways, caissons or cofferdams shall be separately classified. This classification includes the pouring of concrete floor slabs, foundations, retaining walls, basement walls and/or footings in connection with poured in place concrete, masonry and structural steel buildings, and the subsequent pouring of on-grade concrete slabs and any concrete floors and decks above ground level The pouring or finishing of concrete floor slabs and concrete slab-type foundations for other than concrete buildings or structural steel buildings of multi-story construction, and the pouring or finishing of concrete foundations for private residences for occupancy by one or two families or other wood frame family dwellings not exceeding three stories in height shall be separately classified as 5201(2), Concrete or Cement Work, or 5205(2), Concrete or Cement Work. 272

273 Door Operators The original version of the R & I entry shown below was established in 1972 following a 1971 appeal to the C & R Committee by an employer engaged in the installation, service and repair of automatic power door operators that are used at pedestrian entrances of buildings. The appellant s operations were assigned by the WCIRB to Classification 3724(2), Electrical Machinery or Auxiliary Apparatus. After comparing the processes and hazards involved, the Committee assigned the operations to Classification 9519(1), Household Appliances, and the R & I entry was established to reflect this assignment. In 2003, the entry was augmented to clarify that (1) the installation, service and repair of motorized chain driven or swing arm security gates are assignable to Classification 3724(2), Electrical Machinery or Auxiliary Apparatus, and (2) the installation, service and repair of door openers for residential or commercial overhead doors are assignable to Classification 9519(1). These amendments were in accordance with historical classification procedure. R & I Entry Door Operators 3724(2) Electrical Machinery or Auxiliary Apparatus 9519(1) Household Appliances The installation, service and repair of motorized chain driven or swing arm security gates shall be assigned to Classification 3724(2), Electrical Machinery or Auxiliary Apparatus. The installation, service and repair of automatic door operators at pedestrian entrances of supermarkets, restaurants, hospitals, airport terminals and similar public buildings shall be assigned to Classification 9519, Household Appliances. The installation, service and repair of door openers for overhead doors, such as garage and loading dock doors, whether residential or commercial, shall also be assigned to Classification These include openers for tilt-up doors, sectional doors and roll-up doors. The current phraseologies for Classifications 3724(2) and 9519(1) are: ELECTRICAL MACHINERY OR AUXILIARY APPARATUS installation or repair including incidental wiring This classification is not available for division of payroll of employees of employers engaged in the installation or repair of electrical apparatus on the premises both occupied and operated by the employer. Such payroll shall be included in the governing classification. The erection of poles, stringing of wires, installation of service transformers on poles or on the outside of buildings, or the making of service connections shall be separately classified. 3724(2) HOUSEHOLD APPLIANCES electrical installation, service or repair 9519(1) This classification includes shop or outside employees and incidental parts department employees. Electrical wiring shall be separately classified. Analysis The operations involved in the installation, service or repair of motorized chain driven or swing arm security gates are similar to many other operations assignable to Classification 3724(2); however, such 273

274 operations are not directly included in this classification. The WCIRB thinks it would be helpful to amend Classification 3724(2), Electrical Machinery or Auxiliary Apparatus, to include, for clarity, the installation, service or repair of automated or mechanized security gates. Although the R & I entry qualifies security gates as motorized chain driven or swing arm, such qualification is not required and may be too restrictive. With respect to the assignment of Classification 9519(1), Household Appliances, to the installation, service and repair of automatic door operators at pedestrian entrances of buildings, the C & R Committee found that such operations are most comparable to those operations contemplated by Classification 9519(1), and that the operations typically assignable to Classification 3724(2) involve working with equipment and apparatus that is heavier than that associated with the installation, service and repair of automatic door operators. The WCIRB continues to agree with the Committee s 1971 analysis and decision and thinks it would be helpful to amend the USRP accordingly. Classifications 5107, Door, Door Frame or Pre-Glazed Window Installation not overhead doors, and 5108, Door Installation overhead doors should be amended, for clarity, to provide that the installation, service or repair of door openers shall be assigned to Classification 9519(1). The operations involved in the installation, service and repair of door openers for residential or commercial overhead doors, such as garage and loading dock doors, are similar to many other operations assignable to Classification 9519(1); however, such operations are not directly included in this classification. The WCIRB thinks it would be helpful to amend Classification 9519(1), Household Appliances, to clarify that this classification includes the installation, service or repair of automatic door openers. 274

275 Recommendation Amend Classification 3724(2), Electrical Machinery or Auxiliary Apparatus installation or repair, to include the installation, service or repair of automated security gates for clarity and consistency. PROPOSED ELECTRICAL MACHINERY OR AUXILIARY APPARATUS installation or repair including incidental wiring This classification is not available for division of payroll of employees of employers engaged in the installation or repair of electrical apparatus on the premises both occupied and operated by the employer. Such payroll shall be included in the governing classification. This classification includes the installation, service or repair of automated security gates. The erection of poles, stringing of wires, installation of service transformers on poles or on the outside of buildings, or the making of service connections shall be separately classified. 3724(2) * * * * * Recommendation Amend Classification 5107, Door, Door Frame or Pre-Glazed Window Installation not overhead doors, for clarity to provide that the installation, service or repair of automatic door openers shall be separately classified as 9519(1). PROPOSED DOOR, DOOR FRAME OR PRE-GLAZED WINDOW INSTALLATION not overhead doors 5107 At a particular job or location, this classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions, General Exclusions or in connection with Classification 5146(1), Cabinet or Fixtures portable; interior trim). The installation, service or repair of automatic door openers shall be separately classified as 9519(1), Household Appliances. * * * * * 275

276 Recommendation Amend Classification 5108, Door Installation overhead doors, for clarity to provide that the installation, service or repair of automatic door openers shall be separately classified as 9519(1). PROPOSED DOOR INSTALLATION overhead doors 5108 This classification shall apply to the installation, service or repair of overhead doors, including tilt-up, sectional and roll-up doors. The installation, service or repair of automatic door openers shall be separately classified as 9519(1), Household Appliances. * * * * * Recommendation Amend Classification amending Classification 9519(1), Household Appliances, to clarify that this classification also applies to the installation, service or repair of automatic door openers. PROPOSED HOUSEHOLD APPLIANCES electrical installation, service or repair 9519(1) This classification includes shop or outside employees and incidental parts department employees. This classification also applies to the installation, service or repair of automatic door openers. Electrical wiring shall be separately classified. 276

277 Electronic Product Design Firms The R & I entry shown below was established in 1996 following a 1995 study of the Electronics Industry, which resulted in several changes to the Standard Classification System of the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP). The R & I clarifies that firms in the electronics industry that design products, oversee manufacturing performed by separate concerns, and conduct final testing and shipping of the products are assignable to the appropriate manufacturing classification. R & I Entry Electronic Product Design Firms For classification purposes, a firm engaged in the design of a proprietary product which is contemplated by an Electronics Industry classification, as delineated in Part 3, Section VII, Standard Classifications, of the Uniform Statistical Reporting Plan, shall be assigned to the appropriate manufacturing classification provided the following functions are performed: 1. Product design; 2. Manufacture of the prototype, or subcontract of the manufacture of the prototype; 3. Manufacture of the product, or subcontract of the manufacture of the product; and 4. Receipt of the manufactured product and performance of quality control operations prior to shipment. Firms which neither design nor manufacture the product, but purchase products from manufacturers for resale purposes, shall be assigned to the appropriate stores classification notwithstanding that they may engage in some product preparation or quality control operations. Analysis It is common for firms in the electronics manufacturing industry to use a subcontractor for some or all of the production manufacturing operations yet maintain a shop for product design, prototype development, final product testing, and the preparation of products for delivery. Such operations frequently use the same machinery, equipment and instruments commonly used by electronic production manufacturers to perform limited manufacturing, quality control operations, customize products by reworking circuitry, final burn-in operations and repair operations. The classification procedure set forth in the subject R & I entry is limited to the classifications listed in the Electronics Industry Group in the USRP. In view of its limited and specific application, it would be helpful to amend USRP Part 3, Section IV, Special Industry Classification Procedures, to clarify the classification procedure for the Electronics Industry. 277

278 Recommendation Amend Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, to add Rule 3, Electronic Products Manufacturing, to clarify the classification procedure for manufacturers assigned to classifications in the Electronics Industry Group, and renumber all subsequent rules in this Section. PROPOSED Section IV Special Industry Classification Procedures 3. Electronic Products Design and Manufacturing The Electronics Industry Group includes a list of classifications that apply to employers engaged in the manufacture of electronic and electrical products. These classifications contemplate manufacturing operations whether performed in connection with the employer s proprietary products or performed on a contract basis for other concerns. Employers that design the proprietary product but subcontract the manufacture to other concerns shall be assigned to the appropriate Electronics Industry Group manufacturing classification provided the following functions are performed: 1. Product design; 2. Manufacture of the prototype, or subcontract the manufacture of the prototype; or 3. Receipt of the manufactured product and performance of quality control operations prior to shipment. Employers that neither design nor manufacture the product, but purchase products from manufacturers for resale purposes, shall be assigned to the appropriate stores classification notwithstanding that they may engage in some product preparation or quality control operations. 278

279 Estimators Automobile Repair The R & I entry shown below was established in 1985 following an appeal to the C & R Committee by an operator of an automobile transmission repair facility. The employer contended that estimators or service writers should not be assignable to Classification 8389, Automobile or Automobile Truck Repair Shops or Garages. The C & R Committee confirmed that estimating operations are an integral part of the automobile transmission repairing industry and are therefore assignable to Classification R & I Entry 8393 Automobile or Automobile Truck Body and Fender Repairing and Painting 8391 Automobile or Automobile Truck Dealers 8389 Automobile or Automobile Truck Repair Shops or Garages 8397 Automobile or Automobile Truck Transmission Repairing and Rebuilding 9501(3) Painting automobile or automobile truck bodies 8388 Rubber Tire Dealers Automobile mechanical repair shops, automobile dealerships, automobile body repair and paint shops, transmission repair shops, rubber tire dealers, and automobile body paint shops normally retain employees who are skilled in estimating costs of repairs and/or painting of vehicles based on time and materials required to effect such automotive repair or reconditioning. To determine the estimated cost of such repairs typically requires visual and/or physical examination of the vehicle. The estimator may perform such operations at the premises of the employer or at the location of the customer. These employees generally divide their time between the above-described operations and clerical work incidental to their estimating duties. The payroll of such estimators shall be assigned to the basic classification of Classification 8389, Automobile or Automobile Truck Repair Shops or Garages, Classification 8391, Automobile or Automobile Truck Dealers, Classification 8393, Automobile or Automobile Truck Body and Fender Repairing and Painting, Classification 8397, Automobile or Automobile Truck Transmission Repairing and Rebuilding, Classification 8388, Rubber Tire Dealers, or Classification 9501, Painting automobile or automobile truck bodies, depending upon the nature of the employer s business. Current phraseologies for Classifications 8393, 8391, 8389, 8397, 9501(3), and 8388 are: AUTOMOBILE OR AUTOMOBILE TRUCK BODY AND FENDER REPAIRING AND PAINTING all employees including estimators, service writers and customer service representatives Towing, roadside assistance, and freeway service patrol operations when conducted on vehicles not owned by the employer shall be separately classified as 7227, Automobile or Automobile Truck Towing, Roadside Assistance or Freeway Service Patrol. Roadside assistance refers to services provided to the vehicle owner under an agreement with a third party (such as a motor club or law enforcement agency). Contemplated services include changing tires, jump-starting batteries, supplying a small amount of gasoline or performing minor vehicle repairs such as reattaching ignition wires or battery cables

280 AUTOMOBILE OR AUTOMOBILE TRUCK DEALERS all employees other than vehicle salespersons including estimators, service writers, vehicle maintenance and repair, accessory or spare parts sales and the transporting of vehicles that are owned by the employer This classification shall apply only to those employers having, in addition to proprietors, a regular sales force engaged exclusively in the demonstration and sale of vehicles and separate clerical staff. If these conditions do not exist, Classification 8391 does not apply. If Classification 8391 does not apply and the employer performs vehicle repair work, assign the applicable vehicle repair classification(s) and if the employer performs no vehicle repairing assign Classification 8392, Automobile or Automobile Truck Storage Garages or Parking Stations or Lots, to employees who perform activities such as cleaning and washing vehicles, changing tires and recharging batteries. Also refer to companion Classification 8748, Automobile or Automobile Truck Dealers vehicle salespersons. Towing, roadside assistance, and freeway service patrol operations when conducted on vehicles not owned by the employer shall be separately classified as 7227, Automobile or Automobile Truck Towing, Roadside Assistance or Freeway Service Patrol. Roadside assistance refers to services provided to the vehicle owner under an agreement with a third party (such as a motor club or law enforcement agency). Contemplated services include changing tires, jump-starting batteries, supplying a small amount of gasoline or performing minor vehicle repairs such as reattaching ignition wires or battery cables AUTOMOBILE OR AUTOMOBILE TRUCK REPAIR SHOPS OR GARAGES no retail gasoline sales all employees including estimators, service writers and customer service representatives N.O.C. Classification 8389 shall not be used for division of payroll in connection with Classification 8388, Rubber Tire Dealers, unless the operation described by Classification 8389 constitutes a separate and distinct enterprise having no connection with the operations covered by Classification This classification does not apply to those automobile repair shop or garage locations at which the sale of rubber tires exceeds 10% of the total gross receipts. Such locations shall be classified as 8388, Rubber Tire Dealers. Towing, roadside assistance, and freeway service patrol operations when conducted on vehicles not owned by the employer shall be separately classified as 7227, Automobile or Automobile Truck Towing, Roadside Assistance or Freeway Service Patrol. Roadside assistance refers to services provided to the vehicle owner under an agreement with a third party (such as a motor club or law enforcement agency). Contemplated services include changing tires, jump-starting batteries, supplying a small amount of gasoline or performing minor vehicle repairs such as reattaching ignition wires or battery cables AUTOMOBILE OR AUTOMOBILE TRUCK TRANSMISSION REPAIRING AND REBUILDING including removal and installation operations all employees including estimators, service writers and customer service representatives Classification 8397 shall not be used for division of payroll in connection with Classifications 8389, Automobile or Automobile Truck Repair Shops or Garages, 8387, Automobile or Automobile Truck Service Stations, or 3828, Automobile or Automobile Truck Parts Machining and Rebuilding, unless the operation described by Classification 8397 constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 8389, 8387 or

281 PAINTING automobile or automobile truck bodies including incidental sanding no body or fender repairing This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 9501(3) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. 9501(3) RUBBER TIRE DEALERS wholesale or retail, or combined wholesale and retail including inside salespersons, estimators, service writers, customer service representatives and cashiers; repairing and adjusting tires away from the premises; and accessories and spare parts departments 8388 Analysis The R & I entry clarifies that Classifications 8389, 8391, 8393, 8397, 8388 and 9501(3) include estimators as they typically are an integral part of operations described by each classification. With the exception of Classification 9501(3), all the classifications listed above state that estimators are included. Firms assigned to these classifications typically retain employees with titles such as estimator, service writer and customer service representative who are skilled in estimating the costs of repairs and painting of customer s vehicles. Such operations are normal and integral to the operation of the business described by the particular classification. Operations assigned to Classification 9501(3) are different from those associated with the above-noted classifications in that the painting described by Classification 9501(3) is production work that is typically performed in connection with new vehicles or fleet vehicles such as taxi cabs, police vehicles, ambulances and other commercial trucks and vehicles. Such operations usually do not require each vehicle to be inspected for preparation of an estimate based on the unique condition of each vehicle. Nevertheless, the WCIRB thinks it would be helpful to amend Classification 9501(3) to provide that this classification includes estimators, service writers and customer service representatives who conduct visual inspections of vehicles. It also is noted that employers assigned to Classification 8390, Automobile Van Conversion or Customizing all operations, may employ estimators who conduct visual inspections of vehicles. Accordingly, the WCIRB thinks it would be helpful to amend Classification 8390 to provide that this classification includes estimators and customer service representatives who conduct visual inspections of vehicles. 281

282 Recommendation Amend Classification 8390, Automobile Van Conversion or Customizing all operations, to provide that this classification include estimators and customer service representatives who conduct visual inspections of vehicles. PROPOSED AUTOMOBILE VAN CONVERSION OR CUSTOMIZING all operations including estimators and customer service representatives who inspect vehicles 8390 * * * * * Recommendation Amend Classification 9501(3), Painting automobile or automobile truck bodies, to provide that this classification include estimators, service writers and customer service representatives who conduct visual inspections of vehicles. PROPOSED PAINTING automobile or automobile truck bodies including incidental sanding no body or fender repairing including estimators, service writers and customer service representatives who inspect vehicles This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 9501(3) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. 9501(3) 282

283 Foundry Sand Cores Manufacturing The R & I entry shown below was established in 1968 following the reassignment of the manufacturing of foundry sand cores conducted for separate concerns on a fee basis from Classification 4041(1), Brick or Clay Products Mfg. N.O.C. including construction and reconstruction of sheds and kilns, to Classification 4049(1), Potteries glazed or porcelain, earthenware. R & I Entry Foundry Sand Cores Manufacturing 4049(1) Potteries The manufacture of foundry sand cores typically involves placing resin coated core sand into core boxes or automatic core forming machines where the sand is packed or compressed to form sand cores which are then cured by heat or carbon dioxide gas. The manufacture and use of foundry sand cores by firms engaged in casting metal shall be considered normal to the foundry operations and assigned thereto. Employers engaged in the manufacture of foundry sand cores that are sold commercially and not used in the employer s business shall be assigned to Classification 4049(1), Potteries glazed or porcelain, earthenware. The current phraseology for Classification 4049(1) is: POTTERIES glazed or porcelain, earthenware 4049(1) This classification includes the manufacture of china or tableware, electrical porcelain, decorative floor, wall, or fireplace tile and similar products. Mining or clay digging shall be separately classified. Analysis The R & I entry describes the manufacture of foundry sand cores and clarifies that when an employer operates a foundry (engages in the casting of metal), the manufacture of foundry sand cores is normal and usual and shall be assigned to the applicable foundry classification. The foundry classifications shown below do not include this useful information: 3081(1), Foundries iron N.O.C. 3085, Foundries non-ferrous N.O.C. 3082, Foundries steel castings The R & I entry also clarifies that an employer that manufactures foundry sand cores that are sold commercially and not used in the employer s business shall be assigned to Classification 4049(1). Classification 4049(1) makes no reference that this classification contemplates such activities. D-1 283

284 Recommendation Amend Classification 4049(1), Potteries glazed or porcelain, earthenware, to clarify that it includes the manufacture of foundry sand cores that are sold commercially. PROPOSED POTTERIES glazed or porcelain, earthenware 4049(1) This classification includes the manufacture of china or tableware, electrical porcelain, decorative floor, wall, or fireplace tile and similar products. This classification also includes the manufacture of foundry sand cores that are sold commercially. Mining or clay digging shall be separately classified. * * * * * Recommendation Amend Classification 3081(1), Foundries iron N.O.C., to provide that this classification includes the manufacture of foundry sand cores that are used in the employer s foundry operations. PROPOSED FOUNDRIES iron N.O.C. 3081(1) This classification includes the manufacture of foundry sand cores that are used in the employer s foundry operations. * * * * * Recommendation Amend Classification 3085, Foundries non-ferrous N.O.C., to provide that this classification includes the manufacture of foundry sand cores that are used in the employer s foundry operations. PROPOSED FOUNDRIES non-ferrous N.O.C This classification includes the manufacture of foundry sand cores that are used in the employer s foundry operations. * * * * * D-2 284

285 Recommendation Amend Classification 3082, Foundries steel castings, to provide that this classification includes the manufacture of foundry sand cores that are used in the employer s foundry operations. PROPOSED FOUNDRIES steel castings 3082 This classification includes the manufacture of foundry sand cores that are used in the employer s foundry operations. D-3 285

286 Greenhouse Erection The R & I entry shown below was established in 1993 following a study of greenhouse and solarium erection. The study determined that employers engaged in the erection of commercial or residential greenhouses and solariums develop insufficient payroll and losses to sustain a statistically credible rate, and, therefore, a new classification could not be established for this industry. The R & I entry was established to clarify the classification procedure for most operations associated with the erection of commercial and residential greenhouses. R & I Entry Greenhouse Erection 5146(1) Cabinet or Fixtures 5432 Carpentry high wage 5403 Carpentry low wage 5107 Door, Door Frame or Pre-Glazed Window Installation 5102(1) Iron, Steel, Brass, Bronze or Aluminum Erection non-structural 5187(1) Plumbing high wage 5183(1) Plumbing low wage Firms engaged in the erection of greenhouses for commercial agricultural purposes and firms engaged in the erection of residential greenhouses or solariums for non-commercial use typically perform a variety of construction and erection operations. Such firms shall be classified in accordance with Part 3, Section IV, Rule 2, of the Uniform Statistical Reporting Plan. Operations most common to greenhouse erection shall be classified as follows: 1. The erection of commercial or residential greenhouse metal framing shall be assigned to Classification 5102(1), Iron, Steel, Brass, Bronze, or Aluminum Erection. 2. Carpentry activities conducted in support of the erection of wood framed commercial greenhouses shall be assigned to Classification 5403, Carpentry, or Classification 5432, Carpentry, depending on the regular hourly wage of the employees (see actual classification phraseologies). 3. The assembly of wooden residential greenhouses from prefabricated kits, requiring only hand tools, shall be assigned to Classification 5146, Cabinet or Fixtures installation. 4. The job site installation of glass, acrylic or plastic sheet stock by means of setting and securing same with sealing gaskets or caulking compounds shall be assigned to Classification 5467, Glaziers, or Classification 5470, Glaziers, depending on the regular hourly wage of the employees (see actual classification phraseologies). 5. The installation of pre-glazed windows or wall panels and the installation of plastic sheet stock by means other than glazing (such as screws, bolts, rivets) shall be assigned to Classification 5107, Door, Door Frame, or Pre-Glazed Window Installation, provided the employer does not engage in any other construction activity at the particular job or location. 6. If the employer performed metal framing activities at the particular job or location, the installation of pre-glazed windows or wall panels and the installation of plastic sheet stock by means other than glazing (such as screws, bolts, rivets) shall be assigned to Classification 5102(1), Iron, Steel, Brass, Bronze, or Aluminum Erection. 7. If the employer performed wood framing activities at the particular job or location, the installation of pre-glazed windows or wall panels and the installation of plastic sheet stock by means other than glazing (such as screws, bolts, rivets) shall be assigned to Classification 5403, Carpentry, or Classification 5432, Carpentry, depending on the regular hourly wage of the employees (see actual classification phraseologies). 286

287 8. The installation of greenhouse irrigation systems shall be assigned to Classification 5183, Plumbing, or Classification 5187, Plumbing, depending on the regular hourly wage of the employees (see actual classification phraseologies). Construction operations not listed above shall be assigned to the appropriate construction classification. The current phraseologies for Classifications 5102(1), 5403, 5432, 5146(1), 5467, 5470, 5107, 5183(1) and 5187(1) are: IRON, STEEL, BRASS, BRONZE OR ALUMINUM ERECTION non-structural within buildings This classification includes all the following and similar metal features of construction within buildings: railings, bank cages and similar grille work, metal wall paneling, and movable steel partitions. The erection of staircases shall be separately classified. 5102(1) CARPENTRY including the installation of interior trim, builders finish, doors and cabinet work in connection therewith employees whose regular hourly wage does not equal or exceed $29.00 per hour This classification shall apply to the installation of shingle roofing and the installation or application of insulation materials in buildings or within building walls, but only if installed by the same employer who performs the carpentry work in constructing new buildings or additions to existing buildings at the same job or location. All other roofing shall be separately classified. The making, erecting or stripping of forms in connection with concrete work shall be assigned to the appropriate concrete classification CARPENTRY including the installation of interior trim, builders finish, doors and cabinet work in connection therewith employees whose regular hourly wage equals or exceeds $29.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $29.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $29.00 per hour shall be classified as 5403, Carpentry. This classification shall apply to the installation of shingle roofing and the installation or application of insulation materials in buildings or within building walls, but only if installed by the same employer who performs the carpentry work in constructing new buildings or additions to existing buildings at the same job or location. All other roofing shall be separately classified. The making, erecting or stripping of forms in connection with concrete work shall be assigned to the appropriate concrete classification CABINET OR FIXTURES portable; interior trim installation N.O.C. 5146(1) At a particular job or location, Classification 5146(1) shall not be used for division of payroll in connection with Classifications 5403, Carpentry, or 5432, Carpentry. The installation of doors, door frames and sash shall be assigned to Classification 5107, Door, Door Frame or Pre-Glazed Window Installation no overhead doors. 287

288 GLAZIERS away from shop employees whose regular hourly wage does not equal or exceed $29.00 per hour 5467 GLAZIERS away from shop employees whose regular hourly wage equals or exceeds $29.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $29.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $29.00 per hour shall be classified as 5467, Glaziers DOOR, DOOR FRAME OR PRE-GLAZED WINDOW INSTALLATION not overhead doors 5107 At a particular job or location, this classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions, General Exclusions or in connection with Classification 5146(1), Cabinet or Fixtures portable; interior trim). The installation, service or repair of automatic door openers shall be separately classified. PLUMBING shop and outside gas, steam, hot water or other pipe fittings installation, including house connections installation employees whose regular hourly wage does not equal or exceed $24.00 per hour N.O.C. Automatic sprinkler installation, within buildings, shall be separately classified. 5183(1) PLUMBING shop and outside gas, steam, hot water or other pipe fittings installation, including house connections installation employees whose regular hourly wage equals or exceeds $24.00 per hour N.O.C. Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5183(1), Plumbing. Automatic sprinkler installation, within buildings, shall be separately classified. 5187(1) Analysis The R & I clarifies that various operations associated with greenhouse and solarium construction should be assigned to specific construction or erection classifications. With the exception of the erection of commercial or residential greenhouse metal framing and the assembly of wooden residential greenhouses from prefabricated kits, the remaining operations are described by the various construction classifications or addressed by the Special Industry Classification Procedures for construction and erection work found at Part 3, Section IV, Rule 2, Construction or Erection Work. Such classifications, therefore, do not require revision. The R & I clarifies that the erection of commercial or residential greenhouse and solarium metal framing is assignable to Classification 5102(1). It also clarifies that Classification 5102(1) applies to the installation of pre-glazed windows or wall panels and the installation of plastic sheet stock by means other than glazing if the employer performed the metal framing activities at the particular job or location. Greenhouse and solarium metal framing is typically light weight metal that is received in a kit and assembled with hand tools. These operations are most comparable to those operations assignable to Classification 5102(1) and this classification contemplates the installation of pre-glazed windows or wall panels when the 288

289 employer erects the metal framing. Accordingly, the WCIRB recommends that Classification 5102(1) be amended to include the erection of commercial or residential greenhouse and solarium metal framing and the installation of pre-glazed windows or wall panels in connection with greenhouse or solarium metal framing. The R & I clarifies that the assembly of wooden residential greenhouses from prefabricated kits shall be assigned to Classification 5146(1), Cabinet or Fixtures portable; Interior Trim installation N.O.C. These operations involve the assembly of precut wooden parts with the use of hand tools. These operations are most comparable to those operations involving the installation of portable cabinets, fixtures and interior trim (Classification 5146). The onsite assembly of other pre-manufactured wooden backyard structures, such as gazebos, play structures and hot tub enclosures, are also assignable to Classification Accordingly, the WCIRB recommends that Classification 5146 be amended to include the assembly from prefabricated kits of wooden residential greenhouses and similar backyard structures, such as gazebos, play structures and hot tub enclosures. The R & I indicates that greenhouse irrigation systems shall be assigned to Classifications 5183(1)/5187(1), Plumbing. Classifications 5183(1)/5187(1) provide that [a]utomatic sprinkler installation, within buildings, shall be separately classified. The WCIRB recommends that this statement be amended to specify that automatic fire suppression sprinkler installation be separately classified. 289

290 Recommendation Amend Classification 5102(1), Iron, Steel, Brass, Bronze or Aluminum Erection non-structural within buildings, to provide that this classification also includes the erection of commercial or residential greenhouse or solarium metal framing, and the installation of pre-glazed windows or wall panels, but only if installed by the same employer who erects the metal framing at the same job or location. PROPOSED IRON, STEEL, BRASS, BRONZE OR ALUMINUM ERECTION non-structural within buildings This classification includes all the following and similar metal features of construction within buildings: railings, bank cages and similar grille work, metal wall paneling, and movable steel partitions. The erection of staircases shall be separately classified. This classification also includes the erection of commercial or residential greenhouse or solarium metal framing. It also includes the installation of pre-glazed windows or wall panels, if installed by the same employer that erects the metal framing at the same job or location. 5102(1) * * * * * Recommendation Amend Classification 5146(1), Cabinet or Fixtures portable; interior trim installation, to provide that this classification also includes the assembly from prefabricated kits of wooden residential greenhouses and similar backyard structures, such as gazebos, play structures and hot tub enclosures. PROPOSED CABINET OR FIXTURES portable; interior trim installation N.O.C. 5146(1) At a particular job or location, Classification 5146(1) shall not be used for division of payroll in connection with Classifications 5403, Carpentry, or 5432, Carpentry. This classification also applies to the assembly from prefabricated kits of wooden residential greenhouses and similar wooden backyard structures, such as, but not limited to, gazebos, play structures and hot tub enclosures. The installation of doors, door frames and sash shall be assigned to Classification 5107, Door, Door Frame or Pre-Glazed Window Installation no overhead doors. * * * * * 290

291 Recommendation Amend Classifications 5183(1)/5187(1), Plumbing, to provide that the installation of automatic fire suppression sprinklers within buildings shall be separately classified. PROPOSED PLUMBING shop and outside gas, steam, hot water or other pipe fittings installation, including house connections installation employees whose regular hourly wage does not equal or exceed $24.00 per hour N.O.C. Automatic fire suppression sprinkler installation, within buildings, shall be separately classified. 5183(1) PLUMBING shop and outside gas, steam, hot water or other pipe fittings installation, including house connections installation employees whose regular hourly wage equals or exceeds $24.00 per hour N.O.C. Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5183(1), Plumbing. Automatic fire suppression sprinkler installation, within buildings, shall be separately classified. 5187(1) 291

292 Hospitals The R & I entry shown below was added in 1964 in connection with the establishment of Classification 8829, Nursing Homes all employees. Prior to 1964, residential health institutions such as convalescent homes, convalescent hospitals, homes for aged, nursing homes, rest homes, and sanitariums that provided specialized or limited medical care were assigned to 9043, Hospitals all employees including Clerical Office Employees and Outside Salespersons. The subject R & I entry was established to clarify the type of health institutions that are assignable to Classification R & I Entry Hospitals 9043 Hospitals Only those medical institutions providing general hospital facilities shall be assigned to Classification 9043, Hospitals. The following minimum criteria shall be used as a guide for determining those risks assigned to this classification: 1. An organized staff of doctors subject to a duly authorized set of bylaws adopted by the hospital, 2. Registered nurse supervision and such other nursing services to provide patient care 24 hours a day, 3. Facilities including: a. surgical facilities, b. operating or delivery room, and/or c. relatively complete diagnostic and treatment facilities for medical patients on the premises, and 4. Diagnostic X-ray and clinical laboratory services regularly and immediately available. In general, hospitals licensed by the State Department of Public Health, Bureau of Hospitals, under the following types, meet these criteria and shall be assigned to Classification Type of Facility General hospital that admits maternity patients General hospital that does not admit maternity patients Maternity hospital Psychiatric hospital Alcoholism hospital In the event of exceptional cases where WCIRB assistance may be desired to determine the proper classification, it will be necessary to furnish the WCIRB with the name, address, type of license and a resume of the facilities and services provided by the employer. Outpatient clinics may be operated under the hospital s license. If the outpatient clinic uses its own staff of employees working in a separate facility for the treatment of outpatients (not hospital patients), the outpatient clinic is assignable to Classification 8834, Physicians. Skilled nursing facilities operating under the hospital s license for the long-term recuperation of former hospital patients are assignable to Classification The current phraseology of Classification 9043 is: HEALTH AND HUMAN SERVICES HOSPITALS all employees including Clerical Office Employees and Outside Salespersons The payroll for student nurses and interns shall be included at an average wage of at least $100 per week

293 Analysis The R & I entry describes the types of health institutions that are assignable to Classification 9043 based on information such as typical operations and state regulatory license requirements that existed in Currently, there are three types of hospitals licensed by the California Department of Public Health (CDPH) General Acute Care Hospital, Acute Psychiatric Hospital, and Special Hospital all of which are assignable to Classification The CDPH defines a general acute care hospital as a hospital, licensed by the Department, having a duly constituted governing body with overall administrative and professional responsibility and an organized medical staff which provides 24-hour inpatient care, including the following basic services: medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary services. 1 In comparison, acute psychiatric hospitals and special hospitals provide specialized medical care that may not include all of the services as a general acute care hospital. The WCIRB recommends that Classification 9043 be amended to provide that this classification applies to facilities that are licensed by the California Department of Public Health as a General Acute Care Hospital, Acute Psychiatric Hospital or Special Hospital. The R & I entry also clarifies that outpatient clinics that operate under the hospital license are assignable to Classification 8834, Physicians all employees including Clerical Office Employees, if the clinic is separate from the hospital facility, staffed by its own employees and does not accept hospital patients. The WCIRB recommends that Classification 9043 be amended to include this information. The R & I also clarifies that skilled nursing facilities that operate under the hospital license for the longterm recuperation of former hospital patients are assignable to Classification Such operations are considered to be incidental to and part of Classification 9043 since such facilities care for former hospital patients, i.e., such medical care is considered to be an extension of the services provided by the hospital. The phraseology of this classification includes the descriptive phrase all employees. The USRP at Part 3, Section II, Rule 2, All, provides that division of payroll shall not be made for any employee or operations (other than the Standard Exceptions or General Exclusions), without regard to the location of such operations, except for an operation not incidental to and not usually associated with the enterprise described by such classification. Accordingly, the WCIRB does not recommend that Classification 9043 be amended to include information concerning skilled nursing facilities that operate under the hospital license for the long-term recuperation of former hospital patients. Hospitals operated by municipal, state or other public agencies are assignable to Classification 8830, Institutional Employees hospitals, sanitariums, rest homes or homes for the aged all employees including Clerical Office Employees and Outside Salespersons not jail or prison employees. The WCIRB recommends that Classification 9043 be amended to include this information. Hospitals operated in connection with jails or prisons are assignable to Classification 7720, Police, Sheriffs, Constables, Marshals, Animal Control Officers, Game and Fish Wardens, and Jailers including deputies not volunteers. The WCIRB recommends that Classification 9043 be amended to include this information. 1 Source: 293

294 Recommendation Amend Classification 9043, Hospitals all employees including Clerical Office Employees and Outside Salespersons, to provide that (1) this classification applies to facilities that are licensed by the California Department of Public Health as a General Acute Care Hospital, Acute Psychiatric Hospital or Special Hospital; (2) a clinic that operates at a location separate from the hospital with its own staff and does not provide 24-hour inpatient care is to be assigned to Classification 8834, Physicians all employees including Clerical Office Employees; (3) hospitals operated by municipal, state or other public agencies are to be assigned to Classification 8830, Institutional Employees hospitals, sanitariums, rest homes or homes for the aged; and (4) hospitals operated in connection with jails or prisons are to be assigned to Classification 7720, Police, Sheriffs, Constables, Marshals, Animal Control Officers, Game and Fish Wardens, and Jailers including deputies not volunteers. PROPOSED HEALTH AND HUMAN SERVICES HOSPITALS all employees including Clerical Office Employees and Outside Salespersons The payroll for student nurses and interns shall be included at an average wage of at least $100 per week. This classification applies to facilities that are licensed by the California Department of Public Health as a General Acute Care Hospital, Acute Psychiatric Hospital or Special Hospital. Hospitals retain medical staff with the capability to provide 24-hour inpatient care. A medical clinic that operates at a location separate from the hospital shall be assigned to Classification 8834, Physicians all employees including Clerical Office Employees, provided the clinic operates with its own staff and does not provide 24-hour inpatient care. Hospitals operated by municipal, state or other public agencies shall be assigned to Classification 8830, Institutional Employees hospitals, sanitariums, rest homes or homes for the aged all employees including Clerical Office Employees and Outside Salespersons not jail or prison employees. Hospitals operated in connection with jails or prisons shall be assigned to Classification 7720, Police, Sheriffs, Constables, Marshals, Animal Control Officers, Game and Fish Wardens, and Jailers including deputies not volunteers

295 Landscape Gardening The R & I entry shown below was established in 1971 to clarify the application of Classification R & I Entry 8227 Construction or Erection Permanent Yards 5606 Contractors executive level supervisors 0042 Landscape Gardening Classification 0042, Landscape Gardening, shall include those operations of preparing plots and areas of land for horticulture and the decorative treatment, arrangement, planting and maintenance of gardens, lawns, shrubs, vines, bushes, trees and other decorative vegetation. It shall also include the sodding, seeding, planting and related landscape work necessary for the beautification of median strips and roadsides. When performed by the same employer that is primarily engaged in landscape work at a particular job or location, this classification shall include the construction of decorative pools, fountains, drainage and sprinkler systems, as well as the arrangement, fabrication and placement of garden furniture, statuary and monuments. This classification shall not include the pruning, repairing or trimming of large, mature trees, a service normally performed by a specialty contractor. Classification 0042 is an agricultural-type classification, not a construction classification. Classification 5606, Contractors construction or erection executive level supervisors, and Classification 8227, Construction or Erection Permanent Yards, are not available for use by employers whose principal payroll is developed under Classification Current phraseologies for Classifications 0042, 8227, and 5606 are: LANDSCAPE GARDENING all operations including maintenance of gardens 0042 The excavating, transporting and transplanting of mature trees shall be separately classified as 7219(1), Trucking Firms. CONSTRUCTION OR ERECTION PERMANENT YARDS for maintenance of equipment or storage 8227 of material This classification shall apply only to a permanent yard maintained by a construction or erection contractor (see Appendix II, Construction and Erection Classifications) for the maintenance of equipment or the storage of materials or equipment. It is not available for division of payroll at the place where construction operations are conducted, or when the specific construction or erection classification includes storage, shop or yard activities. CONTRACTORS construction or erection executive level supervisors no direct supervision 5606 division of a single employee s payroll with any other classification is not permitted This classification may be assigned only in connection with the construction or erection classifications listed in Appendix II, Construction and Erection Classifications, and must be confirmed by specific written approval from the WCIRB. This classification applies to executive level supervisors that exercise control through second level (or higher) supervisors. First level supervisors have authority and accountability over a crew of workers and report to second level supervisors. Second level supervisors have authority and accountability over one or more first level supervisors and report to executive level supervisors. 295

296 This classification also applies to executive level supervisors when all construction operations are subcontracted to licensed contractors and no payroll is developed under any construction classification. In such instances, executive level supervisors exercise control exclusively through licensed subcontractors. On jobs where all construction operations are subcontracted to licensed subcontractors, Classification 9015(1), Building Operation all other employees, shall apply to job site cleanup and warranty repair conducted after construction is completed. Also refer to Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work. Analysis The R & I entry first describes the types of operations that are contemplated by Classification 0042, Landscape Gardening, including the planting and maintenance of gardens, lawns, shrubs, vines, bushes, trees and other decorative vegetation. Further, the entry clarifies that Classification 0042 applies when an employer that is primarily engaged in landscape work at a particular job or location also constructs decorative pools, fountains, drainage and sprinkler systems. These operations are within the scope of work that is described in the license that is issued to landscape contractors by the California State Contractors License Board, which is shown below: C27 Landscaping Contractor A landscape contractor constructs, maintains, repairs, installs, or subcontracts the development of landscape systems and facilities for public and private gardens and other areas which are designed to aesthetically, architecturally, horticulturally, or functionally improve the grounds within or surrounding a structure or a tract or plot of land. In connection therewith, a landscape contractor prepares and grades plots and areas of land for the installation of any architectural, horticultural and decorative treatment or arrangement. In the past, the WCIRB has received questions whether Classification 0042 applies to new construction of decorative landscape and regarding the applicability of Classification 0042 for the construction of decorative pools and fountains when the job involves little to no landscape construction. Since this is an issue of recurring concern, the WCIRB thinks it would be helpful to amend Classification 0042 to clarify the scope of operations. The R & I entry clarifies that Classification 0042 does not include the pruning, repairing or trimming of large, mature trees. Such operations are assignable to Classification 0106, Tree Pruning, Repairing or Trimming N.O.C. hand or mechanical power including yard employees. The WCIRB often receives questions concerning the line of demarcation for assigning Classifications 0042 and 0106 for tree maintenance operations. Accordingly, it would be helpful to amend Classification 0042 to provide direction regarding the classification of tree care. The R & I entry provides that Classification 0042 is an agriculture-related classification and not a construction classification, and therefore, employers whose principal payroll is developed under Classification 0042 are not eligible for assignment to Classifications 5606 and Both Classifications 5606 and 8227 contain footnotes that confine their use in connection with the construction or erection classifications listed in Appendix II, Construction and Erection Classifications. As a result, Classification 0042 does not need to be amended to state that this classification should not be used in connection with Classifications 5606 and

297 Recommendation Amend Classification 0042, Landscape Gardening all operations including maintenance of gardens, to (1) include a description of the types of operations that are typically assigned to this classification; (2) direct that this classification applies when an employer that is primarily engaged in landscape work at a particular job or location also constructs decorative pools, fountains, drainage and sprinkler systems; and (3) direct that this classification does not include the pruning, repairing or trimming of large, mature trees when any portion of the operations requires elevation using ladders, lifts or by climbing and that such operations are to be assigned to Classification 0106, Tree Pruning, Repairing or Trimming N.O.C. hand or mechanical power including yard employees. PROPOSED LANDSCAPE GARDENING all operations including maintenance of gardens 0042 This classification includes the construction, maintenance, repair, and installation of landscape systems and facilities for public and private gardens and others areas which are designed to aesthetically, architecturally, horticulturally, or functionally improve the grounds within or surrounding a structure or a tract or plot of land. Such operations include the preparation and grading of plots and areas of land for the installation of any architectural, horticultural and decorative treatment or arrangement. It also includes trimming or pruning trees when performed exclusively at ground level. When performed by the same employer that is primarily engaged in landscape work at a particular job or location, this classification shall include the construction or installation of hardscape features such as, but not limited to, decorative pools, fountains, drainage and sprinkler systems, garden furniture, statuary and monuments. This classification shall not include the pruning, repairing or trimming of large, mature trees when any portion of the operations requires elevation using ladders, lifts or by climbing. Such operations, including ground crews, shall be assigned to Classification 0106, Tree Pruning, Repairing or Trimming N.O.C. The excavating, transporting and transplanting of mature trees shall be separately classified as 7219(1), Trucking Firms. 297

298 Limousine Transportation A study in 1970 of bus and limousine operators, taxicab operators and ambulance service firms resulted in the establishment of the R & I entry shown below and Classifications 7365(A), Taxicab Operations all employees, and 7365(B), Ambulance Services all employees. 1 R & I Entry Limousine Transportation 7382 Bus or Limousine Operations 7365 Taxicab Operations Limousine operations means the rental of an automobile of the private passenger type with chauffeur for use on defined trips in connection with weddings, funerals, business, social functions, shopping, longdistance tours and similar purposes. Limousine operations do not include the operation of an automobile that is available for immediate hire with fares determined by zone or meter. Such operations shall be classified as Classification 7365, Taxicab Operations. The current phraseologies of Classifications 7382 and 7365 are: BUS OR LIMOUSINE OPERATIONS all employees 7382 TAXICAB OPERATIONS all employees 7365 Payroll shall include the entire remuneration earned by all taxicab drivers during the policy period. In the event an employer does not keep verifiable payroll records for all taxicab drivers, the minimum remuneration for taxicab drivers shall not be less than $29,200 per annum per taxicab dispatched by or operated under the auspices of the insured. The minimum payroll amount is in consideration of vehicle down-time, vacation time or other periods during which the vehicle is not in operation. The per annum payroll amount shall be prorated only when the vehicle is not dispatched by or under the auspices of the insured or registered for the full policy period or when the policy period is less than one year. Analysis The R & I entry states that Classification 7382 applies to the operation of a private passenger vehicle for use on defined trips while Classification 7365 applies to the operation of an automobile available for immediate hire with fares determine by zone or meter. The WCIRB believes there is a clear line of delineation between these two industries as the WCIRB has received few, if any, complaints regarding the assignment of these classifications and many municipal laws dictate the types of services limousine or taxicab operators may provide. Recommendation Based on the above, the WCIRB does not recommend any changes to Classifications 7382 or In 1978, Classification 7365(B) was eliminated and Classification 7332, Ambulance Services all employees, was established. E-1 298

299 Lumberyards Building Material Dealers The R & I entries shown below were established in 1975 as the result of an appeal to the C & R Committee by an employer that operated a home improvement center consisting of a hardware store and lumberyard. The hardware store was the primary operation; however, it was not physically separated from the lumberyard. At the time, Classification 8232, Lumberyards, included a footnote stating that [e]mployees engaged exclusively in store operations, in a physically separated department, may be rated under the appropriate store classification, but only after specific assignment by the Bureau. Staff informed the Committee that home improvement centers were a rapidly growing industry utilizing a different method of merchandising than a typical lumberyard. Classification 8232 was amended to remove the previously mentioned restrictive footnote to allow the Multiple Enterprises rule to be applied when classifying a home improvement center, which, in the instant case, would allow for the assignment of Classification 8017(7), Stores hardware retail. R & I Entries Building Material Dealers See Classification 8232(1), Lumberyards Lumberyards 8232(1) Lumberyards 8017(7) Stores hardware retail The operations of lumberyards and building material dealers include the sale of rough and surfaced lumber, plywood, sand, gravel, cement, brick, fencing wire, wallboard, doors, roofing paper, paneling, decorative stone, foundation piers, pipe, button board and similar building material items. Such risks shall be assigned to Classification However, when a lumberyard or building material dealer also conducts store operations, handling a variety of products such as hardware, arts and crafts, automotive accessories, electrical appliances, housewares, paint, pet supplies and outdoor furniture, the classifications applicable to such a risk shall be determined in accordance with Part 3, Section III, Rule 3, Multiple Enterprises, of the Uniform Statistical Reporting Plan. This means that when lumberyards or building material dealers have store operations that develop the governing payroll, physical separation is not required for the assignment of the appropriate store classification, in addition to Classification Payroll developed in the sale and delivery of lumber and building materials shall be assigned to Classification 8232, while the payroll developed in store sales shall be assigned to Classification 8017, Stores hardware. If the governing payroll of a risk is developed in its lumberyard or building material operations, store activities must be physically separated to qualify for the assignment of Classification The current phraseologies for Classifications 8232(1), 8232(2) and 8017(7) are: LUMBERYARDS commercial no secondhand materials including counterpersons 8232(1) 299

300 BUILDING MATERIAL DEALERS commercial no secondhand materials including counterpersons This classification contemplates the sale of sand, gravel, cement, brick, fencing wire, wallboard, doors, roofing paper, paneling, decorative stone, foundation piers, pipe, button board, and similar building material items. 8232(2) STORES hardware retail 8017(7) Analysis The R & I entry clarifies that operators of lumberyards or building material dealerships that also operate a store for the sale of various products, including but not limited to hardware, tools, electrical appliances, housewares, and paint may be assigned to Classifications 8232 and 8017(7) if the provisions of the Multiple Enterprises rule are met. Classifications 8232(1) and 8232(2) do not specifically provide for the separate classification of a store in connection with a lumberyard or building material dealership. The WCIRB thinks it would be helpful to amend Classifications 8232(1) and 8232(2) to provide that the operation of a store as described above shall be separately classified as 8017(7) in accordance with the provisions of the Multiple Enterprises rule and, for purposes of applying the Multiple Enterprises rule, the receipt of the payment for lumber purchases is not considered interchange of labor with the lumberyard. 300

301 Recommendation Amend Classification 8232(1), Lumberyards commercial no secondhand materials, to indicate that (1) store operations shall be assigned to Classification 8017(7), Stores hardware retail, in accordance with the provisions of the Multiple Enterprises rule, and (2) for purposes of applying the Multiple Enterprises rule, the receipt of the payment for lumber purchases shall not be considered interchange of labor with the lumberyard. PROPOSED LUMBERYARDS commercial no secondhand materials including counterpersons 8232(1) The operation of a retail store for the sale of various products such as but not limited to hardware, tools, electrical appliances, housewares, and paint shall be separately classified as 8017(7), Stores hardware retail, in accordance with the provisions of the Multiple Enterprises rule. For purposes of applying the Multiple Enterprises rule, the receipt of the payment for lumberyard merchandise shall not be considered interchange of labor with the lumberyard. * * * * * Recommendation Amend Classification 8232(2), Building Material Dealers commercial no secondhand materials, to indicate that (1) store operations shall be assigned to Classification 8017(7), Stores hardware retail, in accordance with the provisions of the Multiple Enterprises rule, and (2) for purposes of applying the Multiple Enterprises rule, the receipt of the payment for lumber purchases shall not be considered interchange of labor with the lumberyard. PROPOSED BUILDING MATERIAL DEALERS commercial no secondhand materials including counterpersons This classification contemplates the sale of sand, gravel, cement, brick, fencing wire, wallboard, doors, roofing paper, paneling, decorative stone, foundation piers, pipe, button board, and similar building material items. The operation of a retail store for the sale of various products such as but not limited to hardware, tools, electrical appliances, housewares, and paint shall be separately classified as 8017(7), Stores hardware retail, in accordance with the provisions of the Multiple Enterprises rule. For purposes of applying the Multiple Enterprises rule, the receipt of the payment for building material merchandise shall not be considered interchange of labor with the building material dealer. 8232(2) 301

302 Metal Products The R & I entry shown below was established in 2009 pursuant to a request from the C & R Committee to develop a list of classifications that apply to products that are typically manufactured or assembled from metal stock or parts. R & I Entry Metal Products The following is an alphabetical listing of classifications that apply to the manufacture or assembly of products that are typically manufactured or assembled from metal stock or parts. Pursuant to the Uniform Statistical Reporting Plan, Part 3, Section III, Rule 1, Classification Description, subrule a, [a]ny business or operation specifically described by a classification shall be assigned to that classification. Further, classifications having an N.O.C. (not otherwise classified) qualifier shall not be used if another classification more accurately describes the operation. 3165(1) Air-Conditioning and Refrigeration Equipment Mfg. 3805(1) Aircraft Engine Mfg. or Rebuilding 3830 Airplane Mfg. 3066(3) Aluminum Ware Mfg Automobile, Automobile Truck or Motorcycle Parts Mfg. N.O.C. 2797(2) Automobile Body Mfg. pleasure car or taxi cab 3815(2) Automobile Body Mfg. truck, trailer or bus 3805(2) Automobile or Automobile Truck Engine Mfg Automobile or Motorcycle Mfg. or Assembling 3815(1) Automobile Truck or Automobile Truck Trailer Mfg. or Assembling 3620(1) Boilermaking N.O.C Can Mfg. 3066(4) Coppersmithing 3060(2) Door or Window Frame Mfg. metal or plastic 3060(1) Door or Window Mfg. metal or plastic including glass 3060(3) Door or Window Mfg. screen 3180 Fixtures or Lamp Mfg. or Assembly 3339 Foundries investment castings 3081(1) Foundries iron N.O.C Foundries non-ferrous N.O.C Foundries steel castings 3175 Furnace, Heater or Radiator Mfg. 3076(1) Furniture Mfg. metal 3401(2) Gate or Corral Mfg. 3574(2) Golf Club or Fishing Rod Mfg. or Assembly 3146(1) Hardware Mfg. N.O.C Iron or Steel Works structural 3040 Iron Works non-structural shop 3383(1) Jewelry Mfg. 3647(2) Lead Mfg., Reclaiming or Alloying 3632 Machine Shops N.O.C Machine Shops aircraft components 3574(1) Machine Mfg. N.O.C. 3560(1) Machinery Mfg. commercial food processing equipment 3560(2) Machinery Mfg. industrial N.O.C. 3560(3) Machinery Mfg. material handling equipment 302

303 3501(1) Machinery Mfg. portable tools and lawn care 3501(2) Machinery Mfg. swimming pool and spa 3507 Machinery or Equipment Mfg. agricultural, construction, mining or ore milling 3400 Metal Goods Mfg. N.O.C. 3152(1) Nail, Tack or Rivet Mfg. 3152(2) Nut, Bolt or Screw Mfg Pattern or Model Mfg Pipe or Tube Mfg. 3620(2) Plate Steel Products Fabrication N.O.C. 3165(2) Refrigerator Mfg. metal 3039 Reinforcing Steel Fabrication 3152(3) Screw Machine Products Mfg. N.O.C. 3066(1) Sheet Metal Products Mfg. N.O.C Steel Making 3169 Stove Mfg. 3131(1) Tag, Button or Fastener Mfg Tool Mfg. N.O.C. 3110(2) Tool Mfg. hot formed tools 3383(4) Trophy Mfg. 3401(1) Tube or Pipe Products Mfg. N.O.C Valve Mfg. N.O.C. 3076(6) Wheelchair Mfg Wire Goods Mfg. N.O.C. 3241(1) Wire Rope or Cable Mfg. including wire drawing 4470 Wire Rope or Cable Mfg. no wire drawing Analysis The R & I entry provides a list of numerous classification that apply to the manufacture or assembly of products for which the only similarity is that the products are typically manufactured or assembled from metal parts. The USRP currently has an Industry Group for Metal Working Classifications. The heading to the Metal Working Classifications Industry Group section includes the following directive: The following grouping includes classifications applicable to the manufacturing and machining of metal stock to produce an end-product that is not specifically described by another classification. Pursuant to Part 3, Section II, Rule 17, a classification having a N.O.C. (not otherwise classified) qualifier shall not be used if another classification more accurately describes the operation. As such, the following group does not include all possible classifications applicable to the manufacture or machining of metal products. For classifications that describe the manufacture or assembly of specific products, refer to the alphabetical listing of classifications. The Metal Working Classifications Industry Group is comprised exclusively of classifications that are metal-specific. However, most of the classifications in the Metal Products list provided in the R & I entry lack this consistency and the list includes many classifications that are not material-specific or that specify a variety of possible materials, including non-metal materials, and therefore, such classifications should not be added to the Metal Working Classifications Industry Group. The exceptions are Classifications 3647(2), Lead Mfg., Reclaiming or Alloying, and 3039, Reinforcing Steel Fabrication. 303

304 Recommendation Move Classification 3647(2), Lead Mfg., Reclaiming or Alloying, to the Metal Working Classifications Industry Group. PROPOSED METAL WORKING CLASSIFICATIONS LEAD MFG., RECLAIMING OR ALLOYING including litharge and lead oxide manufacturing 3647(2) * * * * * Recommendation Move Classification 3039, Reinforcing Steel Fabrication, to the Metal Working Classifications Industry Group. PROPOSED METAL WORKING CLASSIFICATIONS REINFORCING STEEL FABRICATION shearing and bending at permanent shop or yard location 3039 The fabrication of reinforcing steel at job sites shall be assigned to the appropriate construction classification. * * * * * Recommendation Establish a cross-reference to indicate that Classification 3647(2), Lead Mfg., Reclaiming or Alloying, is listed under the Metal Working Classifications Industry Group. PROPOSED LEAD MFG., RECLAIMING OR ALLOYING including litharge and lead oxide manufacturing See Metal Working Classifications. * * * * * Recommendation Establish a cross-reference to indicate that Classification 3039, Reinforcing Steel Fabrication, is listed under the Metal Working Classifications Industry Group. 304

305 PROPOSED REINFORCING STEEL FABRICATION shearing and bending at permanent shop or yard location See Metal Working Classifications. 305

306 Mobile Catering Service The R & I entry shown below was established in 1977 to clarify the classification procedure for employers operating in the mobile catering service industry. R & I Entry Mobile Catering Service 9079(1) Restaurants or Taverns 8017(1) Stores retail 8018 Stores wholesale Mobile catering service operations shall be classified in accordance with the following procedure: 1. The retail selling of packaged and prepared foods and sundry items by mobile catering service firms shall be assigned to Classification 8017, Stores retail N.O.C. 2. The storage of packaged and prepared foods and sundry items, the preparation of cold sandwiches, and the loading of trucks, which are owned and operated by the mobile catering service firm with such merchandise, shall be assigned to Classification The storage, loading, and sale of packaged and prepared foods and sundry items to mobile catering service firms which operate their own trucks by firms that do not perform the retail selling function shall be assigned to Classification 8018, Stores wholesale N.O.C. 4. The preparation of all hot foods by mobile catering service firms or by concerns selling to mobile catering service firms shall be assigned to Classification 9079(1), Restaurants or Taverns. 5. Mobile catering service firms engaged in the retail selling of packaged and prepared foods, which also engage in the cooking of foods on trucks, shall be assigned to Classification 9079(1). The current phraseologies of Classifications 9079(1), 8017(1) and 8018 are: RESTAURANTS OR TAVERNS all employees including musicians and entertainers 9079(1) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 9079(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification contemplates the preparation and serving of hot and cold food items for consumption on or away from the premises or the preparation, pouring and serving of alcoholic beverages for consumption on the premises. Hot foods items are foods that are cooked to order for customers and served hot. Foods that are prepared and served from a warming tray or similar device are also considered hot foods. STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES retail N.O.C. 8017(1) The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. 306

307 STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES wholesale N.O.C Analysis The R & I entry clarifies that Classification 8017(1) is assignable to (1) the retail selling of packaged and prepared foods and sundry items by mobile catering service firms, and (2) the incidental storage of packaged and prepared foods and sundry items by the same employer. Classification 8017(1) contains the term N.O.C. (not otherwise classified), which means that Classification 8017(1) is assignable to the retail sale of products that are not more accurately described by another stores classification. To clarify that the retail sale of packaged food and sundry items, including the incidental storage of such merchandise, are assignable to Classification 8017(1), the WCIRB recommends amending Section IV, Special Industry Classification Procedures, Rule 5, Stores, to direct that firms that operate mobile food trucks for the retail selling of packaged and prepared foods, including the incidental storage of such merchandise, be assigned to Classification 8017(1) Stores retail. The R & I entry clarifies that the preparation of hot foods by mobile catering service firms or by concerns selling to mobile catering service firms is assignable to Classification 9079(1), and that mobile catering service firms engaged in the retail selling of packaged and prepared foods, which also engage in the cooking of foods on trucks, shall be assigned to Classification 9079(1). While Classification 9079(1) provides that this classification contemplates the preparation and serving of hot and cold food items for consumption on or away from the premises or the preparation, pouring and serving of alcoholic beverages for consumption on the premises, the WCIRB recommends amending Classification 9079(1) to state that it also applies to firms that operate mobile food trucks wherein hot food is prepared for sale to customers. The WCIRB also recommends amending Section IV, Special Industry Classification Procedures, Rule 5, Stores, to clarify that firms that operate mobile food trucks wherein hot food is prepared for sale to customers are assignable to Classification 9079(1), Restaurants or Taverns. The R & I also clarifies that firms that sell packaged and prepared foods and sundry items to separate mobile catering service firms for resale are assigned to Classification Since (1) these operations do not include any hot food preparation, and (2) the packaged and prepared foods and sundry items are not sold directly to the general public, this type of operation is not assignable to Classifications 8017(1) or 9079(1). Since Classification 8018 contemplates the wholesale sale of packaged and prepared foods and sundry items, the WCIRB does not recommend that Classification 8018 be amended to specifically include the sale of packaged and prepared foods and sundry items to separate mobile catering service firms for resale. 307

308 Recommendation Amend Classification 9079(1), Restaurants or Taverns, to provide that this classification also applies to the operation of mobile food trucks wherein hot food is prepared for sale to customers. PROPOSED RESTAURANTS OR TAVERNS all employees including musicians and entertainers 9079(1) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 9079(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification contemplates the preparation and serving of hot and cold food items for consumption on or away from the premises or the preparation, pouring and serving of alcoholic beverages for consumption on the premises. This classification also applies to the operation of mobile food trucks wherein hot food is prepared for sale to customers. Hot foods items are foods that are cooked to order for customers and served hot. Foods that are prepared and served from a warming tray or similar device are also considered hot foods. * * * * * Recommendation Amend Section IV, Rule 5, Stores, to direct that firms that operate mobile food trucks for the retail selling of packaged and cold foods be assigned to Classification 8017(1), Stores retail, and that the operation of mobile food trucks wherein hot food is prepared for sale to customers be assigned to Classification 9079(1), Restaurants or Taverns. PROPOSED Section IV Special Industry Classification Procedures 5. Stores ce. The payroll of store employees engaged in the preparation and sale of hot foods shall be assigned to Classification 9079(1), Restaurants or Taverns. f. Firms that operate mobile food trucks for the retail selling of packaged and cold foods from food trucks, including the incidental storage of such merchandise, shall be assigned to Classification 8017(1), Stores retail N.O.C. The operation of mobile food trucks wherein hot food is prepared for sale to customers shall be assigned to Classification 9079(1), Restaurants or Taverns. 308

309 Mobile Crane and Hoisting Services The R & I entry shown below was established in 1968 pursuant to a request by the C & R Committee to clarify what types of firms are considered to be mobile crane and hoisting service contractors. R & I Entry Mobile Crane and Hoisting Services 8267 Machinery and Equipment Dealers secondhand 8107 Machinery Dealers 8028(2) Machinery or Equipment Rental Yards 7219(3) Mobile Crane and Hoisting Service Contractors The WCIRB defines a mobile crane and hoisting service contractor as an employer who enters into contracts to perform hoisting or lifting operations exclusively. Such operations include, but are not limited to, the following: 1. the hoisting of machinery and equipment into existing buildings, 2. the hoisting of materials on construction and erection projects, and 3. the use of mobile cranes to load or unload trucks or freight cars. The payroll developed by insureds performing the above-described operations exclusively shall be assigned to Classification 7219(3), Mobile Crane and Hoisting Service Contractors. An employer who performs both hoisting and construction operations on a particular project shall not be assigned to Classification 7219(3), but shall have its entire payroll in connection with such project, including the payroll developed in the operation of the mobile crane, assigned to the applicable construction classification. Dealers in new mobile cranes, telescoping boom trucks, lift-alls, etc., are assigned to Classification 8107, Machinery Dealers. This classification applies both to the sale of such equipment and to firms that lease such equipment on a long term basis (without operators). Dealers in used mobile cranes, telescoping boom trucks, lift-alls, etc., that are purchased, reconditioned and resold are assigned to Classification 8267, Machinery and Equipment Dealers secondhand. Firms that rent mobile cranes, telescoping boom trucks, lift-alls, etc., without operators are assigned to Classification 8028(2), Machinery or Equipment Rental Yards. Firms that both sell and rent mobile cranes, telescoping boom trucks, lift-alls, etc., will be assigned to Classification 8107 or 8028(2) based upon the predominant activity (over 50% of gross receipts). Firms that rent mobile cranes, telescoping boom trucks, lift-alls, etc., with operators are assigned to Classification 7219(3), Mobile Crane or Hoisting Contractors. The current phraseology for Classifications 8267, 8107, 8028(2), and 7219(3) are: MACHINERY AND EQUIPMENT DEALERS secondhand including incidental reconditioning or repairing Wrecking or salvaging shall be separately classified

310 MACHINERY DEALERS N.O.C. including demonstration and repair 8107 Installation and repair operations away from premises of the employer shall be separately classified. Display and parts departments that are physically separated from the repair shop and sell parts commercially shall be separately classified as 8017(7), Stores hardware. Secondhand machinery dealers shall be classified as 8267, Machinery and Equipment Dealers secondhand. MACHINERY OR EQUIPMENT RENTAL YARDS not dealers in new or used machinery all employees including counterpersons 8028(2) MOBILE CRANE AND HOISTING SERVICE CONTRACTORS N.O.C. all operations including yard employees This classification shall apply to hoisting or lifting operations requiring the use of mobile hoisting equipment, block and fall, jacks, shoring timbers, rollers, ropes and cables, including transportation of such equipment to and from work sites. 7219(3) Analysis The entry clarifies that Classification 7219(3) applies to mobile crane and hoisting service contractors that enter into contracts to perform hoisting or lifting operations exclusively and that employers who perform both hoisting and construction operations on a particular project are assignable to the applicable construction classification. The USRP provides that division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. Accordingly, Classification 7219(3) should be amended to restrict its use with any other classification (other than the Standard Exceptions or General Exclusions). The R & I entry provides examples of the operations associated with mobile crane work; however the intended scope of this classification is clear based on the classification phraseology and footnote. The R & I entry provides direction regarding classifications applicable to dealers that sell new and used crane equipment. The WCIRB thinks it would be helpful to amend Classifications 8107 (new machinery and equipment) and 8267 (secondhand machinery and equipment) to include examples of the types of machinery and equipment that are sold by employers assignable to these classifications, and to amend Classifications 8028(1) and 8028(2) (machinery and equipment rental yards) to include examples of the types of machinery and equipment that are rented by employers assignable to these classifications. The R & I entry provides information regarding the rental of mobile crane and hoisting equipment with and without operators, and clarifies that firms renting such equipment with operators are assignable to Classification 7219(3). The WCIRB thinks it would be helpful to amend Classifications 7219(3), 8028(1) and 8028(2) to include this information. 310

311 Recommendation Amend Classification 7219(3), Mobile Crane and Hoisting Service Contractors, to (1) add a restrictive footnote indicating that, at a particular job or location, it should not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions); and (2) clarify that it also applies to employers that rent mobile crane and hoisting equipment with operators. PROPOSED MOBILE CRANE AND HOISTING SERVICE CONTRACTORS N.O.C. all operations including yard employees At a particular job or location, this classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions). 7219(3) This classification shall apply to hoisting or lifting operations requiring the use of mobile hoisting equipment, block and fall, jacks, shoring timbers, rollers, ropes and cables, including transportation of such equipment to and from work sites. This classification also applies to employers that rent mobile crane and hoisting equipment with operators. * * * * * Recommendation Amend Classification 8267, Machinery and Equipment Dealers secondhand, to provide examples of the types of secondhand machinery and equipment that are sold by employers assignable to this classification. PROPOSED MACHINERY AND EQUIPMENT DEALERS secondhand including incidental reconditioning or repairing This classification applies to dealers of secondhand machinery and equipment such as, but is not limited to, bull dozers, excavators, loaders, graders, mobile cranes, conveyers, machine tools, welding equipment, food processing equipment, mining and ore milling equipment, and farm equipment. Wrecking or salvaging shall be separately classified * * * * * 311

312 Recommendation Amend Classification 8107, Machinery Dealers N.O.C., to provide examples of the types of machinery that is sold by employers assignable to this classification. PROPOSED MACHINERY DEALERS N.O.C. including demonstration and repair 8107 This classification applies to dealers of new machinery such as, but is not limited to, bull dozers, excavators, loaders, graders, mobile cranes, conveyers, machine tools, welding equipment, food processing equipment, mining and ore milling equipment, and farm equipment. Installation and repair operations away from premises of the employer shall be separately classified. Display and parts departments that are physically separated from the repair shop and sell parts commercially shall be separately classified as 8017(7), Stores hardware. Secondhand machinery dealers shall be classified as 8267, Machinery and Equipment Dealers secondhand. * * * * * Recommendation Amend Classification 8028(1), Equipment or Machinery Rental Yards not dealers in new or used equipment, to provide examples of the types of machinery and equipment that are rented by employers assignable to these classifications and to provide that the rental of mobile cranes and hoisting equipment with operators shall be assigned to Classification 7219(3), Mobile Crane and Hoisting Service Contractors. PROPOSED EQUIPMENT OR MACHINERY RENTAL YARDS not dealers in new or used equipment all employees including counterpersons This classification applies to employers engaged in the rental of equipment and machinery such as, but is not limited to portable air compressors, augurs, jacks, chain saws, compactors, wheel barrows, electric drills, grinders, sanders, ladders, hammers, garden tools and equipment, paint compressors, plumbing tools, sandblasting equipment, portable generators, rototillers, chain saws, portable concrete mixers, vibrators, tractors, backhoes, loaders, and trenchers. The rental of mobile cranes and hoisting equipment with operators shall be assigned to Classification 7219(3), Mobile Crane and Hoisting Service Contractors. 8028(1) * * * * * 312

313 Recommendation Amend Classification 8028(2), Machinery or Equipment Rental Yards not dealers in new or used machinery, to provide examples of the types of machinery and equipment that are rented by employers assignable to these classifications and to provide that the rental of mobile cranes and hoisting equipment with operators shall be assigned to Classification 7219(3), Mobile Crane and Hoisting Service Contractors. PROPOSED MACHINERY OR EQUIPMENT RENTAL YARDS not dealers in new or used machinery all employees including counterpersons This classification applies to employers engaged in the rental of machinery and equipment such as, but is not limited to portable air compressors, augurs, jacks, chain saws, compactors, wheel barrows, electric drills, grinders, sanders, ladders, hammers, garden tools and equipment, paint compressors, plumbing tools, sandblasting equipment, portable generators, rototillers, chain saws, portable concrete mixers, vibrators, tractors, backhoes, loaders, and trenchers. The rental of mobile cranes and hoisting equipment with operators shall be assigned to Classification 7219(3), Mobile Crane and Hoisting Service Contractors. 8028(2) 313

314 Motion Pictures The R & I entry shown below was established in 2007 following a study of the motion picture industry. As a result of this study, Classification 4360, Motion Pictures development of negative, printing and subsequent operation except the marketing of the product through file exchanges at locations other than the studio, was eliminated and employers specializing in the development and printing of motion picture film for motion picture companies were reassigned to Classification 4362, Motion Pictures negative and print processors, distributors and film exchanges not motion picture production companies. The R & I entry clarifies the scope of Classifications 9610, Motion Pictures production, 7607(1), Video Post Production computer or electronic, and 7607(2), Audio Post Production computer or electronic. Although the R & I entry lists Classification 4362, Motion Pictures negative and print processors and distributors not motion picture production companies, the entry provides no information on this classification. R & I Entry Motion Pictures 9610 Motion Pictures production in studios and outside all employees 4362 Motion Pictures negative and print processors and distributors not motion picture production companies 7607(1) Video Post Production computer or electronic 7607(2) Audio Post Production computer or electronic Classification 9610, Motion Pictures production, applies to all operations of firms engaged in the production of motion pictures, television features, commercials, music videos or industrial films that are recorded on motion picture film stock, videotape, digital or other media. The payroll limitation of this classification applies to actors, musicians, producers, and the director responsible for all aspects of production. Motion picture producers orchestrate the financial, administrative and creative aspects of a motion picture. Producers are responsible for hiring the motion picture director and may assist in hiring other key personnel to ensure that the motion picture director s creative vision is realized. The motion picture director is responsible for all aspects of the production. The payroll for all other directors such as assistant and associate directors is not subject to limitation. Classification 9610 also contemplates motion picture production using computer animation. Voice talent, motion capture actors, camera and equipment operators, the director, and producers for animated features are assignable to Classification Employees of the motion picture production firm whose duties are confined to using digital applications to create animation and effects (no live action) are assignable to Classification 8810(1), Clerical Office Employees, provided they otherwise meet the Uniform Statistical Reporting Plan s definition of Clerical Office Employees. Classification 7607(1), Video Post Production computer or electronic, applies to digital or electronic video post-production operations for other concerns on a fee basis. Video post-production operations are performed in conjunction with video taped television shows, commercials, music videos, and motion pictures. Many of the aforementioned productions are shot directly onto motion picture film even when it is anticipated the production will be a video production. Video post-production operations consist of a variety of processes that include conversion of film to video, production of dailies, offline editing, online editing, color correction, compositing of special effects, and titling. Classification 7607(2), Audio Post Production computer or electronic, applies to digital or electronic audio post-production operations for other concerns on a fee basis. Soundtracks are assembled by cutting and splicing using electronic or computerized editing equipment also known as digital audio workstations. The elements are sequenced to match the action and dialogue of each scene. 314

315 The current phraseology of Classification 9610, 4362, 7607(1) and 7607(2) are: MOTION PICTURES production in studios and outside all employees 9610 The actual remuneration of actors, musicians, producers and the motion picture director must be included, subject, however, to a maximum of $106,600 per year per person. When such employees do not work the entire year, the payroll limitation shall be prorated based upon the number of weeks in which such employees worked during the policy period. This classification applies to firms that specialize in the production of motion pictures, television features, commercials, music videos or industrial films that are recorded on motion picture film stock, videotape, digital or other media. Employees engaged exclusively in the electronic editing of digital files using computerized editing equipment are assignable to Classification 8810(1), Clerical Office Employees, provided they otherwise meet the definition of Clerical Office Employees as contained in Part 3, Section III, Rule 4. Employees that create animation using computer or digital applications are assignable to Classification 8810(1), Clerical Office Employees, provided they otherwise meet the definition of Clerical Office Employees as contained in Part 3, Section III, Rule 4. The payroll limitation of this classification is applicable to the director responsible for all aspects of production. The payroll for all other directors such as assistant and associate directors is not subject to limitation. The payroll limitation also applies to motion picture producers responsible for overseeing the financial, administrative and creative aspects of a motion picture. MOTION PICTURES negative and print processors, distributors and film exchanges not motion picture production companies 4362 This classification applies to firms that specialize in the developing, printing or distribution of motion pictures for other concerns on a fee basis. This classification also includes motion picture film restoration. VIDEO POST PRODUCTION computer or electronic all employees including Clerical Office Employees and Outside Salespersons This classification shall not be used for division of payroll in connection with any other classification (other than General Exclusions) unless the operations described by Classification 7607(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification applies to those firms engaged exclusively in computerized or electronic video post-production activities for other concerns in connection with motion pictures, television features, commercials or similar productions, on a contract basis. This classification does not apply to firms engaged in television production, motion picture production, or post-production operations such as the developing of film, production of prints by exposing raw film stock, editing of film prints by cutting or splicing, or contract video duplication. 7607(1) 315

316 AUDIO POST PRODUCTION computer or electronic all employees including Clerical Office Employees and Outside Salespersons 7607(2) This classification shall not be used for division of payroll in connection with any other classification (other than General Exclusions) unless the operations described by Classification 7607(2) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification applies to those firms engaged exclusively in computerized or electronic audio post-production activities for other concerns in connection with motion pictures, television features, commercials or similar productions on a contract basis. This classification does not apply to firms engaged in motion picture or television production; audio or music recording or mixing; scoring of motion pictures, television or advertising commercials; or contract audio duplication. Analysis With respect to Classification 9610, the R & I entry (1) describes the operations of firms engaged in the production of motion pictures, television features, commercials, music videos or industrial films; (2) clarifies that the payroll limitation of this classification applies to actors, musicians, producers, and the director responsible for production; (3) clarifies that the payroll limitation does not apply to assistant and associate directors; (4) clarifies that this classification includes motion picture production using computer animation and associated staff, such as voice talent, motion capture actors, camera and equipment operators, the director, and producers; and (5) clarifies that employees whose duties are confined to using digital applications to create animation and effects are assignable to Classification 8810(1), Clerical Office Employees, provided they otherwise meet the USRP s definition of Clerical Office Employees. Each point covered in the R & I entry is adequately addressed by Classification The R & I defines the operations assignable to Classification 7607(1), which are also referenced in the footnote for Classification 7607(1). Although music videos is not specifically included in the classification, the footnote to Classification 7607(1) includes the term, motion pictures, television features, commercials or similar productions, and therefore the addition of music videos is not needed. The R & I entry also includes specific processes, such as the conversion of film to video, production of dailies, offline editing, online editing, color correction, compositing of special effects, and titling, as examples of video post-production. Post production processes include a large variety of operations and the WCIRB has not received questions concerning the post production processes contemplated by Classification 7607(1). Amending the footnote to Classification 7607(1) to add specific post production processes may appear to limit the assignment of Classification 7607(1). The WCIRB does not recommend changes to Classification 7607(1). The R & I clarifies that Classification 7607(2) includes the assembly of soundtracks by cutting and splicing using electronic or computerized equipment (digital audio workstations). The phraseology of Classification 7607(2) contemplates these types of activities; however, the WCIRB thinks it would be helpful to clarify that this classification includes post-production operations for the audio portion of motion pictures, including dubbing type work and incidental studio recording, when performed on a contract basis for separate concerns. Although Classification 4362, Motion Pictures negative and print processors, distributors and film exchanges, is included in the title of the subject R & I, no information is provided in the R & I pertaining to Classification 4362, and the WCIRB does not recommend any changes to this classification. 316

317 Recommendation Amend Classification 7607(2), Audio Post Production computer or electronic all employees, to clarify that it includes post-production operations for the audio portion of motion pictures, including dubbing type work and incidental studio recording, when performed on a contract basis. PROPOSED AUDIO POST PRODUCTION computer or electronic all employees including Clerical Office Employees and Outside Salespersons 7607(2) This classification shall not be used for division of payroll in connection with any other classification (other than General Exclusions) unless the operations described by Classification 7607(2) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification applies to those firms engaged exclusively in computerized or electronic audio post-production activities for other concerns in connection with motion pictures, television features, commercials or similar productions on a contract basis. Such operations include dubbing type work and incidental studio recording in connection with motion pictures when performed on a contract basis. This classification does not apply to firms engaged in motion picture or television production; audio or music recording or mixing; scoring of motion pictures, television or advertising commercials; or contract audio duplication. 317

318 Municipal, State or Other Public Agencies The R & I entry shown below was established in 2000, following a review of the Municipal, State or Other Public Agencies Industry Group of the USRP. The R & I entry was established to clarify the scope of Classifications 9420, Municipal, State or Public Agency Employees all other employees N.O.C., and 9410, Municipal, State or Public Agency Employees. R & I Entry Municipal, State or Other Public Agencies 9420 Municipal, State or Public Agency Employees all other employees N.O.C Municipal, State or Public Agency Employees If the insured is a municipal, state or other public agency, the applicable classification(s) will generally appear on the Municipal, State or Other Public Agencies industry grouping found in the Uniform Statistical Reporting Plan, Part 3, Section VII. Examples of municipal, state or other public agencies include, but are not limited to, airport districts, cemetery districts, cities and towns, community service districts, fire departments, housing authorities, irrigation districts, joint powers authorities, police departments and law enforcement agencies, public school districts, recreation districts, water districts, and various state agencies. New construction, electric light or power departments, pest control, and marina or harbor operations are separately classified using non-municipal classifications. Classification 9410, Municipal, State or Other Public Agency Employees, is applicable to employees of public agencies who (1) do not meet the criteria for assignment to a Standard Exception classification and (2) do not engage in or directly supervise manual labor, construction, shop, or mercantile operations. Employees assigned to 9410 include, but are not limited to, mayors, city council members, elected officials, judges, hearing officers, district attorneys, courthouse employees, employees engaged in laboratory work, health inspectors, building inspectors, meter readers other than water meter readers, engineers not engaged in actual construction or operation, and similar occupations. With regard to municipal recreation and park department operations, Classification 9410 is applicable to the operations commonly performed by recreation leaders, coaches, instructors, referees, and officials; daycare/babysitting; activity supervisors; and similar operations that do not involve manual labor. Classification 9410 is not available for division of payroll with other municipal classifications that include a descriptive phrase beginning with all, as in the expression all employees, all other employees, all operations, and all work to completion, except for an operation not incidental to and not usually associated with the enterprise described by such a classification. Classification 9420, Municipal, State or Public Agency Employees all other employees N.O.C., is a Not Otherwise Classified (N.O.C.) classification that applies to laborers, mechanics, storekeepers, and similar employees of public agencies. It does not apply in cases where operations are more specifically described by another municipal classification. The classification footnote specifies that new construction work, electrical light or power departments, pest control, and marina or harbor operations shall be separately classified. With regard to municipal recreation and park department operations, Classification 9420 is applicable to park and facility maintenance, landscape, snack bar and vending operations, lifeguards, security, and similar activities in support of the facility. Classification 9420 does not apply to park security operations when performed by fish and game wardens or by park rangers. The current phraseologies for Classifications 9410 and 9420 are: 318

319 MUNICIPAL, STATE OR OTHER PUBLIC AGENCIES MUNICIPAL, STATE OR OTHER PUBLIC AGENCY EMPLOYEES not engaged in manual labor, or direct supervision of construction or erection work N.O.C. This classification includes mayors, city council members, elected officials, judges, hearing officers, district attorneys, courthouse clerks and public records clerks, employees engaged in laboratory work, health inspectors, building inspectors, engineers not engaged in actual construction or operation, and similar occupations MUNICIPAL, STATE OR OTHER PUBLIC AGENCIES MUNICIPAL, STATE OR PUBLIC AGENCY EMPLOYEES all other employees including laborers, mechanics, and storekeepers N.O.C. New construction work, pest control operations, and electrical light or power department operations shall be separately classified. Marina or harbor operations shall be separately classified as 9016(1), Amusement Parks or Exhibitions Analysis The R & I entry provides examples of the types of entities that are municipal, state or other public agencies and thus are subject to the classifications included in the Municipal, State or Other Public Agencies Industry Group. Staff believes that the status of an entity as a public agency is readily verifiable, and the title of the Municipal, State or Other Public Agencies Industry Group is sufficiently descriptive to identify its intended constituency. The entry clarifies that new construction, electric light or power departments, pest control, and marina or harbor operations are separately classified using non-municipal classifications. This information is also provided in the footnote for Classification 9420, Municipal, State or Public Agency Employees all other employees N.O.C. The entry indicates that Classification 9410, Municipal, State or Other Public Agency Employees, is applicable to employees of public agencies who (1) do not meet the criteria for assignment to a Standard Exception classification and (2) do not engage in or directly supervise manual labor, construction, shop, or mercantile operations. Classification 9410 does not specifically include either Clerical Office Employees or Outside Salespersons and already specifies that employees assigned to Classification 9410 are not engaged in manual labor or direct supervision of construction or erection work. The entry clarifies that [e]mployees assigned to 9410 include, but are not limited to, mayors, city council members, elected officials, judges, hearing officers, district attorneys, courthouse employees, employees engaged in laboratory work, health inspectors, building inspectors, meter readers other than water meter readers, engineers not engaged in actual construction or operation, and similar occupations. Additional examples are provided specifically for recreation and park department operations. With the exception of meter readers other than water meter readers and recreation and park department operations, these same examples are already listed in the footnote for Classification Staff recommends that meter readers other than water meter readers and recreation and park department operations be added to Classification The entry states that Classification 9410 is not available for division of payroll with other municipal classifications that include a descriptive phrase beginning with all, 1 except for an operation not incidental to and not usually associated with the enterprise described by such a classification. The USRP already provides direction on the administration of classifications that include a descriptive phrase beginning with all. 1 Descriptive phrases beginning with all, include all employees, all other employees, all operations, and all work to completion. 319

320 The entry explains that Classification 9420, Municipal, State or Public Agency Employees all other employees N.O.C., is a Not Otherwise Classified (N.O.C.) classification that applies to laborers, mechanics, storekeepers, and similar employees of public agencies, and that it does not apply in cases where operations are more specifically described by another municipal classification. The USRP already provides direction on the administration of classifications that include N.O.C., and the phraseology of Classification 9420 already indicates that it applies to laborers, mechanics, and storekeepers. The entry provides examples of recreation and park department employees assignable to Classification Staff recommends that the phraseology of Classification 9420 include recreation and park department operations. 320

321 Recommendation Amend Classification 9410, Municipal, State or Other Public Agency Employers not engaged in manual labor, or direct supervision of construction or erections work, within the Municipal, State or Other Public Agencies Industry Group, to include (1) meter readers other than water meter readers, and (2) recreation and park department operations that are performed by recreation leaders, coaches, instructors, referees, and officials; daycare/babysitting; activity supervisors; and similar operations that do not involve manual labor. PROPOSED MUNICIPAL, STATE OR OTHER PUBLIC AGENCIES MUNICIPAL, STATE OR OTHER PUBLIC AGENCY EMPLOYEES not engaged in manual labor, or direct supervision of construction or erection work N.O.C. This classification includes mayors, city council members, elected officials, judges, hearing officers, district attorneys, courthouse clerks and public records clerks, employees engaged in laboratory work, health inspectors, building inspectors, engineers not engaged in actual construction or operation, meter readers other than water meter readers and similar occupations. This classification also includes recreation and park department operations that are performed by recreation leaders, coaches, instructors, referees, and officials; daycare/babysitting; activity supervisors; and similar operations that do not involve manual labor * * * * * 321

322 Recommendation Amend Classification 9420, Municipal, State or Other Public Agency Employees not engaged in manual labor, or direct supervision of construction or erection work, within the Municipal, State or Other Public Agencies Industry Group, to (1) include park and facility maintenance, landscape, snack bar and vending operations, lifeguards, security, and similar activities in support of the facility, and (2) provide that this classification does not apply to park security operations when performed by fish and game wardens or by park rangers. PROPOSED MUNICIPAL, STATE OR OTHER PUBLIC AGENCIES MUNICIPAL, STATE OR PUBLIC AGENCY EMPLOYEES all other employees including laborers, mechanics, and storekeepers N.O.C. This classification includes park and facility maintenance, landscape, snack bar and vending operations, lifeguards, security, and similar activities in support of the facility. Classification 9420 does not apply to park security operations when performed by fish and game wardens or by park rangers. Such operations shall be assigned to Classification 7720, Police, Sheriffs, Constables, Marshals, Animal Control Officers, Game and Fish Wardens, and Jailers including deputies not volunteers, or Classification 7722, Police, Sheriffs, Constables, Marshals, Animal Control Officers, Game and Fish Wardens, and Jailers including deputies volunteers, serving with or without remuneration. New construction work, pest control operations, and electrical light or power department operations shall be separately classified. Marina or harbor operations shall be separately classified as 9016(1), Amusement Parks or Exhibitions

323 Newspaper Publishing or Printing The R & I entry shown below was established in 1987 in connection with a study of Classifications 4304, Newspaper Publishing or Newspaper Printing all other employees including drivers and their helpers, and 4299(1), Printing Operation all other employees including counterpersons and driver and their helpers N.O.C. The entry clarifies the definition of newspaper and provides additional information regarding the classification. R & I Entry Newspaper Publishing or Printing 4304 Newspaper Publishing or Newspaper Printing all other employees For classification purposes, Classification 4304, Newspaper Publishing or Newspaper Printing all other employees including miscellaneous employees, is applicable to those firms engaged in the publishing or printing of traditional newspapers, tabloids or advertising newspapers. Newspaper is defined as a paper that is printed and distributed usually daily or weekly and contains news, articles of opinion, specialty features and advertising. Tabloid is defined as a newspaper that is about half the page size of an ordinary newspaper and contains news in condensed form, articles of opinion, specialty features and advertising. An advertising newspaper is defined as a specialty newspaper that is published, printed and distributed usually weekly or monthly and contains advertisements from multiple purveyors and may contain articles of opinion. Further, this classification is applicable to newspaper publishing firms that have other firms perform the actual printing of the newspaper, as previously defined, but operate departments engaged in inserting, bundling, labeling or delivery functions. The printing, whether performed by the newspaper publisher or others, of specialty sections such as the comics section, the television section and other entertainment or information sections of newspapers are assignable to Classification 4304, as such sections are an integral part of newspapers. The phraseology for Classification 4304 is: PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER PUBLISHING OR NEWSPAPER PRINTING all other employees including drivers and their helpers Selling or delivering of newspapers to customers for their personal use and not for resale shall be separately classified. Also refer to companion Classification 8818, Newspaper Publishing or Newspaper Printing editing, designing, proofreading, and photographic composing Analysis The R & I entry clarifies that Classification 4304 is assignable to employers engaged in (1) the publishing or printing of traditional newspapers, tabloids or advertising newspapers as defined in the R & I entry; (2) inserting, bundling, labeling or delivery of newspapers when actual printing is subcontracted to other employers; and (3) the printing of specialty sections such as the comics, television or other entertainment sections. The WCIRB thinks would be helpful to amend Classification 4304 to include the operations that are contemplated by this classification but does not think it is necessary to add the definitions of newspapers, tabloids and advertising newspaper because the meaning of these terms is commonly understood. 323

324 Recommendation Amend Classification 4304, Newspaper Publishing or Newspaper Printing all other employees including drivers and their helpers, within the Printing, Publishing and Duplicating Industry Group, to provide additional information pertaining to the scope of the classification. PROPOSED PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER PUBLISHING OR NEWSPAPER PRINTING all other employees including drivers and their helpers This classification applies to employers engaged in the publishing or printing of newspapers, tabloids, advertising newspapers, and specialty sections, such as the comics section and the television section of newspapers. This classification applies to newspaper publishers that assemble, bundle, label or distribute newspapers that are printed by other employers. Selling or delivering of newspapers to customers for their personal use and not for resale shall be separately classified. Also refer to companion Classification 8818, Newspaper Publishing or Newspaper Printing editing, designing, proofreading, and photographic composing

325 Nurseries Including Florists and Garden Supply Stores and Florists The R & I entries shown below were established in 1958 following a study to clarify the distinguishable operations between nurserymen and florists. In 1994, the R & I entries were amended to replace nurserymen with nurseries. In 2003, the R & I was amended to clarify and provide guidelines for assigning related industry Classification 8004, Stores garden supplies. R & I Entries Nurseries Including Florists and Garden Supply Stores and Florists Florists 0035 Florists cultivating or gardening See Classification 0005, Nurseries propagation and cultivation of nursery stock Nurseries Including Florists and Garden Supply Stores 0035 Florists cultivating or gardening 0005 Nurseries propagation and cultivation of nursery stock 8004 Stores garden supplies The following guidelines shall be used to determine the classifications for nurseries, cultivating florists and garden supply stores: 1. Classification 0005 Nurseries a. Product Nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes. b. Process First planting may be made in (1) greenhouses, (2) cold frames, or (3) the ground. The first two growths are normally transplanted outdoors after attaining the required size. The field is prepared by plowing, fertilizing and watering, and after planting, subsequent spraying and weeding is performed. Bulbs, after they have blossomed, are cleaned, sterilized, and stored for future propagation or sale. 2. Classification 0035 Florists a. Product Cut flowers, potted flower plants, ferns and similar leafy potted plants that are sold for indoor decorative purposes. b. Process Seeds and bulbs are planted in beds or pots in glass-encased buildings. In some cases, planting may be done outdoors. Plants are carefully watered, fertilized and sprayed until they are either potted for sale or blooms are ready for cutting. A bedding plant grower would not fall within this particular group. H-1 325

326 3. Classification 8004 Stores garden supplies N.O.C. a. Product Nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes. In addition, garden supply stores may sell fertilizers, insecticides, lawn mowers and garden tools, barbecue supplies, cut or arranged flowers, statuary, fountains and patio furniture. b. Process Garden supply stores purchase nursery stock that is placed on display and cultivated until sold. However, some stores may also engage in a minor amount of propagation of new plants from seeds, cuttings or bulbs, although such plants represent a minor portion of the plants sold, and cultivating does not exceed 10% of employees time. Garden supply stores are licensed by the California Department of Food and Agriculture as Retailers. The current phraseologies for Classifications 0035, 0005 and 8004 are: NURSERIES propagation and cultivation of nursery stock 0005 FLORISTS cultivating or gardening 0035 STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES garden supplies N.O.C This classification shall apply to firms that maintain a display area for the sale of purchased nursery stock, such as bedding plants, sod, ornamental trees and ground cover. In addition, garden supply stores typically engage in the sale of items such as fertilizers, insecticides, lawn mowers and garden tools, barbecue supplies, cut or arranged flowers, statuary, fountains or patio furniture. Analysis The R & I entry for Classification 0005, Nurseries propagation and cultivation of nursery stock, indicates in part 1a that the products associated with Classification 0005 are [n]ursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes, and part 2a indicates the products associated with Classification 0035, Florists cultivating or gardening, are, [c]ut flowers, potted flower plants, ferns and similar leafy potted plants that are sold for indoor decorative purposes. It would be helpful to include this indoor/outdoor product distinction in Classifications 0005 and The R & I entry parts 1b and 2b provide descriptions of the cultivating operations associated with Classifications 0005 and As these operations are similar for both classifications, and the phraseology for each classification includes cultivation or cultivating, this information does not need to be added to the classifications. Part 3a provides information regarding the products typically sold by stores assigned to Classification 8004, Stores garden supplies. This information is already provided in the footnote for Classification Part 3a also states that, [g]arden supply stores are licensed by the California Department of Food and Agriculture as Retailers. This statement may be correct but it is not determinative for classification assignment purposes; licensing has not been used as a factor when determining which stores are assigned to Classification Part 3b provides a description of the limited plant cultivation associated with Classification 8004, and states that cultivating does not exceed 10% of H-2 326

327 employees time. This employee time limitation, if incorporated into the USRP, could be problematic to enforce without imposing burdensome recordkeeping requirements on the subject employers. The WCIRB, therefore, does not recommend amending the USRP to incorporate the information in part 3 of this R & I entry. Additionally, the WCIRB thinks it would be helpful to (1) amend Classification 0035 to provide that (a) firms engaged in the sale of cut flowers, potted flower plants, ferns and similar potted plants for indoor decorative purposes shall be assigned to Classification 8001, Stores florists including service away from premises; and (b) firms engaged in the propagation and cultivation of nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes shall be assigned to Classification 0005, Nurseries propagation and cultivation of nursery stock; (2) amend Classification 0005 to provide that firms engaged in the cultivating or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes shall be assigned to 0035, Florists cultivating or gardening; and (3) amend Classification 8001 to provide that the cultivating or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes shall be separately classified as 0035, Florists cultivating or gardening. H-3 327

328 Recommendation Amend Classification 0035, Florists cultivating or gardening, to indicate that (1) it applies to the cultivation or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes; (2) employers engaged in the sale of cut flowers, potted flower plants, ferns and similar potted plants for indoor decorative purposes shall be assigned to Classification 8001, Stores florists including service away from premises; and (3) employers engaged in the propagation and cultivation of nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes shall be assigned to Classification 0005, Nurseries propagation and cultivation of nursery stock. PROPOSED FLORISTS cultivating or gardening 0035 This classification applies to employers that cultivate or garden flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes. Employers engaged in the sale of cut flowers, potted flower plants, ferns and similar potted plants for indoor decorative purposes shall be assigned to Classification 8001, Stores florists including service away from premises. Employers engaged in the propagation and cultivation of nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes shall be assigned to Classification 0005, Nurseries propagation and cultivation of nursery stock. * * * * * Recommendation Amend Classification 0005, Nurseries propagation and cultivation of nursery stock, to indicate that (1) it applies to the propagation and cultivation of nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes; and employers engaged in the cultivating or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes shall be assigned to 0035, Florists cultivating or gardening. PROPOSED NURSERIES propagation and cultivation of nursery stock 0005 This classification applies to employers that propagate and cultivate nursery stock, bedding plants, bulbs and trees that are sold for outdoor planting or decorative purposes. Employers engaged in the cultivating or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes shall be assigned to 0035, Florists cultivating or gardening. * * * * * H-4 328

329 Recommendation Amend Classification 8001, Stores florists including service away from premises, to provide that the cultivating or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes shall be separately classified as 0035, Florists cultivating or gardening. PROPOSED STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES florists including service away from premises 8001 Cultivating or gardening of flowers, potted flower plants, ferns and similar potted plants that are sold for indoor decorative purposes shall be separately classified as 0035, Florists cultivating or gardening. H-5 329

330 Nursing Homes The R & I entry shown below was established in 1976 in connection with a study of residential care facilities for the elderly that resulted in the establishment of Classification 9070(1), Residential Care Facilities for the Elderly N.O.C. all employees. The R & I entry clarifies that residential health facilities that provide 24-hour nursing care are assignable to Classification R & I Entry Nursing Homes 8829(2) Convalescent Homes or Convalescent Hospitals 8829(1) Nursing Homes 8829(4) Rest Homes 8829(5) Sanitariums These classifications apply to concerns providing residential health facilities (other than general or acute care hospitals) and are generally licensed as Skilled Nursing Facilities. These firms offer 24-hour nursing care to incapacitated or bedridden patients. The current phraseologies for Classifications 8829(2), 8829(1), 8829(4) and 8829(5) are: HEALTH AND HUMAN SERVICES CONVALESCENT HOMES OR CONVALESCENT HOSPITALS all employees 8829(2) HEALTH AND HUMAN SERVICES NURSING HOMES all employees 8829(1) HEALTH AND HUMAN SERVICES REST HOMES all employees 8829(4) HEALTH AND HUMAN SERVICES SANITARIUMS all employees 8829(5) Analysis The USRP contains many classifications in the Health and Human Services Industry Group that pertain to the various types of residential care and health facilities that operate in California. With the exception of the four classifications listed above, each classification describes the type of operation contemplated by the classification. The principal operational characteristic of the residential health facilities assignable to Classification 8829 is the provision of 24-hour nursing care to residents. Accordingly, the WCIRB recommends that each of the classifications listed above be amended to include this and additional information pertaining to the scope of the classification. While the R & I entry states that the subject facilities are generally licensed as Skilled Nursing Facilities, licensing requirements vary and are not determinative for classification purposes. Accordingly, it is not recommended that license information be added to the classifications. 330

331 Recommendation Amend Classification 8829(2), Convalescent Homes or Convalescent Hospitals all employees, within the Health and Human Services Industry Group, to provide that this classification shall apply to those firms that provide 24-hour medical care to their residents. PROPOSED HEALTH AND HUMAN SERVICES CONVALESCENT HOMES OR CONVALESCENT HOSPITALS all employees 8829(2) Convalescent homes engage in the provision of skilled nursing care and supportive care to patients whose primary need is the availability of skilled nursing care on an extended basis. These facilities provide 24-hour inpatient care including medical, nursing, dietary, and pharmaceutical services. * * * * * Recommendation Amend Classification 8829(1), Nursing Homes all employees, within the Health and Human Services Industry Group, to provide that this classification shall apply to those firms that provide 24-hour medical care to their residents. PROPOSED HEALTH AND HUMAN SERVICES NURSING HOMES all employees 8829(1) Nursing homes engage in the provision of skilled nursing care and supportive care to patients whose primary need is the availability of skilled nursing care on an extended basis. These facilities provide 24-hour inpatient care including medical, nursing, dietary, and pharmaceutical services. * * * * * 331

332 Recommendation Amend Classification 8829(4), Rest Homes all employees, within the Health and Human Services Industry Group, to provide that this classification shall apply to those firms that provide 24-hour medical care to their residents. PROPOSED HEALTH AND HUMAN SERVICES REST HOMES all employees 8829(4) Rest homes engage in the provision of skilled nursing care and supportive care to patients whose primary need is the availability of skilled nursing care on an extended basis. These facilities provide 24-hour inpatient care including medical, nursing, dietary, and pharmaceutical services. * * * * * Recommendation Amend Classification 8829(5), Sanitariums all employees, within the Health and Human Services Industry Group, to provide that these classifications shall apply to those firms that provide 24-hour medical care to their residents. PROPOSED HEALTH AND HUMAN SERVICES SANITARIUMS all employees 8829(5) Sanitariums engage in the provision of skilled nursing care and supportive care to mentally ill individuals whose primary need is the availability of skilled nursing care on an extended basis. These facilities provide 24-hour inpatient care including medical, nursing, dietary, and pharmaceutical services. * * * * * 332

333 Photographic Composing The R & I entry shown below was established in 1979 in connection with a study of cold copy (photographic) composing operations to clarify that all photographic composing operations should be assigned to Classification 8807, Newspaper, Magazine, or Book Publishing no printing editing, designing, proofreading, and photographic composing including clerical office employees. In 1984, the R & I entry was amended to include platemaking in the scope of photographic composing. In 1987, the printing and newspaper industries were separated and Classifications 8818, Newspaper Publishing or Newspaper Printing editing, 8813(1), Printing editing, and 8813(2), Bookbinding editing, were added to this entry. R & I Entry Photographic Composing 8813(2) Bookbinding editing 8807 Newspaper, Magazine or Book Publishing no printing 8818 Newspaper Publishing or Newspaper Printing editing 8813(1) Printing editing The term photographic composing, when used in the phraseology of Classification 8818, Newspaper Publishing or Newspaper Printing, Classification 8807, Newspaper, Magazine or Book Publishing no printing, Classification 8813(2), Bookbinding Operation, or Classification 8813(1), Printing Operation, shall be interpreted to apply to all cold-type composing operations prior to printing. Activities within the scope of the term photographic composing include, but are not limited to, computer assisted design (CAD), computer desktop publishing activities, typesetting, paste-up operations, graphics arts, camera processing, negative stripping, and plate making. It does not include printing or binding activities. The current phraseology for Classifications 8818, 8807, 8813(2), and 8813(1) are: PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER PUBLISHING OR NEWSPAPER PRINTING editing, designing, proofreading, and photographic composing including Clerical Office Employees Also refer to companion Classification 4304, Newspaper Publishing or Newspaper Printing all other employees PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER, MAGAZINE OR BOOK PUBLISHING no printing or distribution editing, designing, proofreading, and photographic composing including Clerical Office Employees 8807 PRINTING, PUBLISHING AND DUPLICATING BOOKBINDING OPERATION editing, designing, proofreading and photographic composing including Clerical Office Employees Also refer to companion Classification 4299(2), Bookbinding Operation all other employees. 8813(2) 333

334 PRINTING, PUBLISHING AND DUPLICATING PRINTING OPERATION editing, designing, proofreading, and photographic composing including Clerical Office Employees Also refer to companion Classification 4299(1), Printing Operation all other employees N.O.C. 8813(1) Analysis The R & I entry defines the term photographic composing as all cold-type composing operations prior to printing (pre-press) when used in the context of printing industry classifications. It also lists the following activities as examples: computer assisted design, computer desktop publishing, typesetting, paste-up operations, graphics arts, camera processing, negative stripping, and plate making. With the exception of negative stripping and plate making, these activities clearly come within the scope of pre-press activities editing, designing, proofreading, and photographic composing that are described in each classification listed above, and therefore, there is no benefit to add these specific activities to the subject classifications. However, the WCIRB thinks it would be helpful to amend each classification listed above to include the scope of the classification and to specifically include negative stripping and plate making for clarity. 334

335 Recommendation Amend Classification 8818, Newspaper Publishing or Newspaper Printing editing, designing, proofreading, and photographic composing including Clerical Office Employees, within the Printing, Publishing and Duplicating Industry Group, to include the scope and a description of the activities. PROPOSED PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER PUBLISHING OR NEWSPAPER PRINTING editing, designing, proofreading, and photographic composing including Clerical Office Employees This classification includes pre-press activities and Clerical Office Employees of firms engaged in publishing or printing newspapers. Pre-press activities include editing, designing, proofreading, and photographic composition, including negative stripping and plate making Also refer to companion Classification 4304, Newspaper Publishing or Newspaper Printing all other employees. * * * * * Recommendation Amend Classification 8807, Newspaper, Magazine or Book Publishing no printing or distribution editing, designing, proofreading, and photographic composing, within the Printing, Publishing and Duplicating Industry Group, to include the scope and a description of the activities. PROPOSED PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER, MAGAZINE OR BOOK PUBLISHING no printing or distribution editing, designing, proofreading, and photographic composing including Clerical Office Employees This classification includes pre-press activities and Clerical Office Employees of firms engaged in publishing newspapers, magazines or books where all printing and distribution is conducted by separate concerns. Pre-press activities include editing, designing, proofreading and photographic composing, including negative stripping and plate making * * * * * 335

336 Recommendation Amend Classification 8813(2), Bookbinding Operation editing, designing, proofreading and photographic composing including Clerical Office Employees, within the Printing, Publishing and Duplicating Industry Group, to include the scope and a description of the activities. PROPOSED PRINTING, PUBLISHING AND DUPLICATING BOOKBINDING OPERATION editing, designing, proofreading and photographic composing including Clerical Office Employees This classification includes pre-bindery activities and Clerical Office Employees of firms engaged in bookbinding. Pre-bindery activities include editing, designing, proofreading, and photographic composition, including negative stripping and plate making. Also refer to companion Classification 4299(2), Bookbinding Operation all other employees. 8813(2) * * * * * Recommendation Amend Classification 8813(1), Printing Operation editing, designing, proofreading, and photographic composing including Clerical Office Employees, within the Printing, Publishing and Duplicating Industry Group, to include the scope and a description of the activities. PROPOSED PRINTING, PUBLISHING AND DUPLICATING PRINTING OPERATION editing, designing, proofreading, and photographic composing including Clerical Office Employees This classification includes pre-press activities and Clerical Office Employees of firms engaged in commercial printing. Pre-press activities include editing, designing, proofreading, and photographic composition, including negative stripping and plate making. Also refer to companion Classification 4299(1), Printing Operation all other employees N.O.C. 8813(1) 336

337 Plastic Goods Manufacturing Classifications The R & I entry shown below was established 1994 following the establishment of six classifications for the plastics industry. The R & I entry clarifies the application of each classification pertaining to the manufacture of plastic products. R & I Entry Plastic Goods Manufacturing Classifications 4478 Plastic Goods Mfg Plastics blow molded products mfg Plastics extrusion molded products mfg Plastics fabricated products mfg. no molding 4497 Plastics fiber reinforced plastic products mfg Plastics injection molded products mfg Plastics thermoformed products mfg Tool Mfg. When possible, firms engaged in the manufacture of a plastic product shall be assigned to the classification that specifically describes the firm s product. However, in those cases where no specific product classification exists, the firm shall be assigned to the appropriate Plastics classification described below. Classification 4478, Plastic Goods Mfg. N.O.C., applies to any plastics manufacturing operation that is not specifically addressed by any other classification. Such processes include, but are not limited to, casting, compression molding, cultured marble mfg., dip molding, expanded polystyrene foam block and shape molding, foam molding, laminating and rotational molding. Classification 4494, Plastics blow molded products mfg. N.O.C., applies to those firms engaged in the blow forming of plastic products. Blow molding is typically performed by extruding a tube of plastic, which is encased in a die and inflated to form the configuration of the mold. Blow molding also may be performed through an injection process in which molten plastic is injected onto a spindle in one mold, transferred to a second mold and inflated. Various secondary machining and printing or labeling operations are typically associated with this process. Blow molding is generally used to form hollow, basically cylindrical containers, such as cosmetic containers and soda bottles. Classification 4495, Plastics extrusion molded products mfg. N.O.C., applies to those firms that engage in the extruding of molten plastic through dies to form products in sheet, tube or rod form. The extruded products may be either raw materials for use in other manufacturing operations, such as sheet plastic or plastic pellets, or a wide variety of finished custom products, including drinking straws, pipe or rolls of plastic sheeting. Classification 4496, Plastics fabricated products mfg. no molding N.O.C., applies to those firms that receive pre-molded plastic sheet, rod or bar stock and perform various operations, such as cutting, milling, routing, drilling, bending, grinding, polishing and assembly to form products including display cases and stands, picture frames, furniture items, counter tops and machined plastic pipe. This classification also applies to those firms that receive pre-molded plastic foam, which is cut, formed and assembled to customer specification. This classification does not apply to any firm that engages in the molding of plastics, or plastic foams, which are subsequently used in the firm s fabrication operations. Classification 4497, Plastics fiber reinforced plastic products mfg., applies to firms engaged in the manufacture of products using thermosetting fiber reinforced plastics, such as fiberglass and graphite composites. Products may be formed using hand or spray lay-up, wrapping or spinning, transfer molding or resin injection molding. This classification includes all preparation and finishing operations associated with the manufacture of fiber reinforced plastic products. 337

338 Classification 4498, Plastics injection molded products mfg. N.O.C., applies to firms engaged in the manufacture of molded plastic products using injection molding machines. Injection molding involves the pressure injection of molten plastic into dies for the production of a variety of products. This classification contemplates all secondary machining, printing and labeling operations. Classification 4499, Plastics thermoformed products mfg. N.O.C., applies to the molding of plastic sheet or roll stock using a thermoforming or vacuum forming process. In this process, plastic sheet stock is heated to a pliable state and brought into contact with a vacuum mold, which draws the plastic into the configuration of the mold. This classification includes all secondary machining operations, which are commonly associated with thermoforming. To determine the proper classification for tool and die departments maintained by firms engaged in plastic molding operations, it is necessary to ascertain the percentage of employee time that is dedicated to 1) the manufacture or modification of molds and dies (irrespective of the end user) and the fee maintenance or repair of molds and dies not used in the insured s plastics molding operations; and 2) the maintenance or repair of molds used in the insured s plastics molding operations. If the manufacture or modification of molds and dies and the fee maintenance or repair of molds and dies not used in the insured s plastics molding operation exceeds 50% of employee time, the payroll of the tool and die department shall be assigned to Classification 3099, Tool Mfg. N.O.C. If the maintenance or repair of molds used in the insured s plastic molding operation exceeds 50% of employee time, the payroll of the tool and die department shall be assigned to the appropriate Plastics classification. The current phraseology of Classifications 4478, 4494, 4495, 4496, 4497, 4498, 4499, and 3099 are: PLASTIC GOODS MFG. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4478, Plastic Goods Mfg. N.O.C. PLASTICS blow molded products mfg. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4494, Plastics blow molded products mfg. PLASTICS extrusion molded products mfg. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4495, Plastics extrusion molded products mfg. 338

339 PLASTICS fabricated products mfg. no molding N.O.C This classification shall apply to those firms engaged in the fabrication of plastic products typically by machining, bending, grinding, polishing or assembling. This classification also applies to firms engaged in the cutting, shaping and assembly of molded foam. This classification does not apply to any firm that engages in the molding of plastics or plastic foams that are subsequently used in the firm s fabrication operations. PLASTICS fiber reinforced plastic products mfg. N.O.C PLASTICS injection molded products mfg. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4498, Plastics injection molded products mfg. PLASTICS thermoformed products mfg. N.O.C This classification contemplates secondary machining operations, such as routing, drilling, grinding and assembly. The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4499, Plastics thermoformed products mfg. TOOL MFG. N.O.C Analysis The R & I entry clarifies that, when possible, employers engaged in the manufacture of a plastic product are to be assigned to the classification that specifically describes the employer s product. Although each of the subject plastic classifications includes an N.O.C. (not otherwise classified) designation, the WCIRB recommends creating an industry grouping for these classifications with a preface statement indicating that, when possible, employers engaged in the manufacture of a plastic product are to be assigned to the classification that specifically describes the employer s product. The entry provides a brief description of the plastic manufacturing operations commonly associated with each classification. Of the subject plastics classifications, only Classification 4496 includes a footnote that describes the operations assignable to the classification. However, the phraseology of each of the subject classifications is sufficiently descriptive to identify its intended constituency. The entry also provides instructions regarding the classification procedure applicable to tool and die departments that may be operated in connection with plastic molding operations. With the exception of Classifications 4496 and 4497, each plastics classification has a footnote that provides the classification procedure for the tool and die department. As Classification 4496 specifies no molding, it does not require 339

340 such a footnote. With regard to Classification 4497, the manufacture of some types of fiber reinforced plastic products, such as compression-molded fiber reinforced plastic products, require tools and dies. The WCIRB recommends that Classification 4497 be amended to include the classification procedure for a tool and die department. Further, the WCIRB recommends that the current footnotes describing the classification procedure for a tool and die department be amended for clarity. 340

341 Recommendation Amend Section VII, Rule 1, Subrule a, Industry Groups, to reflect the proposed establishment of Plastic Products Manufacturing as an industry group and to renumber the subsequent listings in the Rule. PROPOSED Section VII Standard Classifications 1. Classification Section a. Industry Groups Some classifications are grouped alphabetically under industry groupings to assist users in identifying and assigning classifications within similar industries. Construction-related classifications are listed in Appendix II, Construction and Erection Classifications. The following other industry groups are incorporated into the classifications listed below: (1) Aircraft Operations (2) Electronics Industry (3) Farms (4) Food Packaging and Processing (5) Health and Human Services (6) Metal Working Classifications (7) Mining (8) Municipal, State or Other Public Agencies (9) Petroleum Industry (10) Plastic Products Manufacturing (1011) Printing, Publishing and Duplicating (1112) Property Management/Operation (1213) Salvage Material Dealers (1314) Sign Industry (1415) Stores * * * * * * * 341

342 Recommendation Establish an industry group for Plastic Products Manufacturing and amend the associated classifications for clarity. PROPOSED PLASTIC PRODUCTS MANUFACTURING The following grouping includes classifications applicable to the manufacturing and fabrication of plastic materials to produce an end-product that is not specifically described by another classification. Pursuant to Part 3, Section II, Rule 17, a classification having a N.O.C. (not otherwise classified) qualifier shall not be used if another classification more accurately describes the operation. As such, the following group does not include all possible classifications applicable to the manufacture or fabrication of plastic products. For classifications that describe the manufacture or fabrication of specific products, refer to the alphabetical listing of classifications. PLASTIC GOODS MFG. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4478, Plastic Goods Mfg. N.O.C. The entire payroll of a tool and die department shall be classified as follows: If 50% or more of the department s total time is devoted to the maintenance or repair, (not manufacture or modification), of molds and dies used in the employer s production operations, assign Classification 4478, Plastic Goods Mfg. If more than 50% of the department s total time is devoted to the manufacture or modification (not maintenance or repair) of molds or dies (irrespective of the end user), assign Classification 3099, Tool Mfg. PLASTICS blow molded products mfg. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4494, Plastics blow molded products mfg. The entire payroll of a tool and die department shall be classified as follows: If 50% or more of the department s total time is devoted to the maintenance or repair, (not manufacture or modification), of molds and dies used in the employer s production operations, assign Classification 4494, Plastics blow molded products mfg. If more than 50% of the department s total time is devoted to the manufacture or modification (not maintenance or repair) of molds or dies (irrespective of the end user), assign Classification 3099, Tool Mfg. PLASTICS extrusion molded products mfg. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4495, Plastics extrusion molded products mfg. 342

343 The entire payroll of a tool and die department shall be classified as follows: If 50% or more of the department s total time is devoted to the maintenance or repair, (not manufacture or modification), of molds and dies used in the employer s production operations, assign Classification 4495, Plastics extrusion molded products mfg. If more than 50% of the department s total time is devoted to the manufacture or modification (not maintenance or repair) of molds or dies (irrespective of the end user), assign Classification 3099, Tool Mfg. PLASTICS fabricated products mfg. no molding N.O.C This classification shall apply to those firms engaged in the fabrication of plastic products typically by machining, bending, grinding, polishing or assembling. This classification also applies to firms engaged in the cutting, shaping and assembly of molded foam. This classification does not apply to any firm that engages in the molding of plastics or plastic foams that are subsequently used in the firm s fabrication operations. PLASTICS fiber reinforced plastic products mfg. N.O.C The entire payroll of a tool and die department shall be classified as follows: If 50% or more of the department s total time is devoted to the maintenance or repair, (not manufacture or modification), of molds and dies used in the employer s production operations, assign Classification 4496, Plastics fiber reinforced plastic products mfg. If more than 50% of the department s total time is devoted to the manufacture or modification (not maintenance or repair) of molds or dies (irrespective of the end user), assign Classification 3099, Tool Mfg. PLASTICS injection molded products mfg. N.O.C The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4498, Plastics injection molded products mfg. The entire payroll of a tool and die department shall be classified as follows: If 50% or more of the department s total time is devoted to the maintenance or repair, (not manufacture or modification), of molds and dies used in the employer s production operations, assign Classification 4498, Plastics injection molded products mfg. If more than 50% of the department s total time is devoted to the manufacture or modification (not maintenance or repair) of molds or dies (irrespective of the end user), assign Classification 3099, Tool Mfg. PLASTICS thermoformed products mfg. N.O.C This classification contemplates secondary machining operations, such as routing, drilling, grinding and assembly. The payroll of a tool and die department shall be classified as 3099, Tool Mfg., if the amount of time devoted to the manufacture or modification of molds or dies (irrespective of the end user) exceeds 50% of the department s time. Tool and die departments primarily engaged in the maintenance or repair of molds and dies used in the employer s production operations shall be classified as 4499, Plastics thermoformed products mfg. The entire payroll of a tool and die department shall be classified as follows: If 50% or more of the department s total time is devoted to the maintenance or repair, (not manufacture or modification), of molds and dies used in the employer s production operations, assign Classification 4499, Plastics thermoformed products mfg. If more than 50% of the department s total time is devoted to the manufacture or modification (not maintenance or repair) of molds or dies (irrespective of the end user), assign Classification 3099, Tool Mfg. 343

344 Printing Operation The R & I entry shown below was established in 1996 in connection with the establishment of Classifications 8019(1), Printing quick printing all employees including Clerical Office Employees and Outside Salespersons, and 8019(2), Document Duplication or Photocopying Service all employees including Clerical Office Employees and Outside Salespersons, for the quick printing and document duplication or photocopying industries. The R & I entry clarifies the application of Classifications 4299(1), Printing Operation all other employees, 4295(1), Printing Operation screen printing all other employees, and R & I Entries Printing Operation 4299(1) Printing Operation all other employees 4295(1) Printing Operation screen printing all other employees 8019(1) Printing quick printing 8019(2) Document Duplication or Photocopying Service 4295(2) Screen Printed Merchandise Dealers all other employees 8821 Attorney Support Services For classification purposes, Classification 4299(1), Printing Operation all other employees including counterpersons and drivers and their helpers N.O.C., is applicable to those firms engaged in commercial printing by lithography, flexography, rotogravure or letterpress (direct) methods, producing such printed matter as business forms, stationery, greeting cards, labels, advertising and sales promotions, bank checks, books, magazines and other forms of commercial printing. Rolls of paper or sheet stock, exceeding 18 x 24, are loaded onto printing presses, printed, cut to size and finished according to specification. Classification 4299(1), Printing Operation, does not include firms that publish or print newspapers, tabloids or advertising newspapers. Such firms are assigned to Classification 4304, Newspaper Publishing or Newspaper Printing. Classification 4299(1) also does not include screen printing operations. Such operations are assigned to Classification 4295(1), Printing Operation screen printing, or Classification 4295(2), Screen Printed Merchandise Dealers. Classification 4299(1) also does not apply to quick print shops (locations), where all printing is done by means of offset printing presses on sheet-fed paper not exceeding 18 x 24. Such operations are assigned to Classification 8019(1), Printing quick printing. Locations that reproduce documents on a job basis using electrostatic copiers, photocopiers, ink jet, or laser printers are assigned to Classification 8019(2). Document duplication, when conducted by firms that specialize in the provision of legal support services, is assignable to Classification 8821, Attorney Support Services. Quick Print Shops See Classification 4299(1), Printing all other employees The current phraseologies for Classifications 4299(1), 4304, 4295(1), 8019(1), 8019(2), 4295(2) and 8821 are: 344

345 PRINTING, PUBLISHING AND DUPLICATING PRINTING OPERATION all other employees including counterpersons and drivers and their helpers N.O.C. Also refer to companion Classification 8813(1), Printing Operation editing, designing, proofreading, and photographic composing. 4299(1) PRINTING, PUBLISHING AND DUPLICATING NEWSPAPER PUBLISHING OR NEWSPAPER PRINTING all other employees including drivers and their helpers Selling or delivering of newspapers to customers for their personal use and not for resale shall be separately classified. Also refer to companion Classification 8818, Newspaper Publishing or Newspaper Printing editing, designing, proofreading, and photographic composing PRINTING, PUBLISHING AND DUPLICATING PRINTING OPERATION screen printing all other employees 4295(1) Also refer to companion Classification 8846(1), Printing Operation screen printing editing, designing, proofreading, and photographic composing including Clerical Office Employees. PRINTING, PUBLISHING AND DUPLICATING PRINTING quick printing all employees including Clerical Office Employees and Outside Salespersons This classification applies to those locations engaged in job printing using sheet-fed offset printing presses on paper not exceeding 18 x 24. This classification does not apply to locations that use roll-fed presses or where the paper fed to the press exceeds 18 x (1) PRINTING, PUBLISHING AND DUPLICATING DOCUMENT DUPLICATION OR PHOTOCOPYING SERVICE all employees including Clerical Office Employees and Outside Salespersons This classification applies to those locations engaged in document duplication or photocopying on a job basis using electrostatic copiers, scanners, ink jet or laser printers on paper of any size. This classification also applies to locations that reproduce technical drawings, sketches and renderings for architects, contractors, engineers and similar customers. This classification does not apply to locations that perform offset printing. This classification does not apply to firms that specialize in the provision of legal support services as contemplated under Classification 8821, Attorney Support Services. 8019(2) 345

346 PRINTING, PUBLISHING AND DUPLICATING SCREEN PRINTED MERCHANDISE DEALERS all other employees 4295(2) This classification applies to those firms engaged in the screen printing of merchandise where not less than 75% of gross receipts are developed through the sale of items printed by the employer. Such firms typically print and distribute items such as clothing, advertising novelties, balloons, souvenirs, etc. Retail store operations shall be separately classified. Also refer to companion Classification 8846(2), Screen Printed Merchandise Dealers editing, designing, proofreading, and photographic composing. ATTORNEY SUPPORT SERVICES including Clerical Office Employees and Outside Salespersons This classification shall not be used for division of payroll in connection with any other classification unless the operations described by Classification 8821 constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification shall apply to firms that specialize in providing legal support services such as process serving of summons, subpoenas and complaints; preparation or filing of court documents; or the reproduction of documents by photocopying, scanning, microfilming or other means by registered professional photocopiers Analysis The R & I entry describes the types of printing and representative finished products associated with the N.O.C. (not otherwise classified) printing classification, 4299(1), Printing Operation all other employees including counterpersons and drivers and their helpers N.O.C., and clarifies that (1) newspaper printing is assignable to Classification 4304, Newspaper Publishing or Newspaper Printing; (2) screen printing is assignable to Classification 4295(1), Printing Operation screen printing, (3) locations where all printing is performed by means of offset printing presses on sheet-fed paper not exceeding 18 x 24 are assignable to Classification 8019(1), Printing quick printing, (4) locations where documents are reproduced on a job basis using electrostatic copiers, photocopiers, ink jet, or laser printers are assigned to Classification 8019(2), Document Duplication or Photocopying Service, and (5) document duplication, when conducted by firms that specialize in the provision of legal support services, is assignable to Classification 8821, Attorney Support Services. With respect to Classification 4299(1), the WCIRB thinks it would be helpful to amend the classification to (1) include its scope, (2) direct that Classification 8019(1), Printing quick printing, applies to those locations at which job printing is exclusively performed with sheet-fed offset printing presses on paper not exceeding 18 x 24, and (3) refer to the other printing classifications. With respect to Classification 4304, it has been proposed in a separate report that this classification be amended to include its scope. With respect to Classifications 4295(1), 4295(2), 8019(1) and 8019(2), the WCIRB thinks that each of these classifications sufficiently describes the intended operations or type of business as the WCIRB receives few questions concerning the application of these classifications; therefore, no changes to these classifications are recommended. 346

347 Recommendation Amend Classification 4299(1), Printing Operation all other employees including counterpersons and drivers and their helpers N.O.C., to include its scope, direct that Classification 8019(1), Printing quick printing, applies to those locations at which job printing is exclusively performed with sheet-fed offset printing presses on paper not exceeding 18 x 24, and to refer to the other printing classifications for clarity. PROPOSED PRINTING, PUBLISHING AND DUPLICATING PRINTING OPERATION all other employees including counterpersons and drivers and their helpers N.O.C. Also refer to companion Classification 8813(1), Printing Operation editing, designing, proofreading, and photographic composing. Classification 4299(1) applies to employers engaged in commercial offset printing using methods such as lithography, flexography, rotogravure or letterpress to produce printed matter such as business forms, stationery, greeting cards, labels, bank checks, books and magazines. Locations at which job printing is exclusively performed with sheet-fed offset printing presses on paper not exceeding 18 x 24 shall be classified as 8019(1), Printing quick printing. Also refer to Classifications 4304, Newspaper Publishing or Newspaper Printing, 4295(1), Printing Operation screen printing, and 8019(1), Printing quick printing. 4299(1) 347

348 Private Residence Employees This entry was first added to the R & I effective January 1, The purpose of the entry was to provide the definition of private residence employee as stated in Labor Code Section 3351(d) and to provide notice that with the enactment of Assembly Bill No. 133 effective March 25, 1977 placed the administration of workers compensation insurance rates, classifications and rating systems for private residence employees under the provisions of the McBride-Grunsky Act. Effective January 1, 2003, the entry was amended to its current form. The amendments cited to the definition of private residence employee in Labor Code section 3351(d) rather than repeating it in the R & I entry. Further, the amendments deleted reference to Assembly Bill No. 133 since it had now been codified and instead referred to the specific Insurance Code Sections and Finally, the entry was also amended to clarify that the provisions of the USRP do not apply to coverage for private residence employees. R & I Entry Private Residence Employees Private residence employees as used herein are those persons defined as employees in Section 3351(d) of the California Labor Code. Pursuant to California Insurance Code Sections and , the rates, classifications and rating systems for the workers compensation insurance covering private residence employees is subject to the provisions of the McBride-Grunsky Act (California Insurance Code Sections et seq.). Consequently, the provisions of the Uniform Statistical Reporting Plan do not apply to coverage for private residence employees. The rates and classifications applicable to private residence employees may be determined by the insurer affording coverage. Analysis Most of this information is included in the Private Residence Employees entry in Appendix III, Payroll/Remuneration Table, in the USRP. To clarify that the insurer affording coverage may determine the rates and classifications applicable to private residence employees as indicated in the R & I entry, the WCIRB is proposing amendments to the Private Residence Employees entry in Appendix III. 348

349 Recommendation Amend the Private Residence Employees entry in Appendix III, Payroll/Remuneration Table, for clarity. PROPOSED Appendix III Payroll/Remuneration Table Type of Compensation Private Residence Employees (Remuneration paid to) Private Residence Employees as defined by Labor Code Section 3351(d)). Pursuant to Section 3351(d), a private residence employee includes any person employed by the owner or occupant of a residential dwelling whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant. Is Payment Included as Payroll? No Exception or Comment Pursuant to California Insurance Code Sections and , the rates, classifications and rating systems for workers compensation do not apply to the workers compensation insurance covering those persons defined as employees by Labor Code Section 3351(d). Accordingly, payroll or losses developed by private residence employees shall not be reported on unit statistical reports. The rates and classifications applicable to private residence employees may be determined by the insurer affording coverage in accordance with the provisions of the McBride-Grunsky Act (California Insurance Code Sections , et seq.) Q-2 349

350 Property Management Firms including Apartment or Condominium Complex Operation, Building Operation, Mobile Home Parks and Warehouses The R & I entries shown below were originally established in 1978 in connection with a review of the property management industry. In 1991, following the establishment of six companion classifications for property management, the R & I entry was revised to indicate that supervisors of various types of building operations may be assigned to Classification 8740 if (1) the supervision of employees engaged in the operation, maintenance or care of the properties is directed through the resident or onsite manager, or (2) the operations, maintenance or care of the properties is performed exclusively by other concerns. In 1995, following the establishment of Classification 9007, Apartment of Condominium Complex Operation for Seniors, the R & I entry was further revised to address the classification procedure applicable to property management personnel who interchange between operations assignable to two or more building operation classifications. R & I Entries Apartment or Condominium Complex Operation 9011/8740(1) Apartment or Condominium Complex Operation 9007/8740(6) Apartment or Condominium Complex Operation for Seniors See Property Management Firms Building Operation 9015(1)/8740(3) Building Operation 9009/8740(2) Building Operation commercial properties See Property Management Firms Mobile Home Parks 9010/8740(4) Mobile Home Park Operation See Property Management Firms Property Management Firms 9011 Apartment or Condominium Complex Operation all other employees 9007 Apartment or Condominium Complex Operation for Seniors 8740(6) Apartment or Condominium Complex Operation for Seniors property management supervisors 8740(1) Apartment or Condominium Complex Operation property management supervisors 9009 Building Operation commercial properties all other employees 8740(2) Building Operation commercial properties property management supervisors 9010 Mobile Home Park Operation all other employees 8290 Warehouses self-storage all other employees 8740(5) Warehouses self-storage property management supervisors Property management firms engage in managing real property owned by others and managed under contract and/or owned by the property management firm. 350

351 All employees, such as maintenance, security, grounds keeping, etc., who are engaged in the operation, maintenance or care of the properties shall be assigned to the property management classification which best describes the nature of the property being managed. Should a property management firm engage in operations that are contemplated by more than one of the property management classifications discussed below, the payrolls of those employees who interchange between separately classifiable operations shall be reported under the classification carrying the highest pure premium rate, unless the payroll of such employees is segregated by classification in accordance with the Uniform Statistical Reporting Plan, Part 3, Section V, Rule 3. On-site property managers are those employees who work at the site of the property for which they are employed to manage. Off-site property management supervisors are those employees who do not work at, or from, the properties being managed. Such employees are based at, and work from, remote office sites and periodically travel to the property site to perform supervisory and/or administrative duties. The term resident or residing shall refer to those employees whose primary residence is located at the property under management. The procedures presented below shall be used for assigning property management personnel in the following industries: 1. Apartment or Condominium Complex Operation Resident or on-site property managers shall be assigned to Classification 9011, Apartment or Condominium Complex Operation. Off-site apartment or condominium complex property management supervisors shall be assigned to Classification 8740(1), Apartment or Condominium Complex Operation property management supervisors not resident or on-site managers, provided (1) the supervision of employees engaged in the operation, maintenance or care of the properties is directed through resident or on-site managers; or (2) the operation, maintenance or care of the properties is performed exclusively by other concerns. Off-site property management supervisors who do not meet the criteria outlined above shall be assigned to Classification 9011, Apartment or Condominium Complex Operation. 2. Apartment or Condominium Complex Operation for Seniors Resident or on-site property managers shall be assigned to Classification 9007, Apartment or Condominium Complex Operation for Seniors. Off-site management supervisors for apartment or condominium complexes for seniors shall be assigned to Classification 8740(6), Apartment or Condominium Complex Operation for Seniors age restricted property management supervisors not resident or on-site managers, provided (1) the supervision of employees engaged in the operation, maintenance or care of the properties is directed through resident or on-site managers; or (2) the operation, maintenance or care of the properties is performed exclusively by other concerns. Off-site property management supervisors who do not meet the criteria outlined above shall be assigned to Classification Mobile Home Park Operation Resident or on-site property managers shall be assigned to Classification 9010, Mobile Home Park Operation. Off-site mobile home park property management supervisors shall be assigned to Classification 8740(4), Mobile Home Park Operation property management supervisors not resident or onsite managers, provided (1) the supervision of employees engaged in the operation, maintenance or care of the properties is directed through resident or on-site managers; or (2) the operation, maintenance or care of the properties is performed exclusively by other concerns. Off-site property management supervisors who do not meet the criteria outlined above shall be assigned to Classification

352 4. Self-Storage Warehouses Resident and on-site property managers shall be assigned to Classification 8290, Warehouses self-storage. Off-site self-storage warehouse property management supervisors shall be assigned to Classification 8740(5), Warehouses self-storage property management supervisors not resident or on-site managers, provided (1) the supervision of employees engaged in the operation, maintenance or care of the properties is directed through resident or on-site managers; or (2) the operation, maintenance or care of the properties is performed exclusively by other concerns. Off-site property management supervisors who do not meet the criteria outlined above shall be assigned to Classification Commercial Property Operation On-site and off-site commercial property management supervisors shall be assigned to Classification 8740(2), Building Operation commercial properties property management supervisors, provided (1) all operation, maintenance and care duties are performed by separate concerns, or (2) the supervision of employees engaged in the operation, maintenance and care of the commercial properties is directed through managers or foremen. Commercial property management supervisors who do not meet the criteria outlined above shall be assigned to Classification 9009, Building Operation commercial properties. Warehouses 8290/8740(5) Warehouses self-storage See Property Management Firms The current phraseology of Classifications 9011, 8740(1), 9007, 8740(6), 9015(1), 8740(3), 9009, 8740(2), 9010, 8740(4), 8290, and 8740(5) are as follows: PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION N.O.C. not Homeowners Associations all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee Flats, apartments, or multiple dwellings having four or more units are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(1), Apartment or Condominium Complex Operation N.O.C. property management supervisors not resident or on-site managers or supervisors. 352

353 PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION N.O.C. property management supervisors not resident or on-site managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site apartment or condominium complex managers. This classification also applies to off-site property management supervisors who oversee apartment or condominium complexes at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 9011, Apartment or Condominium Complex Operation. Also refer to companion Classification 9011, Apartment or Condominium Complex Operation N.O.C. not Homeowners Associations all other employees. 8740(1) PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION FOR SENIORS age restricted not Congregate Living Facilities or Homeowners Associations all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Flats, apartments, or multiple dwellings having four or more units are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. This classification applies to apartment or condominium complexes that, in compliance with State or Federal housing laws, restrict tenancy to persons who have reached a minimum age (typically either 55 or 62 depending on the type of facility). Those facilities that, for a single monthly fee, provide a service package that typically includes a living unit, one to three meals a day, in-unit housekeeping, and personal laundry service shall be classified as 8851, Congregate Living Facilities for the Elderly. New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(6), Apartment or Condominium Complex Operation for Seniors age-restricted property management supervisors not resident or on-site managers or supervisors PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION FOR SENIORS age restricted property management supervisors not resident or on-site managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site apartment or condominium complex managers. This classification also applies to off-site property management supervisors who oversee apartment or condominium complexes for seniors at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 9007, Apartment or Condominium Complex Operation for Seniors. Also refer to companion Classification 9007, Apartment or Condominium Complex Operation for Seniors age restricted not Congregate Living Facilities or Homeowners Associations all other employees. 8740(6) 353

354 PROPERTY MANAGEMENT/OPERATION BUILDING OPERATION N.O.C. all other employees including resident or on-site managers When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Flats, apartments, or multiple dwellings having four or more units are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(3), Building Operation N.O.C. property management supervisors not resident or on-site managers or supervisors. 9015(1) PROPERTY MANAGEMENT/OPERATION BUILDING OPERATION N.O.C. property management supervisors not resident or onsite managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site property managers. This classification also applies to off-site property management supervisors who oversee properties at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 9015(1), Building Operation N.O.C. all other employees. Also refer to companion Classification 9015(1), Building Operation N.O.C. all other employees. 8740(3) PROPERTY MANAGEMENT/OPERATION BUILDING OPERATION commercial properties all other employees 9009 New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(2), Building Operation commercial properties property management supervisors. PROPERTY MANAGEMENT/OPERATION BUILDING OPERATION commercial properties property management supervisors 8740(2) This classification applies to property management supervisors who exercise direction through managers who directly supervise employees engaged in the operation, maintenance and care of properties. This classification also applies to property management supervisors who oversee commercial properties at which all operation, maintenance and care activities are conducted by separate concerns. Property managers not meeting the above conditions shall be classified as 9009, Building Operation commercial properties. Also refer to companion Classification 9009, Building Operation commercial properties all other employees. 354

355 PROPERTY MANAGEMENT/OPERATION MOBILE HOME PARK OPERATION all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Mobile home parks are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. New construction, alteration, or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(4), Mobile Home Park Operation property management supervisors not resident or on-site managers or supervisors PROPERTY MANAGEMENT/OPERATION MOBILE HOME PARK OPERATION property management supervisors not resident or onsite managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site mobile home park managers. This classification also applies to off-site property management supervisors who oversee mobile home parks at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is developed under 9010, Mobile Home Park Operation. Also refer to companion Classification 9010, Mobile Home Park Operation all other employees. 8740(4) PROPERTY MANAGEMENT/OPERATION WAREHOUSES self-storage all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Also refer to companion Classification 8740(5), Warehouses self-storage property management supervisors not resident or on-site managers or supervisors PROPERTY MANAGEMENT/OPERATION WAREHOUSES self-storage property management supervisors not resident or on-site managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site self-storage warehouse managers. This classification also applies to offsite property management supervisors who oversee self-storage warehouses at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 8290, Warehouses self-storage. Also refer to companion Classification 8290, Warehouses self-storage all other employees. 8740(5) Analysis The R & I entry provides a brief description of property management and directs that employees shall be assigned to the property management classification which best describes the nature of the property being managed. In each case, the property management classification clearly describes the type of property to which the classification applies. For ease of reference, all of the subject classifications are listed together in the USRP in the Property Management/Operation Industry Group. 355

356 The R & I entry provides direction regarding dividing payrolls of those employees who interchange between separately classifiable operations. This information is addressed by existing provisions in the Division of Single Employee s Payroll rule in the USRP. The R & I entry provides information to define on-site property managers and off-site property management supervisors, as well as resident or residing employees. These terms are not defined in the applicable classifications and questions have arisen concerning their meaning. Accordingly, it is recommended that the applicable classifications be amended to include this information for clarity. The R & I entry provides a procedure for determining which employees qualify for assignment to Classification 8740 in each property management companion classification pairing. These qualifications are already included in the footnote to each of the 8740 classifications. 356

357 Recommendation Amend Classification 9011, Apartment or Condominium Complex Operation N.O.C. not Homeowners Associations, within the Property Management/Operation Industry Group, to provide that (1) on-site property managers are those employees who work at any property location that they are employed to manage, and (2) the term resident shall refer to any employee who resides at a property managed by the employer. PROPOSED PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION N.O.C. not Homeowners Associations all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Flats, apartments, or multiple dwellings having four or more units are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. On-site property managers are those employees who work at any property location that they are employed to manage. The term resident shall refer to any employee who resides at a property managed by the employer. New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(1), Apartment or Condominium Complex Operation N.O.C. property management supervisors not resident or on-site managers or supervisors * * * * * Recommendation Amend Classification 8740(1), Apartment or Condominium Complex Operation N.O.C. property management supervisors, within the Property Management/Operation Industry Group, to provide that offsite property management supervisors are those employees who do not work at or from the properties being managed, and that such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. PROPOSED 357

358 PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION N.O.C. property management supervisors not resident or on-site managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site apartment or condominium complex managers. This classification also applies to off-site property management supervisors who oversee apartment or condominium complexes at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 9011, Apartment or Condominium Complex Operation. Off-site property management supervisors are those employees who do not work at or from the properties being managed. Such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. Also refer to companion Classification 9011, Apartment or Condominium Complex Operation N.O.C. not Homeowners Associations all other employees. 8740(1) * * * * * Recommendation Amend Classification 9007, Apartment or Condominium Complex Operation for Seniors age restricted not Congregate Living Facilities or Homeowners Associations, within the Property Management/Operation Industry Group, to provide that (1) on-site property managers are those employees who work at any property location that they are employed to manage, and (2) the term resident shall refer to any employee who resides at a property managed by the employer. PROPOSED PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION FOR SENIORS age restricted not Congregate Living Facilities or Homeowners Associations all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Flats, apartments, or multiple dwellings having four or more units are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. This classification applies to apartment or condominium complexes that, in compliance with State or Federal housing laws, restrict tenancy to persons who have reached a minimum age (typically either 55 or 62 depending on the type of facility). On-site managers are those employees who work at any property location that they are employed to manage. The term resident shall refer to any employee who resides at a property managed by the employer. Those facilities that, for a single monthly fee, provide a service package that typically includes a living unit, one to three meals a day, in-unit housekeeping, and personal laundry service shall be classified as 8851, Congregate Living Facilities for the Elderly. New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(6), Apartment or Condominium Complex Operation for Seniors age-restricted property management supervisors not resident or on-site managers or supervisors * * * * * 358

359 Recommendation Amend Classification 8740(6), Apartment or Condominium Complex Operation for Seniors age restricted property management supervisors, within the Property Management/Operation Industry Group, to provide that off-site property management supervisors are those employees who do not work at or from the properties being managed, and that such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. PROPOSED PROPERTY MANAGEMENT/OPERATION APARTMENT OR CONDOMINIUM COMPLEX OPERATION FOR SENIORS age restricted property management supervisors not resident or on-site managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site apartment or condominium complex managers. This classification also applies to off-site property management supervisors who oversee apartment or condominium complexes for seniors at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 9007, Apartment or Condominium Complex Operation for Seniors. Off-site property management supervisors are those employees who do not work at or from the properties being managed. Such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. Also refer to companion Classification 9007, Apartment or Condominium Complex Operation for Seniors age restricted not Congregate Living Facilities or Homeowners Associations all other employees. 8740(6) * * * * * Recommendation Amend Classification 9015(1), Building Operation N.O.C. all other employees, within the Property Management/Operation Industry Group, to provide (1) examples of the types of properties to which this classification applies, and (2) that resident or on-site property managers are those employees who work at any property location that they are employed to manage. PROPOSED 359

360 PROPERTY MANAGEMENT/OPERATION BUILDING OPERATION N.O.C. all other employees including resident or on-site managers When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Flats, apartments, or multiple dwellings having four or more units are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. This classification applies to the management or operation of properties such as family residences, including duplexes and triplexes, individual apartment or condominium units, (not apartment or condominium complexes), undeveloped land, recreational vehicle parks and campgrounds. Resident or on-site managers are those employees who work at any property location that they are employed to manage. New construction, alteration or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(3), Building Operation N.O.C. property management supervisors not resident or on-site managers or supervisors. 9015(1) * * * * * Recommendation Amend Classification 8740(3), Building Operation N.O.C. property management supervisors, within the Property Management/Operation Industry Group, to provide that off-site property management supervisors are those employees who do not work at or from the properties being managed, and that such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. PROPOSED PROPERTY MANAGEMENT/OPERATION BUILDING OPERATION N.O.C. property management supervisors not resident or onsite managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site property managers. This classification also applies to off-site property management supervisors who oversee properties at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 9015(1), Building Operation N.O.C. all other employees. Off-site property management supervisors are those employees who do not work at or from the properties being managed. Such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. Also refer to companion Classification 9015(1), Building Operation N.O.C. all other employees. 8740(3) * * * * * 360

361 Recommendation Amend Classification 9010, Mobile Home Park Operation all other employees including on-site managers, resident employees and resident Clerical Office Employees, within the Property Management/Operation Industry Group, to provide that (1) on-site property managers are those employees who work at any property location that they are employed to manage, and (2) the term resident shall refer to any employee who resides at a property managed by the employer. PROPOSED PROPERTY MANAGEMENT/OPERATION MOBILE HOME PARK OPERATION all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. Mobile home parks are subject to a minimum payroll of $2,000 per annum for one location and to a minimum of $1,000 for each additional location covered by the same policy. On-site managers are those employees who work at any property location that they are employed to manage. The term resident shall refer to any employee who resides at a property managed by the employer. New construction, alteration, or demolition work shall be separately classified. The preparation or serving of hot foods shall be separately classified as 9079(1), Restaurants or Taverns. Also refer to companion Classification 8740(4), Mobile Home Park Operation property management supervisors not resident or on-site managers or supervisors * * * * * Recommendation Amend Classification 8740(4), Mobile Home Park Operation property management supervisors not resident or on-site managers or supervisors, within the Property Management/Operation Industry Group, to provide that off-site property management supervisors are those employees who do not work at or from the properties being managed, and that such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. PROPOSED PROPERTY MANAGEMENT/OPERATION MOBILE HOME PARK OPERATION property management supervisors not resident or onsite managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site mobile home park managers. This classification also applies to off-site property management supervisors who oversee mobile home parks at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is developed under 9010, Mobile Home Park Operation. Off-site property management supervisors are those employees who do not work at or from the properties being managed. Such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. Also refer to companion Classification 9010, Mobile Home Park Operation all other employees. 8740(4) * * * * * 361

362 Recommendation Amend Classification 8290 Warehouses self-storage all other employees, within the Property Management/Operation Industry Group, to provide that (1) on-site property managers are those employees who work at any property location that they are employed to manage, and (2) the term resident shall refer to any employee who resides at a property managed by the employer. PROPOSED PROPERTY MANAGEMENT/OPERATION WAREHOUSES self-storage all other employees including on-site managers, resident employees and resident Clerical Office Employees When lodging is provided by the employer, the total remuneration shall include the market value of such lodging to the employee. On-site managers are those employees who work at any property location that they are employed to manage. The term resident shall refer to any employee who resides at a property managed by the employer. Also refer to companion Classification 8740(5), Warehouses self-storage property management supervisors not resident or on-site managers or supervisors * * * * * Recommendation Amend Classification 8740(5), Warehouses self-storage property management supervisors, within the Property Management/Operation Industry Group, to provide that off-site property management supervisors are those employees who do not work at or from the properties being managed, and that such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. PROPOSED PROPERTY MANAGEMENT/OPERATION WAREHOUSES self-storage property management supervisors not resident or on-site managers or supervisors This classification applies to off-site property management supervisors who exercise direction through resident or on-site self-storage warehouse managers. This classification also applies to offsite property management supervisors who oversee self-storage warehouses at which all operation, maintenance and care activities are conducted by separate concerns and no payroll is assignable to 8290, Warehouses self-storage. Off-site property management supervisors are those employees who do not work at or from the properties being managed. Such employees are based at and work from remote office locations and periodically travel to the property to perform supervisory and/or administrative duties. Also refer to companion Classification 8290, Warehouses self-storage all other employees. 8740(5) 362

363 Residential Care Facilities The R & I entry shown below was established in 1993 in connection with the establishment of Classification 8851, Congregate Living Facilities for the Elderly no care or supervision. The R & I entry clarifies the classification procedure for various types of health and human care facilities. R & I Entry Residential Care Facilities 8851 Congregate Living Facilities for the Elderly 8829(1) Nursing Homes 9070(3) Residential Care Facilities for Adults 9070(1) Residential Care Facilities for the Elderly These classifications apply to concerns operating residential care facilities providing nonmedical care and supervision to adult or elderly individuals who either need or desire assisted care but who do not require 24-hour a day medical care. Care and supervision include the following: 1. assistance in dressing, grooming, bathing, and other personal hygiene; 2. assistance in taking medication; 3. central storing and distribution of medications; 4. arrangement of and assistance with medical and dental care, which may include transportation; 5. maintenance of house rules for the protection of residents; 6. supervision of resident schedules and activities; 7. maintenance and supervision of resident monies and property; and 8. monitoring food intake and special diets. In general, Residential Care Facilities for the Elderly and Residential Care Facilities for Adults are licensed by the State Department of Social Services. When skilled nursing care is provided as an identifiable unit, such nursing care unit shall be assigned to Classification Employees common to both operations, such as those involved in the preparation and serving of food, the operation of laundries, maintenance, security and supervision, shall be assigned to the governing classification. A residential care facility for the elderly (RCFE) licensed as such by the Department of Social Services is permitted to provide special care and supervision to patients, but is not permitted to provide 24- hour skilled nursing care. Twenty-four-hour skilled nursing care requires a skilled nursing facility license from the Department of Health Services. RCFEs that specialize in Alzheimer s patients often maintain a special care unit providing special care and supervision to patients suffering from Alzheimer s disease. The special care unit is assigned to Classification 9070, provided it operates under the license of the RCFE. When a separate unit is operated for the provision of congregate living services only (no care and supervision), such unit shall be assigned to Classification 8851, Congregate Living Facilities for the Elderly. Employees common to all operations, such as those involved in the preparation and serving of food, the operation of laundries, maintenance, security and supervision, shall be assigned to the governing classification. 363

364 The current phraseologies for Classifications 8851, 8829(1), 9070(3), and 9070(1) are: HEALTH AND HUMAN SERVICES CONGREGATE LIVING FACILITIES FOR THE ELDERLY no care or supervision 8851 This classification shall apply to those firms providing retirement facilities that, for a single monthly fee, provide a service package that typically includes a living unit, one to three meals a day, inunit housekeeping, and personal laundry service. This classification shall not be assigned to operations that are licensed by the Department of Social Services. Age restricted apartment or condominium complexes that do not provide the above services shall be classified as 9007, Apartment or Condominium Complex Operation for Seniors. Operations licensed by the Department of Social Services to provide assisted care services, including but not limited to, assisting residents with dressing, eating, personal hygiene and taking medications shall be classified as 9070(1), Residential Care Facilities for the Elderly. When skilled nursing care is provided as an identifiable unit, such nursing care shall be classified as 8829(1), Nursing Homes. HEALTH AND HUMAN SERVICES NURSING HOMES all employees 8829(1) HEALTH AND HUMAN SERVICES RESIDENTIAL CARE FACILITIES FOR THE ELDERLY N.O.C. all employees 9070(1) Classification 9070(1) shall not be used for division of payroll in connection with Classifications 8804(1), Substance Use Disorder Recovery Homes, or 8804(2), Social Rehabilitation Facilities for Adults, unless the operation described by Classification 9070(1) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 8804(1) or 8804(2). This classification shall apply to those firms that provide nonmedical care and supervision to their residents. When a separate unit is operated for the provision of congregate living services only (no care and supervision), such unit shall be separately classified as 8851, Congregate Living Facilities. When skilled nursing care is provided as an identifiable unit, such nursing care shall be separately classified as 8829(1), Nursing Homes. HEALTH AND HUMAN SERVICES RESIDENTIAL CARE FACILITIES FOR ADULTS N.O.C. all employees 9070(3) Classification 9070(3) shall not be used for division of payroll in connection with Classifications 8804(1), Substance Use Disorder Recovery Homes, or 8804(2), Social Rehabilitation Facilities for Adults, unless the operation described by Classification 9070(3) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 8804(1) or 8804(2). This classification shall apply to those firms providing community care facilities for residents who are ambulatory and where the facilities are nonmedically oriented. When skilled nursing care is provided as an identifiable unit, such nursing care unit shall be separately classified as 8829(1), Nursing Homes. Analysis The R & I entry describes the types of facilities, residents and services associated with residential care facilities, and explains the proper classification assignment for identifiable units that are licensed by 364

365 regulatory agencies. The R & I entry also clarifies that when skilled nursing care is provided as an identifiable unit, such nursing care is assignable to Classification Currently, Classifications 8851, 9070(3) and 9070(1) provide that [w]hen skilled nursing care is provided as an identifiable unit, such nursing care shall be separately classified as 8829(1), Nursing Homes. The R & I entry clarifies that when a residential care facility for the elderly operates a specialized care unit for certain patients, i.e., patients suffering from Alzheimer s disease, such care units are assignable to Classification 9070(1) when the units operate under the license for a residential care facility for the elderly. The WCIRB thinks that this information does not need to be incorporated into the USRP because Classification 9070(1) already directs that certain operations be separately classified as either 8851 or 8829(1). The R & I entry explains that employees common to all operations, such as food services, laundry, maintenance, security and supervisory employees, are assignable to the governing classification. The WCIRB thinks this information is helpful and recommends amending Classifications 8851, 9070(1) and 9070(3) to direct that employees common to all operations be assigned to the governing classification. The assignment of the governing classification to employees common to all operations may be contrary to the term all employees that attends Classifications 9070(1) and 9070(3). The WCIRB, therefore, recommends that the term all employees be removed from Classifications 9070(1) and 9070(3). The footnote to Classification 8851 references Classification 9070(1) and describes the principal types of residential care services that are provided by employers assigned to Classifications 9070(1). However, Classifications 9070(1) and 9070(3) do not describe these services. Therefore, the WCIRB recommends that Classifications 9070(1) and 9070(3) be amended to list the types of care services primarily provided by residential care facilities. Classification 9070(1) directs that, [w]hen a separate unit is operated for the provision of congregate living services only (no care and supervision), such unit shall be separately classified as 8851, Congregate Living Facilities. Classification 9070(3) does not contain this directive. The WCIRB recommends adding this directive to Classification 9070(3) for consistency. The WCIRB also recommends adding the converse directive to Classification

366 Recommendation Amend Classification 8851, Congregate Living Facilities for the Elderly no care or supervision, for clarity and consistency with other related classifications, and to provide that employees common to separately classifiable operations be assigned to the governing classification. PROPOSED HEALTH AND HUMAN SERVICES CONGREGATE LIVING FACILITIES FOR THE ELDERLY no care or supervision 8851 This classification shall apply to those firms providing retirement facilities that, for a single monthly fee, provide a service package that typically includes a living unit, one to three meals a day, in-unit housekeeping, and personal laundry service. This classification shall not be assigned to operations that are licensed by the Department of Social Services. Age restricted apartment or condominium complexes that do not provide the above services shall be classified as 9007, Apartment or Condominium Complex Operation for Seniors. Operations licensed by the Department of Social Services toa separate unit operated at the same location for the provision ofde assisted care services, including but not limited to, assisting residents with dressing, eating, personal hygiene and taking medications shall be classified as 9070(1), Residential Care Facilities for the Elderly. When sskilled nursing care is provided at the same location as an identifiable unit, such nursing care shall be classified as 8829(1), Nursing Homes. When the congregate living facility operates one or more separate units at the same location that is assigned to Classification 8829(1), Nursing Homes, and/or Classification 9070(1), Residential Care Facilities for the Elderly, employees common to all operations, such as but not limited to, food services, laundry, maintenance, security and supervisory employees, shall be assigned to the Governing Classification. (See Section II, Classification Terminology for the definition of Governing Classification.) * * * * * Recommendation Amend Classification 9070(1), Residential Care Facilities for the Elderly N.O.C. all employees, within the Health and Human Services Industry Group, to remove the term all employees ; clarify the types of services provided by employers assigned to this classification; and provide that employees common to separately classifiable operations be assigned to the Governing Classification. PROPOSED 366

367 HEALTH AND HUMAN SERVICES RESIDENTIAL CARE FACILITIES FOR THE ELDERLY N.O.C. all employees 9070(1) Classification 9070(1) shall not be used for division of payroll in connection with Classifications 8804(1), Substance Use Disorder Recovery Homes, or 8804(2), Social Rehabilitation Facilities for Adults, unless the operation described by Classification 9070(1) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 8804(1) or 8804(2). This classification shall apply to those firms that provide nonmedical care and supervision to their residents. Such services include, but are not limited to, assisting residents with dressing, eating, personal hygiene and taking medications. When aa separate unit is operated at the same location for the provision of congregate living services only (no care and supervision), such unit shall be separately classified as 8851, Congregate Living Facilities. When Sskilled nursing care is provided at the same location as an identifiable unit, such nursing care shall be separately classified as 8829(1), Nursing Homes. When the residential care facility operates units at the same location that are assigned to Classification 8851, Congregate Living Facilities, and/or Classification 8829(1), Nursing Homes, employees common to all operations, such as but not limited to, food services, laundry, maintenance, security and supervisory employees, shall be assigned to the Governing Classification (See Section II, Classification Terminology, for the definition of Governing Classification.) * * * * * Recommendation Amend Classification 9070(3), Residential Care Facilities for Adults N.O.C. all employees, within the Health and Human Services Industry Group, to remove the term all employees ; clarify the types of services that are provided by employers assigned to this classification; provide that an identifiable unit that is operated for the provision of congregate living services only (no care and supervision) be separately classified as 8851, Congregate Living Facilities; and (4) provide that employees common to separately classifiable operations be assigned to the Governing Classification. PROPOSED 367

368 HEALTH AND HUMAN SERVICES RESIDENTIAL CARE FACILITIES FOR ADULTS N.O.C. all employees 9070(3) Classification 9070(3) shall not be used for division of payroll in connection with Classifications 8804(1), Substance Use Disorder Recovery Homes, or 8804(2), Social Rehabilitation Facilities for Adults, unless the operation described by Classification 9070(3) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 8804(1) or 8804(2). This classification shall apply to those firms providing community care facilities for residents who are ambulatory and where the facilities are nonmedically oriented. Such firms provide nonmedical care services such as, but not limited to, assisting residents with dressing, eating, personal hygiene and taking medications. A separate unit operated at the same location for the provision of congregate living services only (no care and supervision) shall be separately classified as 8851, Congregate Living Facilities. When sskilled nursing care is provided at a separate location as an identifiable unit, such nursing care unit shall be separately classified as 8829(1), Nursing Homes. When the residential care facility operates separate units at the same location that are assigned to Classification 8851, Congregate Living Facilities, and/or Classification 8829(1), Nursing Homes, employees common to all operations, such as but not limited to, food services, laundry, maintenance, security and supervisory employees, shall be assigned to the Governing Classification. (See Section II, Classification Terminology, for the definition of Governing Classification.) 368

369 Showroom Sales Samples Only The R & I entry shown below was established in 1980 following an appeal to the C & R Committee by an employer that operated a permanent showroom for the display of samples of women s fashion accessories available for wholesale purchase by buyers for stores. The C & R Committee concluded that salespersons who sell to buyers for stores exclusively from samples in a showroom are assignable to Classification 8742(1). R & I Entry Showroom Sales Samples Only 8742(1) Salespersons outside Salespersons who sell exclusively from samples to buyers for stores (no direct sales) in a salesroom or showroom and who have no other duties of any kind in the service of the employer, except clerical work or as outside salespersons, shall be assigned to Classification 8742(1), Salespersons outside. The current phraseology of Classification 8742(1) is: SALESPERSONS Outside 8742(1) Assignment of this classification is subject to the provisions of the rules for Standard Exceptions. Analysis The R & I entry clarifies that Classification 8742(1) is assignable to salespersons who sell exclusively from samples to buyers for stores in a salesroom or showroom and who have no other duties of any kind in the service of the employer. The sales activities involve showing various samples of merchandise to customers and writing sales orders. Merchandise is shipped by other employees or by other concerns directly to the customer. The operations of showrooms that cater to wholesale buyers are prevalent in the apparel industry, as well as other industries that sell on a wholesale basis. Over the years, the WCIRB has received numerous questions regarding the assignment of showrooms to classifications other than 8742(1). In many instances, the showroom is not limited to sales from samples, but may include cash-and-carry sales, or sales made directly to the consumer, and therefore, the showroom is assigned to a store classification. Accordingly, the WCIRB thinks it would be helpful to amend the USRP to include the classification procedure for salespersons who sell exclusively from samples to buyers for stores in a salesroom or showroom where no actual inventory (exclusively of showroom samples) is maintained, and who have no other duties of any kind in the service of the employer. 369

370 Recommendation Amend Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 5, Stores, subrule b(2), Wholesale vs. Retail, to clarify the classification procedure for showroom salespersons who sell exclusively from samples to buyers for stores. PROPOSED Part 3 Standard Classification System Section IV Special Industry Classification Procedures 5. Stores b. The applicable store classification is determined based upon the type of merchandise sold and whether the operations are wholesale or retail. In the absence of specific instructions found in the classification phraseology or footnote, the following definitions apply when determining the applicable store classification. (2) Wholesale vs. Retail A store that sells merchandise on both a wholesale and a retail basis shall be assigned to the appropriate store classification, depending upon whether the gross receipts are principally (more than 50%) from wholesale or retail sales. Salespersons who sell exclusively from samples to buyers for stores (no direct sales) in a salesroom or showroom location where no actual inventory (exclusive of showroom samples) is maintained, and who have no other duties of any kind in the service of the employer except clerical work or as outside salespersons, shall be assigned to Classification 8742(1), Salespersons Outside. 370

371 Stores Lottery Ticket Sales The R & I entry shown below was established in 1992 following an appeal to the C & R Committee pertaining to the assignment of Classification 8061, Stores groceries and provisions convenience retail, based, in part, on the inclusion of the full price of lottery tickets when determining the percentage of the types of goods sold. The R & I entry clarifies that only the commission on the sale of lottery tickets should be included in determining total gross receipts. R & I Entry Stores Lottery Ticket Sales In determining the applicability of certain store classifications, it is necessary to determine the percentage of gross receipts as accounted for by the sale of two or more types of products. When the products sold by a store operation include lottery tickets for games authorized by the California State Lottery, only that portion of the sales proceeds identified by the California State Lottery as commission shall be included in determining total gross receipts and the percentages of gross receipts among product lines. Analysis For stores that sell categories of merchandise that are contemplated by more than one classification, the classification procedure is provided in the USRP at Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 5, Stores, Subrule b, which appears in pertinent part as follows: 5. Stores b. The applicable store classification is determined based upon the type of merchandise sold and whether the operations are wholesale or retail. In the absence of specific instructions found in the classification phraseology or footnote, the following definitions apply when determining the applicable store classification. (1) Type of Merchandise Sold If a store sells more than one type of merchandise, each of which may be subject to a different classification, the store classification shall be determined based on the highest rated category of merchandise sold, provided that category exceeds twentyfive percent (25%) of gross receipts. As shown above, Subrule b does not provide that only the commission on the sale of lottery tickets is to be included in determining total gross receipts. Since gross receipts from the sale of lottery tickets have the potential to impact the determination of store classifications in many cases, the WCIRB thinks the Stores rule should be amended to provide direction as to the treatment of lottery ticket sales when determining the percentage of gross receipts. 371

372 Recommendation Amend Part 3, Section IV, Special Industry Classification Procedures, Rule 5, Stores, to provide that when the products sold by a store operation includes lottery tickets for games authorized by the California State Lottery, only that portion of the sales proceeds identified by the California State Lottery as commission shall be included in determining the percentage of gross receipts. PROPOSED Section IV Special Industry Classification Procedures 5. Stores a. For store operations, the classification shall be separately determined for each type of store that is conducted as a separate operation without interchange of labor. b. The applicable store classification is determined based upon the type of merchandise sold and whether the operations are wholesale or retail. In the absence of specific instructions found in the classification phraseology or footnote, the following definitions apply when determining the applicable store classification. (1) Type of Merchandise Sold If a store sells more than one type of merchandise, each of which may be subject to a different classification, the store classification shall be determined based on the highest rated category of merchandise sold, provided that category exceeds twenty-five percent (25%) of gross receipts. If a store sells lottery tickets authorized by the California State Lottery, only that portion of the sales proceeds identified by the California State Lottery as commission shall be included in determining gross receipts. 372

373 Stores Manufacturing/Assembling The R & I entry shown below was established in 2003 to clarify that store operations include the incidental assembly of merchandise for display or sale. R & I Entry Stores Manufacturing/Assembling It is common for certain types of stores, such as those engaged in the sale of bicycles, furniture, jewelry and light fixtures, to perform incidental assembly activities in preparation for the sale or display of merchandise. Assembly or get ready activities that are incidental to a store s operations shall be assigned to the appropriate store classification. Analysis Various types of stores engage in incidental assembly and get ready operations in preparation for the display and sale of merchandise. For example, furniture stores may receive pre-manufactured parts such as table tops and legs, and assemble the table for display and sale. A jewelry store may receive ring settings and gemstones and as purchases are made, jewelers will set and secure the gemstone selected by the customer. Such incidental assembly 1 and get ready operations are typical for many types of stores and are included in the store classification. The USRP at Part 3, Section IV, Special Industry Classification Procedures, Rule 5, Stores, provides the classification procedure for stores; however, this rule does not specify that the incidental assembly and get ready of merchandise by a store operation is assignable to the appropriate store classification. 1 The USRP at Part 3, Section II, Classification Terminology, Rule 2, Assembly or Assembling, defines assembly or assembling as, [r]efers to the joining together of purchased prefabricated component parts to form a described product ; however, Rule 2 pertains to manufacturers of products, not store operations. 373

374 Recommendation Amend Part 3, Section IV, Special Industry Classification Procedures, Rule 5, Stores, to provide that the incidental assembly and preparation of merchandise for sale shall be assigned to the store classification. PROPOSED Section IV Special Industry Classification Procedures 5. Stores c. The incidental assembly and preparation of purchased merchandise for display or sale shall be assigned to the store classification. Examples Furniture stores may receive pre-manufactured components of a dining table and assemble the table for display and sale. These operations shall be assigned to Classification 8015, Stores furniture wholesale or retail. Jewelry stores may receive ring settings and gemstones and as purchases are made, jewelers will set and secure the gemstone selected by the customer. These operations shall be assigned to Classification 8013(1), Stores jewelry wholesale or retail. 374

375 Stores Preparation and Sale of Hot Food The R & I entry shown below was established in 2004 following a study of hot food preparation at grocery stores, prompted by numerous requests for assistance in defining hot food departments within grocery stores. The study found that the preparation and sale of hot food is an operation that does not prevail within the retail grocery industry, and therefore, such operations should be separately classified. The R & I entry clarifies the classification procedure for a grocery store or supermarket that engages in the preparation and sale of hot foods. R & I Entry Stores Preparation and Sale of Hot Food The Special Industry Classification Procedures for Stores (Uniform Statistical Reporting Plan, Part 3, Section IV, Rule 5, Stores) directs that employees engaged in the preparation and sale of hot foods shall be separately classified. In addition, the footnote attending Classification 8006(1), Stores groceries and provisions retail, directs that hot food departments shall be separately classified. For the purpose of administering this procedure, hot food is defined as food that is displayed and sold hot, or cooked to order. Prepared cold food that is warmed for individual customers at the time of sale is not considered hot food. Stores, especially grocery stores, may maintain a separate department for the preparation and sale of hot food. Often the hot food operations are combined with a delicatessen department that sells sandwiches, specialty prepared foods, lunchmeats, salads, and cheeses. Hot food department employees may perform the incidental handling and packaging of cold foods and delicatessen-type items such as lunchmeats, salads, and cheeses. Hot food department employees shall be assigned to Classification 9079(1), Restaurants or Taverns. The payroll of store employees who perform hot food department operations and also perform store operations outside of the hot food department must be classified in accordance with the Uniform Statistical Reporting Plan, Part 3, Section V, Rule 3. The current phraseology of Classifications 8006(1) and 9079(1) are: STORES Refer to Section IV, Special Industry Classification Procedures, Rule 5, pertaining to Stores. STORES groceries and provisions retail 8006(1) This classification shall apply to stores principally (over 50% of gross receipts) engaged in the sale of grocery items such as, but not limited to, fresh and frozen produce, dairy products, cereals, canned goods, frozen foods, bread, condiments, baking supplies, flour, soft drinks, coffee, tea, delicatessen style meats, salads, and cheeses. The following departments shall be separately classified: Fresh meat (cutting or wrapping) Bakery Hot food (preparation or serving) Stores having less than 5,000 square feet devoted to the display and sale of merchandise and open past 11:00 P.M. any night of the week shall be separately classified. 375

376 RESTAURANTS OR TAVERNS all employees including musicians and entertainers 9079(1) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 9079(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification contemplates the preparation and serving of hot and cold food items for consumption on or away from the premises or the preparation, pouring and serving of alcoholic beverages for consumption on the premises. Hot foods items are foods that are cooked to order for customers and served hot. Foods that are prepared and served from a warming tray or similar device are also considered hot foods. Analysis Many grocery stores and supermarkets have departments dedicated to the preparation of hot food items such as fried chicken, pizza, lasagna and similar hot food items packaged in serving size containers to go or for consumption in a small dining area on the store premises. The footnote to Classification 8006(1) directs that hot food departments shall be separately classified. Grocery store and supermarkets may also retain a delicatessen department for the preparation and sale of cold food such as deli meats, cheese, and various types of salad. The WCIRB has received requests pertaining to the classification assignment of grocery stores that maintain delicatessen departments and also prepare and serve hot food, i.e., a combined delicatessen and hot food department. In accordance with Uniform Statistical Reporting Plan (USRP), Part 3, Section IV, Special Industry Classification Procedures, Rule 5, Stores, Subrule c and the subject R & I entry, the WCIRB has assigned Classification 9079(1) when the delicatessen department is also engaged in the preparation of hot foods. Rule 5c appears as follows: The payroll of store employees engaged in the preparation and sale of hot foods shall be assigned to Classification 9079(1), Restaurants or Taverns. Although this rule does not specifically include the preparation of cold food or delicatessen-type operations, it is common practice for restaurants and food preparation operations that prepare hot foods to also prepare cold foods and all operations are assigned to Classification 9079(1). The R & I entry also clarifies that store employees who perform hot food department operations and engage in store operations outside of the hot food department, e.g., stocking shelves, are classified in accordance with the USRP Part 3, Section V, Rule 3, Division of Single Employee s Payroll. The Division of Single Employee s Payroll Rule provides the guidelines for dividing a single employee s payroll between separate classifications and appears in relevant part as follows: the remuneration of any one employee may be divided between two or more classifications, provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee There appears to be a conflict in the application of the Division of a Single Employees Payroll Rule and the Stores Rule, specifically Rule 5c (shown above). The Division of Single Employees Payroll Rule allows the separate classification assignment of a single employee s payroll to more than one classification, while the Stores Rule states that the payroll of store employees engaged in the preparation 376

377 and sale of hot foods are assignable to Classification 9079(1). In view of the apparent conflict, the WCIRB recommends amending Rule 5c to provide that a hot food department, rather than the payroll of individual store employees, shall be assigned to Classification 9079(1). This recommendation is consistent with the footnote attending Classification 8006(1) which describes the separate classification of various departments. 377

378 Recommendation Amend Part 3, Section IV, Special Industry Classification Procedures, Rule 5, Stores, Subrule c, to provide the classification procedure for stores that maintain a hot food preparation department. PROPOSED Section IV Special Industry Classification Procedures 5. Stores c. The payroll of If a store employees engaged in maintains a department for the preparation and sale of hot foods, such operations are assignable shall be assigned to Classification 9079(1), Restaurants or Taverns. The payroll of employees that interchange between store operations and the department engaged in the preparation and sale of hot foods shall be assigned in accordance with Section V, Rule 3, Division of Single Employee s Payroll. 378

379 Storm Drain Construction The R & I entry shown below was established in 1970 following an appeal to the C & R Committee by an employer that protested the assignment of Classifications 6307/6308, Sewer Construction all operations including construction of laterals and tunneling at street crossings, to the construction of a flood control system consisting of an open-type channel and a closed-type drain. R & I Entry Storm Drain Construction 6361(1) Canal Construction 6308 Sewer Construction high wage 6307 Sewer Construction low wage Storm drain construction shall be classified in accordance with the following procedure: 1. The construction of monolithic or concrete pipe storm drains shall be assigned to Classification 6307, Sewer Construction all operations, or Classification 6308, Sewer Construction all operations, depending on regular hourly wage of the employees. (See actual classification phraseologies.) 2. The construction of concrete lined open channel storm drains shall be assigned to Classification 6361(1), Canal Construction all operations. The current phraseologies of Classifications 6361(1), 6307 and 6308 are as follows: CANAL CONSTRUCTION all operations 6361(1) Pile driving, tunneling, and dam or sewer construction shall be separately classified. SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage does not equal or exceed $26.00 per hour 6307 SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage equals or exceeds $26.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $26.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $26.00 per hour shall be classified as 6307, Sewer Construction Analysis The construction of monolithic or concrete pipe storm drains is not specifically described by any construction or erection classification; however, the operations are comparable to those involved in sewer construction, which is assignable to Classifications 6307/6308. Accordingly, the WCIRB recommends that Classifications 6307/6308 be amended to include the construction of monolithic or concrete pipe storm drains, including catch basins. Further, while not covered in the R & I entry, the WCIRB recommends that the installation of septic tanks be added to Classifications 6307/6308 as this is an operation that is commonly assigned to these classifications. A concrete lined open channel storm drain is a canal and therefore, the construction of this type of storm drain is described by Classification 6361(1) and no amendment to this classification is required. J-1 379

380 Recommendations Amend Classifications 6307/6308, Sewer Construction all operations, to include (1) the construction of monolithic or concrete pipe storm drains and catch basins and (2) the installation of septic tanks. PROPOSED SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage does not equal or exceed $26.00 per hour This classification also includes the construction of monolithic or concrete pipe storm drains and catch basins and the installation of septic tanks SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage equals or exceeds $26.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $26.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $26.00 per hour shall be classified as 6307, Sewer Construction. This classification also includes the construction of monolithic or concrete pipe storm drains and catch basins and the installation of septic tanks J-2 380

381 Trenching The R & I entry shown below was established in 1965 following a study of specialty contracting firms engaged in trenching operations in connection with a variety of projects including but not limited to telephone cable installation, electrical wire installation, and water pipe installation. The C & R Committee concluded that trenching operations by specialty contractors are assignable to Classifications 6218/6220, Excavation N.O.C. including borrowing, filling or backfilling, except when trenching operations are conducted in connection with the construction of canals, irrigation systems, drainage systems, crosscountry water pipe line construction, oil or gas pipeline construction or sewer construction. R & I Entry Trenching 6220(1) Excavation high wage 6218(1) Excavation low wage Trenching operations by specialty contractors shall be assigned to Classification 6218(1), Excavation N.O.C., or Classification 6220(1), Excavation N.O.C., except when such trenching operations are in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction. In such cases, trenching operations shall be assigned to one of the following classifications: Classification 6361(1), Canal Construction all operations Classification 6361(2), Cross-Country Water Pipeline Construction Classification 6364, Irrigation Pipe Installation Classification 6233, Oil or Gas Pipeline Construction Classification 6307, Sewer Construction low wage Classification 6308, Sewer Construction high wage The current phraseologies of Classifications 6218(1), 6220(1), 6361(1), 6361(2), 6364, 6233, 6307 and 6308 are: EXCAVATION N.O.C. including borrowing, filling or backfilling employees whose regular hourly wage does not equal or exceed $26.00 per hour Mass rock excavation, grading or excavation in connection with street or road construction, pile driving, shaft sinking, caisson or cofferdam work shall be separately classified. Trenching operations conducted by specialty contractors in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction shall be assigned to the corresponding construction classification. 6218(1) EXCAVATION N.O.C. including borrowing, filling or backfilling employees whose regular hourly wage equals or exceeds $26.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $26.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $26.00 per hour shall be classified as 6218(1), Excavation N.O.C. Mass rock excavation, grading or excavation in connection with street or road construction, pile driving, shaft sinking, caisson or cofferdam work shall be separately classified. Trenching operations conducted by specialty contractors in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction shall be assigned to the corresponding construction classification. 6220(1) 381

382 CANAL CONSTRUCTION all operations 6361(1) Pile driving, tunneling, and dam or sewer construction shall be separately classified. CROSS-COUNTRY WATER PIPELINE CONSTRUCTION all operations 6361(2) IRRIGATION PIPE INSTALLATION agricultural all operations 6364 OIL OR GAS PIPELINE CONSTRUCTION 6233 Pile driving, dredging or tunneling shall be separately classified. SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage does not equal or exceed $26.00 per hour 6307 SEWER CONSTRUCTION all operations including construction of laterals and tunneling at street crossings employees whose regular hourly wage equals or exceeds $26.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $26.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $26.00 per hour shall be classified as 6307, Sewer Construction Analysis The footnotes to Classifications 6218/6220 direct that trenching operations shall be assigned to the corresponding construction classification when the trenching operations are performed in connection with the construction of canals, irrigation systems, cross-country water pipelines, and oil or gas pipeline construction or sewer construction as provided in the R & I entry above. Accordingly, Classifications 6218/6220 do not need to be amended in this regard; however, staff recommends that each classification be amended for clarity to provide that the classification includes trenching operations conducted by specialty contractors except in connection with identified operations. It is noted that Classification 6233, Oil or Gas Pipeline Construction, does not include the term, all operations, which is included in Classifications 6361(1), 6361(2) and For clarity and consistency, the WCIRB recommends that Classification 6233 be amended to include all operations. 382

383 Recommendation Amend Classification 6233, Oil or Gas Pipeline Construction all operations, to include all operations for clarity and consistency. PROPOSED OIL OR GAS PIPELINE CONSTRUCTION all operations 6233 Pile driving, dredging or tunneling shall be separately classified. * * * * * Recommendation Amend Classifications 6218(1)/6220(1), Excavation N.O.C. including borrowing, filling or backfilling, for clarity. PROPOSED EXCAVATION N.O.C. including borrowing, filling or backfilling employees whose regular hourly wage does not equal or exceed $26.00 per hour Mass rock excavation, grading or excavation in connection with street or road construction, pile driving, shaft sinking, caisson or cofferdam work shall be separately classified. This classification includes Ttrenching operations conducted by specialty contractors except in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction. Such operations shall be assigned to the corresponding construction classification. 6218(1) EXCAVATION N.O.C. including borrowing, filling or backfilling employees whose regular hourly wage equals or exceeds $26.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $26.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $26.00 per hour shall be classified as 6218(1), Excavation N.O.C. Mass rock excavation, grading or excavation in connection with street or road construction, pile driving, shaft sinking, caisson or cofferdam work shall be separately classified. This classification includes Ttrenching operations conducted by specialty contractors except in connection with the construction of canals, irrigation systems, cross-country water pipelines, oil or gas pipeline construction or sewer construction. Such operations shall be assigned to the corresponding construction classification. 6220(1) 383

384 Upholstering including Automobile Body Upholstering, Coffin or Casket Upholstering Work, Furniture Upholstering and Wheelchair Upholstering The R & I entries shown below were established in 1979 to clarify the definition of upholstering operations. R & I Entries Automobile Body Upholstering See Classification 9522(1), Upholstering Coffin or Casket Upholstering Work See Classification 9522(1), Upholstering Furniture Upholstering 9522(2) Furniture upholstering See Classification 9522(1), Upholstering Upholstering 9522(3) Automobile Body Upholstering 9522(4) Coffin or Casket Upholstery Work 9522(2) Furniture Upholstering 9522(1) Upholstering 9522(5) Wheelchair Upholstering The following activities shall constitute upholstering operations and are contemplated under Classification 9522: 1. Fabric cutting and sewing. 2. Spring-up. 3. Trimming. 4. Final assembly of the upholstery material to the manufactured frame. This classification does not contemplate any frame manufacturing or frame assembly. Wheelchair Upholstering 9522(5) Wheelchair Upholstering See Classification 9522, Upholstering 384

385 The current phraseologies for Classifications 9522(3), 9522(4), 9522(2), 9522(1) and 9522(5) are: AUTOMOBILE BODY UPHOLSTERING 9522(3) Classification 9522(3) shall not be used for division of payroll in connection with Classifications 3808, Automobile or Motorcycle Mfg. or Assembling, 3815(1), Automobile Truck or Automobile Truck Trailer Mfg. or Assembling, 3815(2), Automobile Body Mfg., or 8390, Automobile Van Conversion or Customizing, unless the operation described by Classification 9522(3) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 3808, 3815(1), 3815(2) or COFFIN OR CASKET UPHOLSTERY WORK 9522(4) FURNITURE upholstering 9522(2) UPHOLSTERING 9522(1) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions, General Exclusions or in connection with Classification 2812, Cabinet Mfg. wood) unless the operations described by Classification 9522(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification other than Classification WHEELCHAIR UPHOLSTERING 9522(5) The corresponding manufacturing and assembling classification phraseologies are: FURNITURE ASSEMBLING other than metal including finishing 2881(1) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions, General Exclusions or in connection with Classification 9522(2), Furniture upholstering) unless the operations described by Classification 2881(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification, except Classification 9522(2). This classification shall apply to employers assembling furniture exclusively from parts fabricated by others. This classification does not apply to employers engaged in the fabrication and subsequent assembly of furniture parts. Upholstery operations shall be separately classified as 9522(2), Furniture upholstering. COFFIN OR CASKET MFG. OR ASSEMBLING wood 2881(2) Upholstery operations shall be separately classified as 9522(4), Coffin or Casket Upholstery Work. 385

386 FURNITURE MFG. wood including assembling or finishing 2883 This classification includes, but is not limited to, the manufacture of tables, chairs, desks, bookcases, bed frames, assembled furniture framework parts, entertainment cabinets, game tables, credenzas, church furniture, benches and similar furniture items. This classification shall include the fabrication of metal hardware parts, if such operations account for less than 50% of the total payroll. Upholstery operations shall be separately classified as 9522(2), Furniture upholstering. FURNITURE MFG. metal 3076(1) This classification applies to the manufacture of metal furniture including but not limited to tables, chairs, desks, bed frames, bookcases, and storage, filing or medicine cabinets. Upholstery operations shall be separately classified as 9522(2), Furniture upholstering. WHEELCHAIR MFG. metal 3076(6) Upholstery operations shall be separately classified as 9522(5), Wheelchair Upholstering. Analysis The R & I entry shown above clarifies the definition of upholstery operations that are contemplated by the various upholstery classifications and specifically notes that they do not contemplate any frame manufacturing or frame assembly. Further, each manufacturing classification listed above indicates how the upholstery operations are to be classified. The WCIRB has responded to inquiries concerning the line of demarcation between upholstery and certain manufacturing or assembly operations, such as the assembly of furniture frames to which upholstery materials are attached. The assembly of frames is assignable to the appropriate manufacturing or assembly classification. Accordingly, the WCIRB thinks it would be helpful to amend the various upholstery classifications to provide that such classifications do not include manufacturing or assembly operations and that such operations are assignable to the appropriate manufacturing or assembly classification. 386

387 Recommendation Amend Classification 9522(1), Upholstering, to provide that this classification does not include frame manufacturing or assembly and that such operations shall be assigned to the appropriate manufacturing or assembly classification. PROPOSED UPHOLSTERING 9522(1) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions, General Exclusions or in connection with Classification 2812, Cabinet Mfg. wood) unless the operations described by Classification 9522(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification other than Classification This classification does not include frame manufacturing or assembly. Such operations shall be assigned to the appropriate manufacturing or assembly classification. * * * * * Recommendation Amend Classification 9522(2) Furniture upholstering, to provide that this classification does not include furniture frame manufacturing or assembly and that such operations shall be assigned to the appropriate manufacturing or assembly classification. PROPOSED FURNITURE upholstering 9522(2) This classification does not include furniture frame manufacturing or assembly. Such operations shall be assigned to the appropriate manufacturing or assembly classification. * * * * * 387

388 Recommendation Amend Classification 9522(3), Automobile Body Upholstering, to provide that this classification does not include automobile body manufacturing or assembly and that such operations shall be assigned to the appropriate manufacturing or assembly classification, or Classification 8390, Automobile Van Conversion or Customizing. PROPOSED AUTOMOBILE BODY UPHOLSTERING 9522(3) Classification 9522(3) shall not be used for division of payroll in connection with Classifications 3808, Automobile or Motorcycle Mfg. or Assembling, 3815(1), Automobile Truck or Automobile Truck Trailer Mfg. or Assembling, 3815(2), Automobile Body Mfg., or 8390, Automobile Van Conversion or Customizing, unless the operation described by Classification 9522(3) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 3808, 3815(1), 3815(2) or This classification does not include automobile body manufacturing or assembly. Such operations shall be assigned to the appropriate manufacturing or assembly classification, or Classification 8390, Automobile Van Conversion or Customizing. * * * * * Recommendation Amend Classification 9522(4), Coffin or Casket Upholstery Work, to provide that this classification does not include casket manufacturing or assembly and that such operations shall be assigned to the appropriate manufacturing or assembly classification. PROPOSED COFFIN OR CASKET UPHOLSTERY WORK 9522(4) This classification does not include casket manufacturing or assembly. Such operations shall be assigned to the appropriate manufacturing or assembly classification. * * * * * 388

389 Recommendation Amend Classification 9522(5), Wheelchair Upholstering, to provide that this classification does not include wheelchair manufacturing or assembly and that such operations shall be assigned to Classification 3076(6), Wheelchair Mfg. metal. PROPOSED WHEELCHAIR UPHOLSTERING 9522(5) This classification does not include wheelchair manufacturing or assembly. Such operations shall be assigned to Classification 3076(6), Wheelchair Mfg. metal. 389

390 Wallboard Application The R & I entry shown below was established in 1976 in connection with an appeal to the C & R Committee by a specialty contractor that protested the assignment of Classification 5474, Painting, Decorating or Paper Hanging, to those operations involving wallboard taping and texturizing. The R & I entry was established to clarify that wallboard taping and texturing operations should be assigned to Classification 5445, Wallboard Application, regardless of the type of firm performing the work. R & I Entry Wallboard Application 5485 Plastering or Stucco Work high wage 5484 Plastering or Stucco Work low wage 5447 Wallboard Application high wage 5446 Wallboard Application low wage Classification 5446, Wallboard Application, and Classification 5447, Wallboard Application,* shall include the entire operation of installing gypsum wallboard, including taping and texturing, but not painting. Texture application of a gypsum-based compound shall also be included in these classifications. Texturing may be hand or machine applied to produce a pattern such as fog and spatter, orange peel, knockdown, crowsfoot, swirl, glitter or other effects. The installation of non-structural metal stud wall framing, when performed by the same employer that subsequently installs gypsum wallboard at a particular job or location, is included in Classification 5446/5447, Wallboard Application. Taping and texturing operations conducted by painting or other contractors shall be assigned to Classification 5446/5447, provided that the contractors maintained proper payroll records. The application of veneer plaster over installed wallboard shall be assigned to Classification 5484, Plastering or Stucco Work, or Classification 5485, Plastering or Stucco Work*. * Depending on the regular hourly wage of the employees see actual classification phraseologies. The current phraseologies for Classifications 5446, 5447, 5484, and 5485 are: WALLBOARD APPLICATION within buildings installation or application of gypsum wallboard including finishing and preparation prior to painting employees whose regular hourly wage does not equal or exceed $31.00 per hour N.O.C. This classification shall apply to the installation or application of insulating materials within building walls, but only if installed by the same employer who performs the wallboard application in constructing new buildings or additions to existing buildings at the same job or location WALLBOARD APPLICATION within buildings installation or application of gypsum wallboard including finishing and preparation prior to painting employees whose regular hourly wage equals or exceeds $31.00 per hour N.O.C. Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $31.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $31.00 per hour shall be classified as 5446, Wallboard Application. This classification shall apply to the installation or application of insulating materials within building walls, but only if installed by the same employer who performs the wallboard application in constructing new buildings or additions to existing buildings at the same job or location

391 PLASTERING OR STUCCO WORK employees whose regular hourly wage does not equal or exceed $25.00 per hour 5484 PLASTERING OR STUCCO WORK employees whose regular hourly wage equals or exceeds $25.00 per hour Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $25.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $25.00 per hour shall be classified as 5484, Plastering or Stucco Work Analysis The R & I entry clarifies that in addition to installing gypsum wallboard, Classifications 5446/5447 include (1) taping and texturing whether performed by the wallboard contractor or by a specialty contractor; and (2) the installation of non-structural metal stud wall framing when performed by the same employer that subsequently installs the wallboard at a particular job or location. Although Classifications 5446/5447 include finishing and preparation prior to painting, it would be helpful to clarify that these classifications include wallboard taping and texturing by specialty contractors. These classifications also should be amended to include the installation of non-structural metal stud wall framing when performed by the same employer that subsequently installs the wallboard at a particular job or location, when the same employer engages in structural framing of buildings using cold formed, light gauge steel studs and joists, all metal framing operations should be assigned to 5632/5633, Steel Framing light gauge. In addition, the WCIRB recommends that for clarity Classifications 5474(1)/5482(1), Painting, be amended to include the incidental patching and surface preparation for painting and to direct that wallboard taping, finishing or texturing be assigned to Classifications 5474(1)/5482(1). The R & I entry clarifies that the application of veneer plaster over installed wallboard is assignable to Classifications 5484/5485, Plastering or Stucco Work. The application of veneer plaster involves a process of applying layers of plaster over the entire surface of the walls to achieve the desired texture. This process and these materials differ from what is contemplated by the finishing and preparation work that is currently included in Classifications 5446/5447. Accordingly, the WCIRB thinks that it would be helpful to amend Classifications 5446/5447 to include this information. 391

392 Recommendation Amend Classifications 5446/5447, Wallboard Application, to (1) include the installation of non-structural metal stud wall framing when performed by the same employer that subsequently installs the wallboard at a particular job or location; (2) include wallboard taping and texturing whether performed by the same employer that subsequently installs the wallboard or by a specialty contractor; and (3) provide that the application of veneer plaster over installed wallboard shall be separately classified as 5484/5485, Plastering or Stucco Work. PROPOSED WALLBOARD APPLICATION within buildings installation or application of gypsum wallboard including finishing and preparation prior to painting employees whose regular hourly wage does not equal or exceed $31.00 per hour N.O.C. This classification shall apply to the installation of non-structural metal stud wall framing and the installation or application of insulating materials within building walls, but only if installed by the same employer who performs the wallboard application in constructing new buildings or additions to existing buildings at the same job or location. At a particular job or location, when the same employer engages in structural framing of buildings using cold formed, light gauge steel studs and joists, all metal framing operations shall be assigned to 5632/5633, Steel Framing light gauge. This classification includes wallboard taping and texturing whether or not it is performed by the same employer who performs the wallboard application. The application of veneer plaster over installed wallboard shall be separately classified as 5484/5485, Plastering or Stucco Work WALLBOARD APPLICATION within buildings installation or application of gypsum wallboard including finishing and preparation prior to painting employees whose regular hourly wage equals or exceeds $31.00 per hour N.O.C. Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $31.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $31.00 per hour shall be classified as 5446, Wallboard Application. This classification shall apply to the installation of non-structural metal stud wall framing and the installation or application of insulating materials within building walls, but only if installed by the same employer who performs the wallboard application in constructing new buildings or additions to existing buildings at the same job or location. At a particular job or location, when the same employer engages in structural framing of buildings using cold formed, light gauge steel studs and joists, all metal framing operations shall be assigned to 5632/5633, Steel Framing light gauge. This classification includes wallboard taping and texturing whether or not it is performed by the same employer who performs the wallboard application. The application of veneer plaster over installed wallboard shall be separately classified as 5484/5485, Plastering or Stucco Work

393 Recommendation Amend Classifications 5474(1)/5482(1), Painting, to include incidental patching and surface preparation, and direct that wallboard taping, finishing or texturing be assigned to Classifications 5446/5447, Wallboard Application. PROPOSED PAINTING, DECORATING OR PAPER HANGING including shop operations employees whose regular hourly wage does not equal or exceed $24.00 per hour N.O.C. 5474(1) This classification includes incidental patching and surface preparation for painting. Wallboard taping, finishing or texturing shall be assigned to Classifications 5446/5447, Wallboard Application. Painting steel structures or bridges shall be separately classified. PAINTING, DECORATING OR PAPER HANGING including shop operations employees whose regular hourly wage equals or exceeds $24.00 per hour N.O.C. 5482(1) Assignment of this classification is subject to verification at the time of final audit that the employee s regular hourly wage equals or exceeds $24.00 per hour. The payroll of an employee whose regular hourly wage is not shown to equal or exceed $24.00 per hour shall be classified as 5474(1), Painting, Decorating or Paper Hanging. This classification includes incidental patching and surface preparation for painting. Wallboard taping, finishing or texturing shall be assigned to Classifications 5446/5447, Wallboard Application. Painting steel structures or bridges shall be separately classified. 393

394 Weighmasters and/or Dispatchers The R & I entry shown below was established in 1964 following a review by the C & R Committee of the classification procedure applicable to weighmasters. The Committee concluded that weighmasters and/or dispatchers may be assigned to Classification 8810(1), Clerical Office Employees N.O.C., when the duties of such employees are wholly clerical in nature and there is no exposure to the operative hazards of the business. R & I Entry Weighmasters and/or Dispatchers 8810(1) Clerical Office Employees Weighmasters and/or dispatchers may be assigned to Classification 8810(1), Clerical Office Employees N.O.C., when the duties of such employees are wholly of a clerical nature and there is no exposure to the operative hazards of the business. The current phraseology of Classification of 8810(1) is: CLERICAL OFFICE EMPLOYEES N.O.C. 8810(1) Assignment of this classification is subject to the provisions of the rules for Standard Exceptions. The USRP at Part 3, Section III, Rule 4 defines Clerical Office Employees as follows: a. Clerical Office Employees are defined as those employees whose duties are confined to keeping the books, records, or cash of the employer; conducting correspondence; or who are engaged wholly in general office work or office drafting, having no regular duty of any other nature in the service of the employer. The entire payroll of any employee who is engaged in operations performed by clerical office employees and also is exposed (1) to any operative hazard of the business or (2) to any outside selling or collecting work, shall be assigned to the highest rated classification of work to which the employee is so exposed. Supervisors and clerks, such as time, stock, or tally clerks, whose work is necessary, incidental, or appurtenant to any operations of the business other than clerical office, shall not be considered clerical office employees. The clerical office employee classification shall be applied only to the payroll of persons herein described who work exclusively 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 as defined in this section. Analysis Weighmasters and/or dispatchers are retained by various employers to perform duties, including but not limited to recording truck weights, preparing customer orders, directing drivers to yard locations and receiving or dispensing payments for purchases. When these employees work within an office area that is separated from other work areas and perform their work solely with office equipment such as computers, printers, copiers and telephones, the duties are considered clerical in nature and these employees are assignable to Classification 8810(1). If these employees leave their work area for any reason, e.g., to inspect trucks, direct traffic, or function as cashiers, they are assignable to the primary classification of the business. Classification 8810(1) does not provide a specific classification procedure for weighmasters and/or dispatchers; accordingly, the WCIRB recommends that Rule 4a be revised to include weighmasters and dispatchingers and recording weights. 394

395 Recommendation Amend Part 3, Section III, Rule 4a, Clerical Office Employees, to include PROPOSED a. Clerical Office Employees are defined as those employees whose duties are confined to keeping the books, records, or cash of the employer; conducting correspondence; dispatching; recording weights; or who are engaged wholly in general office work or office drafting, having no regular duty of any other nature in the service of the employer. The entire payroll of any employee who is engaged in operations performed by clerical office employees and also is exposed (1) to any operative hazard of the business or (2) to any outside selling or collecting work, shall be assigned to the highest rated classification of work to which the employee is so exposed. Supervisors and clerks, such as time, stock, or tally clerks, whose work is necessary, incidental, or appurtenant to any operations of the business other than clerical office, shall not be considered clerical office employees. The clerical office employee classification shall be applied only to the payroll of persons herein described who work exclusively 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 as defined in this section. 395

396 Certificates of Insurance Out of State Coverage California Labor Code Section , added in 1955, provides that if an employee who is hired in California is injured while temporarily working in another state, compensation is to be made according to the laws of California. Conversely, if an employee is hired outside California and is covered by workers compensation insurance in that state but is injured in California while here temporarily, the laws of the other state control the determination of benefits provided the laws of the other state are similar to California. This section of the Labor Code specifies that a certificate of insurance from an authorized officer of the appeals board or a similar department of another state certifying that the employer is insured in that other state and has provided extraterritorial coverage insuring their employees while working within California is prima facie evidence that the employer carries such insurance. Following the addition of Labor Code Section , the WCIRB established agreements with various states for providing Certificates of Insurance to those states appeals board or similar entity. In 1975, this R & I entry was added to document the then current practice. R & I Entry Certificates of Insurance Out of State Coverage California Labor Code Section When Certificates of Insurance are issued under the reciprocal agreement between California and other states, the following procedure shall apply: 1. Insurers shall submit Certificates of Insurance, in triplicate, to the WCIRB for verification; 2. Certificates of Insurance shall indicate all limitations and restrictions which have been made part of the policy; and 3. After examination, the WCIRB shall transmit verified certificates to the appropriate agency of the participating state. Analysis This R & I entry was established to document the procedure for insurers when submitting a Certificate of Insurance for verification by the WCIRB. The WCIRB now has an alternate means for providing evidence of its coverage records. 1 Parties involved in a workers compensation dispute may submit a Coverage Research Service Request Form and the WCIRB will provide the requested coverage information for a fee. Since the procedures referenced in this R & I entry are outdated, WCIRB staff recommends that they be deleted from the R & I and not incorporated into any of the regulatory plans. Recommendation The WCIRB does not recommend any amendments to the USRP as a result of the elimination of this R & I entry. 1 The California Workers Compensation Appeals Board has stated that Insurance Code section does not require a certificate but merely allows the use of a certificate as one method of establishing a prima facie case of coverage. Carroll v. New Orleans Saints (2010) 2010 Cal. Wrk. Comp. P.D. Lexis 176 (Appeals Board panel decision). See also Booker v. Cincinnati Bengals (2012) 2012 Cal. Wrk. Comp. P.D. Lexis

397 First Aid Claims This R & I entry was added effective January 1, 2005 in order to confirm that first aid claims must be reported on unit statistical reports. The information included in the R & I entry was assembled from four previously issued WCIRB Bulletins as well as an announcement issued by the California Department of Insurance. R & I Entry First Aid Claims First aid treatment is included as medical care that all employers must provide for their injured employees. California Labor Code Section 6409(a) requires a physician who treats an injured employee to file a Doctor s First Report of Injury (DFR) with the claims administrator for every work-related illness or injury even first aid cases where there is no lost time from work. In addition, to the extent that sums have been paid or are due to a physician as a result of treatment of an employee with a work-related illness or injury, the insurer is obligated, under the workers compensation insurance policy, to make such payment. Because the insurer is obligated to make this payment, the insurer, therefore, has sustained an incurred loss that must be reported to the WCIRB pursuant to the provisions of the Uniform Statistical Reporting Plan. (The Experience Rating Plan also contemplates the reporting of all medical losses incurred.) An insurer that fails to report these losses may be in violation of California Insurance Code Section Analysis The USRP at Part 4, Unit Statistical Report Filing Requirements, Section V, Loss Information, requires that each claim be reported individually and the ERP at Section III provides that the entire California workers compensation insurance experience of a risk (except as hereinafter provided) developed under any policy that provides California workers compensation insurance coverage for all or a part of the risk s operations shall be reported and used in determining its experience modification. To provide greater clarity, the WCIRB recommends amending the USRP to state that all claims must be reported. 397

398 Recommendation Amend Part 4, Section V, Loss Information, Part A, General Loss Reporting Instructions, Rule 1, Reporting Losses, to clarify that all claims must be reported. PROPOSED Part 4 Unit Statistical Report Filing Requirements Section V Loss Information A. General Loss Reporting Instructions 1. Reporting Losses All claims must be reported and eeach claim must be reported individually. All loss amounts are on a direct basis (excluding reinsurance assumed and adjustment for reinsurance ceded) and must be reported on a gross basis prior to the application of any deductibles. 398

399 Group Insurance The R & I entry related to Groups was last amended effective January 1, The purpose of the entry is to detail the information and documents required to be provided for the WCIRB to approve requests for the issuance and renewal of a group policy. R & I Entry Group Insurance The term group insurance refers to workers compensation insurance insuring an organization or association of employers as a group. In accordance with California Insurance Code Section and California Code of Regulations, Title 10, Section 2508, the following information, documents, statements and agreements must be filed with the WCIRB before approval to provide group insurance will be given. The information, documents, statements and agreements are to be submitted at least 30 days prior to the effective date of the group insurance. I. Original Request for Group Insurance A. The following association documents are to be submitted with the insurer s request (see B below) for approval if the insurer has not previously issued approved group insurance to the association: 1. A copy of the articles of incorporation and bylaws (or, if unincorporated, the agreement of association and rules and regulations), certified by the custodian of the originals. The articles of incorporation and/or bylaws should contain the following: a. A provision regarding the distribution or forfeiture of funds derived from dividends pursuant to California Code of Regulations, Title 10, Section 2508; and b. A provision undertaking to establish and maintain a safety committee which, by education and otherwise, will seek to reduce the incidence and severity of accidents. 2. An agreement confirming that all members of the association which are to be insured by group insurance are engaged in a common trade or business (see 4d below) and are members in good standing, and that the association will notify the insurer of any change in such status for the purpose of immediate elimination from participation in the group plan. 3. A membership list. 4. An application letter from the association that should include: a. The name of the insurer, which will provide the group insurance and the policy period for which approval is being requested; b. A statement setting forth the association s reasons for desiring group insurance; c. A statement certifying that no less than 75% of the regular membership of the association is engaged in a common trade or business (see 4d below) and that such percentage of membership will be maintained during the time the group insurance is in force; and d. A statement certifying that no less than 75% of the regular members of the association and each member of the association to be insured by group insurance is engaged in a common trade or business as specified in one of the following: i. Fifty-one percent or more of the total payroll is developed under a single standard classification (the classification must be specified). ii. Fifty-one percent or more of the total payroll is developed under any combination of standard classifications applicable to agricultural enterprises. 399

400 iii. Fifty-one percent or more of the total payroll is developed under any combination of standard classifications applicable to the building and construction industry. iv. Fifty-one percent or more of the total payroll is developed under any combination of standard classifications applicable to the transportation and warehousing industry. v. Fifty-one percent or more of the total payroll is developed under any combination of standard classifications applicable to the timber and lumber industry. vi. Fifty-one percent or more of the total payroll is developed under any combination of standard classifications applicable to public agencies providing industrial, domestic or agricultural water services. vii. Fifty-one percent or more of the total payroll is developed under any combination of standard classifications applicable to sheltered workshops and rehabilitation facilities licensed pursuant to California Labor Code Section viii. Fifty-one percent or more of the total payroll of manufacturing facilities as identified in Sectors 31 to 33, inclusive, of the North American Industry Classification System that is developed under any combination of standard classifications applicable to manufacturing concerns engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products. (See Appendix 1, Standard Manufacturing Classifications). ix. Seventy-five percent or more of the total payroll is developed under the same two standard classifications (the two classifications must be specified). Fifty percent or more of the association s present members have been members for at least one year prior to the issuance of the group insurance policy. B. The following information must be submitted if the insurer and the association agree that the association will pay the past due premium of the insured members of the association if notified by the insurer within 60 days of the nonpayment: 1. A copy of the written agreement stating that the association and the insurer agree to use dividends due for the nonpayment of premium. 2. A copy of the written agreement stating the association will be responsible for past due premiums of its insured members. 3. A copy of the resolution of the governing board of the association authorizing the execution of the agreement to pay past due premium. C. The following information must be prepared by the insurer and submitted to the WCIRB: 1. A written request for approval to provide group insurance. The request must identify the association and the policy period for which approval is sought. 2. Written verification of all statements made by the association. 3. A detailed explanation, in writing, of the nature of the trade or business engaged in by the association members and the standard classification(s) applicable to the members insured under the group insurance. 4. A written statement that the insurer will notify the WCIRB promptly concerning any member that discontinues membership or does not maintain good standing in the association. 5. A written statement that the insurer will not deliver the proposed group insurance until approval from the WCIRB is received. 400

401 II. Request to Renew Group Insurance A. The following association documents, except those designated in 4 below, are to be submitted annually with the insurer s request for approval (see C below) if the insurer is seeking approval to renew previously approved group insurance: 1. A letter from the association designating the insurer providing the group coverage and the policy dates requested for group approval. 2. A written statement from the association confirming that the safety committee is being maintained. 3. An updated list of members. 4. A copy of the following original association documents and any amendments made thereto are required to be submitted with the request to renew group insurance no less frequently than once every five years: a. Articles of incorporation and bylaws (or agreement of association and rules and regulations), all certified by the custodian of the originals; b. A new agreement guaranteeing premium payment and the resolution of the governing board of the association authorizing the execution of such guarantee agreement; and c. An agreement confirming that all employers insured are engaged in a common trade or business and are members in good standing, and that the association will notify the insurer of any change in such status for the purpose of immediate elimination from participation in the group. B. If an agreement regarding the association s obligation to pay past due premium of individual group members is executed, either a new agreement stating that the association and the insurer agree to use dividends due for the nonpayment of past due premium and stating the association will be responsible for past due premiums of its insured members and a new resolution of the governing board of the association authorizing the execution of the agreement or a copy of the original resolution duly certified indicating the current date must be submitted. C. With respect to the renewal period for which approval to provide group insurance is sought, the insurer must prepare and submit the information specified in I.C above. Analysis The R & I entry requires insurers to submit information and documents beyond what is required under California Insurance Code and California Code of Regulations, Title 10, This additional information is necessary for the WCIRB to approve new and renewal group policies in accordance with the Insurance Code and includes: the name of the insurer providing the group insurance, the dates requested, a membership list for the group, confirmation that the WCIRB will be notified of any member that discontinues membership or does not maintain their membership in good standing and a statement from the insurer that it will not deliver the policy to the group until the WCIRB has approved the request. In addition, in order for the WCIRB to confirm that the policy is being issued to an appropriate group of employers that are engaged in a common trade or business as required by the Insurance Code, the insurer is required to provide a detailed explanation of the nature of the trade or business engaged in by the prospective participants in the group policy and the classifications the insurer will use on the policy. Further, certain documents and information must be provided at defined intervals. Currently, the entry for group insurance in the Miscellaneous Regulations provides guidance as to what should be filed with the WCIRB related to group insurance; however, it does not contain all the provisions 401

402 that are necessary for the WCIRB to process the requests. Therefore, WCIRB staff recommends that certain provisions from the R & I be adopted as part of the Miscellaneous Regulations. If these changes to the Miscellaneous Regulations are adopted by the Insurance Commissioner, the WCIRB has developed forms, a checklist and template letters that can be used by insurers when submitting new and renewal group approval requests. The use of these documents will simplify the process and make it clear to insurers what information, documents and verifications are needed. 402

403 Recommendation Amend Part 3, Group Workers Compensation Insurance, Section II, Procedure for Obtaining Approval of Group Workers Compensation Insurance, of the Miscellaneous Regulations for the Recording and Reporting of Data 1995, for clarity as to the information and documents that must be provided to the WCIRB for purposes of obtaining approval of new and renewal group workers compensation insurance policies. PROPOSED Part 3 Group Workers Compensation Insurance Section I General Instructions 1. An insurer may insure an organization or association of employers as a group pursuant to the provisions of Sections , and of the California Insurance Code if such organization or association files with the WCIRB the documents, statements and agreements required to be filed by Section Such documents, statements and agreements should be filed at least thirty (30) days prior to the effective date of the proposed group policy. 2. Separate policies must be issued for each member of the group unless their experience is combinable pursuant to Part 2, Section III, Additional Interests. Pursuant to Section of the California Insurance Code, each member of an organization insured under a group policy shall be treated as a single and separate entity as respects experience rating and standard classification assignments. Section II Procedure for Obtaining Approval of Group Workers Compensation Insurance 1. Before any new or renewal group policy is issued, the insurer shouldshall, not less than thirty (30) days prior to the effective date of the proposed group policy, file with the WCIRB: a. A verification of aall documents and statements required of the organization or association of employers by the provisions of California Insurance Code Section and California Code of Regulations, Title 10, Section b. A statement from the association designating the insurer providing the group insurance and the policy dates requested for group approval. c. A membership list. d. A request from the insurer for approval to provide group insurance that identifies the association and the policy period for which approval is being sought. e. Verification from the insurer of all statements made by the association. b.f. A detailed explanation from the insurer of the nature of the trade or business engaged in by prospective participants in the group policy, and the insurer classifications to be used in the policy. c.g. A statement from the insurer that it will promptly notify the WCIRB concerning any member that discontinues membership or does not maintain good standing in the association. d.h. A statement from the insurer that it will not deliver the proposed group policy until it receives approval from the WCIRB. 2. Before any renewal group policy is issued, the insurer shall, not less than thirty (30) days prior to the effective date of the proposed group policy, file with the WCIRB: 403

404 a. A statement from the association setting forth the name of the insurer providing group coverage and the policy dates requested for approval. b. A statement from the association confirming that the safety group is being maintained. c. An updated membership list. d. If the association has agreed to pay past due premium of individual group members, a new agreement stating that the association and insurer agree to use dividends due for nonpayment of past due premiums, that the association will be responsible for past due premiums and a new resolution of the governing board authorizing the execution of the agreement or a copy of the original resolution duly certified by the custodian of the originals indicating the current date. e. A request from the insurer for approval to provide group insurance identifying the association and the policy period for which approval is sought. f. Verification from the insurer of all statements made by the association. g. A detailed explanation from the insurer of the nature of the trade or business engaged in by prospective participants in the group policy, and the insurer classifications to be used in the policy. h. A statement from the insurer that it will promptly notify the WCIRB concerning any member that discontinues membership or does not maintain good standing in the association. i. A statement from the insurer that it will not deliver the proposed group policy until it receives approval from the WCIRB. j. No less frequently than once every five years, copies of the following: i. Articles of incorporation and bylaws (or agreement of association and rules and regulations), all certified by the custodian of the originals; ii. A new agreement guaranteeing premium payment and the resolution of the governing board of the association authorizing the execution of the guarantee agreement; and iii. An agreement that all employers insured are engaged in a common trade and are members in good standing, and that the association shall immediately notify the insurer of any change in such status for purposes of immediate elimination from participation in the group plan. 404

405 Joint Ventures The purpose of this entry is to provide guidance in connection with experience rating and the Additional Interests rule in the Miscellaneous Regulatons as they relate to joint ventures. When the Additional Interests rule was amended effective January 1, 1945, questions arose with respect to experience rating where a joint venture was involved. In 1945, Bureau Circular No. 499 was issued which included provisions 1, 2 and 4 below. In 1958, WCIRB staff raised questions regarding the Additional Interests rule as it relates to Joint Ventures with the Classification and Rating (C & R) Committee. At that time, the Committee confirmed that the provisions in Bureau Circular No. 499 were still appropriate and stated that it was appropriate for a joint venture to be added as an additional insured employer so long as the coverage to the joint venture is limited so as to apply only as respects the original named insured (provision 3 in the R & I Entry). The entry to the R & I regarding Joint Ventures was added effective October 1, 1968 as part of a longterm project to incorporate into the R & I practices which were regularly employed and resulted from a C & R decision or a Bureau Circular if they would be helpful to persons using the manual. The entry has not been amended since that time. The ERP, however, was amended effective January 1, 1984 to delete the rule that prohibited a joint venture from being combined with the operations of another entity, even if identically owned, for purposes of experience rating. Instead, joint ventures are treated the same as partnerships with each member of a joint venture being treated the same as general partners meaning that each is treated as owning an equal share of the joint venture. R & I Entry Joint Ventures With respect to joint ventures, the following procedure shall be adhered to in the administration of the Experience Rating Plan and the Regulations pertaining to Additional Interests. 1. The experience of a joint venture cannot be arbitrarily divided among its members and reported separately as the experience of each individual member. 2. A member of a joint venture shall not be included as an additional insured employer on the policy issued to the joint venture. 3. A joint venture may be added as an additional insured employer on the policy of a member of the joint venture; however, the extension of coverage to the joint venture shall be limited to apply only as respects the employees of such member. 4. A member of a joint venture may enter into a subcontract with the joint venture for any part of the work; however, such subcontractor shall cover the work, which he performs under his own separate insurance policy at his own experience rating. Analysis The Additional Interests rule at Part 2, Workers Compensation Forms and Coverage, Section III, Additional Interests, of the Miscellaneous Regulations states as follows: Section III Additional Interests As used in this paragraph, employer includes individual, partnership, association, corporation or other legal entity. Two or more employers may be named as the insureds in a single workers compensation policy only if their experience is combinable under the rules of the Experience Rating Plan or they share a joint liability to pay workers compensation to employees engaged in connection with the same work, and not otherwise. Other employers may be added by endorsement to a policy to insure them 405

406 against their workers compensation liability arising in particular and described circumstances as to which the named insured (or all of the named insureds if more than one) and the additional insured have joint liability to pay workers compensation to employees engaged in the same work, or as permitted in Rule 4, Application of Experience Modification to Policies Covering Employee Leasing Arrangements, Section V, Application of Experience Modification, of the Experience Rating Plan, and not otherwise. With respect to the first item in the R & I entry, the USRP requires unit statistical reports for each workers compensation policy and it does not authorize experience to be divided up and reported separately. For the fourth entry, it is standard that if a subcontractor is completing the work, it would be performed under that subcontractor s insurance policy at their own experience rating. It does not appear necessary to incorporate either of these items into one of the Plans. For the second and third items listed in the R & I entry, as this information is not stated explicitly in the Plans, the WCIRB thinks it would be helpful to add this information to the Additional Interests rule in the Miscellaneous Regulations. Finally, we recommend adding joint venture to the list of entities to which this rule applies and referring to the definition of Entity in the ERP for clarity. 406

407 Recommendation Amend Part 2, Workers Compensation Forms and Coverage, Section III, Additional Interests, of the Miscellaneous Regulations for the Recording and Reporting of Data 1995, to clarify that (1) a joint venture is an employer for purposes of this rule and (2) that a member of a joint venture is not to be included as an additional insured employer on a policy issued to the joint venture and that a joint venture may be added as an additional insured employer on a policy of a member of the joint venture so long as the extension of coverage to the joint venture is limited to apply only as respects the employees of such member. PROPOSED Part 2 Workers Compensation Forms and Coverage Section III Additional Interests As used in this paragraph, employer includes individual, joint venture, partnership, limited liability partnership, unincorporated association, corporation or other legal entityfiduciary operation (e.g., trust, receivership or estate of deceased individual). Two or more employers may be named as the insureds in a single workers compensation policy only if their experience is combinable under the rules of the Experience Rating Plan or they share a joint liability to pay workers compensation to employees engaged in connection with the same work, and not otherwise. Other employers may be added by endorsement to a policy to insure them against their workers compensation liability arising in particular and described circumstances as to which the named insured (or all of the named insureds if more than one) and the additional insured have joint liability to pay workers compensation to employees engaged in the same work, or as permitted in Rule 4, Application of Experience Modification to Policies Covering Employee Leasing Arrangements, Section V, Application of Experience Modification, of the Experience Rating Plan, and not otherwise. A member of a joint venture, however, shall not be included as an additional insured employer on the policy issued to the joint venture and a joint venture may only be added on as an additional insured on a policy of a member of the joint venture if the extension of coverage to the joint venture is limited to apply only as respects the employees of such member. 407

408 Samples of Selected Endorsement Forms Several sample endorsement forms are included in the R & I. These include: Annual Rating Endorsement, Surcharge Endorsement, Cancellation Notice, Reinstatement Notice and Renewal Agreement. The Annual Rating Endorsement, Cancellation Notice, Reinstatement Notice and Renewal Agreement were added to the R & I effective April 1, 1972 as part of the effort to standardize the reporting of endorsements and cancellations as much as possible in order to implement an automated procedure for examining policy data. At this time, the WCIRB began to key data into its computer system and destroy the hard copy policy information and endorsements. There was concern that without a hard copy file to reference, reporting standards were necessary to ensure the WCIRB s records contained accurate information. The Surcharge Endorsement was added to the R & I effective October 1, 1974 as part of amendments to the manual rules to ensure that whenever a company surcharge is shown on a policy, it was clearly differentiated from the manual rates and experience modification. Analysis The Annual Rating Endorsement, Cancellation Notice, Reinstatement Notice and the Renewal Agreement forms will be evaluated for inclusion in the Forms Manual as these are filed, albeit infrequently, as nonstandard forms by insurers. Some insurers also use NCCI Form WC B Policy Termination/Cancellation/Reinstatement Notice and the WCIRB will evaluate whether this form should be filed with the CDI as a Standard Form. The WCIRB does not intend to file the Surcharge Endorsement as a Standard Form as it is no longer used. Recommendation The WCIRB will review each of the forms as indicated above and, as appropriate, file them with the CDI as standard forms. All approved forms will be incorporated into the Forms Manual. 408

409 Item CR Proposed Non-Substantive Amendments California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) The USRP contains the necessary rules and instructions for the reporting of policy and unit statistical data. The WCIRB is proposing changes to Part 1, Section II, Rule 12, Final Premium(s), and Rule 13, Insurer Classification(s), for consistency with other terms in the USRP. In addition, the WCIRB is proposing to amend Part 3, Section VI, Rule 1, Inspection of Employer s Premises, to update the address for the WCIRB Customer Service and to eliminate the restrictions on field inspectors providing information to employers during the field inspection for consistency with current WCIRB practice and procedure. California Workers Compensation Experience Rating Plan 1995 (ERP) The ERP governs the experience rating procedure to be followed in connection with California workers compensation insurance. The WCIRB is proposing to amend Section III, Rule 3, Experience to be Used for Rating California Workers Compensation Insurance Risks, Subrule g, which provides that unaudited payroll not be used in experience rating unless the payroll is not required to be audited pursuant to Part 3, Rule 4, Audit of Payroll, in the USRP. Rule 4, however, was previously amended to clarify that policies must be physically or voluntarily audited and, as a result, there is no situation where payroll is not required to be audited. The WCIRB, therefore, is proposing to eliminate the reference to this rule for clarity. 409

410 Proposed Revisions to the California Workers Compensation Uniform Statistical Reporting Plan 1995 Recommendation Amend Part 1, General Provisions, Section II, General Definitions, Rule 12, Final Premium(s), and Rule 13, Insurer Classification(s), for clarity and consistency. PROPOSED Part 1 General Provisions Section II General Definitions The definitions set forth in this Section shall govern the construction and meaning of the terms and phrases used in this Plan. 12. Final Premium(s) See definition of Final Premium(s) located in Part 4, Section II, Definitions, of this Plan. 13. Insurer Classification(s) Classifications of occupations, employments, industries and businesses used by an insurer in connection with its workers compensation insurance coverage. (See also Classification(s) or Standard Classification(s).) * * * * * Recommendation Amend Part 3, Standard Classification System, Section VI, Administration of Classification System, Rule 1, Inspection of Employer s Premises, to update the address for WCIRB Customer Service and to eliminate the requirement that field inspectors not discuss their observations or provide information to the employer during the field inspection for consistency with current WCIRB practice. PROPOSED Part 3 Standard Classification System Section VI Administration of Classification System 410

411 1. Inspection of Employer s Premises c. WCIRB field representatives shall not be permitted to give information to, or to discuss their observations with, the employer or its employees. Questions concerning the WCIRB s inspection program may be directed to: WCIRB Customer Service 525 Market Street, Suite 800 San Francisco, CA (CAWCIRB) Fax [email protected]@wcirb.com 411

412 Proposed Revisions to the California Workers Compensation Experience Rating Plan 1995 Recommendation Amend Section III, Eligibility and Experience Period, Rule 3, Experience to be Used for Rating California Workers Compensation Insurance Risks, Subrule g, to remove the exception and cross-reference to Part 3, Section VI, Rule 4, Audit of Payroll, of the USRP for consistency. PROPOSED Section III Eligibility and Experience Period 3. Experience to be Used for Rating California Workers Compensation Insurance Risks The following experience shall not be used: g. Unaudited payroll unless such payroll is not required to be audited pursuant to Part 3, Standard Classification System, Section VI, Rule 4, of the Uniform Statistical Reporting Plan. 412