I recently partnered with a Machine Shop in Marion North Carolina that specialized in machining parts under 10 inches in diameter and in a tight tolerance grouping. After completing a policy audit, my team and I found that their new agent had changed the work comp code they were classifying themselves in when he signed up their account last year.
I don’t generally point fingers, but this was either a devious act to help get the total insurance package cost down to make the option look more attractive, or it was a plain ignorance to which code he should have used for the scope of work they were doing.
Moving forward, let’s use the following guidelines to assist in selecting the appropriate workers compensation class codes for classifying a machine shop risk. Keep in mind that scopes should always be consulted.
•Start with the assumption that the machine shop risk belongs in Machine Shop NOC code 3632.
•If the business does a variety of types of machining, manufacturing, repair or job shop work, the appropriate code is 3632.
•Code 3632 anticipates assembly.
•Automotive machine shops are classified to class code 3632.
•Scopes provides a list of work comp class codes that are somewhat related in nature to codes 3632 and 3629, but are not assigned to those codes.
•NCCI has identified Code 3629 as a frequently misclassified code. To clarify its use, the term "precision" has been removed from the Scopes Manual description and references to tolerance requirements have also been removed. The new description is "Machined Parts Mfg. NOC." Under new Scope guidelines, code 3629 only applies to risks that machine single-piece parts for others that meet all of the following: ◦Business operations or parts manufactured are not described by another code
◦No assembly of single-piece machined parts. (Assembly operations are defined as including, but not limited to: welding, fastening, inserting, pressing, and the joining of springs, ball bearings, gears, or other parts or components to any other part or component.)
◦No casting, forging, stamping, forming, or fabrication
•A risk can't have both the machined parts code 3629 and the general machine code 3632 on the same workers compensation policy for the same location unless the operations are actually separate and distinct businesses that meet the Basic WC Manual requirements for a second basic class code.
•A mass production machine shop that manufactures single-piece parts and that also does job shop work would probably be classified into the general machine shop code 3632 due to the job shop work, unless the job shop work is extremely limited.
•The name of the business should not be used to determine the correct work comp code that applies to the business.
•The machined parts code 3629 and the general machine shop code 3632 are both NOC codes, therefore neither class code is applicable if there is another more specific class code that applies. For example, a mass production machine shop that meets the requirements of code 3145, Screw Mfg, would apply code 3145, even though the risk also meets the requirements for code 3629.
•If the business makes a mass production product, check Scopes to determine if there is a specific code for it. An alpha type search (i.e. metal, gears, etc) in Scopes may lead to a specific class code. For example, pump manufacturing goes into code 3612, gear manufacturing into code 3635, and screw manufacturing into code 3145.
•Sometimes the type of machines used to make the product will give a hint of the correct work comp classification. For example, if the risk uses a majority of screw machines to make the product, code 3145 may be the appropriate work comp class code, even if screws are not the actual product.
•Code 3113 Tool Mfg.-Not Drop or Machine Forged-NOC is only applicable when the risk makes tools and dies for others. Code 3113 is not applicable to insured's that make tools, dies, or machine fixtures for use by their own business, even if they are made in a separate department.
•The same class code is normally used for both manufacturing and repair. For example, use code 3635 for both gear manufacturing and also gear repair. However, if a significant amount of other job shop work is done beside the gear work, then code 3632 would apply instead of code 3635.
•Quality control employees should be classified into the governing machine shop class code because quality control employees do not meet the Basic WC Manual definition of clerical employees.
•Driver code 7380 applies to employees who pick up or deliver items to customers. If those employees also do machine shop work, their payroll would be put into the highest rated classification of the jobs they do, unless separate payroll records are kept.
•When work is done at the customer's location, apply code 3724 to that work, including driving to and from the customer's location.