Does Your Workers' Compensation Company Owe You A Misclassification Refund?

What Every Employer MUST Know About Workers Compensation Insurance. Part 3 of the 6 part series.

A "How to" Guide

My previous article dealt with the alarming fact that a large number of organizations have had their employees improperly classified for purposes of workers compensation insurance (Workers Comp Misclassifications Can Cost Employers a Fortune). The consequence of misclassification could mean that a business unknowingly paid far more in workers compensation premiums than they should have. Just think if you found out that your company overpaid and could be entitled to a refund? How could use this "found money"? This article will serve as a "How To" guide to see if your company has overpaid and deserves a refund due to employee misclassification. How you ultimately spend the money is up to you!

What information is necessary?

The first thing you need to do in order to conduct your self audit is to gather lots of documentation. You will need your workers compensation declarations pages, audit statements, experience rating worksheets, merit rating worksheets, loss runs, and running totals of premiums paid and attributable to workers comp premiums. Unfortunately, you will need this information for each policy year being audited. I would recommend auditing at least the previous 5 years worth of data. If you find a smoking gun in any of those 5 years, you may wish to audit prior years as well. One error can indicate past inaccuracies and can compound the effect of future mistakes.

How do I know if my classification code is right?

Does Your Workers' Compensation Company Owe You A Misclassification Refund?

Once you have collected all this information, your work really begins. What you must determine is whether or not your organization was properly categorized based upon what it actually did during each policy period in question. To make that determination easier (in Pennsylvania). This 85 page survey begins with some general questions about your organization and then moves into specifics regarding your particular industry. For instance, if you are questioning whether your business is properly classified as a Paper Products Manufacturer, the following is a list of the industry specific questions you would need to answer:

List, and provide percentages for, the raw materials and finished products.

Does the risk manufacture paper/operate a paper mill?

Provide a step-by-step description of the manufacturing process.

Does the risk provide contract paper services such as slitting, sheeting, winding, finishing, laminating, etc.? If yes, provide a detailed description of these services. List all equipment used in the risk's manufacturing and/or processing operations.