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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: California Employment Law
Satisfied Customers: 116711
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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This question is for a workers' comp specialist. We have

Customer Question

This question is for a workers' comp specialist.
We have been hit with a hefty additional premium bill after our workers' comp policy audit. The reason for the increase is that the founder of the company is not an owner and is not listed any documents as the managing partner of the LLC. The agreement was, and continues to be, that several years into the business, the founder will get some equity. When workers' comp was set up, the insurer treated the founder as an owner and he was included from any coverage.
Leading up to the audit, it was established that the founder needs to be classified and a premium should be applied to his payroll. According to the small nature of the business, the founder does versatile work in the company, focusing mostly on sales (from his office and outside). Due to the fact that he occasionally visits the workshop as he needs to know the status of the manufactured goods (aquariums and aquarium stands), the insurer insists that the founder can not be classified under Clerical or Outside sales and should instead be classified under one of the manufacturing categories. Our policy lists 3 manufacturing classes: glass (aquariums), furniture (aquarium stands), and piping (steel structures for the stands). The latter is very minor as we only produced 2 metal stands in the year and the employee charged with that was terminated.
The difference in premium between wood and glass is more than 4-fold (wood being higher). The auditor ruled that the founder, because of being exposed to workshop risks, must be classified under the HIGHEST classification that he supervises. I find it incorrect as the wood stands are an auxiliary product for us: the company name literally says "Aquariums" (not stands) and for every three tanks we make, we only make one stand. We have 2 workshop employees that build tanks and only 1 that builds stands. So shouldn't our business' governing classification be glass, not wood? And if so, shouldn't the "supervisor" be rated under that class code?
Also, is it possible, for an aquarium manufacturing company, to be able to classify this founder/officer under code 5606, Executive Level Supervisor? Or is that limited only to the construction industry? Thank you.
Submitted: 11 months ago.
Category: California Employment Law
Expert:  Law Educator, Esq. replied 11 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
The problem is that if you build even one stand, they have to classify him to the highest level he supervises, as they told you. Executive level supervisor is for contractors or construction only. If he was not listed as an officer under Code 3351, then this can be an issue. Administrative or clerical would not apply here. If he is having any contact with manufacturing regardless of how little, workers compensation must classify him to the highest level of manufacturing performed I am afraid. For future benefits, you can seek to avoid payment by making him an officer to bring him under the officer exemption under 3351, but that would not help you retroactively I am afraid.

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