Where’s California’s Telecommuting Class For Workers’ Comp?

Insurance Commissioner Ricardo Lara is expected to approve emergency rules this month to allow employers to save money by reclassifying workers who are now working at home in the lower cost 8810 classification for clerical workers.

The savings will be welcome, but employers likely could be saving more if California had a separate class for telecommuters, as dozens of other states have had for years.

The idea of a telecommuter’s class was raised at the Workers’ Compensation Insurance Rating Bureau’s Classification & Rating Committee meeting that drafted the emergency reclassification rules (for past coverage see New Rules).

But, Bureau staff pushed off the idea for later study.

“We think it would be challenging from a legal perspective to have a [new] class with a rate that applies to policy exposure that’s already happened,” noted WCIRB chief actuary Dave Bellusci during the committee’s discussion. “We just have some concerns whether we could apply it in a kind of retroactive basis with a rate that we would have to file and then have it apply to in-force policies that may well have expired by the time the rate’s approved.”

The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.

Many other states, however, including the 38 states covered by the National Council on Compensation Insurance (NCCI), already have a specific class for clerical employees who work remotely.  Across the board, the rate for this telecommuting class is significantly lower than the regular clerical rate (see the chart at right for a recent comparison of NCCI’s rates by state). In many cases, the base clerical rate is more than double the rate for the same type of employee who is telecommuting.

For example, in Alaska and Hawaii, the pure premium rate for the 8810 class for in-office clerical workers was $0.23 per $100 of payroll when the corresponding rate for 8871 was just 8 or 9 cents. In other areas, the difference is much less – there is only a 2-cent difference in Virginia and just a one-cent difference in the neighboring District of Columbia.

Different Exposures.

Jeff Eddinger, a senior division executive at NCCI, tells Workers’ Comp Executive that the 8871 Clerical Telecommuter classification was first developed in the mid-1990s. It covers clerical employees who work remotely at least 50% of the time and has a well-developed history of losses.

Eddinger acknowledges the consistently lower rate in the telecommuting class. He says there are several plausible explanations for the difference in the underlying loss costs. Still, he notes that NCCI has not performed an in-depth data analysis to pin down the exact reasons for the difference.

“We started looking at this [cost difference] a month or so ago when all this telecommuting started, and I came up with a couple of theories,” Eddinger says, noting that the data underlying the rates pre-dates the current pandemic. “Before this, employers tended to offer the telecommuting options to more experienced workers. So that may be one reason.”

Numerous studies have shown that workers with more tenure on the job tend to have a better safety record than those with less experience.

“And the second reason is the types of work that you can perform at home is a lot more limited in scope than what you might perform in an office,” Eddinger says. These existing telecommuters also would have shifted to a remote working arrangement during a less hectic time than the rapid shift to work-from-home assignments that have happened in response to the stay-at-home orders that many states implemented. He cautions that the same experience pattern may not hold for these new work-from-homers.

“A lot of times, if a company knows they are going to have an employee working from home, they might set them up with standard office equipment, and they might set up some home workspace guidelines,” Eddinger notes. “So you should be a little bit careful about just assuming at this time that we could just categorize everybody into the telecommuting code because the situations may not be the same as they are for the current people in this code.”

During the discussion of a possible telecommuter class in California, some insurance company representatives noted that employees in the telecommuting class appeared less likely to file a claim if they were working from home than if they were working in the office. Others said their own research also supported this observation, but several members also expressed concerns that longer-term, poor ergonomic practices could lead to repetitive stress claims.

When or if California will develop a telecommuting class is still to be seen. Bureau staff indicated that this would be considered in the future, but did not commit to any particular timeline.

Recent Comparison Of Rates For 8810 and 8871

State88108871Diff.% Diff.
DISTRICT OF COLUMBIA$0.06$0.05$0.0183%
NEW HAMPSHIRE$0.10$0.06$0.0460%
NEW MEXICO$0.16$0.08$0.0850%
NORTH CAROLINA$0.07$0.04$0.0357%
RHODE ISLAND$0.13$0.08$0.0562%
SOUTH CAROLINA$0.14$0.06$0.0843%
SOUTH DAKOTA$0.12$0.06$0.0650%
WEST VIRGINIA$0.09$0.04$0.0544%