Workers Compensation Carriers Are Misclassifying Employees of On-Line Retailers and Wholesalers

Workers Compensation Carriers Are Misclassifying Employees Of On-Line Retailers and Wholesalers

One area we see a lot of errors is the proper classification of employees of On Line Retailers and On Line Wholesalers during a workers compensation audit from insurance carriers like the New York State Insurance Fund.  Within these businesses most  have no retail store presence but have a robust mail order, on-line retail footprint selling their goods and service, their employees are getting misclassified during workers compensation audits generating large, incorrect bills for the on-line retailer or on-line wholesaler.

You see it every day how much the world has changed. The world’s largest retailer has no stores ; Amazon. The world’s largest hospitality company doesn’t own one hotel room AirBnB. The world’s largest livery business owns no cabs or limos ; Uber. Our legacy systems are having a difficult time sorting and organizing all these changes because they are happening so fast. This is especially true of our worker’s compensation system which struggles with properly classifying all the new jobs and businesses that have evolved over the last ten years.

As an example,  we were recently retained by a small artisan craft business that designs their own pillows using a computer. They ship their designs overseas where the items are manufactured. They are shipped to New York fully completed and assembled and are packaged in tissue paper, labels and special packaging where they are shipped to the end user who found and purchase their product on-line.

The insurance carrier upon audit determined that this small business was a manufacturer and charged them a manufacturing rate for their employees which took their insurance premium from $2,500 a year to $25,000 a year which was hardship to say the least for this small business. We took the file on as we felt the injustice for this particular business was too much for us to take as they had nowhere to turn as most brokers and agents don’t have the capability to successfully protest an incorrect workers compensation premium audit.

In 10 minutes we found the correct worker’s compensation classification code for this business which essentially is described like this:

Operations Covered: “This classification applies to stores which are principally engaged in the wholesale selling of merchandise not described by any other specialty wholesale store classification. Stores principally engaged in the wholesale or retail mail order sales of merchandise such as the merchandise described above are also included in this classification.

Other types of operations assigned to this classification are:

Packing – receiving bulk merchandise for re-packaging.

This is the appropriate worker’s compensation classification code for this and most On-Line Retailers and On-Line Wholesalers. Naturally, there are some caveats to this contingent on exactly what you do, and what your workflow and processes are.

One mistake this particular business owner did was try to solve for their worker’s compensation premium audit challenge on their own which ultimately dug the hole deeper. We recommend that you speak with a workers compensation audit expert that knows the worker’s compensation system and the appropriate state rules that govern the audit process. The insurance carriers know you are at a disadvantage and most agents and brokers do not have the internal capabilities to successfully challenge the carriers or the states workers compensation rating board. To be successful in your worker’s compensation premium audit protest it’s important to understand the rules FIRST before you start answering their questions as one misstep can doom your entire argument.

If you have been audited by your worker’s compensation or general liability insurance carrier and you feel they have taken an adverse position that is generating significant insurance premiums simply make a simple call to an EXPERT. Most will give you a no-commitment consultation to at least guide you and give you a sense of their overall mastery of your particular issue.

Lastly, we strongly dissuade you from signing contingency contracts whereby you are obligated to pay them 40 to 50% of their “recovery”.Often we charge a flat rate based on how much time we think it will take to collar the carrier. It’s your money, their error! Why pay a firm half of someone else’s error which is probably not pocket change.

We hope you found this article informative and helpful . IF you wish to speak to a Risk Advisor please call (914) 357-8444 or simply CLICK HERE.