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Workers’ Compensation Insurance Rating Bureau of California®

Workers’ Compensation Insurance Rating Bureau of California

Report on Consulting Engineers

Excerpt from the WCIRB Classification and Rating Committee Minutes September 13, 2010

About this Report The WCIRB prepares and presents reports to the WCIRB’s Classification and Rating

Committee to assist in the formulation of proposed changes to the Insurance Commissioner’s regulations. Once adopted by the Classification and Rating Committee, the recommendations contained in the report are provided to the WCIRB Governing Committee and may be included in a WCIRB regulatory filing that is submitted to the Insurance Commissioner for approval. About the WCIRB The WCIRB is California's trusted, objective provider of actuarially-based information and research, advisory pure premium rates, and educational services integral to a healthy workers' compensation system. Learn more at www.wcirb.com.

2010 Workers’ Compensation Insurance Rating Bureau of California. All rights reserved.

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Released: September 15, 2010

WCIRB Ca l i fo rn ia ®

Report on Consulting Engineers

8601(1), Engineers — consulting — mechanical, civil, electrical and mining engineers and architects — not engaged in actual construction or operation

8601(2), Oil or Gas Geologists or Scouts 8601(3), Geophysical Exploration — including mapping of subsurface areas

Executive Summary Objective At the request of a member of the Classification and Rating Committee, the WCIRB reviewed the scope and application of Classification 8601(1), Engineers – consulting – mechanical, civil, electrical and mining engineers and architects – not engaged in actual construction or operation, 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration – including mapping of subsurface areas. In the course of this review, staff evaluated the following:

1. Whether a new classification should be established for professional land surveyors and timber cruisers;

2. Whether oil or gas geologists or scouts and firms engaged in geophysical exploration should be combined with land surveyors and timber cruisers; and

3. Whether Classification 8601 should be amended to include outside salespersons and clerical

office employees, including drafters. Findings Based upon its review of the scope and application of Classification 8601(1), Engineers – consulting, 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration, the WCIRB has determined the following:

1. There is a commonality and overlap in some of the activities performed by engineers and land surveyors.

2. Due to technological advances such as the invention and expanding use of Global Positioning System (GPS) measurement tools, the demand for onsite land surveying is diminishing and many tasks are performed in a clerical office setting. This trend is expected to continue.

3. There exists an overlap in duties among employees of engineering firms who are assigned to Classifications 8601(1), Engineers – consulting, 8742(1), Salespersons – Outside, 8810(1), Clerical Office Employees, and 8810(2), Draftspersons, which may lead to misclassification of employees.

Recommendations

In view of the above, the WCIRB recommends the following:

1. Do not establish a new classification for land surveying and timber cruising. Continue to assign land surveying, engineers and timber cruising to Classification 8601(1), Engineers – consulting.

2. For consistency and clarity, add a footnote to Classification 8601(1), Engineers – consulting, to state that this classification includes land surveying and timber cruising.

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3. Continue to assign oil or gas geologists or scouts and firms engaged in geophysical exploration to Classifications 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration, respectively.

4. Amend Classifications 8601(1), Engineers – consulting, 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration, to include outside salespersons and clerical office employees.1

1 The inclusion of clerical office employees will encompass the inclusion of drafters.

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Introduction A member of the Classification and Rating Committee requested that the WCIRB study the classification procedure for consulting mechanical, civil, electrical and mining engineers and architects, land surveyors, timber cruisers, oil or gas geologists or scouts, and geophysical exploration firms, as well as the outside salespersons, drafters and clerical office employees associated with such firms, taking into consideration changes adopted in other jurisdictions for such operations. Staff agreed to study the issues and present its findings and recommendations in preparation for the 2011 pure premium rate filing. Pursuant to the above, this report focuses on the following issues:

1. Whether a new classification should be established for land surveyors and timber cruisers;

2. Whether oil or gas geologists or scouts and firms engaged in geophysical exploration should be combined with land surveyors and timber cruisers; and

3. Whether Classification 8601 should be amended to include outside salespersons and clerical

office employees. Classification History Presented below is a timeline of the significant changes to the scope and application of the relevant classifications:

1923: Classification 8601(1), Engineers – consulting, was established.

1930: Classification 8604, Geophysical Exploration, was established.

1937: Classification 8605, Oil or Gas Geologists or Scouts, was established.

1974: Classification 8605, Oil or Gas Geologists or Scouts, was eliminated; Classification 8601(2), Oil or Gas Geologists or Scouts, was established.

1996: Classification 8604, Geophysical Exploration, eliminated; Classification 8601(3),

Geophysical Exploration, was established. Description of Operations Following are the classification phraseologies and footnotes and respective summaries of operations currently assigned to Classifications 8601(1), Engineers – consulting, 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration:

ENGINEERS — consulting — mechanical, civil, electrical and mining engineers and architects — not engaged in actual construction or operation

8601(1)

This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 8601(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification.

Consulting Mechanical and Electrical Engineers and Architects2 Consulting mechanical and electrical engineers and architects provide consulting services on a fee basis to separate concerns who are engaged in the construction of commercial and industrial buildings and residential housing. The mechanical and electrical engineers and architects receive project specifications,

2 Licensed professional engineers may perform the activities that are defined and described in Section 6700 of the Business and Professions Code, aka Professional Engineers Act.

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drawings and other necessary data from customers or outside parties. The engineers and architects travel to customer locations to view buildings and building sites, attend meetings, discuss drawings and specifications, answer project related questions and gather pertinent information needed for preparing plans and specifications within the office. When necessary, engineers and architects will visit building sites during construction to answer questions related to project plans and specifications. Engineers and architects spend a significant portion of their time both during and between projects working within a clerical office setting compiling data, designing plans and creating drawings or specifications for the building mechanical systems such as air conditioning, heating, ventilating, plumbing and fire sprinkler systems, and the building electrical systems. In addition, engineers and architects supervise and oversee work completed by drafters. All construction and direct construction supervision is performed by separate concerns (general contractors). It is not uncommon for architectural and engineering firms to retain staff to make models typically from wood, styrofoam, cardboard or similar materials to provide clients with a visual representation of how a finished project will appear. Consulting Civil Engineers Civil engineers provide consulting services to land developers, builders, government agencies and general contractors related to the design, construction, and maintenance of public works such as streets, roads and bridges, public utilities, government buildings, public facilities such as airports and train stations, housing developments and various community planned projects. Preliminary land survey operations and soil testing is conducted by the civil engineering firm or by other concerns. Civil engineers consult with public agencies, property owners, project managers, developers, construction firms and architects to discuss all aspects of the project. Civil engineers and architects spend a significant portion of their time both during and between projects working in a clerical office setting preparing plans, specifications and various reports that are provided to clients. In addition, the engineers and architects supervise and oversee work completed by drafters. During construction operations, the civil engineers and architects review work in progress, review plans and specifications with project superintendents and answer questions that arise. Civil engineering firms may also retain employees to make models as described above. On some projects, civil engineers survey and stake construction sites. Further, civil engineers licensed prior to January 1, 1982 may perform the land surveying duties described below without any additional licensing. Land Surveyors3 Land surveyors work within a clerical office setting conducting design activities, compiling surveying statistics, reviewing topography data, creating maps and charts and writing reports that are provided to the customer. As required, land surveyors travel to outside locations to survey vacant or developed land prior to construction by other concerns. Using surveying equipment, measurements are taken and elevations and other topography specifications are recorded. Boundary lines are marked with stakes for use by separate concerns during construction and land development. While construction activities and land development are being performed by these outside parties, land surveyors travel to construction sites to attend project meetings and answer project related questions concerning surveying or topography issues. Due to the expanding use of technological advances (GPS, etc.), on some jobs, the land surveyor is required to spend little time visiting outside locations to obtain data for maps and reports. According to industry experts, continuing technological advances will enable land surveyors to perform virtually all activities within a clerical office setting within the next several years. Land surveying equipment and related supplies include tripods, transits, transit levels, surveying rods, prisms, total stations, GPS equipment, magnetic locators, measuring and metering devices and similar equipment.

3 Licensed professional land surveyors may perform the activities defined and described in Section 8700 of the Business and Professions Code, aka Professional Land Surveyors‘ Act.

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Timber Cruisers Timber cruising operations may be performed under contract to California Department of Forestry, the United States Forest Service or private individuals. The operations include reviewing logging harvest plans and using instruments, equipment or a visual inspection to determine the boundary areas and trees that can be marked for cutting. Reports are prepared to estimate the number of board feet available to be harvested and to determine the potential value of the timber on a site if it is felled and sold. Timber cruisers also determine which trees are the healthiest and stand the best chance of obtaining maturity, and which trees should be cut. Operations may also include compiling environmental impact reports, remediation and reforestation plans and preparing designs and plans for access roads needed for logging operations to be performed by separate concerns. Equipment used by timber cruisers to measure various tree dimensions and other characteristics consists of cruising rods, Biltmore sticks, clinometers, telescopes, measuring tapes and similar equipment.

OIL OR GAS GEOLOGISTS OR SCOUTS 8601(2)

Classification 8601(2) shall not be used for division of payroll in connection with

Classifications 6235(1), Oil or Gas Wells — drilling, 1320, Oil or Gas Lease Operators, or

7515, Oil or Gas Pipeline Operation, unless the operation described by Classification 8601(2)

constitutes a separate and distinct enterprise having no connection with the operations

covered by Classifications 6235(1), 1320 or 7515.

Classification 8601(2), Oil or Gas Geologists or Scouts, contemplates consulting services in connection with oil and gas drilling. Geologists or scouts travel to possible oil drilling sites to observe and gather data that is compiled into a report. This is conducted by non-seismic methods of geophysical exploration. Rather than measuring shock waves created by vibrating equipment (geophysical exploration), non-seismic methods measure gravitational pull with the use of sensitive electrical instruments. This involves workers surveying the surface of the earth and monitoring gravimeters placed on the earth’s surface. As with the vibration methods of geophysical exploration, maps and reports are generated detailing the earth’s subsurface with respect to possible hydrocarbon pockets. Geologists also travel to various well sites and meet with clients to review drilling progress. These employees typically are not exposed to actual drilling operations, but will travel to the well site to obtain technical data from cameras and well monitoring instruments. With this data, employees use computers to calculate and recommend drilling direction within the well. In addition, employees analyze well cuttings to determine types of formations and the presence of hydrocarbons.

GEOPHYSICAL EXPLORATION — including mapping of sub-surface areas 8601(3)

Classification 8601(3) shall not be used for division of payroll in connection with

Classifications 6235(1), Oil or Gas Wells — drilling, 1320, Oil or Gas Lease Operators, or

7515, Oil or Gas Pipeline Operation, unless the operation described by Classification

8601(3) constitutes a separate and distinct enterprise having no connection with the

operations covered by Classifications 6235(1), 1320 or 7515.

Classification 8601(3), Geophysical Exploration, contemplates the seismic geophysical exploration of subsurface areas to determine the feasibility and probability of locating oil or gas for the petroleum industry. The process involves producing ground vibrations that are measured by a seismometer that in turn produces a map of the subsurface. Truck-mounted “thumpers” and “vibrators” are used to create shock waves and low-frequency sound waves through the earth by pounding or vibrating the earth’s surface. Crews travel to potential oil or gas producing areas. The area to be mapped may range from 20 to 100 square miles. Working crews proceed to strategically map out the area and determine where to set up the vibration and monitoring equipment. Workers position the vibration creating equipment in designated positions and proceed to produce shock waves through the earth’s surface. An instrument called a geophone monitors the reflections created by various vibration techniques. Workers place geophones and cables along the surface of the earth. The information gathered as a result of the

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vibrations is interpreted to determine subsurface structures. The completed product is a subsurface map of the earth that is used by the oil and gas industry to search for hydrocarbons. This data is stored electronically so that it can be sent directly to the customer as raw data or back to the firm’s office for further analysis. Employees prepare preliminary and final written reports for customers as to the results of the geophysical exploration. Outside Salespersons and Draftspersons (Drafters) Following are the classification phraseologies and footnotes and respective summaries of operations currently assigned to Classifications 8742(1), Salespersons – Outside, and 8810(2), Draftspersons, for employees in the architectural and engineering industry:

SALESPERSONS — Outside 8742(1)

Assignment of this classification is subject to the provisions of the rules for Standard

Exceptions.

Classification 8742(1) applies to individuals who travel to customer locations to promote the firms’ consulting services and encourage business relationships. It is noted that questions and disputes arise over the assignment of Classification 8742(1) to employees in this industry. It is not uncommon for industry professionals, especially business owners, executives and partners, to be responsible for conducting marketing and/or sales operations and to oversee employees performing the operations contemplated by Classification 8742(1). These professionals may also attend meetings with clients directly related to architectural or engineering projects, which is contemplated by Classification 8601(1).

DRAFTSPERSONS 8810(2)

Assignment of this classification is subject to the rules for Standard Exceptions.

Classification 8810(2) applies to individuals in the architectural or engineering industry who prepare plans and write specifications within a clerical office setting. Drafters receive drawings, rough sketches, specifications and other information provided by engineers, surveyors and architects and prepare plans and specifications using Computer Aided Design and Drafting (CADD) systems and drafting equipment. While drafters work within an office setting, such employees may occasionally accompany an engineer or architect to attend an off-site architectural or engineering related meeting. Also, given the potential for down time between projects, licensed architects and engineers may spend an entire policy period working in a clerical office setting. The potential for drafters to travel and the potential for licensed professionals to work exclusively within a clerical office setting sometimes leads to disputes when classifying such employees at the time of audit or when claims arise. Classification Analysis A review of the WCIRB’s classification inspection report library has revealed the following breakdown of firms assigned to Classification 8601:

Table 1: Classification Inspection Report Categorization

Operations Classification Reports Percent

Consulting Mechanical, Civil, Electrical and Mining Engineers and Architects – No Surveying Operations

8601(1), Engineers 1,876 84.2%

Engineers and Architects – with Surveying Operations 8601(1), Engineers 196 8.8%

Land Surveyors Exclusively 8601(1), Engineers 79 3.5%

Timber Cruisers 8601(1), Engineers 51 2.3%

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http://en.wikipedia.org/wiki/Computer_Aided_Design_and_Drafting



Operations Classification Reports Percent

Oil or Gas Geologists 8601(2), Oil or Gas

Geologists or Scouts 18 0.8%

Geophysical Exploration 8601(3), Geophysical

Exploration 8 0.4%

Total 2,228 Based upon a review of classification inspection reports and information obtained through interviews with industry experts, WCIRB staff analyzed whether: (1) a new classification should be established for land surveyors and timber cruisers; (2) oil or gas geologists or scouts and firms engaged in geophysical exploration should be combined with land surveyors and timber cruisers; and (3) the classification that applies to consulting engineers and architects should be amended to include outside salespersons and clerical office functions. Land Surveyors, Timber Cruisers, Oil or Gas Geologists or Scouts and Geophysical Exploration Land surveyors, timber cruisers, oil or gas geologists or scouts and firms engaged in geophysical exploration constitute subsets of the architectural and engineering industry. Nevertheless, the job duties contemplated by these occupations are similar to and in some cases not distinguishable from those performed by engineers and architects. According to the California Board of Professional Engineers and Land Surveyors (BPELS) and the American Council of Engineers Companies of California (ACEC CA), a licensed land surveyor may practice engineering as a subordinate under the responsible charge of a licensed engineer. Conversely, a licensed engineer can practice land surveying as a subordinate under the responsible charge of a licensed land surveyor. As noted above, of the 275 WCIRB inspection reports that identified land surveying as an occupation, most (196) reports describe firms that perform both engineering and land surveying operations. This supports the position of the employer associations that land surveying is an integral operation of the engineering industry. Although licenses for land surveying and engineering operations are given to individuals and not to companies, the fact that it is legally permissible for land surveyors and engineers to work as subordinates under a licensed professional of a different discipline creates the potential for an overlap in job duties. Civil engineers may survey and stake construction sites, which is typically performed by land surveyors. Civil engineers licensed prior to January 1, 1982 may perform all land surveying operations contemplated by the Professional Land Surveyors’ Act. Technological advances are reducing the amount of time required for on-site land surveying. Such advances are expected to continue. Based on these observations, it would not be prudent to establish a unique classification for land surveyors. Such action may lead to classification disputes, and the classification for land surveyors may lose statistical credibility over time if employees who currently perform field activities become eligible for Classification 8810(1), Clerical Office Employees – N.O.C., due to continued technological improvements. Land surveyors and timber cruisers should continue to be assigned to Classification 8601(1). With regard to oil and gas geologists and geophysical explorers, these occupations have been assigned to Classification 8601 for several years due to similarities in operations and a lack of statistically credible data to create unique rates. These characteristics remain true today. Accordingly, oil and gas geologists and geophysical explorers should continue to be assigned to Classifications 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration, respectively, which are cross-reference classifications to 8601(1), Engineers – consulting. Outside Salespersons, Drafters and Clerical Office Employees As noted above, questions and disputes often arise concerning the assignment of either Classification 8742(1) or 8810 to an individual employee during the time of final audit or when claims occur. These disputes are based on the following:

1. Licensed engineers or architects who primarily perform sales functions;

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2. Licensed engineers or architects who primarily conduct clerical office functions or drafting duties;

3. Drafters who occasionally travel to outside locations to attend architectural or engineering project

meetings;

4. Sales or marketing professionals who attend architectural or engineering related meetings with clients; and

5. Claims occurring for employees previously assigned to Classification 8742(1) or 8810, where the

description of the claim is consistent with the job duties associated with Classification 8601, i.e., a claimant was injured while touring a construction site.

The California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP) currently has several classifications that include outside salespersons and/or clerical office employees. These classifications typically include one or both of the Standard Exceptions when it is difficult to distinguish between which operations should be assigned to the classification that describes the business and which operations should be assigned to the Standard Exceptions classifications. For the architectural and engineering industry, there is an overlap in duties for licensed architects and engineers who perform sales or clerical functions, drafters who travel to outside locations during a policy period, and outside salespersons who attend architectural or engineering related client meetings. Land surveyors spend a significant portion of their time working in a clerical office setting to create maps, reports and other materials for customers. Due to technological advances, the time required for onsite land surveying will continue to diminish. Based on these observations, there is good cause to amend Classification 8601 to include outside salespersons and clerical office employees. To identify the firms in the architectural or engineering industry whose clerical and outside salespersons’ experience should be used to develop loss to payroll ratios for analysis, staff reviewed all unit statistical reports (USRs) for the 2006 policy year that reported payroll in Classification 8601 and selected all firms where Classification 8601 was the governing payroll. The clerical and outside salespersons’ experience was added to the data reported under Classification 8601. The loss to payroll ratio for the Architectural and Engineering study group is shown in Table 2:

Table 2: Architectural and Engineering Study Group Classification 8601 including Outside Salespersons and Clerical Office Employees

Loss to Payroll Ratio at Policy Year 2010 Level

Year Number of Reports Payroll Losses Loss to Payroll

Ratio

2005 7,163 8,737,222,892 27,149,235 0.311

2006 7,033 9,275,608,025 32,138,352 0.346

Total 18,012,830,917 59,287,587 0.329

Selected (Unlimited) Loss to Payroll Ratio 0.353

Credibility4

4 The relativity for each classification in the upcoming policy year is determined based on a comparison of that classification’s actual losses per $100 of payroll and the ratio of losses per $100 of payroll underlying the current pure premium rate. The ”credibilities” assigned to a classification are the statistical weights assigned to that classification’s experience as a predictor of future claim experience relative to the loss per $100 of payroll underlying the classification’s current pure premium rate. The predictability or

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Indemnity Medical

1.00 1.00 As shown in Table 3, the loss to payroll ratio for the Architectural and Engineering study group is significantly lower than that of Classification 8601:

credibilities assigned to a classification’s recent historical experience depends on the volume of indemnity and medical claims incurred during the experience period. The WCIRB strives to have classifications that are fully, or 100%, statistically credible based on historical experience over five or fewer years, which means that the classification’s relativity in the upcoming policy year can be best estimated using only the loss per $100 of payroll experience from the latest two-, three-, four- or five-year periods. The WCIRB generally will not recommend the establishment of a new classification if the credibility factors are less than one-half (< 0.50).

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Table 3: Comparison of Loss to Payroll Ratio at Policy Year 2010 Level

Classification 8601

Architects and Engineers – Study

Group Difference

0.515 0.329 -0.186 (-36.1%) Table 4 compares the current selected loss to payroll ratio for Classification 8742 with the residual for 8742 after removing the 8742 data associated with the Architectural and Engineering study group:

Table 4: All of 8742 vs. 8742 Less Architectural and Engineering Study Group Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2010 Level

Classification 8742

Classification 8742 less Architectural and Engineering

Study Group Difference

0.343 0.344 +0.001 (+0.3%)

Table 5 compares the current selected loss to payroll ratio for Classification 8810 with the residual for 8810 after removing the 8810 data associated with the Architectural and Engineering study group:

Table 5: All of 8810 vs. 8810 Less Architectural and Engineering Study Group Comparison of Selected (Unlimited) Loss to Payroll Ratio at Policy Year 2010 Level

Classification 8810

Classification 8810 less Architectural and Engineering

Study Group Difference

0.284 0.288 +0.004 (+1.4%)

For informational purposes, Table 6 shows the clerical office payroll and loss data at the policy year 2010 level pertaining solely to firms where Classification 8601 was the governing payroll:

Table 6: Engineer’s Clerical Office Employees – Study Group



Ratio

2004 4,111 2,143,069,514 2,868,549 0.134

2005 4,420 2,408,390,946 1,955,768 0.081

2006 4,627 2,611,133,446 3,783798 0.145

Total 7,162,593,906 8,608,115 0.120

Credibility

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Indemnity Medical

1.00 1.00 Table 7 is a comparison of the loss to payroll ratios at policy year 2010 level for the engineer’s clerical office employees study group compared to the loss to payroll ratio for all of Classification 8810:


Classification 8810 Engineer’s Clerical Office Study Group Difference

0.265 0.120 -0.145 (-54.7%)

For informational purposes, Table 8 shows the outside salesperson’s payroll and loss data at the policy year 2010 level pertaining solely to firms where Classification 8601 was the governing payroll:

Table 8: Engineer’s Outside Salespersons – Study Group



Ratio

2002 462 101,002,156 640,564 0.634

2003 504 112,609,938 26,919 0.024

2004 518 114,788,610 157,100 0.137

2005 566 127,681,383 549,266 0.430

2006 601 138,411,194 81,613 0.059

Total 594,493,281 1,455,461 0.245

Credibility

Indemnity Medical

0.41 0.46 Although the data for the engineer’s outside salespersons study group is not credible to draw a

meaningful statistical conclusion, for information purposes only, Table 9 shows a comparison of the loss to payroll ratios at policy year 2010 level for the engineer’s outside salespersons study group and all of

Classification 8742:


All of Classification 8742

Engineer’s Outside Salespersons – Study

Group Difference

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0.321 0.245 -0.076 (-23.7%)

Impact Analysis Inclusion of Outside Salespersons, Draftspersons and Clerical Office Employees Tables 10, 11 and 12 compare the current selected loss to payroll ratios for Classifications 8601, 8742 and 8810 with the loss to payroll ratio for the Architectural and Engineering study group:

Table 10: All of 8601 vs. Architectural and Engineering Study Group Comparison of Selected and Limited Loss to Payroll Ratios at Policy Year 2010 Level

Classification

8601 Architectural and Engineering

Study Group (8601) Difference

0.553 0.353 -0.200 (-36.2%)


Classification



0.343 0.353 +0.010 (+2.9%)


Classification



0.284 0.353 +0.069 (+24.3%)

Table 13 shows the hypothetical change in “premium” for a risk with the average 2006 payroll amounts for

each classification in the study group. Loss to payroll ratios are used as a proxy for insurance rates.

Table 13: Hypothetical Change in Premium

Typical Payrolls by Classification

Exposure Current Loss to Payroll Ratio

Hypothetical Measure of Premium

Study Group Loss to Payroll

Ratio


Diff.

8601 650,000 0.553 3,595 0.353 2,295 8742 275,000 0.343 943 0.353 971 8810 900,000 0.284 2,556 0.353 3,177 Total 1,825,000 7,094 6,442 -9.2%

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Table 14 shows the hypothetical change in “premium” for a risk from the study group that reports a

majority of its payroll in Classification 8601.


Classification 8601 Predominate



Study Group Loss to Payroll Ratio


Diff.

8601 1,500,000 0.553 8,295 0.353 5,295 8742 50,000 0.343 172 0.353 177 8810 200,000 0.284 568 0.353 706 Total 1,750,000 9,035 6,178 -31.6% Table 15 shows the hypothetical change in “premium” for a risk from the study group that reports a majority of its payroll in Classification 8810.


Classification 8810 Predominate



Study Group Loss to Payroll

Ratio


Diff.

8601 10,000,000 0.553 55,300 0.353 35,300 8742 2,000,000 0.343 6,860 0.353 7,060 8810 28,000,000 0.284 79,520 0.353 98,840 Total 40,000,000 141,680 141,200 -0.3%

Conclusion and Recommendation Based on its review of the classification procedures applicable to firms assigned to Classifications 8601(1), 8601(2) and 8601(3), WCIRB staff finds the following:

1. There is a commonality and overlap in some of the activities performed by engineers and land surveyors.

2. Due to technological advances, the demand for onsite land surveying is diminishing and in fact some jobs are performed exclusively in a clerical office setting. This trend is expected to continue.

3. There exists an overlap in duties among employees of engineering firms who are assigned to Classifications 8601(1), Engineers – consulting, 8742(1), Salespersons – Outside, 8810(1), Clerical Office Employees, and 8810(2), Draftspersons, which may lead to the misclassification of employees.

In view of the above, the WCIRB recommends the following:

1. Do not establish a new classification for land surveying. Continue to assign land surveying,

engineers and timber cruising to Classification 8601(1), Engineers – consulting.

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2. For consistency and clarity, add a footnote to Classification 8601(1), Engineers – consulting, to state that this classification includes land surveying and timber cruising.

3. Continue to assign oil or gas geologists or scouts and firms engaged in geophysical exploration to

Classifications 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration, respectively.

4. Amend Classifications 8601(1), Engineers – consulting, 8601(2), Oil or Gas Geologists or Scouts, and 8601(3), Geophysical Exploration, to include outside salespersons and clerical office employees.

Implementing the foregoing recommendations would require that the following changes to Part 3 of the USRP be included at the time of the next pure premium rate filing.

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WCIRB Ca l i f o rn ia®

Proposed Changes to the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 Related to:

8601(1), Engineers — consulting — mechanical, civil, electrical and mining engineers and architects — not engaged in actual construction or operations

8601(2), Oil or Gas Geologists or Scouts 8601(3), Geophysical Exploration — including mapping of subsurface areas

Recommendation Amend Classification 8601(1), Engineers – consulting – mechanical, civil, electrical and mining engineers and architects – not engaged in actual construction or operation, to include outside salespersons and clerical office employees and add a footnote to direct that land surveying and timber cruising are included in this classification.

PROPOSED

ENGINEERS — consulting— mechanical, civil, electrical and mining engineers and architects — not engaged in actual construction or operation — including Outside Salespersons and Clerical Office Employees

8601(1)

This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 8601(1) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification.

This classification includes land surveying and timber cruising.

* * * * * * * Recommendation Establish a cross-reference to indicate that Classification 8601(3), Geophysical Exploration, is listed under the Petroleum Industry Group.

PROPOSED

GEOPHYSICAL EXPLORATION — including mapping of subsurface areas 8601(3)

Classification 8601(3) shall not be used for division of payroll in connection with Classifications 6235(1), Oil or Gas Wells — drilling, 1320 Oil or Gas Lease Operators, or 7515, Oil or Gas Pipeline Operation, unless the operation described by Classification 8601(3) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 6235(1), 1320 or 7515.

See Petroleum Industry.

* * * * * * * Recommendation Amend Petroleum Industry Classification 8601(3), Geophysical Exploration – including mapping of subsurface areas, to include outside salespersons and clerical office employees.

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WCIRB Ca l i f o rn ia®

PROPOSED

PETROLEUM INDUSTRY

GEOPHYSICAL EXPLORATION — including mapping of subsurface areas — including Outside Salespersons and Clerical Office Employees

8601(3)

Classification 8601(3) shall not be used for division of payroll in connection with Classifications 6235(1), Oil or Gas Wells — drilling, 1320 Oil or Gas Lease Operators, or 7515, Oil or Gas Pipeline Operation, unless the operation described by Classification 8601(3) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 6235(1), 1320 or 7515.

* * * * * * * Recommendation Amend Petroleum Industry Classification 8601(2), Oil or Gas Geologists or Scouts, to include outside salespersons and clerical office employees.

PROPOSED

PETROLEUM INDUSTRY

OIL OR GAS GEOLOGISTS OR SCOUTS — including Outside Salespersons and Clerical Office Employees

8601(2)

Classification 8601(2) shall not be used for division of payroll in connection with Classifications 6235(1), Oil or Gas Wells — drilling, 1320, Oil or Gas Lease Operators, or 7515, Oil or Gas Pipeline Operation, unless the operation described by Classification 8601(2) constitutes a separate and distinct enterprise having no connection with the operations covered by Classifications 6235(1), 1320 or 7515.

* * * * * * *

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report on consulting engineers - wcirb · 2016-09-21 · report on consulting engineers ... onsite...

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