Class Code 5606…The Most Unique Code in the Book! Are You Taking Advantage of It?

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by Jeffrey Cavignac, CPCU, RPLU, ARM, CRIS, MLIS

Classification Code 5606 – Contractors/Executive Level Supervisors is a preferred and unique classification for a construction company operating in California. It’s preferred because the rate for this code is substantially less than the operational classifications that apply to the majority of a construction company’s employees, and it is unique in that the classification may be used only upon specific written assignment by the Workers Compensation Insurance Rating Bureau (the Bureau).

Code 5606 is available only to executive supervisors or construction superintendents having administrative or managerial responsibility for a construction or erection project. Executive Supervisors or Construction Superintendents are defined as ‘those persons exercising supervisory control through job superintendents or foremen’.

Code 5606 does not apply to any person who is directly in charge of construction work. These employees would be assigned to an operational class (like carpentry or plumbing) which better describes the type of construction or erection work over which they are exercising direct supervisory control.

In addition you can’t segregate payroll with other classifications. In other words, if someone is not 100% qualified as Code 5606, they would have to take the governing or appropriate operational classification and would not be eligible for Code 5606.

There are two circumstances under which this classification may be awarded:

1.  For firms whose employees perform construction operations:

  • The employer must develop payroll in one or more construction classifications;
  • There must be two levels of supervision (superintendents and foremen) below the executive supervisor;
  • If the executive supervisor is a corporate executive officer, a partner or an individual employer, superintendents and foremen must be retained on all construction projects;
  • The superintendents and foremen of subcontractors are not to be considered in determining the existence of the required three levels of supervision; and
  • An executive supervisor may exercise general supervision, but may not engage in direct supervision.

2. Firms that subcontract all work may have executive supervisors who coordinate the activities of subcontractors, check the quality of materials used, determine acceptability of completed work, serve as a liaison with owners of construction projects, or direct subcontractors in the performance of their work.

The operations of an executive supervisor performing such functions are contemplated by Code 5606, if all construction work is performed by subcontractors, and no payroll is developed under any construction classification. This will generally apply to what we call ‘paper contractors.’ Code 5606 recognizes that some of these ‘paper contractors’ may also be engaged in warranty repairs conducted subsequent to the sale of the structure constructed or basic clean-up operations. Employee of firms involved in these types of services can take Classification Code 9015(1) – ‘Building Operations – NOC.’

Effective January 1, 2014, Classification 5606, Contractors – construction or erection, was amended for clarity to include management level employees such as safety managers, project managers and engineers, who are not in the direct chain of command over construction operations but whose duties include walking through a construction site during the construction phase, provided the insured retains two levels of supervision over the construction crew(s) or where all operations have been subcontracted to licensed subcontractors. These amendments, which are included in Classification 5606 shown below, do not represent any change to established classification procedure; rather, the amendments were for clarity only.

Best Practices

Class Code 5606 should be reviewed and understood.  If it is conceivable that you may have employees who qualify for this classification but are not classed accordingly you should request Bureau authorization to use the class.

Discussion of Class Code 5606 underscores a bigger issue, making certain all your classifications are correct.  As mentioned earlier, there are hundreds of different classifications in the Bureau Manual.  If you have been in business for any length of time, the Bureau has probably already inspected your operations and assigned appropriate class codes.  You should review these to make certain they are accurate.  If there are gray areas which may work to your advantage you should explore those and if appropriate ask for a re-inspection.

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CODE 5606

CONTRACTORS – construction or erection – executive level supervisors – no direct supervision – division of a single employee’s payroll with any other classification is not permitted

This classification may be assigned only in connection with the construction or erection classifications listed in Appendix I, Construction and Erection Classifications, and must be confirmed by specific written approval from the WCIRB.

This classification applies to executive level supervisors as defined in Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 2d, Executive Level Supervisors.

This classification also applies to executive level supervisors when all construction operations are subcontracted to licensed contractors and no payroll is developed under any construction classification. In such instances, executive level supervisors exercise control exclusively through licensed subcontractors.

This classification also includes management level employees such as safety managers, project managers and engineers, who do not supervise construction operations but whose duties include walking through a construction site during the construction phase, provided the employer retains two levels of supervision over the construction crew(s) or where all operations have been subcontracted to licensed subcontractors. Otherwise, such employees are miscellaneous employees and shall be classified in accordance with Part 3, Section IV, Rule 2c, Miscellaneous Employees (Construction or Erection).

On jobs where all construction operations are subcontracted to licensed subcontractors, Classification 9015(1), Building Operation – all other employees, shall apply to job site cleanup and warranty repair conducted after construction is completed.

Also refer to Part 3, Section IV, Rule 2, Construction or Erection Work.