Workers’ Compensation Class Code 5606 Contractors/Executive Supervisors

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Introduction:  Classification Code 5606* pertains to executive level supervisors for construction companies.  It 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 up until January 1st of 2017 the classification could only be used upon specific written assignment by the Workers Compensation Insurance Rating Bureau (the Bureau). While Bureau review is no longer required, careful attention to the rules governing this classification is critical.  Failing to do so will result in the applicable employee being placed in the appropriate operational construction classification which as mentioned above will carry a rate significantly higher than the rate for Code 5606.

Who it applies to:  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 are assigned to the operational class (like carpentry or plumbing) which best describes the type of construction or erection work over which they are exercising direct supervisory control.  It is also important to note that the division of a single employee’s payroll with any other classification is not allowed.

There are two scenarios under which Class Code 5606 may apply.

  1. The first pertains to firms that develop payroll in one or more construction or erection classifications. In order to qualify there needs to be at least two levels of supervision as defined in Part 3, Section IV Rule 2.d.*** For those firms with two levels of supervision, 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 are also included in Code 5606.
  1. The second scenario under which Class Code 5606 may apply involves firms that sub out all construction operations to licensed contractors and no direct payroll is developed under any construction classifications.  Executive level supervisors in these situations exercise control exclusively through licensed subcontractors. 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 construction are also included in Code 5606.  On projects where all work is subbed out Classification 5610** (Contractors-construction or erection-all construction subcontracted-all other employees) applies to other employees that perform job site cleaning and debris removal and post construction warranty and repair work.  Prior to January 1st 2017, this type of work was placed in to Class Code 9015.

An important exception:  There is an exception to both Code 5606 and 5610.  It pertains to those workers whose duties are limited to estimating, outside sales or public relations.  These employees who may visit job sites for the purpose of pre-construction estimating, or for meeting with clients and other project representatives, are classified as Salespersons (Class Code 8742).  Fee based construction management companies that do not perform construction or provide direct supervision are placed in the Engineering classification (Code 8601).

Best Practices

Class Code 5606 should be reviewed and understood. As mentioned above the rate for this classification is much less than the operational construction classification.  Discussion of Class Code 5606 underscores a bigger issue, making certain all your classifications are correct.  There are hundreds of different classifications in the Bureau Manual and it is not always clear which classification should apply.  In order to make sure you are classified favorably you need to understand what options you may have.  Your broker should be able to work with you to determine the best classifications for you.

*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.

Footnote:

This classification may be assigned only in connection with the construction or erection classifications listed in Appendix I, Construction and Erection Classifications.

This classification applies to executive level supervisors of construction operations wherein the employer develops payroll in one or more construction or erection classifications provided not less than two levels of supervision, as defined in Part 3, Section IV, Rule 2d, Executive Level Supervisors, are retained between the executive level supervisor and the workers performing actual construction operations.

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).

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.

On jobs where all construction operations are subcontracted to licensed subcontractors, Classification 5610, Contractors — construction or erection — all construction subcontracted, shall apply to all other employees including but not limited to job site cleaning and debris removal and post-construction warranty repair operations.

Classification 5606 does not apply to employees whose job site duties are limited to estimating, outside sales or public relations. Employees whose non-clerical duties are confined to visiting job sites for the purpose of pre-construction estimating, or for meeting with clients and other project representatives, are classified as 8742(1), Salespersons — Outside, provided they have no supervisory responsibilities over construction operations and they do not walk through job sites for purposes such as assessing construction progress, evaluating quality or determining compliance with safety standards.

Fee-based construction management companies that do not engage in or perform supervision over construction operations, but serve as an intermediary between the general contractor and project owner or otherwise provide expertise regarding a construction project, shall be classified as 8601(1), Engineers — consulting.

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

**5610 CONTRACTORS — construction or erection — all construction subcontracted — all other employees

Footnote:

This classification applies to all employees other than executive level supervisors on jobs where the employer subcontracts all operations to licensed subcontractors. This classification applies to operations, including but not limited to job site cleaning and debris removal and post-construction warranty repair operations. Otherwise, such employees are miscellaneous employees and shall be classified in accordance with Part 3, Section IV, Rule 2c, Miscellaneous Employees (Construction or Erection).

Employers that perform construction job site cleaning for other concerns on a fee basis shall be classified as 9008, Janitorial Services — by contractors.

Industry Group/Related Classifications:

Construction and Erection

***EXCERPT

California Workers’ Compensation Uniform Statistical Reporting Plan—1995
Effective January 1, 2017

Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection, Paragraph d, Executive Level Supervisors

Executive Level Supervisors

Executive level supervisors oversee the insured’s construction operations through second level (or higher) supervisors. In addition, on job sites where the insured subcontracts all operations to licensed subcontractors, executive level supervisors may oversee operations through subcontractors. Notwithstanding any other provisions contained herein, it is not permissible to divide a single employee’s payroll, within a single policy period, between Classification 5606, Contractors – executive level supervisors, and any other classification.

Executive level supervisors over construction operations wherein the insured develops payroll in one or more construction or erection classifications shall be eligible for Classification 5606 provided not less than two levels of supervision, as defined below, are retained between the executive level supervisor and the workers performing the actual construction operations.

  1. First level supervisorsgenerally work at a job site with a single crew of workers performing a single trade and do not travel between concurrent job sites to supervise different crews. While first level supervisors may engage in construction activities alongside the crew, as supervisors they have the authority to direct and control the crew’s work. This control includes training, evaluating, and disciplining crewmembers. Employees who assist with training or leading a crew, but who do not have the authority to direct and discipline crewmembers, or are not accountable for the work performed by the crew, are not considered first level supervisors.
  2. Second level supervisorsgenerally have broad authority over the work crews at one or more job sites. Second level supervisors direct and control the work of first level supervisors. The duties of second level supervisors are exclusively supervisory in nature.