Separation of Payroll for Contracting Employers in Construction or Erection Operations: An Update

Recently, the New York Compensation Insurance Rating Board (NYCIRB) amended the New York Workers Compensation and Employers Liability Manual. The update – effective January 1, 2018 – revised application of Manual Rule IV D.7., which relates to the separation of payroll for contracting employers, by adding the wording “All Operations to Completion” to all 85 contracting classification phraseologies.

Soon after, NYCIRB released another memo clarifying the changes made to the New York Workers Compensation and Employers Liability Manual. Here’s what they said:

“The approved filing described in RC 2454 does not change the existing methodology for classifying Construction or Erection Operations. Rather, the addition of the phrase “all operations to completion” to these construction classification phraseologies clarifies that incidental operations performed within a specific trade at a single job or location are not eligible for a separate classification code assignment even if separate payroll records are maintained.”

As was the case prior to the original memo, each distinct type of construction or erection operation at a single job or location will continue to be assigned to the classification which specifically describes the operations performed provided separate payroll records are maintained for each trade/operation.

Understandably, a number of our clients from the construction industry reached out to us for clarification on what this means for their businesses. The most common interpretation of the release is that multiple codes are only available if and when the employees performing the incidental work belong to a designated separate crew (that is separate from the main work and separate payrolls are kept.) However, there may be various interpretations on the rule from the New York State Insurance Fund and/or standard carriers.

The safest way to ensure there are no issues is to interpret the manual’s update to mean there need to be designated crews doing only one classification of work and not mixing duties and classifications.  In addition, those payroll records should be well-maintained and clear. We recommend keeping this in mind for projects where there are employees doing a decent amount of split work (in two significantly different class codes.)

These updates also open up broader conversations outside of this specific situation, most notably ensuring use of proper classification and management of audit issues across industries. We’re happy to talk about these important topics more to further clarify for clients. To get in touch about business insurance, please click here or contact us at 800-242-2433.

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