Workers' Comp, Payroll and Class Codes for a Garage Door Company

Workers' comp at a garage door company is priced from class codes, payroll and the experience mod (a multiplier built from claims history), and a purchase usually hands you the seller's claims history. Overhead door installation is commonly found under class 3724 in many states, but codes and even the rating bureau vary by state, and your insurer assigns the class. This guide is for new owners. It shows how installers, service technicians, estimators and office staff map to codes, what to do about 1099 installers, how an owner's own pay is treated, and what to report after closing.

How do the people at a garage door company map to class codes?

Workers' comp premium is generally a state-approved rate per $100 of payroll for each class code, times the payroll in that class, with the experience mod then applied. The business is classified, and a few standard exceptions let certain employees be rated separately, but only when their duties fit the class definition.

The table uses wording from the Massachusetts bureau's published class pages and a third-party class lookup site. Neither is the NCCI manual, so the text can differ from the rule in your state. Your insurer assigns your class, and this table does not tell you which code applies to you.

Michigan uses a different meaning for 3724, and California also lists a separate code 5108 for overhead door installation. The class code glossary page and the workers' compensation page explain the basics.

What about repair technicians, opener crews and commercial doors?

This is the classification question most worth asking before an audit asks it for you. Repair work is the hands-on core of a garage door business: replacing torsion springs, cables, rollers and openers on service calls. The Massachusetts bureau's text for the installer code does not mention repair, so spring and opener repair is the open question. Ask the insurer to confirm in writing whether it shares the installer class. A shop that does installs, repairs and commercial dock doors may have its payroll split, or all of it placed in one class.

Three rules from the NCCI system generally apply in NCCI states, and other bureaus and state funds have their own versions.

• A business can have more than one basic class only in limited cases, such as construction operations and truly separate operations that are physically separated with separate payroll records. Whether your mix of installation, service and commercial door work qualifies is for the insurer or rating bureau to decide.
• One employee's pay can be split between two classes only if records show actual time and pay in each. Estimates are not allowed.
• If an auditor finds the real work is not described by the classes on your policy, the audited premium can change.

Ask the insurer to put in writing how it classifies installers, service technicians and any commercial door crew, and compare that to what the crews really do. A Morrow review can help you ask. If something looks wrong, workers' comp class code corrections explains how corrections work.

Will a payroll audit hand me a bill?

It can. The premium you pay during the year is an estimate. After the policy ends, the insurer audits actual payroll and the correct class codes, and you pay a balance or get a refund. The insurer can audit for up to three years after the policy ends. Payroll for premium purposes generally includes wages, commissions, bonuses and paid time off, and optional tips and employer-paid group insurance are generally excluded, with exceptions. Many payroll rules let the extra premium portion of overtime pay be excluded, but only if your records show it separately, and rules vary by state, so ask the insurer before the audit. Payroll can swing by season, so ask the seller for monthly payroll for the last two years.

A garage door audit checklist:

1. Monthly payroll for installers and for service technicians, kept separately.
2. Pay for helpers and warehouse staff.
3. Per-door pay and certificates for any 1099 installers.
4. Time records for anyone whose work spans two classes, such as a dock or rolling door crew.
5. A mid-year note to the insurer if the work mix changes.

The guide to payroll estimates and audit bills covers the audit process, and pay-as-you-go workers' comp explains a billing option tied to actual payroll.

Are 1099 installers and helpers a workers' comp problem?

They can be. The standard policy counts pay to all persons engaged in work that could make the insurer liable, which is how uninsured subcontractors end up on the premium base. At audit, an uninsured subcontractor's pay is classified as if its workers were your own employees and your mod applies. If no payroll records are provided, the audit rules use minimum percentages of the subcontract price, including 90 percent for labor-only work and 100 percent for piecework. If installers are paid per door as 1099 workers, treat that as a question for the seller: ask how each installer was paid and whether you have current certificates.

A hypothetical example. A garage door company pays two installers a combined $200,000 in a year, per door, as 1099 subcontractors with no certificates of insurance and no payroll records. Depending on how the audit rules classify the arrangement, the auditor could add between $180,000 (90 percent, labor only) and $200,000 (100 percent, piecework) of payroll to the installer class at your rate and your mod. If the installers had provided current certificates showing their own workers' comp coverage, the picture could be different. The figures are round and illustrative only, and the audit rules in your state control.

A 1099 form is not the test of who is an employee: state law decides, so ask your attorney or your state's workers' compensation agency. In many states, an injury to an uninsured subcontractor's worker can also lead to a claim against the hiring contractor's policy, so a certificate matters for claims as well as audits. The 1099 contractors and the workers' comp audit guide and do I need workers' comp for 1099 contractors go deeper.

How is your own pay as an owner treated?

Whether an owner or officer is covered, can be excluded or must be included depends on the state and on how the company is organized, and the rules for LLC members and corporate officers differ. Ask your insurer and broker in writing how your own pay will be counted. If you will install or service doors yourself, ask how the insurer would class that work, because duties and records decide the class, not a job title. Confirm the answer for your state before the first audit.

Questions to ask:

• Can I be included or excluded under my entity type in this state?
• If I am included, what payroll figure will be used?
• How would my own install or service time be classed?

What do you inherit and what must you report after closing?

When a business changes hands, its past payroll and claims history usually follows it, so you usually inherit the seller's mod where the seller had one (small employers may have none). Under NCCI rules, a change in ownership includes buying stock or membership interests, buying the assets and taking over operations, a merger, and forming a new entity that acts as a successor. An asset purchase into a brand new company is still an ownership change. In a hypothetical case where the seller's mod is 1.25, the same payroll costs 25 percent more than the 1.00 you may have modeled. A recalculated mod can apply back to the date of the change, up or down.

Your first-month checklist:

• Report the ownership change to your insurer within 90 days (the policy generally requires it), and ask your broker how your state routes the report. Failing to report can be treated as evading the mod rules.
• In an asset deal, plan for a new policy, because the seller's cannot be taken over without the insurer's written consent.
• In a stock deal, ask who pays if a post-closing audit bills pre-closing payroll, and put the answer in the purchase agreement.
• Do not expect to drop the seller's experience: that generally needs a near-complete change of owners, a change in operations big enough to change the governing class, and a change in the work process and hazards, and the rating organization decides.

See reviewing the experience mod for errors.

Does it work the same in every state?

No. Independent rating bureaus run the class and rating rules in a number of states, including California, Massachusetts, New York and Pennsylvania, so codes and rules from NCCI material do not carry over directly, and four states (North Dakota, Ohio, Washington and Wyoming) are monopolistic, so comp generally must be bought from the state fund (some large employers may qualify to self-insure). The workers' comp review guide has the lists. Ownership-change rules differ too. New York ties the effective date of a recalculated mod to when you report, and California and Pennsylvania apply their own tests for how experience carries over, so ask your broker which bureau's rules apply to your company.

Licensing can tie in. A California contractor licensee must keep a workers' compensation certificate on file with the contractor board unless it qualifies for a no-employee exemption, which is not available when a responsible managing employee qualifies the license, and a lapse can suspend the license. Whether a state requires a license for your trade at all is covered in contracts, licenses and bonds for a garage door company. If your seller used a professional employer organization (PEO), see PEO versus your own workers' comp. For the other lines, see what insurance a new garage door company owner needs.

Keep reading

• Just Bought a Garage Door Company? What Insurance Do You Need?
• What Drives Insurance Cost for a Garage Door Company?
• Contracts, Licenses and Bonds for a Garage Door Company
• Payroll Estimates and Surprise Workers' Comp Audit Bills
• Do 1099 Contractors Count in Your Workers' Comp Audit?
• All guides for new business owners

Frequently asked questions

What class code does a garage door installer fall under?

The Massachusetts bureau's manual places installation of overhead (garage) doors in code 3724, and a lookup site lists the same code in most NCCI states. Other states and bureaus differ, and your insurer assigns the class, so confirm it in writing.

Are garage door repair technicians in the same class as installers?

It depends on the insurer and the rating bureau, and the answer can change if you add commercial doors. Ask for the classification in writing and compare it with what your crews actually do.

Will my 1099 installers be added to my workers' comp premium?

They can be. If an installer is uninsured, the auditor can charge their pay as if they were your employees, and minimum percentages of the subcontract price apply when records are missing. Certificates and payment records help.

Do I inherit the seller's experience mod?

Generally yes, where the seller had one. The rating organization decides how the ownership change affects the mod, and a recalculated mod can apply back to the date of the change.

How long do I have to report the ownership change?

The policy generally requires notice to the insurer within 90 days of the change. Some states have their own reporting routes, so ask your broker how to file.

References

• WCRIB of Massachusetts: Classification Search, code 3724
• WCRIB of Massachusetts: Classification Search, code 5102
• WCRIB of Massachusetts: Classification Search, code 8810
• WCRIB of Massachusetts: Classification Search, code 8742
• WCRIB of Massachusetts: Classification Search, code 7380
• InsuranceXDate: class 3724, door installation, overhead and drivers
• NCCI: Workers Compensation and Employers Liability Insurance Policy WC 00 00 00 C (carrier-hosted copy)
• North Carolina Rate Bureau: Basic Manual Rule 2, Premium and Payroll (NCCI rules, North Carolina edition)
• NCCI: Reporting Ownership Change Information
• NCCI: ABCs of Experience Rating
• California Contractors State License Board: Workers' Compensation Insurance Requirements

This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.