Laundromat Workers' Comp: Class Code, Payroll, Mod

Your laundromat's workers' comp bill rests on three things to check in your first 90 days: the class code your insurer assigns, your payroll estimate (including any wash-dry-fold or delivery pay), and the seller's experience mod (a score built from past injury claims), which usually follows the business to you. Report the ownership change to the insurer within 90 days. Codes vary by state and rating bureau, the insurer assigns the code, and your state's rulebook controls. This guide is for the buyer of a laundromat who wants to check all three before the first audit arrives.

The short answer

Class codes classify the business, not each employee's job. Wash-dry-fold, delivery or a dry-cleaning counter may bring payroll that belongs in a different class, and in rulebooks that follow the National Council on Compensation Insurance (NCCI) system, a split needs records of actual time and pay.
The seller's mod usually follows the business, whether you bought stock or bought assets and took over operations. Report the change to the insurer within 90 days. Under current NCCI rules a recalculated mod can apply back to the date of the change, and independent bureaus and state funds have their own timing.
Many laundromats have few paid hours on site. Ask who cleans, collects coins and services machines, because owners, attendants and outside vendors raise different coverage questions.
The premium is an estimate. An audit can follow for up to three years after the policy ends, so keep payroll records by operation from day one.

Which workers' comp class does my laundromat fall under?

Short answer: your insurer assigns the class from what the store does. One state bureau lists self-service laundries within its retail store code 8017, and codes and titles vary by state, so ask for the assigned code in writing and ask what it covers. Premium is a state-approved rate per $100 of payroll in each class, times the payroll in that class, with the mod applied on top. The table connects the duties of the people who work in a laundromat to the payroll questions that follow.

Laundromat duties and the payroll question each raises
Who and what	Typical injury exposure	Payroll and class question
Attendant: opening, closing, cleaning machines, lint traps and floors, stocking vending, helping customers	Standing, repetitive motion, slips, lifting supplies	Often the class that describes the store's main business; the insurer decides
Wash-dry-fold staff: sorting, loading, folding, bagging	Heavy lifting of wet laundry, repetitive motion, heat near dryers, handling soiled items	May belong in a different class if it is a separate operation; ask the insurer
Maintenance or owner who services machines	Caught-in hazards when a jam is cleared, electrical and gas appliance work	Highest machine exposure; records and training matter
Delivery driver, if you deliver	Vehicle accidents, lifting	May be treated differently by the insurer; do not assume
Office or bookkeeping staff	Low	A clerical exception may apply only if duties and work area meet the class definition

Treat 8017 as a question for your insurer, not an answer: it comes from one state bureau's wording and a third-party crosswalk, not from NCCI's own manual. California, Pennsylvania and Delaware use classification systems that differ from the NCCI system, and New Jersey has an independent bureau, so NCCI material does not carry over directly. Never assume the code on a friend's policy or on an online list applies to you. Read the glossary entry on workers' comp class codes and workers' comp class code corrections.

Who actually works in a lightly staffed laundromat, and who is covered?

Many laundromats have few paid hours on site, and the work of cleaning lint traps, collecting coins and servicing machines may be done by the owner, a part-time attendant or an outside vendor. Each raises a different question. A paid attendant belongs on payroll in the class the insurer assigns. An outside cleaner or repair vendor can add to your premium base at audit unless you can show proof that the vendor, or the vendor's employer, lawfully secured workers' compensation, so collect that proof before the first invoice is paid. An owner who works in the store and services machines has the most machine exposure, and some states let owners of corporations or LLCs choose to include or exclude themselves. The rules and forms vary, so check your state workers' compensation agency's rules and ask your broker what applies. Excluding yourself generally means no workers' compensation benefits if you are hurt on the job, so make the choice on purpose. The wider review is in the new owner workers' comp review.

On safety, the federal laundry machinery rule (29 C.F.R. 1910.264) and the lockout and tagout rule (29 C.F.R. 1910.147) address guarding, training and servicing. How they apply to customer-operated machines depends on how the machines are powered and serviced, so ask a safety professional or the Occupational Safety and Health Administration (OSHA). A written servicing procedure for a jammed machine is worth having either way.

Will the seller's mod follow me into a laundromat I bought through a new LLC?

Usually yes. Under NCCI rules, a change in ownership includes buying the stock or membership interests, buying the assets and taking over operations, a merger, or forming a new entity that acts as the old one's successor. The past payroll and claims history generally transfers to the new owner, so forming a new LLC usually does not start the mod at 1.00. A buyer can shed the seller's experience only in unusual cases: a near-complete change of owners plus a real change in operations that changes the class and the hazards. Do not plan around it. A very small store may have no mod at all, because a business must reach a state-set minimum premium to qualify, so ask the insurer and the rating bureau whether yours has one. Check reviewing the experience mod for errors.

Report the ownership change to the workers' compensation insurer within 90 days, whether or not a mod currently applies. This is the usual policy wording, with some state variations. The form goes to the insurer and the rating organization, not the state insurance department. The NCCI manuals set no fixed fine for a late report, but the rating organization can treat it as possible mod evasion and issue corrected mods. Under current NCCI rules, a mod recalculated for an ownership change applies retroactively to the date of the change, up or down, and can reach the current mod and up to two prior mods. Independent-bureau states have their own timing rules.

A hypothetical example. A seller's mod is 1.20 after two back injuries from lifting wet laundry bags at the wash-dry-fold counter. The buyer forms a new LLC, buys the assets and takes over the store. Nobody reports the change at first, so the new policy is priced with no mod. The bureau recalculates the mod back to the date of the transfer and the carrier bills the difference. A timely report would not have avoided the recalculation, and a late one can add evasion questions. The buyer would have done better to ask for the mod worksheet before closing, report within 90 days and price a possible difference into the model. Your broker can help prepare the information, but the bureau decides the result.

How do I report wash-dry-fold, delivery and dry cleaning payroll?

If your store adds wash-dry-fold service, a commercial laundry service for hotels or salons, pickup and delivery, or dry cleaning, ask the insurer whether that payroll belongs in a different class. Ask the insurer which class applies to those operations, and do not assume one. Class codes classify the business, so a store usually has one governing class, and a second basic class generally applies only to a truly separate operation, such as a physically separate one with its own payroll records. In NCCI-style rulebooks the split rules are these (other bureaus may differ):

One employee's pay can be split between two classes only if your records show the actual time and pay in each class. Estimates and percentage splits are not allowed.
Without those records, all of that employee's pay goes to the highest-rated class involved.
Clerical staff may qualify for a standard clerical exception only when their duties and work area meet the definition.

You cannot move a person into a cheaper class by changing a job title, and your state's manual controls. An auditor who finds work the policy's classes do not describe can change the audited premium. Keep timecards, pay records and job descriptions separate for each service from the first payroll after closing. If the store has a dry-cleaning counter, read the series article on workers' comp and payroll for a dry cleaner.

Will I get an audit bill, and do my 1099 helpers count?

The premium is an estimate that is trued up after the policy ends; see payroll estimates and audit bills and the premium audit entry.

To build an estimate, list each role (attendant, wash-dry-fold, maintenance, delivery, office) and the hours the store will actually be staffed. Start from the seller's last full year of payroll, then adjust for your own staffing plan. Record wash-dry-fold pay separately even when staff are paid per pound, and tell your broker before you add a service.

In a stock or membership interest purchase, the insured company stays the same, so a post-closing audit can bill it for payroll from before you owned it. In an asset purchase, the audit balance on the seller's policy normally stays with the seller, and the purchase agreement decides who bears the cost, so ask deal counsel.

If your attendants or drivers are paid on 1099s, do not assume they fall outside the premium, since it includes pay to other people engaged in work that could make the insurer liable. Whether a worker is an employee is a legal question for your attorney. Read 1099 contractors and the audit. If you want a second pair of eyes on the class, the payroll estimate and the ownership change report before your first audit, a Morrow review can start there; the bureau and the carrier still decide the result.

Does my state change any of this?

Four states (North Dakota, Ohio, Washington and Wyoming) require state fund coverage and usually add a separate stop gap policy, which covers the employer's own liability for employee injury claims, and Texas lets most private employers opt out. Washington and Ohio also have successor rules that can reach a buyer, so confirm notice steps with the state fund and deal counsel.

What if the seller used a PEO or a pay-as-you-go plan?

If the seller used a professional employer organization (PEO) or a pay-as-you-go plan, check what each agreement says about a sale. In an asset purchase, coverage under the seller's PEO policy does not extend to your new company by itself, so plan your own setup effective at closing. In a stock or membership interest purchase the same entity stays the insured, so the change of control terms decide. See PEO vs your own workers' comp after an acquisition and pay-as-you-go workers' comp. For what moves the premium itself, see what drives insurance cost for a laundromat.

Keep reading

Frequently asked questions

What workers' comp class code does a laundromat use?

One state bureau lists self-service laundries within code 8017, a retail store class, but codes vary by state and bureau and your insurer assigns the code. Confirm it in writing with your broker.

Will my new LLC start with a clean mod?

Usually not. Under NCCI rules the seller's experience generally transfers to the buyer, including in an asset purchase where you take over operations. A very small store may have no mod at all.

When do I have to report that I bought the laundromat?

The usual policy wording requires you to report an ownership change to the workers' compensation insurer within 90 days. Late reporting can lead to a corrected mod.

Can I put my wash-dry-fold employees in a cheaper class?

Not by relabeling jobs. The insurer assigns classes based on what the business does, and payroll can be split between classes only when your records show actual time and pay for each. Without those records an auditor can assign an employee's pay to the highest-rated class involved.

Do I need to cover myself if I service the machines?

Some states let owners of corporations and LLCs choose to include or exclude themselves, and the rules and forms vary. Excluding yourself generally means no workers' comp benefits if you are hurt on the job. Ask your broker and your state workers' compensation agency what applies, and make the choice on purpose after closing.

Do my 1099 attendants count in my workers' comp premium?

They can. The premium base includes pay to other people engaged in work that could make the insurer liable, unless you can show proof that the person, or the person's employer, lawfully secured workers' comp. Whether a worker is an employee is a legal question, so ask your attorney.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

Request a review Check a contract

Morrow · 25 New Chardon Street, 4th Floor, Boston, MA 02114

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.

Laundromat Workers' Comp: Class Code, Payroll and the Seller's Mod