Pool Service Company Workers' Comp and Class Codes

Workers' compensation for a pool service company is priced from payroll in a class code that your insurer assigns to the business, and your payroll estimate is only a deposit until the audit. Class codes vary by state and bureau, and the seller's experience mod (a multiplier built from the business's past claims, where 1.00 is average) generally comes with the business, and the standard policy wording requires reporting the ownership change to your insurer within 90 days. This guide is for buyers of a route or repair business who want to check what the inherited policy assumes about duties, payroll and technicians.

The short answer

Class codes classify the business, not each technician. They vary by state and rating bureau, and your insurer assigns and corrects them at audit.
Seasonal payroll makes the estimate risky. Audits can run up to three years after the policy ends.
Technicians paid as 1099 contractors, often by the stop, can create audit charges and wage claims. A 1099 or a certificate does not settle it.
The seller's mod (a multiplier built from past claims) generally follows the business, a new LLC generally does not reset it, and the standard policy wording requires reporting the ownership change to the insurer within 90 days. Very small employers may have no mod at all, and reporting rules vary by state.

What class code will my pool technicians be in?

The class code describes the business, not each employee's job. Your insurer assigns it, and the rating organization (the National Council on Compensation Insurance, NCCI, or your state's independent bureau) publishes the rules. Premium is generally a state-approved rate per $100 of payroll in each class, times the payroll in that class, with the mod applied after. The table shows how pool service duties tend to map, not which class applies to you.

How pool service work may map to workers' comp classes
Work	How it may be classified	What to ask your insurer
Weekly route: testing water, adding chemicals, skimming, brushing, vacuuming, cleaning filters	Usually the basic class for the business. Where a state has a pool cleaning or maintenance class, route work tends to sit there. Labels differ by state and bureau.	Which class applies to my route payroll, and what in the manual supports it?
Repairing or replacing pumps, heaters and controls	May stay in the basic class or may bring in other classes, such as plumbing, electrical or construction, depending on the state and bureau.	Is repair work included in my class, and do I need separate payroll records for it?
Building or remodeling pools	Usually a construction-type class and a different business from route service.	Is any of my work construction, and is it rated separately?
Running a public pool with lifeguards or attendants	Listed under a public operation class in some lookups, which describes a different business from servicing customers' pools.	Do I operate any pool myself, or only service pools for customers?
Office staff and outside sales	A clerical or outside sales standard exception class can apply only if the person's duties meet the definition. In North Carolina's published edition of the NCCI Basic Manual, the clerical area must also be separated from operating hazards. Rules vary by state and bureau.	Which staff qualify, and what records do I need to keep?

As one example, the Massachusetts rating bureau's business description index lists swimming pool cleaning or maintenance not done by a construction contractor under class 9014, a class whose published scope describes janitorial services, which is one more reason to confirm. Other states use other numbers and titles (a third-party lookup site shows several), and California, Pennsylvania and Delaware use classification systems that differ from NCCI's, so do not copy a number from this page or a lookup site. Ask your insurer for the class and the manual support in writing. See workers' comp class codes and class code corrections.

Do the class codes and rules differ by state?

Yes, in four ways:

North Dakota, Ohio, Washington and Wyoming have state funds that private insurers cannot sell for workers' comp. Wyoming's coverage rules for non-hazardous employers differ, so confirm with the state. Policies from those funds do not include employer's liability, so ask about stop gap coverage (an add-on that fills the employer's liability gap).
Texas is an NCCI state, but most private employers there may choose not to carry coverage.
Eleven states have independent rating bureaus instead of NCCI: California, Delaware, Indiana, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania and Wisconsin. Some of them, including Indiana, Massachusetts and North Carolina, use NCCI's experience rating plan, while others use their own rules.
Class definitions, estimate rules and audit practices vary by bureau.

A pool route that crosses a state line, or a metro area split by one, means payroll is reported by state under that state's rules. Ask your insurer which bureau governs each state and how it rates the mix of route and repair work. See workers' compensation for the overview.

How do payroll estimates and audits work in a seasonal business?

The premium on the policy is a deposit based on an estimate. The final premium is set after the policy ends from actual payroll and the correct class codes, and you pay the balance or get a refund. The insurer can audit your records during the policy and for up to three years after it ends. Pool service payroll rises in swim season and for openings and closings, so an estimate built from a slow month can produce an audit bill, and one built from a peak month ties up cash.

Under NCCI rules as published for North Carolina (other states and bureaus vary), payroll for premium purposes includes wages, commissions, bonuses and the value of vacation and sick pay, and excludes items such as optional tips and qualifying expense reimbursements. In a pool business, ask how your insurer treats:

pay by the stop or the route;
seasonal bonuses;
commissions on repair work;
phone or vehicle reimbursements.

Splitting one employee's pay between two classes, for example route work and repair work, needs records of actual time and pay in each, because manuals generally do not accept estimates or percentage splits. Without proper records, all of that employee's pay goes into the higher rated class. Pay-as-you-go billing spreads premium across payroll cycles, but the insurer keeps its audit rights. Owner and officer pay depends on the state and the policy, so ask in writing. See payroll estimates and audit bills and understanding your premium audit.

Can I pay technicians by the stop and treat them as 1099 contractors?

Maybe, but pay by the stop does not decide it. A technician paid per stop can still be an employee, and employees paid that way belong on payroll like anyone else. The audit problem comes from treating workers as independent contractors when they are not. The policy counts pay to employees and also pay to other people doing work that could make the insurer responsible. If a subcontractor has no workers' comp and no records, the insurer may charge a set percentage of what you paid that person as if it were payroll, using your mod. That percentage varies by state, so ask your insurer for its rule.

Whether a worker is truly independent is a question of state law and the facts, and the U.S. Department of Labor notes that misclassification can deprive workers of minimum wage and overtime. Do not assume a 1099 or a certificate of insurance settles it. Before closing, ask for a list of everyone paid outside payroll, and see 1099 contractors and the workers' comp audit and inherited wage and hour exposure for the claims side. Employment questions belong with your attorney.

What happens to the seller's mod and policy when you buy?

Most of what matters at a sale falls into two lists.

What generally follows you.

The seller's payroll and claims history, whether you bought stock or assets and operate the business as before. Forming a new LLC for an asset purchase does not reset the mod.
The mod's effect is decided by the rating organization, not your broker or insurer. Excluding the seller's experience is rare and needs a near-complete change of owners, operations and hazards.
The duty to report an ownership change to your insurer within 90 days.
For a route business with most payroll in one class, a bad chemical burn or crash year can show up in the mod.
In a stock or membership interest purchase, a post-closing audit can bill the company you now own for payroll from before closing, and the purchase agreement decides who bears that cost. In an asset purchase the audit balance normally sits with the seller on the seller's policy.

What does not follow you.

The seller's policy rights. They do not move to you without the insurer's written consent, so in an asset deal you need your own policy effective at closing.
A pay-as-you-go arrangement. It is tied to a specific policy and payroll account, so confirm with the carrier and the payroll provider what happens at closing and plan to set up your own.
A professional employer organization (PEO) policy for the seller's workforce, which does not automatically extend to your new entity. See PEO versus your own workers' comp.

These are general rules. Very small employers may have no mod, a partial purchase depends on whether the insurer can split out the data, and independent bureau states such as New York use their own timing rules.

A hypothetical example. The seller's mod is 1.25 after two chemical burn claims and a vehicle crash. In an NCCI state, the buyer forms a new LLC, buys the assets and starts a new policy that carries no mod yet, which means a factor of 1.00. Months later the rating organization recalculates the mod using the seller's history. Under current NCCI rules it applies the recalculated mod back to the date of the change, up or down, whether or not the report was timely. A late report can add its own consequences. Because a 1.25 mod multiplies premium by 1.25 after rate and payroll are applied, the correction can produce a bill for months that have already passed. The buyer would have wanted the mod worksheet before closing, the report filed well inside 90 days, and, with deal counsel, a purchase agreement that says who bears a retroactive charge.

In Ohio and Washington, the state's successor rules (rules about who inherits a prior employer's account) can also reach unpaid state fund amounts. Ask deal counsel. See reviewing the experience mod for errors, which covers the mechanics.

What injuries should I plan for, and what can I do about them?

Claims drive the mod, and the mod follows you. The injuries to plan for come from the work: chemical burns and inhalation, vehicle crashes, slips and strains, electric shock around equipment, and heat illness on summer routes. Federal hazard communication rules call for a written program, accessible safety data sheets and employee training, and a trade association publishes a model safety manual that can serve as a template, though it is not meant to be used verbatim. Some states have their own outdoor heat rules and the federal position can change, so ask your state workplace safety agency what applies, and build water, shade and rest breaks into the route plan.

Practical steps for the first year: document training at hire, set a rule that chemicals are never mixed and are kept in original labeled containers, run a short return-to-work process so minor injuries do not turn into long lost-time claims, and review each claim on the loss runs for what changed. See return to work and claim cost control and what drives insurance cost for a pool service company. The core coverage guide lists every other policy to confirm.

Keep reading

Frequently asked questions

What class code does a pool service company use for workers' comp?

There is no single national answer. One bureau lists pool cleaning and maintenance not done by a construction contractor under class 9014, and other states label the work differently. Your insurer assigns the class, and an audit can correct it, so ask for the class and the manual support in writing.

If I buy through a new LLC, does the seller's mod reset?

Generally no. Under NCCI rules an asset purchase into a new company is still an ownership change, and the seller's experience generally transfers. The rating organization decides the effect, so report the change to your insurer within 90 days.

Can I put my office staff in a clerical class to save premium?

Only if their duties meet the class definition. In North Carolina's published edition of the NCCI Basic Manual, the clerical work area must also be separated from operating hazards, and rules vary by state and bureau. Someone who also does field work generally cannot be treated as clerical for that time, and splitting pay needs records of actual time.

Does pay-as-you-go workers' comp mean I will not have an audit?

No. Pay-as-you-go bills premium from each payroll cycle instead of a large deposit, but the insurer keeps its right to audit, and a final audit can still produce a balance.

Do I have to cover myself as the owner?

It depends on the state and the policy. Some states let owners or officers be included or excluded under the rules, and in the four state fund states the fund sets the terms. Ask your insurer in writing how owner pay is treated.

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.

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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.

Workers' Comp, Payroll and Class Codes for a Pool Service Company