The Workers' Comp Executive is the journal of record
for the workers' comp community in California.    
FREE Flash Reports
Arrow FREE to your inbox!














 

Take a MemoStaffing Firm, State Fund Fight over Classifications

Do apartment leasing agents who jot down messages from tenants about maintenance step outside their job classification? What if they do minor maintenance? State Compensation Insurance Fund (SCIF) says “yes” and it hopes to score $70,000 in back premium by convincing a Department of Insurance administrative law judge to rule in its favor. At issue is whether APT Personnel Staffing, a staffing agency insured by SCIF, classified the personnel it supplied to apartment complexes properly or not.

SCIF alleges APT owes it for failing to provide the full scope of duties performed by the employees, which resulted in misclassification of those employees and therefore incorrect premium. APT insists it’s done nothing wrong.

The central part of the dispute is whether apartment leasing agents were properly classified as real estate agents under class code 8741, which covers real estate agents and other clerical workers in real estate agencies. SCIF maintains that for this classification to apply, leasing agents can deal only with potential tenants, otherwise they should move to class code 9011, which covers apartment or condominium complex operations, including clerical workers and on-site managers.

“Temporary agency personnel assigned to client companies are classified based on the client companies’ operations.”
—Emily Gorin, SCIF

“Once these initial leasing activities are completed, bona fide leasing agents never deal with the tenant again. Nor does the leasing agent have any other duties in connection with the operation of the apartment complex,” SCIF maintained in its notice to APT about the reclassification.

But APT’s attorney Sepahi maintains that SCIF is taking this distinction to absurd lengths. For example, he notes that tenants might call and say they have maintenance issues or complaints about someone taking their parking space. If leasing agents make note of complaints, then SCIF says they’re out of class code 8741, Sepahi tells Workers’ Comp Executive.

“We argued that this is ridiculous. The 8741 classification aside, they’re still engaged primarily in leasing work. If someone comes in and  [doesn’t] take down a maintenance request and doesn’t do anything thereafter, doesn’t follow up with maintenance, doesn’t check on the work, simply taking down a memo is still clerical work,” Sepahi maintains. “This doesn’t expose the employee to any further risk; they were still limited to the four corners of the office.”

“What we’re trying to do is settle up,” says SCIF spokeswoman Emily Gorin. SCIF seeks nearly $18,000 in premiums from the 2006 policy year and more than $51,000 from 2007. “State Fund uses information provided by the policyholder and its client companies submitted on insurance application forms and client identification information forms specifying client companies’ business operations. Temporary agency personnel assigned to client companies are classified based on the client companies’ operations. State Fund also performs audits, as was the case with APT,” Gorin says.

Staffing companies are notorious, according to industry common wisdom, for incorrectly classifying employees. Most carriers refuse to write them because a direct relationship with the dual employer is hard to control and therefore underwriting information may not be as clear.


“Make no mistake about it. SCIF attempted to muscle appellant into a settlement and when appellant produced documents corroborating that their employees were in fact misclassified, SCIF then proceeded to adopt a strategy that appellant never provided them with descriptions of their employees’ duties.”
—Seth Sepahi, APT attorney

Because staffing companies present a unique set of risks, SCIF runs these accounts through its Special Risks Unit, which also handles accounts covered by the U.S. Longshore and Harbor Workers’ Compensation Act (USL&H).

“The Special Risks Unit is a segment of Corporate Underwriting that processes complex accounts requiring focused and dedicated underwriting, auditing and servicing. APT did go through our Special Risks Unit,” notes Gorin. Currently, temporary staffing agencies account for 0.3% of SCIF’s policies.

APT maintains that it provided SCIF with descriptions of the workers’ duties and went with the classifications given. “This was the first business they had set up and they hadn’t had any workers’ comp before this, so State Fund was who they had to go with and they were relying on what they were being told by the underwriters,” notes APT attorney Sepahi.

But rate differences were significant. Reclassifications would have cost APT nearly $140,000 in additional premium under SCIF’s initial audit results, but in a bid to settle the case, SCIF backed out some of the reclassified payroll to lower the tab. Some clerical was moved back to class code 8810, and some that had been pulled out of 9011 and moved to a carpentry classification (5645) was moved back.

But Sepahi maintains that this was a last-ditch effort to save its case.

“Make no mistake about it. SCIF attempted to muscle appellant into a settlement and when appellant produced documents corroborating that their employees were in fact misclassified, SCIF then proceeded to adopt a strategy that appellant never provided them with descriptions of their employees’ duties,” he argued in filings with the department.

Even when a decision is issued, an appeal may be on the horizon. The California Department of Insurance administrative law judge indicated after presiding over a two-day bench hearing that she would seek additional evidence in the case before issuing a decision.

Copyright 2010 Providence Publications, LLC. All Rights Reserved.