Report on Wiping Cloth or Rag Dealers

Transcription

1 Workers Compensation Insurance Rating Bureau of California Workers Compensation Insurance Rating Bureau of California Report on Wiping Cloth or Rag Dealers Excerpt from the WCIRB Classification and Rating Committee Minutes January 7, 2014 About this Report The WCIRB prepares and presents reports to the WCIRB s Classification and Rating Committee to assist in the formulation of proposed changes to the Insurance Commissioner s regulations. Once adopted by the Classification and Rating Committee, the recommendations contained in the report are provided to the WCIRB Governing Committee and may be included in a WCIRB regulatory filing that is submitted to the Insurance Commissioner for approval. About the WCIRB The WCIRB is California's trusted, objective provider of actuarially-based information and research, advisory pure premium rates, and educational services integral to a healthy workers' compensation system. Learn more at

2 Notice This Report was developed by the Workers Compensation Insurance Rating Bureau of California (WCIRB) to assist in the formulation of proposed changes to the Insurance Commissioner s regulations. The WCIRB has made reasonable efforts to ensure the accuracy of this Report. You must make an independent assessment regarding the use of this Report based upon your particular facts and circumstances Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted in this copyright notice or by federal copyright law. Each WCIRB member company, including any registered third-party entities, (Company) and agents and brokers licensed to transact workers compensation insurance in the state of California are authorized to reproduce any part of this work solely for the purpose of transacting workers compensation insurance and for no other purpose. This reproduction right does not include the right to make any part of this work available on any Website or on any form of social media. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Online, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the Workers Compensation Insurance Rating Bureau of California, 525 Market Street, Suite 800, San Francisco, California

3 Report on Wiping Cloth or Rag Dealers 8103, Wiping Cloth or Rag Dealers including all laundry operations Executive Summary Objective Employers assignable to Classification 8103, Wiping Cloth or Rag Dealers including all laundry operations, develop very little payroll and loss experience to produce advisory pure premium rates. Therefore, the WCIRB studied this classification to determine whether it should be eliminated and its constituents reassigned to one or more existing classifications. Findings The WCIRB determined that wiping cloth and rag dealer operations are similar to paper stock, bottle and rubber stock dealer operations, which are assignable to Classifications 8264(1), Paper Stock Dealers secondhand, 8264(2), Bottle Dealers secondhand, and 8264(3), Rubber Stock Dealers secondhand. Conclusion and Recommendations The WCIRB recommends the following changes to the California Workers Compensation Uniform Statistical Reporting Plan 1995 (USRP) effective January 1, 2015: 1. Eliminate Classification 8103, Wiping Cloth or Rag Dealers including all laundry operations; 2. Establish Classification 8264(4) as an alternate wording to Classification 8264 for wiping cloth and rag dealers; 3. Amend Classification 8264(1), Paper Stock Dealers secondhand, to list common materials and processes associated with Classification 8264(1) and to direct that employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials including, but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C., for clarity; 4. Amend Classification 8264(2), Bottle Dealers secondhand, to list common materials and processes associated with Classification 8264(2), and to direct that employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials including, but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C., for clarity; 5. Amend Classification 8264(3), Rubber Stock Dealers secondhand, to list common materials and processes associated with Classification 8264(3), and to direct that employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials including, but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C., for clarity; and 6. Amend Classification 8265(2), Junk Dealers N.O.C., for consistency. 1

4 Introduction Pursuant to the WCIRB s policy of reviewing classifications that develop very little payroll and loss experience to produce advisory pure premium rates, Classification 8103, Wiping Cloth or Rag Dealers including all laundry operations, was studied to determine whether it should be eliminated and its constituents reassigned to one or more existing classifications. Classification History The history of Classification 8103 is as follows: 1915: Classification 8200, Paper Stock or Rag Dealers, was established as one of the original classifications of the Manual of Compensation and Liability Rules and Rates. 1920: Classification 8200 was combined with Classification 8208, Paper Stock Dealers handling new paper, to create Classification 8216, Paper Stock or Rag Dealers. 1931: Classifications 8210, Rubber Stock Dealers, 8212, Bottle Dealers second-hand and 8216 were eliminated and Classifications 8264(A), Paper Stock or Rag Dealers, 8264(B), Bottle Dealers, and 8264(C), Rubber Stock Dealers, were established. 1984: Classification 8103, Wiping Cloth or Rag Dealers including all laundry operations, was established to apply to wiping cloth or rag dealers. 1990: Classification 8103, Wiping Cloth or Rag Dealers including all laundry operations, was listed under the heading Salvage Material Dealers. Description of Operations Following is the classification phraseology, footnote and relevant summary of operations that are assigned to Classification WIPING CLOTH OR RAG DEALERS including all laundry operations 8103 Wiping cloth or rag dealers receive bulk quantities of wiping cloths or rags, break down orders, and ship the cloths or rags to separate concerns. In other instances, operations involve receiving new cloth mill ends, remnants and nonwoven fabrics from mills or other manufacturing concerns. The fabric is cut to length and width, bundled, and subsequently boxed for shipment. This classification also contemplates receiving unusable clothing items from separate concerns such as thrift stores, garbage dumps and brokers which are sorted by color and material type, cut to remove sleeves, pockets, buttons, snaps and zippers with cutting knives and cloth cutter machines, washed, dried, bundled and shipped to separate commercial concerns such as maintenance operations, automobile repair shops, hotels, laundries, car washes and other businesses. Classification 8103 Payroll and Loss Experience Table 1 summarizes the payroll and loss data developed under Classification 8103 for the most recent five years of available data and the associated credibility factors at policy year 2014 level. 2

5 Year No. of Unit Statistical Reports Table 1: Classification 8103 Relativity Data at Policy Year 2014 Level Payroll Losses Adj. Loss to P/R Ratio ,822, , ,298, , ,490, , ,884, , ,394,568 47, Total: 24,890,541 1,573,217 Selected (Unlimited) Loss to Payroll Ratio Indemnity Credibility Factors Medical It is noted that the credibility factors for Indemnity (0.35) and Medical (0.37) losses are low. Classification Analysis The WCIRB considered an alternative classification to which wiping cloth or rag dealer operations could be assigned. As wiping cloth or rag dealers were assigned to Classification 8264(A), Paper Stock or Rag Dealers including all laundry operations, prior to the establishment of Classification 8103 in 1984, staff compared the operations of wiping cloth or rag dealers to the operations assignable to Classifications 8264(1), 8264(2) and 8264(3). Classification 8264(1), Paper Stock Dealers secondhand Classification 8264(1) applies to firms engaged in paper recycling. These operations involve the receipt of purchased paper scrap, which is sorted, weighed and placed in a paper baler. The paper is compacted, tied and set aside pending delivery to separate concerns. Drivers pick up paper from customers and deliver baled paper to customers locations. This classification also applies to firms that resell paper materials obtained through curb side pick-up activities in residential areas and firms that provide mobile shredding of documents or computer printouts and resell the shredded materials. Classification 8264(2), Bottle Dealers secondhand Classification 8264(2) applies to firms engaged in the recycling of glass bottles. Bottle recycling involves receiving glass bottles that are dumped onto a conveyor belt and employees remove metal and trash out of the glass. The glass is crushed and stockpiled. As orders are received, crushed glass is delivered to customers. The California Redemption Value (CRV) on beverage containers is not contemplated by this classification. Classification 8264(3), Rubber Stock Dealers secondhand Classification 8264(3) applies to firms engaged in rubber stock recycling. These operations involve the receipt of scrap rubber from tire dealers, tire retreaders, athletic goods manufacturers, and other concerns. The purchased scrap rubber is sorted and sold to separate concerns as is, or it is processed prior to shipment. Rubber is sorted, dumped into hoppers or onto shaker screens and inspected for foreign materials, which are removed. Rubber choppers grind the rubber and subsequently classify it by size. The ground rubber is packaged into bags and boxes, and sealed pending shipment to customers. 3

6 Customers may consist of rubber product manufacturers or contractors who construct rubberized asphalt surfaces. The type of equipment used by paper stock, bottle and rubber stock dealers includes shredders, rubber choppers and grinders, crushers, balers, conveyers, compactors, bundlers, scales, forklifts and skip loaders. A comparison of the operations of wiping cloth and rag dealers with those performed by paper stock, bottle and rubber stock dealers shows that all of these employers operate within the salvage materials dealer industry and although the materials are different, all employers receive, process and ship the salvage materials to separate concerns. As reflected in Graph 1, there has been a similarity in pure premium rates for Classifications 8103 and 8264 for the past several years. Graph 1: Comparison of Historical Pure Premium Rates 8103 vs In view of the common industry and similarities in the process and equipment used, WCIRB staff concludes that wiping cloth and rag dealers would be appropriately assigned to Classification Impact Analysis Table 2 shows the current selected loss to payroll ratio for Classification 8264 compared to the selected loss to payroll ratio for Classifications 8103 and 8264 combined at policy year 2014 level. This comparison shows that combining Classifications 8103 and 8264 does not result in a change of the current selected loss to payroll ratio for Classification Table 2 Comparison of Selected (Unlimited) Loss to Payroll Ratios at Policy Year 2014 Level 8103 and 8264 Combined vs Classification 8103 and Classification 8264 Combined Classification 8264 Difference (0%) 4

7 The current selected loss to payroll ratio for Classification 8103 was compared to the selected loss to payroll ratio for Classifications 8103 and 8264 combined to determine the impact to employers currently assigned to Classification 8103 that will result due to the elimination of Classification 8103 (see Table 3). Table 3 Comparison of Selected (Unlimited) Loss to Payroll Ratios at Policy Year 2014 Level 8103 and 8264 Combined vs Classification 8103 and Classification 8264 Combined Classification 8103 Difference (3.2%) Conclusion and Recommendations Wiping cloth and rag dealer operations are similar to paper stock, bottle and rubber stock dealer operations. As a result, the following changes to the USRP are recommended to be effective January 1, 2015: 1. Eliminate Classification 8103, Wiping Cloth or Rag Dealers including all laundry operations; 2. Establish Classification 8264(4) as an alternate wording to Classification 8264 for wiping cloth and rag dealers; 3. Amend Classification 8264(1), Paper Stock Dealers secondhand, to list common materials and processes associated with Classification 8264(1), and to direct that employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials including, but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C., for clarity; 4. Amend Classification 8264(2), Bottle Dealers secondhand, to list common materials and processes associated with Classification 8264(2), and to direct that employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials including, but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C., for clarity; 5. Amend Classification 8264(3), Rubber Stock Dealers secondhand, to list common materials and processes associated with Classification 8264(3), and to direct that employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials including, but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C., for clarity; and 6. Amend Classification 8265(2), Junk Dealers N.O.C., for consistency. 5

8 Recommendation Eliminate Classification 8103, Wiping Cloth or Rag Dealers, which is part of the Salvage Material Dealers Industry Group, as this classification does not develop sufficient data to produce a statistically credible advisory pure premium rate. PROPOSED SALVAGE MATERIAL DEALERS WIPING CLOTH OR RAG DEALERS including all laundry operations 8103 * * * * * * * Recommendation Amend Classification 8264(1), Paper Stock Dealers secondhand, which is part of the Salvage Material Dealers Industry Group, to identify common materials and processes associated with Classification 8264(1), and to direct that employers handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C. PROPOSED SALVAGE MATERIAL DEALERS PAPER STOCK DEALERS secondhand 8264(1) The handling of metal shall be separately classified.this classification applies to the purchasing, baling and resale of paper, cardboard and corrugated stock, and includes mobile paper shredding services. This classification does not apply to handling scrap metal; refer to Classification 8265(1), Iron or Steel Scrap Dealers, or Classification 8500, Metal Scrap Dealers. The collection and redemption of California Refund Redemption Value beverage containers at sites other than processing facilities shall be classified as 8847, Beverage Container Collection or Redemption. Operations that include the handling of ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers. * * * * * * * 6

9 Recommendation Amend Classification 8264(2), Bottle Dealers secondhand, which is part of the Salvage Material Dealers Industry Group, to identify common materials and processes associated with Classification 8264(1), and to direct that employers handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C. PROPOSED SALVAGE MATERIAL DEALERS BOTTLE DEALERS secondhand 8264(2) This classification applies to the purchasing, sorting, crushing and resale of glass originating from glass bottles. This classification does not apply to handling scrap metal; refer to Classification 8265(1), Iron or Steel Scrap Dealers, or Classification 8500, Metal Scrap Dealers. The handling of metal shall be separately classified. The collection and redemption of California Refund Redemption Value beverage containers at sites other than processing facilities shall be classified as 8847, Beverage Container Collection or Redemption. Operations that include the handling of ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers. * * * * * * * Recommendation Amend Classification 8264(3), Rubber Stock Dealers secondhand, which is part of the Salvage Material Dealers Industry Group, to identify common materials and processes associated with Classification 8264(3), and to direct that employers handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers N.O.C. PROPOSED SALVAGE MATERIAL DEALERS RUBBER STOCK DEALERS secondhand 8264(3) The handling of metal shall be separately classified.this classification applies to the purchasing, sorting, grinding and resale of scrap rubber material. This classification does not apply to handling scrap metal; refer to Classification 8265(1), Iron or Steel Scrap Dealers, or Classification 8500, Metal Scrap Dealers. Operations that include the handling of ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers. 7

10 * * * * * * * Recommendation Establish Classification 8264(4), Wiping Cloth or Rag Dealers including all laundry operations, which is part of the Salvage Material Dealers Industry Group, as alternate wording to Classification 8264 for wiping cloth and rag dealers. PROPOSED SALVAGE MATERIAL DEALERS WIPING CLOTH OR RAG DEALERS including all laundry operations 8264(4) This classification applies to the purchasing, sorting, cutting, laundering, bundling and resale of wiping cloth or rag material. This classification does not apply to the handling of scrap metal; refer to Classification 8265(1), Iron or Steel Scrap Dealers, or Classification 8500, Metal Scrap Dealers. Operations that include the handling of ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials, including but not limited to, bottles, rags, paper and rubber, shall be classified as 8265(2), Junk Dealers. * * * * * * * Recommendation Amend Classification 8265(2), Junk Dealers N.O.C., for clarity. PROPOSED SALVAGE MATERIAL DEALERS JUNK DEALERS N.O.C. 8265(2) This classification shall not be used for division of payroll in connection with any other classification (other than the Standard Exceptions or General Exclusions) unless the operations described by Classification 8265(2) constitute a separate and distinct enterprise having no connection with the operations covered by any other applicable classification. This classification shall apply to those employers engaged in collecting and handling ferrous or nonferrous scrap metals in addition to a miscellaneous line of secondhand materials such as, including but not limited to, bottles, rags, paper and rubber and, in addition, ferrous or non-ferrous scrap metals. Wrecking or salvaging shall be separately classified. * * * * * 8

11 Recommendation Amend Section VIII, Abbreviated Classifications Numeric Listing, for consistency. PROPOSED Section VIII Abbreviated Classifications Numeric Listing 8103 Wiping Cloth/Rag Dealers 8264(4) Wiping Cloth/Rag Dealers 9

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