What does Governing Classification mean?
The governing classification is the grouping system used by workers' compensation insurance companies to identify the workers compensation exposure of an employer's business, as determined by a majority of payroll. There are approximately 600 different governing classification codes. Some of the most common include Farm Employees, Clothing Manufacturing, Bakeries, Tree Trimming, etc.
Each governing classification, when used appropriately, identifies the normal activities of a particular business operation. For example, if a worker is identified as working in a manufacturing plant, common work functions might include the processing of raw materials, welding parts, cleaning parts, packaging and distribution. All of these work processes would be included and assumed by the correct governing class code.
After the workers compensation insurance company has classified employees and their payroll into the appropriate job classification code they are able to establish a premium rate for each classification code and determine a base premium.
Consider, however, there are exceptions to the governing classification rule. Some occupations are so common in businesses that they are allocated within a standard exception classification. Exceptions can include clerical office employees who perform bookkeeping, record keeping, correspondence and other office work, drivers, salespersons, collectors or messengers who perform work off the premises of the employer.