Cannabis Workers’ Comp Class Codes: A Guide for Business Owners
Workers' compensation insurance protects cannabis business owners from potential lawsuits and provides financial assistance to employees for work-related injuries or illnesses.
Understanding the various cannabis workers’ comp class codes ensures your business is adequately covered and avoids any surprises with your insurance rates.
What are Class Codes and why are they important?
Class codes are four-digit numbers assigned to different job roles, industries, and business types. They're like barcodes that reference information about specific job roles. These codes are created and managed by the National Council on Compensation Insurance (NCCI).
In cannabis workers’ comp insurance, class codes help insurance companies in several ways:
- Understand your business: Class codes categorize various job roles within your business.
- Estimate risk: They assign the risk level for each job role.
- Set Insurance rates: They help determine the cost of your insurance premiums.
How are Class Codes determined?
Each class code has 3 parts managed by the NCCI.
- Four-digit class code
- Description of the class code
- Risk rate
This risk rate represents the likelihood of serious injury or illness from a specific job. It helps insurance companies figure out how risky each job role is so they can set premiums.
The class code and description do not change but the risk rate can change annually based on the industry data analyzed by the NCCI.
The NCCI analyzes all the injuries for each industry in each state and calculates if there were more or less injuries than the previous years. This makes the risk rate increase or decrease.
Common Class Codes for Cannabis Businesses
Most states use one of the following class codes for cannabis employees:
Class Code 0035
Class code 0035 is for cannabis cultivating and farming (e.g., growers and cultivators).
Class Code 4825
Class code 4825 refers to processing of Cannabis into CBD oil or products (e.g., manufacturers of edibles, gummies, hash, oils).
Class Code 8045
Class code 8045 is designated for retail dispensaries. While typical retail codes like 8017 are used for general retail, cannabis dispensaries are categorized as medicinal, so they use the code for medicinal retailers or pharmacies, which is 8045.
Class Code 8047
This code is used for wholesale cannabis dispensaries.
Class Code 8832
This is used for medical dispensaries.
Non-Industry Class Codes
For roles not specific to the cannabis industry, business owners can use different codes to save on workers' comp costs.
For example, you can use code 8810 for a finance/bookkeeper role. This will save you money on your cannabis workers’ comp because this code typically has lower rates than cannabis industry codes.
Other examples include independent security roles, for which you would use class code 7720.
For drivers, including those on bikes, you might use class code 7380.
Get more Kickstand tips to manage your cannabis workers’ comp.
How do Class Codes affect Insurance Rates?
Class codes indicate how risky a specific job is. Insurance companies use these rates to calculate the cost of a workers' compensation policy. Jobs with higher risks will have more expensive policies to cover those potential injuries.
To see how these rates vary, let's look at the workers' compensation rates for different cannabis class codes in several states.
The charts below show the differences in rates for Cannabis Class Codes 0035, 4825, 8045, 8047, and 8832. Each state has its own rates based on unique risks and rules.
Cannabis Cultivation & Farming (Code 0035) Rates per State - 2024
The average workers comp rate for Class Code 0035 is $1.98.
Cannabis Processing (Code 4825) Rates per State - 2024
The average workers comp rate for Class Code 4825 is $0.69.
Cannabis Retail Dispensaries (Code 8045) Rates per State - 2024
The average workers comp rate for Class Code 8045 is $0.63.
Cannabis Wholesale Dispensaries (Code 8047) Rates per State - 2024
The average workers comp rate for Class Code 8047 is $0.84.
Cannabis Medical Dispensaries (Code 8832) Rates per State - 2024
The average workers comp rate for Class Code 8832 is $0.28.
For detailed cost information, refer to the Guide to Workers’ Comp Rates for Cannabis Business.
Tips to ensure your Class Codes are correct
To make sure your cannabis business has the right insurance coverage, it's important to classify your employees accurately according to their job roles. Misclassification can lead to underinsurance and put your business at risk if a claim is made.
Keep in mind that your workers' comp classification will be checked during your annual workers' comp audit.
Here are some quick tips:
- Understand Job Roles: Ensure job descriptions match the appropriate class codes
- Regular Updates: Review and update classifications regularly to reflect any changes
- Consult Your Agent: Work with your insurance agent to verify correct class codes
- Internal Audits: Conduct periodic audits to catch and correct errors
- Stay Informed: Keep up with changes in class codes and regulations
Get the right coverage with accurate Class Codes
Using the correct class codes ensures your cannabis business has appropriate workers' compensation coverage. Misclassification can result in higher premiums or insufficient coverage, exposing your business to unnecessary risk.
If you have questions about the right class code for your business, start an instant quote to speak with an agent or call us at 886-338-8823. We specialize in providing workers' compensation for cannabis businesses and can help you secure the coverage you need to protect your business and employees.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
Your company's payroll will be reviewed and verified during a workers' compensation audit. Since the payroll paid to your employees over the course of a policy term directly affects the workers’ compensation premiums, auditors look at your payroll at expiration or cancellation of every workers' comp policy.
