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Using the Single Enterprise Rule When Classifying Businesses

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Using the Single Enterprise Rule When Classifying Businesses

July 20, 2016

The Single Enterprise Rule, found in Part 3 of the California Workers’ Compensation Uniform Statistical Reporting Plan–1995 (USRP), is a component of the Standard Classification System which directs that activities that are normally associated with a specific business are assigned to the one classification that most accurately describes the entire business even if the business is operated at more than one location. This is detailed in the first paragraph of the Single Enterprise Rule as seen below.

If the employer’s business, conducted at one or more locations, consists of a single operation or a number of separate operations that normally prevail in the business described by a single classification, the entire exposure of the business shall be assigned to that single classification. No division of payroll shall be permitted in respect to any other operation, even though such operation may be specifically described by some other classification, unless the applicable classification phraseology or other provisions contained herein specifically provide for such division of payroll.

Operations that are classified using related companion classifications, as identified by the classification footnote, shall constitute a single enterprise. Except as provided in the classification phraseology or footnote, division of an employee’s payroll between related companion classifications shall not be permitted.

Division of payroll for Standard Exceptions and General Exclusions shall be made pursuant to the provisions of this Plan.

The Single Enterprise Rule dictates that though some employees of a business may appear to be specifically described by a different classification, they nonetheless must be included in the classification that best describes the business overall, provided they conduct operations that normally prevail in such businesses. This is illustrated in the restaurant example that accompanies the Single Enterprise Rule:

The employer operates a restaurant. Employees are retained as chefs, bakers, dishwashers, wait staff, hosts and hostesses, wine stewards, bartenders, janitors, car parking valets, coat check clerks, manager and assistant manager. In addition, a storage facility is operated at an additional location where restaurant supplies are stored pending use in the restaurant. The activities, duties, hazards and pay scales vary among positions. Classifications such as 2003, Bakeries and Cracker Mfg., 9008, Janitorial Services – by contractors, and 8392, Automobile or Truck Storage Garages or Parking Stations or Lots, describe some of the employees’ activities. However, the restaurant bakery only produces goods served in the restaurant; the janitors only clean the restaurant; the parking valets only park the vehicles of restaurant customers; and the storage facility only stores materials used in the restaurant. All of these operations normally prevail in the operation of a restaurant and, therefore, Classification 9079(1), Restaurants or Taverns, applies to all of the employees.

There are exceptions to this. Some classification phraseologies or other provisions of the USRP may specifically direct that certain employees be separately classified. For example, Classification 9050(1), Hotels – all employees includes a footnote directing that:

The payroll of employees engaged exclusively in connection with restaurant or tavern operations shall be separately classified as 9079(1), Restaurants or Taverns. This includes employees who prepare and serve hot food in connection with complimentary breakfasts, work in food and beverage departments, and room service employees who deliver food or restock in-room refrigerators, provided such employees perform no hotel duties. Employees who perform both restaurant or tavern activities and hotel activities shall be assigned to Classification 9050(1).

So although restaurant, tavern and food and beverage operations may be prevalent in the hotel industry, Classification 9050(1) requires employees engaged in these operations be separately classified.

Companion Classifications

Companion classifications, meaning two classifications that together describe the operations that normally prevail in a business, also constitute a single enterprise. Companion classifications are usually identified in the footnote of a classification such as in Classification 8813(2), Bookbinding Operations – including Clerical Employees and 4299(2), Bookbinding Operations – all other employees. These related companion classifications each apply to specific employees at a bookbinding business, although the business is a single enterprise.

Related Information

Classification Search
California Workers' Compensation Uniform Statistical Reporting Plan—1995
Online Guide to Workers' Compensation – The Standard Classification System
Classification Information