In this article, we explore how Special Industry Classification Procedures apply to California electronic product manufacturing classifications. We also discuss a recent study that reviewed the evolution of the Electronics Industry and the increasing integration between computer programming and electronics manufacturing operations.
Part 3, Standard Classification System, Section IV, Special Industry Classification Procedures, Rule 3, Electronic Products Design and Manufacturing, of the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP) applies to the 12 classifications listed in the Electronics Industry Group. The rule addresses the common electronics industry practice of designing proprietary electronic products while subcontracting the actual manufacturing of prototypes or products to separate manufacturing concerns.
3. Electronic Products Design and Manufacturing
The Electronics Industry Group includes a list of classifications that apply to employers engaged in the manufacture of electronic and electrical products. These classifications contemplate manufacturing operations whether performed in connection with the employer's proprietary products or performed on a contract basis for other concerns.
Employers that design the proprietary product and subcontract manufacturing to other concerns shall be assigned to the appropriate Electronics Industry Group manufacturing classification provided the employer also:
Employers that neither design nor manufacture the product, but purchase products from manufacturers for resale purposes, shall be assigned to the applicable Stores Industry Group classification notwithstanding that they may engage in some product preparation or quality control operations.
California electronic product design companies commonly contract with local or overseas manufacturers to produce their products. As indicated in Rule 3, if the employer designs the proprietary electronic product(s) that is described by a classification contained in the Electronics Industry Group, it will qualify for assignment to the applicable manufacturing classification. Employers that purchase and resell electronic products that are designed by others are not assignable to a manufacturing classification but are assigned to the appropriate Stores classification.
The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) recently performed a review of the classification procedures for computer programming operations in connection with the electronics manufacturing industry based on the increasing integration of computer programming within this industry. The first phase of this review focused on the two largest Electronics Industry Group classifications, Classifications 36811 and 4112, Integrated Circuit and Semiconductor Wafer Mfg. – all other employees.
The study had two main objectives:
Based on the study’s findings, a new companion classification became effective on September 1, 2022, to apply to the hardware and software design and development, clerical and outside sales operations performed in connection with manufacturing operations assigned to Classifications 3681 and 4112. This new companion classification contemplates hardware design and software development operations and does not apply to employees with any hands-on exposure such as testing or assembly of electronic products or prototypes in connection with the employer’s manufacturing operations. Although this new companion classification for 3681 and 4112 applies to clerical and outside sales operations, this classification is not a Standard Exception classification.
The complete descriptions of the five alternate phraseologies of Classification 8874 are available through the Classification Search tool on wcirb.com and through the following links:
Due to the unusually high proportion of hardware and software design and development, clerical and outside sales employees earning high wages, Classification 8874 is subject to a maximum payroll limitation. This maximum annual payroll limitation does not apply to the corresponding manufacturing Classifications 3681 or 4112.
1 Classification 3681 consists of four alternate phraseologies (or suffixes): 3681(1), Instrument Mfg. – electronic – professional or scientific – all other employees – N.O.C.; 3681(2), Computer or Computer Peripheral Equipment Mfg. – all other employees – N.O.C.; 3681(3), Telecommunications Equipment Mfg. – all other employees; and 3681(4), Audio/Video Electronic Products Mfg. – all other employees.