Workers compensation premium audits: what California, Washington and British Columbia say

This page reports what the official source says. It is not legal advice: ask the office named here. It covers three places only. Other states and provinces run their own audits under their own rules, and the office that holds the account decides.

The three offices side by side

Office	Who audits	What the page says is checked
California Department of Insurance, United States	The insurer, and the rating bureau WCIRB can audit to evaluate the insurer's audit	Payroll records against the estimate used to set the premium
Washington Department of Labor and Industries, United States	An L&I auditor	That workers' payroll and hours were reported accurately, and that hours and claims sit in the right risk classification
WorkSafeBC, British Columbia, Canada	WorkSafeBC	Assessable payroll and industry classification

California

The California Department of Insurance explains that the final premium of a workers compensation policy cannot be calculated until the policy term is over and the payroll records have been audited. It says the audit shows whether the first payroll estimate was high or low. If payroll went up from the estimate, the employer owes additional premium. If it went down, the insurer owes a return premium.

The same page says insurers generally have the right to audit payroll records during the policy period and within three years after it ends, usually at the final audit, though interim audits can happen. It lists what it says can follow a failure to comply: cancellation or non-renewal of the policy, collection of unpaid premium, and a premium equal to three times the estimated policy premium. It says deliberate under-reporting of payroll is considered insurance fraud. It adds that some insurers offer monthly payroll reporting.

Washington

The Washington employer guide says L&I may audit employment records. An auditor inspects the business operations and examines records to verify payroll and hours, and checks that hours and claims are in the right risk classification. For records it says each employee's payroll and time records are kept for at least three years. The items it lists include the employee's name, hire date, job title and type of work, type of compensation, pay period and the actual hours worked each day. It says records must be open for examination by L&I.

The guide also lists records of subcontractors, including the legal name, registration or licence number and L&I account number. It has a section on protecting a business from liability if a subcontractor fails to pay workers compensation premiums, which ties the audit to the pages on subcontracting and cover. It says an audit finding is one of the decisions an employer has the right to protest or appeal.

British Columbia

WorkSafeBC calls an audit a normal and integral part of a self-reporting system. It says that if a firm is audited it verifies assessable payroll and industry classification, and that an audit may find an employer is over-paying. It may ask to see financial statements, tax returns and information slips, general ledgers, sales records, and records of affiliates and shareholders. It says an audit typically finds that a firm either reported correctly, with no change in almost one-third of audits, or under- or over-reported payroll, giving an additional payment or a refund, or was not correctly classified, which could change premiums.

What the three have in common

Each office ties the audit to payroll and to the classification. Each says the result can move the premium in either direction. The California and Washington pages name time limits for records. The WorkSafeBC page names none. For the policies themselves, see the page on what tree-work insurance covers.