Surety bonds come in many varieties, but the general purpose of these bonds is to ensure that a person/people or entity/entities will be fairly compensated in the event of a loss.
A wage bond, sometime referred to as welfare, union or fringe benefit bond, ensures the delivery of dues, benefits and packages that have been promised as part of a union agreement. They guarantee that employers will make their contribution to welfare funds. This guarantee also includes the payment of agreed wages, which is how the term “wage and welfare bond” gets its name.
This sort of bond works as financial insurance, and it is a legal contract between three involved parties. The principal is the employer being bonded, the obligee is the union or other entity that requires the principal to be bonded, and the surety is the entity that underwrites the bond.
A fringe benefit bond may differ a bit from welfare and wage. This type of bond may guarantee only that union benefits will be paid by the employer. Unlike a wage, it may not ensure that the employer will pay wages.
Who needs a wage bond?
A variety of employers might be required to purchase a wage and welfare bond. These bonds are generally needed in industries such as transportation services, construction and mining. Employers in other industries might also be required to secure wage surety bonds. The bonds typically seem most necessary in the construction industry. This is likely due to the fact that numerous liens in courts are based on construction workers going unpaid.
What if an employer doesn’t have one?
If an employer is required to have a wage surety bond but doesn’t secure one, they may incur fines and penalties. One example of such a requirement occurred in New York State. In 2015, Governor Cuomo announced that nail salons must purchase these bonds. This was done to protect the exploitation of salon workers. Once this decree was made public, salon owners had to comply within 60 days or face penalties and fines.
If an employer has secured a union bond and doesn’t pay proper wages and benefits, the surety company ensures that such compensation will be paid to employees. However, the principal (employer) will still be held accountable by the surety for the unpaid benefits and wages.
The value of a wage and welfare bond
Union bonds serve a valuable purpose to innumerable workers. Those who put in time and labor at their jobs should reasonably expect to be paid and receive the benefits they have been promised. These bonds work as insurance for workers across the country. NFP can place any kind of union bond in any state, regardless of credit. Feel free to contact us today for more information.
How do I secure a wage bond?
NFP has been a wage and welfare bond leader since 1984. We have access to markets and carriers in all states. Should you have any questions regarding wage bonds, or if you need one, feel free to contact our office. Our professional staff would appreciate answering any questions you may have.