Why contractors need a $100,000 LLC Employee Worker Bond?

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LLC Employee Worker Bond

The LLC employee Worker Bond is a contract which ensures that companies will comply with the state licensing and construction laws. It is a must-have for every contractor who operates in a California construction industry. Moreover, it is for the benefit of employees, individuals or resident who may suffer from a contractor’s failure to meet financial duties.

If you’re operating a Limited Liability Company (LLC) in CA, you must acquire this surety bond of $100,000. Moreover, this Bond protects the workers or contract staff in a case where the company fails to pay them well for their job. The employee Bond is a requirement in California contractor License Law which the Contractor State License Board (CSLB) executes.

The Californian Legislature enacted the requirement of this Bond on January 1, 2012. The reason for it was that some corporations failed to pay appropriate wages and benefits to employees and contract workers.

According to the law, the Limited liability companies must submit a certificate of Liability Policy to the State License Board. These companies must obey this regulation because failure to uphold will attract suspension until they comply. Also, the bond includes Employees with at least $1,000,000 general liability insurance, and information of new improvements service and repair contract. However, for every new employee, the amount increases to $100,000, and to a maximum of $5,000,000.

The LLC Employee Worker Bond

Three parties make up the Employee Worker Bond contract, the Principal, the Obligor, and the Obligee. Where the corporation stands as the Principal, the surety as the Obligor and the CSLB as the Obligee. The LLC obtain the Bond, the Surety provides the Bond, and the CSLB imposes the Bond.

This Bond requirement provides security to employees who suffer non-payment of benefits and wages. Employees and contractors can file a claim against the Bond This Surety Bond will reduce wage dispute and ensure all financial obligation requirement is met by their employer or contractor.

Who Benefits?

  •    Employees and Contractors who are not receiving their due wages.
  •    Residents of Properties which a contractor damaged as a result of the violation of state building laws.
  •    Individuals who suffer harm by contractors or employees who fail to comply with the relevant construction laws.
  •    Entities who suffer from the contractor’s failure to pay fringe benefits.

Resolutions between Contractors and Complainants

It is necessary for contractors to keep documents as evidence of contracts terms including amendments, and every financial transaction. Also, the contractor should provide adequate evidence to resolve all issues and claims by the aggrieved party. Moreover, Limited Liability corporations should communicate with their Employees to solve grievances before they result in pursuing a legal claim.

Individuals or entities can file a claim when the company fails to comply with the demands of their Surety Bond. When they file a claim, the surety will have to confirm the validity of the claim. Also, the CSLB, on the other hand, will carry out its own investigations to pass an effective disciplinary action. However, the CSLB cannot resolve claims against building contractors. It is solely the responsibility of the Obligor, Surety Company. The CSLB can investigate claims against construction contractors.

The Surety Company can directly receive claims filed in by the aggrieved party and ascertain the validity of such claim. If the contractor is at fault, he’s held accountable by the surety for any errors made by a justified claim.  The Contractors will immediately make the reimbursement to the Surety as the California Contractor License Law requires. Failure to comply with this judgment will attract immediate license suspension.

Conclusion

In conclusion, limited liability companies in California must get a license from the CSLB. Also, it is mandatory for LLCs to purchase the $100,000 EW bond to operate in California. These companies should obtain it in addition to the California contractor license bond of $15,000. This license bond will ensure your compliance with the California Code of civil procedure.

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