A union fringe benefit bond, also sometimes referred to as a wage and welfare bond (collectively “Union Fringe Benefit and Wage Bond”) is often required by labor unions to guarantee that an employer will pay participating members the wages and benefits due to them under the particular union’s collective bargaining agreement. A fringe benefit bond is a strict financial guarantee, the amount of which is generally based on the number of covered laborers multiplied by the prevailing wage and benefit rate. A W/W bond may or may not include fringe benefit considerations and a fringe benefit guarantee may not include a guarantee of the payment of wages. Individual locals determine exactly what the surety bond form must contain however the language of a union bond varies little. Most contain provisions similar to the following:
The Principal shall well and faithfully pay the wages due to the Union Employees with respect to the work performed by the Union Employees, the contributions due to the Funds, the dues due to the Union, any interest, liquidated damages, attorneys’’ fees and/or costs that may become due, and such other amounts as the Principal may be required to pay to the Obligees, or to any of them, pursuant to the collective bargaining agreement between the Principal and the Union or pursuant to the rules and regulations of any or all Funds, then this obligation shall be void; otherwise it shall remain in full force and effect.
A union wage and welfare bond is onerous by nature. The most serious violations encountered in union bond underwriting are a principal’s underreporting of employee count and/or misrepresentation of claims history with one or more union offices. Most union claims manuals contain complicated procedures for the reporting of claims, how a limited bond penalty will be prorata distributed among claimants and very short timelines for the satisfaction of amounts due to the complaining union members. Fringe benefit bonds also sometimes included discovery periods that are outside of most surety companies’ appetites. Character and capital are the most important considerations to the underwriting of this surety bond class. The following underwriting key is a helpful guide.
- UNION FRINGE BENEFIT BOND UNDERWRITING CONSIDERATIONS
Degree of Risk: This is a strict financial guarantee. Hazardous due to the nature of the risk. Has principal consistently sustained a poor loss experience? Readily written ONLY for existing contract surety accounts. All others require full bond form and financial/credit review. Should avoid as a stand-alone surety bond.
Qualifying Principal: Considered for reputable principals with the financial strength to support the requested level of surety credit. What are the business’ history and relationship with the union?
Prior Surety Involvement with a previous Union Fringe Benefit and Wage Bond: If so, why change of surety? Any claims history with previous surety(ies)? - UNION WAGE BOND FORM
Provided by Obligee, review for overly onerous terms.
Bond Amount: How is the bond penalty calculated?
Onerous Provisions: Discovery periods, stacking/cumulative liability; forfeiture language, third party claims, etc.?
National surety bond leader, Surety One, Inc. is a specialist in providing for the bonding needs of contractors and employers subject to collective wage agreements. We offer this class of surety bond and performance bonds to all applicants in EVERY state where contractors must be bonded. Although personal credit is a factor in surety bond underwriting, we have programs to fit every credit condition. Call (800) 373-2804 or email Underwriting@SuretyOne.com to discuss a union fringe benefit bond or labor wage and welfare bond application, or to discuss any other surety bond need.
