$100,000 LLC Employee
California Contractor License Law requires California contractor businesses organized as Limited Liability Corporations (“LLC”) to uphold a $100,000 surety bond, called a LLC Employee/Worker Bond. The bond is filed with the Contractor State License Board (CSLB) and aids individuals employed or contracted by an Limited Liabilty Company that are not properly compensated. The LLC Employee/Worker Bond is mandatory in addition to the $15,000 contractor license bond for all contractors.
How does a $100,000 LLC Worker Bond work?
The $100,00 LLC Employee/Worker Bond must be issued by an insurance carrier admitted by the California Department of Insurance. The insurance carrier issuing a surety bond, such as a LLC Employee/Worker Bond, will also be referred to as the “surety company” or the “bond company”. LLC Employee/Worker Bonds refer to the LLC as the “Principal”, the surety bond company as the “Obligor” and the CSLB as the “Obligee”.
The surety company provides the CSLB a guarantee (the surety bond) that the workers employed by or contracted to work for an LLC will receive payment for unpaid compensation up to a limit of $100,000 (“penal sum” or “bond amount”). In addition to wages, the bond covers interest on wages, fringe benefits, welfare fund contributions and apprentice program contributions.
The surety company also directly receives claims from the workers employed by or contracted to work for an LLC and determines the validity of such claims. Ultimately, contractors organized as LLCs are responsible for their actions and required by California Contractor License Law to reimburse the surety company for any payments made under the bond or face indefinite license suspension.
What other types of surety bonds do I need as a contractor in California?
All licensed California contractors are required to carry a $15,000 contractor license bond including contractor businesses organized as LLCs. In addition to the $15,000 Contractor’s Bond, a $12,500 Bond of Qualifying Individual may be required if the Qualifying Individual for a contractor license application is a Responsible Managing Employee, or Responsible Managing Owner/Manager/Member holding less than 10% voting stock/membership interest of the entity seeking licensure.
A Disciplinary Bond may also be required when a licensee, Qualifying Individual, or primary owner or manager of a licensee that has been subject to a CSLB disciplinary action resulting in suspension or revocation of the licensee’s license is seeking a new license, or continuation, renewal, or restoration of a license.
Contractors may also be required by the owner of a project to provide a bid, performance and payment bond, often referred to as Contract Surety Bonds, on a job by job basis.
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A lot of companies quickly realize their insurance needs go beyond basic liability and commercial auto insurance. Some jobs require specific types of coverages such as contractors general liability insurance that gives you protection that may fall outside of basic coverage.
A Contractor’s Bond must be in place before CSLB can issue an active license, reactivate an inactive license, or renew an active license. (Business and Professions Code Section 7071.6).
The bond is filed for the benefit of consumers who may be damaged as a result of defective construction or other license law violations, and for the benefit of employees who have not been paid wages that are due to them.
Effective January 1, 2016, the required amount of a contractor’s bond or cash deposit with CSLB in lieu of a contractor’s bond is $15,000.
The bond for a qualifying individual is $12,500.
Requirements for the Contractor’s Bond:
- The bond must be written by a surety company licensed through the California Department of Insurance.
- The bond must be in the amount of $15,000.
- The business name and license number on the bond must correspond exactly with the business name and license number on the CSLB’s records.
- The bond must have the signature of the attorney-in-fact for the surety company.
- The bond must be written on a form approved by the Attorney General’s Office.
- The bond must be received at the CSLB’s Headquarters Office within 90 days of the effective date of the bond.
For More Information Visit CSLB.CA.GOV
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