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Have a question? +1 815-826-6324 (815-8-BondAI) phil@AmericasSuretyBonds.com
Army Veteran Owned | Expert Surety Bonds Since 2004
A fringe benefit bond lets an insulation contractor signed with Asbestos Workers Local 24 back the benefit fund contributions it owes with a surety company instead of cash. The fund trustees get a solvent party to collect from if contributions go unpaid, and the contractor keeps its working capital in the business.
Insulation contractors signed to an agreement with Asbestos Workers Local 24, the Heat and Frost Insulators local based in Laurel, Maryland, can be required to post a fringe benefit bond guaranteeing the contributions they owe the Local 24 benefit funds. It is a private bond given to the union side of the agreement and the fund trustees, not a Maryland license bond. Federal law at 29 U.S.C. 1145 makes those contributions a legal obligation. Get the required amount, the exact obligee wording and any bond form from the local or its fund office before the bond is issued.
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Contractors often assume their duty to the Local 24 funds ends when they stop working or stop filing reports. A 2010 federal case shows otherwise. In Asbestos Workers Local 24 Pension Fund v. NLG Insulation, Inc., the pension fund trustees sued over a contractor whose sister company had signed the 2000 Joint Trade Agreement with Local 24. That agreement renewed automatically from year to year unless a party gave written notice 90 days before an expiration date. The signatory company stopped operating in 2006 without sending notice. The court treated it and a second company with the same owner as a single employer and entered judgment for $24,165 in withdrawal liability plus interest, $1,282.32 in liquidated damages, $7,260 in attorney fees and $370.89 in costs.
The lesson for anyone posting this bond: read the termination clause in your agreement, give notice in writing the way it requires, and tell your surety about every company you own that does similar work.
Under 29 U.S.C. 1145, every employer obligated to contribute to a multiemployer plan under a collectively bargained agreement must make those contributions on the terms of the plan or agreement. When an employer falls behind, 29 U.S.C. 1132(g)(2) has the court award the unpaid contributions, interest, an added amount equal to the greater of that interest or plan liquidated damages of up to 20 percent of the unpaid contributions, and reasonable attorney fees and costs. The fringe benefit bond puts a surety behind the contractor so the funds can collect even when the contractor cannot pay.
Withdrawal liability, the amount at issue in the NLG case, is a separate obligation from regular monthly contributions. Whether a bond reaches it depends on the wording of the bond form, so read the form before you sign.
The signatory insulation contractor posts the bond. The amount is set by the agreement or the fund office, so get the figure in writing before you apply. If the fund office wants the trustees of particular funds named as obligees, the bond must use that exact wording.
Insulators Local Union 24 is at 901 Montgomery Street, Laurel, Maryland 20707. Ask the local or its fund office where the original bond should be delivered.
The surety prices the bond on the chance it will have to pay a claim. It looks at the owners' personal credit, the company's financial statements, how long the company has operated and its record of filing contribution reports and paying them on time.
Not automatically. In the 2010 NLG Insulation case, the 2000 Joint Trade Agreement renewed each year unless a party gave written notice 90 days before an expiration date. The signatory company closed without sending notice, and its sister company was later held liable for withdrawal liability, interest, liquidated damages and attorney fees. Check the termination clause in your current agreement.
It can. In the NLG Insulation case the court found that two companies owned and run by the same person formed a single employer under the brother and sister control group test, so the second company answered for the first company's liability. Tell your surety about every related company.
No. It is a private bond given to Local 24 and the trustees of its benefit funds as the agreement requires. No Maryland agency issues or holds it. Deliver the original wherever the local or fund office directs.
Federal law at 29 U.S.C. 1132(g)(2) adds interest, liquidated damages of up to 20 percent where the plan provides for them, and attorney fees to unpaid contributions in a successful fund lawsuit. Whether the bond pays those added amounts, or withdrawal liability, depends on the wording of the bond form.
No. A surety bond is not insurance for the contractor. You and the owners sign an indemnity agreement, and the surety will seek repayment of anything it pays to the funds, plus its costs.
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