What types of businesses need a wage bond? §21-5-14. Employer's bond for wages and benefits.With the exception of those companies that qualify for an exemption, every employer engaged in construction or the severance, production or transportation of minerals (excluding railroads and water transporters) in the state of West Virginia must furnish a wage bond to the Division of Labor to protect the wages and benefits of its employees.
§21-5-14(a)
Wage bonds must be issued on forms authorized by the Commissioner of Labor, be made payable to the Division of Labor, and include an authorization from the company allowing the Division to use the bond to pay employee wages and fringe benefits should that become necessary.
What is a wage bond?
A wage bond is a security that is posted with the Division of Labor for the sole purpose of protecting employee wages and fringe benefits.
What is it used for? After an investigation has been performed and the Commissioner of Labor has determined that employee wages and/or fringe benefits are unpaid, the Commissioner shall make demand of the employer for the payment of those wages. If the employer is unable to pay the unpaid wages as determined by the Commissioner, the Division will forfeit the company’s wage bond to pay those employees.
Wage bonds must be issued on forms authorized by the Commissioner of Labor, be made payable to the Division of Labor, and include an authorization from the company allowing the Division to use the bond to pay employee wages and fringe benefits should that become necessary.
Are all companies required to post a wage bond?
The requirement to post a wage bond is specific to companies involved in construction, mining, and the transportation of minerals. Those industries are defined as follows:
Construction is defined as meaning the furnishing of work in the fulfillment of a contract for the construction, alteration, decoration, painting or improvement of a new or existing building, structure, roadway or pipeline, or any part thereof, or for the alteration, improvement or development of real property: Provided, that construction performed for the owner or lessee of a single family dwelling or a family farming enterprise is excluded. §21-5-1(j)
Mining is the severance or production of a mineral from the earth such as clay, coal, flagstone, gravel, limestone, manganese, sand, sandstone, shale, iron ore and any other metallurgical ore. §21-5-1(k)
The transportation of minerals means any method, other than by rail or by water, of moving minerals such as clay, coal, flagstone, gravel, limestone, manganese, sand, sandstone, shale, iron ore and any other metallurgical ore from one physical location to another. §42CSR 33-3.11
Exemption
Not all companies involved in a covered industry must post a wage bond. Any company that qualifies for one of the exemptions listed below may claim that exemption by submitting a “Wage Bond Status Affidavit” to the Division of Labor:
• Companies that have been in business in West Virginia, with employees, for a period of at least 1 year.
• Companies that have been in business in another state for 5 years.
• Companies that do not have employees physically working in West Virginia.
• Companies that are engaged solely in the construction of single family dwellings and/or family farming enterprises.
• Companies that report $100,000.00 or more in available assets.
• Companies that are a subsidiary of a parent company that has been in business for 5 years.
How is the bond amount calculated?Once determined that a wage bond is required, the amount of the bond is calculated using the employer’s gross payroll in West Virginia for a period of four weeks, plus an additional fifteen percent. This amount must reflect the company’s payroll at full maximum capacity or production. (4 weeks gross payroll + 15% = bond amount)
The wages of every “employee” working within the state of West Virginia must be included in the gross payroll amount of the bond. This includes clerical and administrative staff as well as those employees that reside outside of West Virginia, but work in this state.
Exclusions – The wages of sole proprietors are automatically exempt from the wage bond calculation. An owner, partner, limited liability member or corporate officer holding at least twenty percent of shares in a business may also exclude their earnings by filing an Owner/Affidavit form with the Division of Labor, not to exceed a maximum of five (5) ownership exemptions for any one company. Once an affidavit of ownership is submitted, the individual claiming the exemption will not be included in any payout of wages or benefits from the bond. §42CSR 33-8.6
The amount of the bond may be increased or decreased as the employer's payroll increases or decreases. However, the amount of the bond shall not be decreased, except with the Commissioner of Labor’s approval. Such approval is contingent upon a determination that all employee wages are paid to date, and that the remaining bond amount is sufficient to cover the company’s current payroll. §21-5-14(a)
Sample wage bond amount calculation: NOTE: Out-of-state companies determine the amount of wage bond required by entering the amount of their West Virginia payroll only.
1. 4 weeks’ payroll in WV @ maximum capacity or production. $10,000.00
2. Enter 15% of the amount entered above. $1,500.00
Total the amounts on Lines 1 & 2 to determine bond amount. $11,150.00
Cash Bond Requirements
Necessary Forms that must accompany the check or money order.
W-9
Request to Invest
Bond Status Affidavit
Certificates of Deposit
Must be drawn on West Virginia Bank.
Must be made payable to the West Virginia Division of Labor OR “the company’s business name”. Both names must be shown on the CD joined by the word “OR”. Example: West Virginia Division of Labor OR Acme Painting Company.
We must receive the original CD.
Necessary forms:
CD Assignment Form (must be completed by the bank)
Bank Waiver Form (must be completed by the bank)
Bond Status Affidavit
Letters of CreditMust be drawn on:
A United States Bank
A Federal Credit Union
Must be submitted using our format and language. The bank (or credit union) may transfer the required language to their own document (letter head) but they may not change any of the wording.
Required forms: Bond Status Affidavit
Surety BondsMust be submitted on our form.
Two page form; two pages of instructions.
Power of Attorney must be attached.
Parts of the bond must be completed by:
The insurance company
The company obtaining the bond.
Requires approval by the West Virginia Attorney General’s office
Required forms:
Bond Status Affidavit