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Senate Bill 224 - Eliminating Wage Payment Bonds for Some Employers

Photo of Charlotte Hoffman Norris

Senate Bill 224, introduced on February 9, 2017, seeks to eliminate entirely a required bond for certain employers in the construction and mining industries to secure payment of wages and benefits for employees.

More specifically, SB 224 seeks to repeal § 21-5-14(a) of the West Virginia Wage Payment and Collection Act, which requires that "every employer, person, firm or corporation engaged in or about to engage in construction work, or the severance, production or transportation (excluding railroads and water transporters) of minerals" purchase a payment bond, payable to the State of West Virginia, to ensure the payment of wages and benefits to employees "when due." There is an exception for employers who have been actively in business for at least five consecutive years. For those required to purchase the bond, the required bond amount is "the total of employer's gross payroll for four weeks at full capacity or production," adjusted as the employer's payroll may increase or decrease if, with respect to any decrease, there are no "outstanding claims against the bond." The Commissioner of Labor has the authority, under §21-5-14(b), to waive the required bond if the employer has "sufficient financial responsibility to pay wages and fringe benefits." The employer need not purchase a bond from a surety if the Commissioner of Labor approves other forms of security, including, but not limited to "collateral bonding..., letters of credit," etc. In addition to other rights of action for unpaid wages, employees who claim that they have not been paid wages and fringe benefits when due, have a right to file a claim against the bond. Employers who fail to obtain the required bond are subject to criminal penalties and fines under §21-5-15. Prime contractors that subcontract out services within the construction or mineral severance, production or transportation industry also are required to notify the Commissioner of Labor of the identity of the subcontractors, the job site location and the principle business location. Failure to do so also results in criminal penalties.

Presumably, SB 224's effort to repeal the bond requirement and related penalties is intended to create a more business friendly environment and encourage construction and mineral development in West Virginia by companies that have not been operating in the State (for at least five years)-- regardless of whether the companies can demonstrate the financial wherewithal to pay wages and benefits in a timely fashion. The proposed legislation also have the effect of eliminating some of the administrative oversight by the West Virginia Department of Labor over these companies, arguably a potential cost savings to the State.

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