A Farm Labor Contractor Bond is required for farm businesses that hire or work indirectly with agricultural workers. A bond is not only required at the federal level by the U.S. Department of Labor but is also mandated in 10 states (mentioned below). Its purpose is to assure agricultural workers that farm businesses adhere to all labor laws and treat their workers fairly. This bond safeguards workers from exploitation and hazardous working conditions. The bond amount required at the federal level varies depending on the number of employees, while each state may have distinct bond amount regulations.
The cost of a Farm Labor Contractor Bond depends on two main things: how much coverage you need (called the bond amount) and the financial strength of the business. The U.S. Department of Labor sets the bond amount based on how many employees your company has for the following bond amounts:
Each state that requires a farm labor contractor bond also has different requirements for the bond amount. For example, Nebraska requires a $5,000 bond, and California requires a $25,000 bond.
The premium, or the amount you pay, is a percentage of the total bond amount. This percentage usually falls between 1% and 10%. The exact percentage you pay depends on your credit score and your financial situation. If you have a good credit history, you'll pay less than a person with a bad credit history. Every surety company will rate each bond differently and that’s why we’re partnered with over 10 insurance companies. This allows us to get the best rates on the market for our customers. Our prices for a $5,000 farm labor contractor bond start at $100.
A Farm Labor Contractor Bond is necessary for several groups of employers. Firstly, the U.S. Department of Labor mandates this bond for employers engaged in agricultural work and those who employ agricultural workers. Additionally, H-2A employers, who hire foreign agricultural workers through the H-2A visa program, must obtain a Farm Labor Contractor Bond before bringing in any H-2A employees. Furthermore, specific states impose requirements for a farm labor contractor license, and as part of the licensing process, they also mandate a Farm Labor Contractor Bond. These regulations collectively ensure compliance with labor laws and protect the rights of agricultural workers within various contexts.
The H-2A Temporary Agricultural Program is a specialized initiative in the United States that is critical in supporting the agricultural sector during periods of high demand. When American farmers encounter shortages in their local labor force during crucial farming seasons, such as planting and harvesting, they can use the H-2A program. This program enables them to hire temporary foreign workers to fill these labor gaps. However, the program comes with stringent regulations to safeguard the rights and well-being of these foreign workers. Employers must pay these workers fairly, provide transportation to and from their home countries, and ensure suitable housing while they work in the United States. The H-2A program is vital because it helps maintain the stability of the agricultural industry by providing a legal framework for accessing temporary labor when it's needed most while upholding labor standards and fairness for all involved parties.
A claim could be filed against a farm labor contractor bond for violating labor laws and standards outlined in the H-2A program. For example, not paying employees minimum wage, misrepresenting a job position, and other illegal business practices can lead to a claim being filed against a farm labor contractor bond.
Once a claim is filed, the surety company will investigate the validity of the claim. After their investigation, the surety company will pay out claims up to the bond amount. After the surety company has paid the claim, the principal is responsible for repaying the claim amount to the surety. If repayment is not made, the surety company can suspend the farm business’s bond, making it more difficult for them to be bonded in the future due to previous claims. It’s important to note that farm labor contractor bonds serve to protect the agricultural employees and not the employer. Therefore it is important for farm businesses to pay back the claim amount to avoid any future issues in getting a bond.
Only Florida, California, Oregon, Idaho, New York, Wisconsin, Nebraska, Washington, Maryland, Texas, and Pennsylvania require farm businesses to purchase a farm labor contractor bond.