Newly Enacted California Law Requires Surety Bond from Foreign Labor Contractors

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In a continuing effort to improve human trafficking regulation within California, the state enacted the California Foreign Labor Recruitment Law. The bill, SB 477, prohibits foreign labor contractors in California to charge workers recruitment fees. In addition, foreign labor contractors have to register with the California Labor Commissioner and submit employment conditions to the commissioner. This bill takes effect on July 1, 2016.

The Issue

California has battled human trafficking issues over the years, as there have been documented complaints of terrible working conditions and huge debts to be paid off to foreign labor contractors. This bill aims to improve these situations for the approximately 130,000 temporary foreign workers in the state, by far the most in the country.

To help prevent foreign labor contractors from abusing the rights of foreign workers, this bill requires contractors to post a surety bond during registration with the commissioner. This bond serves to hold the principal accountable if the contractor breaches the provisions of Chapter 21.5, Section 9998 of the California Business and Professions Code (California Foreign Labor Recruitment Law).

Bonding Requirements

The requirement for this bond varies according to the contractor’s annual gross receipts. To be registered as a foreign labor contractor in California, the contractor has to fulfill the surety bond requirement as explained in an excerpt from SB 477 (Sec. 9998.1.5) below:

“(3) (A) The person has deposited with the commissioner a surety bond in an amount based on the size of the person’s annual gross receipts from operations as a foreign labor contractor, as follows:

(i) For gross receipts up to five hundred thousand dollars ($500,000), a fifty-thousand-dollar ($50,000) bond.

(ii) For gross receipts of five hundred thousand dollars ($500,000) to two million dollars ($2,000,000), a one-hundred-thousand-dollar ($100,000) bond.

(iii) For gross receipts greater than two million dollars ($2,000,000), a one-hundred-fifty-thousand-dollar ($150,000) bond.

(B) If the foreign labor contractor has been the subject of a final judgment in a year in an amount equal to that of the bond required, that contractor shall be required to deposit an additional bond within 60 days. The bond shall be payable to the people of the State of California and shall be conditioned on the foreign labor contractor complying with all the terms and provisions of this chapter and paying all damages occasioned to any person by failure to do so, or by any violation of this chapter, or false statements or misrepresentations made in the registration process. The bond shall also be payable for interest on wages and for any damages arising from violation of applicable orders of the Industrial Welfare Commission, and for any other monetary relief awarded to a foreign worker as a result of a violation of law by the foreign labor contractor.”

If the principal fails to comply with the regulations of the California Foreign Labor Recruitment Law, the state or the obligee may take action on the bond. The surety compensates the obligee for incurred damages up to the penal sum of the bond, but the principal must reimburse the surety.

For more information on the newly enacted bill and its requirements, contact the Labor Commissioner’s Office.

What’s the next step?

Although the Division of Labor Standards Enforcement has not yet posted a bond form on its website, you can contact the experts at SuretyBonds.com and receive updated information regarding your bond. If you have any questions about your surety bond or wish to purchase one before the July 1, 2016 deadline, give us a call at 1 (800) 308-4358 or submit an online bond request. SuretyBonds.com provides fast and efficient service for all of its customers.

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