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Procedures for Bond Issuance and Management

Bonding services should be incorporated as an integral component of daily job development and placement operations. Employers should be informed about the availability of this special employer incentive; job applicants/program enrollees should be made aware that bonding will no longer be a barrier to employment; and coordinated referral agencies should be made to know that the bond package purchaser has a unique job placement tool available for use.

Service delivery staffs should be oriented to the utility and effectiveness of bonding, and to the administrative simplicity in being able to instantly issue Fidelity Bond insurance to employers to guarantee the job honesty of job seekers usually viewed as being potentially untrustworthy due to problems in their backgrounds. Staff should become familiar with the full content of these guidelines and other FBP resource materials and should be aware of the toll-free number 1-800-233-2258 to resolve questions or other technical assistance needs.

Responsibilities of the Purchasing Organization

• Determining applicant eligibility for bonding. As indicted earlier, at-risk job applicants are ex-offenders, recovering substance abusers, welfare recipients, persons who have poor credit, individuals dishonorably discharged from the military, and economically disadvantaged youth and adults who lack a work history. Others may be eligible if bonding can eliminate the barrier to their securing employment. There are no age restrictions; anyone of legal working age set by the State can be bonded. Job seekers can be bonded for job placement at an employer even if other workers already at the company are not bonded.
• Assessing employment opportunities for bonding. Bonds can be issued to (a) cover any at-risk worker on any job, full or part-time, and (b) any employer regardless of whether the company has or has not purchased a commercial Fidelity Bond. Covered workers must be paid wages with automatic paycheck deductions for Federal taxes; self-employed persons cannot be bonded. Most of the time the key reason for bond issuance will be to overcome an employer's fear that an at-risk applicant will be an untrustworthy worker regardless of the specific job. Some jobs, particularly where money and small tools/goods are handled routinely and can very easily be stolen, have traditionally mandated worker bonding. The organization purchasing the bonds is free to choose to issue bonds for only certain classes of jobs. Technical assistance on this matter can be provided to staff by a call to the toll-free hotline 1-800-233-2258.
• Determining the bond amount to cover the bondee. One bond unit providing $5,000 bond insurance coverage has proven to be sufficient to facilitate most job placements. Issuance of larger bond amounts (not to exceed five bond units or $25,000 coverage) should be limited to only workers who can readily steal, at one time, more than $5,000 in money or property. This is a judgment call by staff, but it should be based upon reasonable justification by the employer as to the theft risk of the job. To cover as many placements as possible with any bond package, only one bond unit should be issued per placement. However, as indicated earlier, bond amounts issued to any employer can be either $5,000. $10,000, $15,000, $20,000, or $25,000 (one to five bond units).

It is recommended that staff (1) should not make it known in advance to employers that more than $5,000 bonding can be issued, (2) routinely inform the employer that a $5,000 bond will be issued and discuss larger amounts only at the employer's urging and explaining why more coverage is needed, and (3) be very judicious in considering issuing greater amounts. The bond package purchaser is free to set any procedures it desires for its staff to use in determining the bond amount, including setting a policy that no bonds will be issued above $5,000. It should be noted that the bond issued has no deductible amount; therefore, the employer receives coverage for the full dollar amount of bond insurance.

Completing and Transmitting the Fidelity Bond Certification Form

For each individual bonded, a separate one-page FIDELITY BOND CERTIFICATION FORM must be completed (the FORM also contains Operational Definitions to facilitate completion). As indicated on the FORM, one or more Official Bond Insurance Stamps (provided by The McLaughlin Company to the organization purchasing the bond package) must be affixed to it. Whether and how the purchasing organization makes these stamps available to its local service delivery offices or retains the stamps at its central office is a decision of the purchaser. Technical assistance on this matter regarding potential administrative alternatives can be provided on the toll-free hotline 1-800-233-2258.

In any event, the original completed FORM is to be transmitted by mail to The McLaughlin Company (address is at the top of the form), and a copy of the completed form is to be retained in files of both the local office responsible for issuing the bond and central office responsible for managing utilization of the bond package.

• Preparing LETTER TO EMPLOYER confirming bonding. At the same time that the completed FIDELITY BOND CERTIFICATION FORM is transmitted to The McLaughlin Company, a LETTER is to be sent to the employer confirming the bond issuance (i.e., bondee name, bond effective date, dollar amount and period of coverage, etc.). This LETTER should be prepared on official letterhead of the bond package purchaser. The purchaser is free to redesign this LETTER in any fashion, but it should convey at least the basic information specified in the sample LETTER. The key purpose of this letter is for the employer to have some tangible evidence confirming the bond issuance in advance of receipt of the actual Fidelity Bond insurance policy mailed to the employer by The McLaughlin Company.
• Determining whether to renew an existing bond. After the initial six-month period of bonding, the purchasing organization may choose to renew the bond for another six months covering the same bondee at the same employer who received the original bond. Such renewal will require use of additional bond units of the purchasing organization and will necessitate completion of another FIDELITY BOND CERTIFICATION FORM specifying "renewal." No more than one renewal should be necessary. However, after the initial six-month period of bonding, if no claim is paid due to employee dishonesty, Travelers Casualty and Surety Company of America; referred to hereafter as TRAVELERS will make the bond available for purchase by the employer at a regular commercial rate (i.e., purchase of a "Transfer Bond").
• Determining record keeping practices. Beyond the above reference to keeping a file copy of each completed FIDELITY BOND CERTIFICATION FORM at local and central offices, there is no other record keeping for the bond package purchaser.
• Protecting the integrity of Fidelity Bonding. Bonds are to be issued at no cost to the employer or job applicant. Issued bonds are not transferable from one employer to another. If a bondee is terminated by the employer or leaves the job for positive reasons, and staff want to bond the same worker at a new job, a new bond must be issued to the second employer for a six-month period (i.e., completion of a new FIDELITY BOND CERTIFICATION FORM). Issuance of more than two separate bonds for the same bondee is not recommended.
• Designating a staff person as central contact for The McLaughlin Company. The purchasing organization will receive 24 months of technical assistance from The McLaughlin Company. It is therefore necessary that a central contact person be designated by the purchaser.

Responsibilities of The McLaughlin Company

Processing the completed FIDELITY BOND PURCHASE AGREEMENT submitted by the purchaser. Immediately upon receipt of a completed AGREEMENT, the organization purchasing the bond package will be sent a confirming communication transmitting (1) a set of OFFICIAL BOND INSURANCE STAMPS for the amount of bond units purchased, (2) a supply of mailing envelopes for transmitting the completed FIDELITY BOND CERTIFICATION FORM to The McLaughlin Company, and (3) an initial supply of materials for implementing bonding services as a job placement tool (i.e., copies of these Guidelines, and copies of the FIDELITY BOND CERTIFICATION FORM—any additional needed copies are to be duplicated by the purchaser). As previously noted, to facilitate immediate bond use, the purchaser should call Ron Rubbin at the bonding hotline 1-800-233-2258 as soon as the AGREEMENT is mailed to The McLaughlin Company.

• Processing each completed FIDELITY BOND CERTIFICATION FORM. Each FORM will be promptly processed upon receipt so that the employer can receive the actual Travelers Fidelity Bond within 15 working days.
• Giving technical assistance to purchaser staff. For a 24-month period from the date of bond package purchase, The McLaughlin Company will provide technical assistance to purchaser staff pertaining to bond issuance, processing, and utilization. In addition, information will be disseminated periodically on exemplary practices distilled from national experience, and on new and emerging significant policy developments. Furthermore, assistance will include the design of sample brochures and other informational materials. Finally, purchaser staff will have access to the toll-free hotline 1-800-233-2258 to address any daily needs, as well as the Federal Bonding Program website (www.bonds4jobs.com). Technical assistance will be routinely communicated by mail, fax and e-mail, as well as in phone conversations on the toll-free hotline. Requests for the conduct of on-site staff training can be arranged in cases where the purchaser can separately cover travel, meals, and hotel costs.
• Processing employer loss claims. Employers are to contact The McLaughlin Company directly with any claim for employee dishonesty. The Company will promptly process the claim through Travelers to expedite appraisal and settlement.
• Arranging "Transfer Bonds." The Insurance Company will make the Fidelity Bond available for purchase by the employer (i.e., a Transfer Bond) at a regular commercial rate after the six-months of free bonding if the worker has demonstrated honesty during that period (i.e., no claim has been paid for employee dishonesty). Should the organization purchasing the bond package decide to renew a bond for a second six-month period, the Transfer Bond can be purchased by the employer after completion of the renewal period if no dishonesty claim has been paid by Travelers.

As a result of making the Transfer Bond available, Travelers has enhanced the long-term positive impact of bonding services. We are unaware of any other insurance company in America that will act to help persons initially designated as NOT BONDABLE become permanently bondable.