As an owner of an LLC in the state of California, understanding the California employees worker bond is essential. This bond is a legal requirement in the state, and it is designed to protect your employee’s rights as well as make sure you are operating your business smoothly and according to the law. In this article, we will explore the California employees worker bond in detail, including its purpose, requirements, and how it can benefit both employees and employers, particularly in the contracting business.
Limited Liability Companies (LLCs) have become a popular choice for small businesses due to their flexibility, simplicity, and protection from personal liability. However, as with any business, there are certain legal requirements that LLCs must adhere to, including the need for worker bonds for their employees. In California, LLC employers are required to have worker bonds, which serve as a form of insurance protection for workers in case of non-payment or other unauthorized actions by their employer.
LLC/Employee Bond Overview
The California LLC employee/worker bond is a surety bond that is required by the California Contractor State Licensing Board (CSLB) for all licensed contractors that are registered as LLCs. Starting in 2026, all California contractors are required to have an LLC bond in place, in addition to their pre-existing contractor license bond. The bond is designed to protect employees from LLC employers who do not pay their wages, workers' compensation benefits, or other benefits that are owed to their employees on time. This bond is required for all LLC contractors in California that have employees, and it must be renewed annually.
The purpose of the California LLC employee/worker bond is to provide a safety net for employees who may not receive payment for work rendered or may have their other benefits withheld. The bond ensures that there is a financial guarantee that employees will be paid the wages they are owed. The bond also guarantees that any claims against the employer for unpaid wages or other benefits will be paid, up to the bond's limit.
The surety bond is a three party agreement between the principal, the obligee, and the surety. In the case of California’s LLC bonds, the principal is the LLC, the company issuing the bond is the surety, and the California State Licensing Board (CSLB) is the obligee.
Starting Jan. 1, 2012, the California law allowed contractors to form LLCs as their business structure. Because LLCs allow employers to have less liability over the financial losses of their business, the LLC employee/worker bond exists to protect workers against this higher perceived risk. According to the Business and Professions [B&P] Code section 7071.6.5, acquiring the workers bond, as well as the contractors license bond, is required in California for maintaining an active LLC contractor license.
Every contracting company that operates under an LLC must purchase an LLC employee/worker bond, with the set bond amount of $100,000.
The pricing for a surety bond depends on the bond amount, the maximum payout the surety company can provide, and the premium, a percentage rate calculated by surety underwriters. Multiplying the bond amount and the premium together gives the price of the bond for an LLC employer or any other bond seeker.
The California LLC worker bond amount is for $100,000, which is in addition to the $25,000 contractor licensing bond.
LLC employee/worker Bonds cost between $1,500 and $10,000 depending on the personal credit, license history, license classification, personal financial reports, and business financial reports of either the LLC members or the LLC itself.
Because the California LLC employee/worker bond amount is set at $100,000, the pricing depends primarily on the bondseeker’s credit checks and other financial creditworthiness.
Here is a table outlining the costs based on premium rate:
Credit Score 1 Year Bond Cost (Premium Rate) 750+ $1,354 (1.35%) 700 – 749 $1,805 (1.8%) 675 – 699 $2,000 (2%) 650 – 674 $2,257 (2.25%) 600 – 649 $5,000 (5%)
The California Contractors State License Board (CSLB) requires that construction LLC companies have a contractor’s bond in place to obtain and maintain a valid license. Determining the bond amount for the LLC employee/worker bond in California is easy—all contractor’s LLC bond amounts are set at $100,000.
The next crucial step is for the construction LLC company to find a reputable surety bonding broker, who will then issue them a bond through one of their partnered surety companies. It is advisable to research the various bonding companies in California and compare their quotes on the rates offered and the quality of their services. SuretyNow is a surety broker that offers price matching guarantees, quick response times, and is licensed and experienced in the state of California in issuing bonds in the contractor industry.
Once a reliable bonding company has been identified, the construction LLC company will need to fill out a bond application form. The form usually requires basic information like the company’s name, address, and contact details, as well as details of the requested bond amount. Your social security number is required and the credit score is the most important factor in determining your price.
Besides filling out the bond application form, the construction LLC company may also be required to provide additional documents to the bonding company. These documents may include a copy of the company’s business license, as well as documentation proving that all state and federal taxes are paid up to date.
After all required documents and information have been submitted, the bonding company will evaluate the application. The construction LLC company should be prepared to wait some time for bond approval. The surety will have to underwrite the application and review the bondseeker’s creditworthiness before approving the bond. One important thing to note is that the surety will have to perform a credit check according to California law; however, this credit check will be a “soft hit,” meaning it will not affect the contractor’s credit. Once approved, the bonding company will send the bond to the construction LLC company.
Now, the construction LLC company must pay the bond premium. The premium is typically a percentage of the bond amount requested, and it varies depending on the bonding company used; we’ve outlined the typical premium rates for the California LLC bond above. Once the premium has been paid, the bonding company will issue a bond certificate to the construction LLC company.
The final step is for the construction LLC company to file the bond certificate with the California Contractors State License Board. This action ensures that the construction LLC company adheres to the CSLB licensing requirements and maintains in good standing.
Not only is securing worker bonds a legal requirement for LLCs in California, but it can also affect the company's insurance premiums. Insurance providers typically view bonded employees as a lower risk, which can result in reduced insurance costs. Additionally, LLCs should ensure that their worker bonds are obtained from reputable surety companies and that they are properly maintained to avoid any lapses in coverage.
The California Employees Worker Bond provides several benefits to employees. Firstly, it ensures that employees receive the wages and benefits they are owed. If an employer fails to pay their employees, the bond can be used to make up for these unpaid wages. Secondly, the bond provides a legal remedy for employees who have not received the benefits they are entitled to. The bond can be used to cover any legal expenses incurred in pursuing a claim against the employer.
Worker bonds are an important legal requirement for LLC employees in California, and failing to obtain or renew them can result in serious consequences. In addition to meeting legal requirements, obtaining and maintaining worker bonds can also have a positive impact on an LLC's insurance premiums. It is important for LLCs in the construction industry to understand the requirements for worker bonds and to take the necessary steps to ensure compliance with state law.
