Federal Bonding Program

1. Federal Bonding Program Ron Rubbin & Roland Brack

2. Background • Established in 1966 by U.S. Department of Labor (USDOL) • Employer hiring incentive that guaranteed job honesty of at-risk job seekers

3. Background • Federal financing of Fidelity Bond insurance, issued at no charge to employers • Enabled delivery of bonding services as unique job placement tool • Assists ex-offenders, and other at-risk/hard-to-place job applicants (e.g., recovering substance abusers, welfare recipients, poor credits, etc.)

4. Background • Various State Employment Services (ES) made up national delivery system for issuing to employers • Bonds purchased from Aetna Casualty and Surety Company • Now owned by and operated as Travelers Casualty and Surety Company of America

5. Need • Job seekers who committed fraudulent or dishonest act, or who demonstrated behavior casting doubt on credibility or honesty, often rejected for employment • Employers view applicants as “at-risk” and potentially untrustworthy workers

6. Heightened Employer Fear… • Fidelity Bond insurance commercially purchased to protect against employee dishonesty usually will not cover at-risk persons • They are designated by insurance companies as “NOT BONDABLE”

7. At Risk Job Applicants • Ex-offenders (anyone with a record of arrest, conviction or imprisonment, and anyone who has ever been on probation or parole) • Total number of persons “under correctional supervision” around 7 million (1 in 32 adults) • More than 600,000 inmates released each yr

8. At Risk Applicants • 67% will be recidivists (i.e., return to crime and incarceration 3 yrs of release) • Failure to become employed major factor contributing to rate of recidivism • Record of arrest, conviction or imprisonment is significant barrier to employment

9. Others at Risk or Not Bondable • Recovering substance abusers • Welfare recipients • Those with poor credit record or declared bankruptcy • Economically disadvantaged youth w/o work history • Military with dishonorable discharge • Others can be classified at-risk if barrier to work can be eliminated by making bondable

10. Fidelity Bonding • Insurance purchased to indemnify employers for loss of money or property sustained through the dishonest acts of their employees (i.e., theft, forgery, larceny, and embezzlement) • AKA “employee dishonesty insurance” • Considered good business management practice & purchased by most employers

11. Fidelity Bonding • Other types of commercially purchased insurance set premiums that vary according to degree of risk (e.g., life insurance) • Fidelity Bond premiums are always low due to being based upon taking low risk

12. Result and Outcome • Result: insurance companies usually will not cover at-risk persons under commercially purchased Fidelity Bonds • Outcome: Practice has created special barrier to employment for those who encountered the criminal justice system & others

13. Instant Background Checks • Employers can determine if applicant has criminal record or has poor personal financial credit history • 80% of employers now make such checks (Source: Society of Human Resources Management) • Increased significantly since September 11th

14. Summary • Not bondable under commercial employee dishonesty insurance policies (i.e., Fidelity Bonds) usually purchased by employers • Led to increase in persons routinely denied jobs • Bonding becomes barrier to employment • Only way to become bondable by participation in FBP

15. Federal Bonding: Job Placement Tool • Guarantee employer job honesty of at-risk job seekers • Employers receive bonds free-of-charge as incentive to hire • Reimburse employer for any loss due to employee theft of money or property with no deductible amount to become employer’s liability (i.e., 100% bond insurance coverage)

16. Great Success • Over 44,000 job placements made for at-risk job seekers who were automatically made bondable • Only around 460 proved to be dishonest • Bonding services as job placement tool considered to have 99% success rate

17. Fidelity Bonding Service Delivery: Fast and User Friendly • NO special application form for job seeker to complete • NO bond approval processing – local staff instantly issue bonds to employers • NO papers for employer to submit or sign to obtain free bond incentive for job hire • NO follow-up and NO termination actions required by bond issued

18. Fast and Friendly… • NO deductible in bond insurance amount if employee dishonesty occurs • NO age requirements for bondee (other than legal working age in State) • NO other U.S. program provides Fidelity Bonding services • NO Federal regulations covering bonds issued

19. Bond Insurance • Applies to any job, any employer, any State • Covers any employee • Covers dishonesty committed on or away from employer’s work facility

20. While assisting job seekers in securing employment is the main goal of the FBP, bonds are also issued to cover already employed workers who need bonding to prevent being laid off or to secure transfer or promotion to a different job at their company • Service delivery efficiency is inherent to bonding because its cost occurs only when a job placement is generated or maintained for an individual whose background is a significant barrier to securing or retaining employment.

21. Any full or part-time employee paid wages (with Federal taxes automatically deducted from pay) can be bonded, including persons hired by “temp. agencies” • Self-employed cannot be covered by Fidelity Bonds

22. Today • 1997 USDOL ordered a redirection of the FBP requiring that State and local funds (including WIA and other Federal allocations) be used to purchase bonds • Any public agency or private community-based-organization or private industry group can directly acquire bonds and deliver bonding services through purchase of a bond package in accordance with the Guidelines on the Purchase and Use of Fidelity Bonds issued by The McLaughlin Company as exclusive agent for Travelers for the FBP

23. Program Management & Direction • The McLaughlin Company in Washington, D.C., under contract with the USDOL’s Employment and Training Administration (ETA) • A national insurance brokerage firm serving as exclusive agent for TRAVELERS which issues Fidelity Bonds nationwide under the FBP • Director: Ron Rubbin (ron4bonds@aol.com) • FBP Coordinator: Roland Brack (brack4bonds@aol.com)