Cancel OK

Hiring and Employment Bonds

Worth the price?

When confronted with the need for an employment bond, a produce company may be faced with a triple-tined fork in the road: forego a key hire, pay any outstanding reparation awards owed by the individual’s prior firm, or secure an employment bond to protect the trade from any future delinquency or malfeasance.

At times, the decision is made to pursue the bond. In this article, we explore the whys and wherefores of obtaining an employment bond and the reasoning behind these restrictive pledges. background and basic tenets

Within the U.S. Department of Agriculture (USDA) is the Perishable Agricultural Commodities Act (PACA) Division, which regulates interstate and foreign produce commerce per the Perishable Agriculture Commodities Act (the Act). As its enforcement arm, the PACA Division seeks to uphold the tenets of fair trade.

One of its main functions is to help ensure that those who deal in fresh and frozen produce are paid. In so doing, the PACA Division has the authority to restrict who may operate in the produce industry, including requiring employers to purchase an employment bond before hiring certain individuals.

The bond may be thought of as an insurance policy as it ensures PACA licensees will pay reparation orders issued against an employer for transactions occurring within the bonding period. Employment bonds differ from a license bond in that the former is used to underwrite the conduct of a produce employee, while the latter is used to ensure the conduct of a business that has had its PACA license revoked. 

Who and Why
Who is subject to an employment bond? Individuals who were previously deemed “responsibly connected” to a produce company that had its PACA license revoked or is presently suspended, or failed to pay a reparation award in the last two years. Part of these employment restrictions may include a mandated employment bond, which is held for four years plus nine months. At the end of 2014, there were 28 employment bonds in place, amounting to $3,705,000 in protective funding for the industry.

Employment bonds seek to thwart a repeat of flagrant fair trade violations and/or the business conduct that led to a PACA license suspension or revocation. Some examples of prohibited conduct under PACA where a bond may be mandated include: failure to make full, prompt payment for produce purchases; failure to pay a reparation order; unlawful employment of a PACA violator; making false or misleading statements for fraudulent purposes in connection with produce transactions; specific misrepresentation as to variety, grade, or origin of a commodity; the misbranding or mislabeling of produce; and commercial bribery.

The process of assessing the need for an employment bond begins with the company’s stated intention to the USDA about hiring a PACA offender. The USDA will follow up with a request for specific information, then provides a brief window to take one of three possible actions. “The firm has thirty days to terminate the employment, pay the reparation award [if applicable], or post a surety bond,” explains Christine Sullivan, a PACA bond specialist.