Unemployment Insurance

Construction Project Risk Protection Compliance

What is the Purpose of the Construction Project Risk Protection Provision?
The construction project risk protection provision of North Dakota Century Code (NDCC 52-04-06.1) requires the general or prime contractor, or the owner, of a major construction project to post a surety bond or irrevocable letter of credit with Job Service North Dakota before commencement of work on the project. The bond or irrevocable letter of credit is in addition to required payment of all Unemployment contributions/taxes due for all employment on the project.

The surety bond or irrevocable letter of credit is intended to guarantee that the general or prime contractor, or the owner, involved in these large construction projects covers the cost of benefits paid to employees who worked on the projects.

Determination of Project Liability
A project is liable to the construction project risk protection provision if the project meets the following criteria:

• Bids are let after August 1, 2001, AND
• Construction costs are $50 million or more, AND
• The project is planned to be completed or discontinued within a period of seven years.

Who is Responsible for Posting the Surety Bond or Irrevocable Letter of Credit?
The general or prime contractor, or owner in those situations in which there is no general or prime contractor, must post the surety bond or irrevocable letter of credit with Job Service North Dakota, in the amount as determined by Job Service North Dakota.

How is the Amount of Protection Determined?
The amount of the surety bond or irrevocable letter of credit is calculated and determined by Job Service North Dakota as the difference between the estimated benefits paid to all employees of the project and estimated contributions collected from all employers on the project. The amount of the surety bond or irrevocable letter of credit can be modified as project costs and total positions employed on the project warrants.

When Must the Bond or Letter of Credit Be Posted?
The surety bond or irrevocable letter of credit in the amount as determined by Job Service North Dakota must be posted with Job Service North Dakota before commencement of work on the project.

Notification of Contract Award
Project owners and contractors on a liable project must notify Job Service North Dakota in writing, within 30 days of awarding a contract to any contractor. The notification must include:

AWARDING ENTITY'S name, address, company contact, contact's phone number, and North Dakota State Unemployment Insurance (NDSUI) account number.

CONTRACTOR'S name, address, company contact, contact's phone number, NDSUI account number, and Federal Employer Identification Number (FEIN).

Reporting Requirements and Payroll Recording
All entities must maintain separate payroll records for all employment on the project. Job Service North Dakota will establish for each entity a North Dakota State Unemployment Insurance (NDSUI) employer tax account for the project. Each employer must submit quarterly Employer's Contribution and Wage Reports for employment on the project. These reports must be separate from reports listing other employees working for that employer.

The general or prime contractor, or owner, is required to report to Job Service North Dakota annually, within thirty days of the anniversary of the project's date of liability to this provision, any change in the construction costs of projects subject to this section.

Payment Obligation
Thirty months after the completion or discontinuance of the project, Job Service North Dakota will determine the total benefits paid to employees of all employers on the project. If the total amount paid to the employees exceeds the total amount of contributions collected from the (project) employers under the North Dakota Unemployment Compensation Law, the general or prime contractor, or owner, shall pay to Job Service North Dakota the total amount of benefits paid to the employees that exceeds the total amount of contributions collected from the employers on the project.

If the amount of benefits paid exceeds the amount of contributions collected, Job Service North Dakota will notify the party that posted the surety bond or irrevocable letter of credit of the total amount due. Payment of this amount is due within 30 days after the mailing of the notice. If payment of this amount is not paid within the time frame specified, Job Service North Dakota will redeem the surety bond or irrevocable letter of credit for payment. If Job Service North Dakota presents the surety bond or irrevocable letter of credit for payment, and the amount of the bond or letter of credit is not large enough to cover the cost of benefits paid for all employment on the project, Job Service North Dakota will collect the additional amount due from the general or prime contractor, or owner.

If the party that posted the surety bond or irrevocable letter of credit fulfills the stated obligation by paying to Job Service North Dakota the full amount of benefits paid that exceeds the contributions collected, Job Service North Dakota will return the surety bond or irrevocable letter of credit to the party from which it was received.

For questions or assistance, please contact the Unemployment Insurance division at Job Service North Dakota.