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 work on a project begins.
Purpose of the Construction Project Risk Protection Provision
This surety bond or irrevocable letter of credit is intended to guarantee the cost to cover benefits paid to employees who worked on the projects. It is in addition to required payment of all unemployment contributions/taxes due for employees on the project.
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.
The amount of protection required
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 can be modified as project costs and total positions employed on the project warrants.
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.
Obligation of payment
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 reimburse Job Service North Dakota for the benefits paid to the employees.
Payment of this amount is due within 30 days after the notice is mailed. 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 the amount of the bond or letter of credit is not large enough to cover the cost of benefits paid, 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 the additional cost of benefits to Job Service North Dakota, we will return the surety bond or irrevocable letter of credit.