(a) Filing and maintenance of Bond. Prior to obtaining a First Construction Document, an Owner or Owners of a Project shall file with the Controller a Bond naming the City as exclusive beneficiary, or other acceptable security as determined by the Controller. The Bond shall contain conditions that require the Owner holding the Bond to comply fully with all provisions of this Article 81 and to acknowledge that the Bond or portions thereof may become payable to the City, to be used to satisfy a determination of violation of a City labor protection for work on the Project, under the conditions set forth in Labor and Employment Code Section 81.5(d). Subject to subsection (d), the Bond shall be filed and maintained in not less than the following amounts:
Estimated Project Cost
|
Bond Amount
|
Less than $5,000,000 | $500,000 |
$5,000,000 to $7,500,000 | $750,000 |
$7,500,000.01 to $10,000,000 | $1,000,000 |
More than $10,000,000 | $1,250,000 |
The Controller shall notify the Agency and the Department of Building Inspection when an Owner files such Bond and the amount thereof.
(b) Request for release or reduction of Bond. Not less than 90 days after the Project has been issued a certificate of final completion and occupancy or an amended certificate of final completion and occupancy under Building Code Section 109A, an Owner may file a request with the Controller to release or reduce the Bond. The Controller shall notify the Agency of the request.
(c) Agency review and report to the Controller.
(1) Upon receiving notice from the Controller under subsection (b), the Agency shall review whether the Owner and Covered Contractors have complied with the requirements of this Article 81 and whether the reports received under Section 81.4(d) appear complete and accurate. After providing Owners and Covered Contractors the opportunity to provide additional reporting, acknowledgements, or certifications, as needed, the Agency shall report to the Controller either (1) the Agency has received and reviewed the reports required under Section 81.4(d) and the reports appear complete and accurate, and no Owner or Covered Contractor has failed to complete the required acknowledgments under Section 81.4(a), the required certifications under Section 81.4(b), or the required documentation under Section 81.4(c); or (2) one or more reports, acknowledgments, certifications, or documentation are missing, incomplete, or appear inaccurate. The Agency shall additionally report the value of the work performed on the Project by a Covered Contractor whose acknowledgments, certifications, or documentation are missing, incomplete, or appear inaccurate. The Agency may open an investigation of an Owner or Covered Contractor whose reports, acknowledgments, or certifications are missing, incomplete, or appear inaccurate, for possible violation of this Article 81.
(2) The Agency shall determine if it has any ongoing investigation or unresolved determination of violation of any law it enforces for work on the Project by any Owner or Covered Contractor. The Agency shall work diligently to promptly resolve any ongoing investigation. After seeking to resolve any unresolved determination of violation, the Agency shall report to the Controller either (1) the Agency has no ongoing investigation or unresolved determination of violation of any law the Agency enforces for work on the Project by an Owner or any Covered Contractor, or (2) the Agency has an open investigation or unresolved determination of violation, as applicable, the parties involved, and the total remedies ordered in any determination of violation, broken down by worker restitution and other remedies.
(3) The Agency shall contact the DLSE to seek information on any unresolved citation or determination of violation of any law DLSE enforces for work on the Project by any Owner or Covered Contractor. If the Agency receives a report of any such citation or determination of violation, the Agency shall provide the Owner and Covered Contractor as applicable a point of contact at DLSE to facilitate resolution of the citation or determination violation. The Agency shall report to the Controller either (1) the Agency is not aware of any unresolved citation or determination of violation of any law DLSE enforces for work on the Project by an Owner or any Covered Contractor, or (2) there is such a citation or determination of violation, the parties involved, and the total remedies ordered in any such citation or determination of violation.
(4) The Agency shall promptly report any material updates to the foregoing report to the Controller on an ongoing basis.
(d) Controller Bond determination.
(1) Bond release. The Bond may be released if the Agency reports the following under subsection (c) with respect to work on the Project:
(A) The Agency has received and reviewed the reports required under Section 81.4(d) and the reports appear complete and accurate;
(C) The City has no ongoing investigation or unresolved determination of violation of any law the Agency enforces for work on the Project by an Owner or Covered Contractor; and
(D) The Agency is not aware of any unresolved citation or determination of violation of any law DLSE enforces for work on the Project by an Owner or Covered Contractor.
(3) Bond reduction.
(A) If the Agency reports that an Owner has submitted each of the reports required under Section 81.4(d) but the required acknowledgments, certifications, or documentation for one or more Covered Contractors is missing, incomplete, or appears inaccurate, the Bond may be reduced, but it shall be maintained at not less than 25% of the value of the work performed on the Project by such Covered Contractor, plus any Bond value required to be maintained under subsections (d)(3)(B) and (d)(3)(C).
(B) If the Agency reports that the City has an ongoing investigation of any law the Agency enforces for work on the Project by an Owner or Covered Contractor, the Bond shall be maintained without reduction during the course of the investigation. If the Agency reports that an Owner or Covered Contractor has an unresolved determination of violation of any law the Agency enforces for work on the Project, the Bond may be reduced, but it shall be maintained at not less than 125% of the total remedies ordered under the determination of violation, plus any Bond value required to be maintained under subsections (d)(3)(A) and (d)(3)(C).
(C) If the Agency reports that an Owner or Covered Contractor has an unresolved citation or determination of violation of any law DLSE enforces for work on the Project, the Bond may be reduced, but it shall be maintained at not less than 125% of the total remedies ordered under the citation or determination of violation, plus any Bond value required to be maintained under subsections (d)(3)(A) and (d)(3)(B).
(D) By way of example and not limitation, if an Owner that maintains a Bond for $1,000,000 requests release or reduction of the Bond, and the Agency reports that one Covered Contractor that did $400,000 worth of work on the Project failed to file its acknowledgements, and a different Covered Contractor has an unresolved determination of violation of a City ordinance with remedies totaling $200,000, the Bond may be reduced but shall be maintained at not less than $350,000, equal to 25% of $400,000 (or $100,000) under subsection (d)(3)(A) plus 125% of $200,000 (or $250,000) under subsection (d)(3)(B).
(4) Bond payment to remedy labor violation on the Project.
(A) The Bond shall name the City as exclusive beneficiary and may become payable in whole or in part in accordance with this Section 81.5(d)(4) in the amount of any final determination of violation of any law the Agency enforces, including a violation of this Article 81, against an Owner or Covered Contractor for work on the Project; provided, however, that the aggregate liability for any and all claims which may arise under such Bond shall in no event exceed the face amount of such Bond regardless of the amount due and owing under a determination of violation.
(B) Upon the expiration of the time to file an administrative appeal of such determination of violation if no administrative appeal is filed, or upon exhaustion of administrative and court remedies, as applicable, the Controller shall issue a notice of the liability to the Owner or Owners maintaining the Bond and the Bond surety. Any Owner maintaining the Bond or surety or both may file an appeal of the liability under the procedures set forth in Section 81.9. The procedures and requirements of Section 81.9 shall apply to the surety in the same manner as any other Appellant under Section 81.9.
(C) The City shall use such Bond proceeds to satisfy the remedies specified in the determination of violation, prioritizing payment of restitution to workers before payment of any fines, penalties, or other remedies. The remainder of the Bond, if any, shall be maintained under Section 81.5.