The Federal Bonding Program for convicted felons is a free federal insurance program that reimburses an employer if a new hire with a criminal record steals money or property on the job. The bond covers up to $25,000 in losses, costs nothing to either the employer or the worker, and is designed to remove the risk that keeps many employers from hiring someone with a felony on their record. Since 1966, more than 52,000 bonds have been issued, and fewer than 1 percent have ever resulted in a claim.1U.S. Department of Labor. US Department of Labor Awards $725K to Help At-Risk Workers
What the Bond Covers
A federal bond is a fidelity bond. It is a form of business insurance that pays the employer back if the bonded employee commits theft, forgery, or embezzlement.2U.S. Department of Labor. ETA Advisory File Text There is no deductible. The employer files a claim and is made whole up to the bond amount.
What the bond will not do is just as important. It does not cover poor workmanship, on-the-job injuries, or workplace accidents. It is not a bail bond, a court bond, or the kind of performance or license bond that a self-employed contractor might need. It is theft insurance, attached to one specific employee in one specific job.
Who Qualifies
People with an arrest, conviction, or prison record are the program’s core eligible group, but the bond is available to anyone whose background makes them hard to insure through a commercial bonding company. That includes:
- People with a history of alcohol or drug abuse
- Welfare recipients
- People with poor credit or a bankruptcy history
- Economically disadvantaged youth and adults without a steady work history
- Individuals dishonorably discharged from the military
Two conditions apply on top of eligibility. You must already have a firm job offer with a specific start date, because the bond is tied to that particular job rather than to you as a person. You must also meet your state’s legal working age. Self-employed workers and 1099 contractors are not eligible; the bonded worker has to be a W-2 employee with federal taxes withheld.2U.S. Department of Labor. ETA Advisory File Text
How Much Coverage the Employer Gets
Bonds are issued in $5,000 units. Most jobs need only one unit, and coverage can be stacked up to $25,000 where the worker will realistically have access to more than $5,000 in cash or property at once, such as a bank teller or a warehouse manager responsible for high-value inventory. The U.S. Department of Labor advises keeping the larger amounts to positions where the risk actually warrants them.2U.S. Department of Labor. ETA Advisory File Text
Each bond runs for six months from the employee’s first day. When those six months end, coverage expires automatically. The employer can buy continued coverage at commercial rates after that, but many do not need to, because they now have six months of firsthand evidence that the employee is trustworthy. Bridging that first stretch is what the program exists to do.
How to Get a Bond Before the Start Date
Either the job applicant or the employer can start the process by contacting a Federal Bonding Coordinator in their state. Every state has at least one, and you can find yours through the program’s official site at bonds4jobs.com or through a local American Job Center.3U.S. Department of Labor. American Job Centers
The coordinator will ask for the employer’s name and address, the job title and work location, and the applicant’s identifying information. Paperwork is minimal and bonds can usually be issued quickly. One detail trips people up: the bond has to be in place before the employee’s first day on the job. Once someone has already started work, the window has closed.
Pairing the Bond With the Work Opportunity Tax Credit
An employer who hires someone through the bonding program may also qualify for the Work Opportunity Tax Credit, a separate federal incentive that reduces the employer’s income tax. For a qualified ex-felon, meaning someone hired within one year of a felony conviction or release from prison, the credit can reach $2,400.4Internal Revenue Service. Work Opportunity Tax Credit The credit is calculated as a percentage of up to $6,000 in qualified first-year wages, with the percentage depending on how many hours the new hire works during the year.5Office of the Law Revision Counsel. 26 USC 51 – Amount of Credit
The deadline is strict. The employer must submit IRS Form 8850 to the state workforce agency within 28 calendar days of the new hire’s start date.4Internal Revenue Service. Work Opportunity Tax Credit Miss it and the credit is forfeited no matter how long the employee stays. The bonding coordinator can help track the timeline, but filing the form is the employer’s job.
What the Track Record Shows
Of the more than 52,000 bonds the program has issued since 1966, fewer than 1 percent have led to a claim.1U.S. Department of Labor. US Department of Labor Awards $725K to Help At-Risk Workers That figure is lower than the loss rate most employers see across their general workforce. For an applicant with a felony conviction, the bond gives an employer a reason to say yes when a background check would otherwise end the conversation. Combined with the WOTC credit, the same hire can cost the employer nothing to insure and return up to $2,400 in tax savings.