CSLB Recognition

Over a hundred people got special ‘bracelets’ from the CSLB in recognition of their ‘work’. Can a contractor preserve a partnership license while removing a partner? ‘Generally’ that has some ‘limited’ consequences. Another contractor discovers why what worked for him one year, may not the next when it comes to providing Worker’s Comp coverage…

Q: I am having FITS with our license. I’ve attached a copy of the Worker’s Comp Cert that was sent to the Contractors Board. This is the same as was sent last year. I don’t understand what the Board is asking for in their form letter, and why the Cert they returned is unacceptable. What do I need to do? Thank you for your input.

A: It would appear this is a new Worker’s Compensation Certificate. My research indicates the one from last year is from a different insurance company. Since a Responsible Managing Employee qualifies your license, the CSLB will not allow an exemption or coverage through a leasing company (which it appears you have). I would contact your insurance agent and discuss a change back to the company you had last year.

Q: We have a limited partnership contractor’s license in several states. In CA, we want to replace one general partner and the limited partner. Can this be done and if so how?

A: If you change a general partner on a partnership license this will result in the licensed being cancelled. You may however substitute the limited partner with no penalty. The CSLB has a form to do this. If in fact the existing partnership has dissolved, you should apply for a new one. This will result in a new license number being issued.

Q: I hold a “C-10″(electrical) and “C-20″(HVAC) license. Sometimes work will be required on a project that does not fall under either of these classifications. Can I get into trouble if I perform this work?

A: B&P Code 7059 addresses your question. A specialty contractor can perform a contract involving the use of two or more crafts or trades if the work is “incidental and supplemental” to the work for which you’re licensed.

The CSLB recently announced the results of its biggest undercover operation ever. The Board’s entire Statewide Investigative Fraud Team (SWIFT) conducted sting operations in 7 different cities. These included Escondido, Orange, Hemet, Redondo Beach, Brentwood, Sacramento and Davis. A total of 167 people were arrested and will need to appear before a Superior Court to answer the misdemeanor charges. About a dozen more serious criminals were ‘cuffed’ and hauled off to jail.

According to CSLB Registrar, Steve Sands, “we could only pull off this type of operation with the cooperation of industry, local cities and law enforcement agencies, District Attorneys and our partners in the Fraud Division at the Department of Insurance”

As I have stated previously in this column, SWIFT’s goal is to combat the underground economy and level the playing field for licensed contractors by getting unlicensed individuals off the street.

Unlicensed Contractors Give Bad Name

They are not actual rats, but they don’t deserve any more respect than real vermin. Who? Unlicensed contractors who give legitimate licensed contractors a bad name and cause real damage to consumers who fall victim to their ‘low-down’ pitches. Now, another layer of ‘rat’ protection is actively seeking to trap these criminals. While most of what I write about is ‘clear’, sometimes I need to add to a prior column. What was not completely transparent in a recent column regarding potential problems with B&P Code 7031b, will now be given some ‘clarity’…

As intended, my recent exposure of a potentially serious problem for contractors has stimulated discussion of the issue. However, I believe a clarification may now be required for the column on B&P Code Section 7031 based on a few comments I’ve received.

In its entirety, my column (of 3/5/07) explained that 7031(b) was written to address “unlicensed” contractors. Unfortunately, if reading only the first portion of the column, a reader might inappropriately conclude that the law makes it a foregone conclusion that monies previously paid on a contract must be repaid if the license was not in good standing. My intent was to show that some attorneys are using section 7031(b) as a hammer held over the head of licensed contractors. Taken out of context the third paragraph for example might give an inadvertent impression. As of now, the State Supreme court – nor any other court that I’m aware of – has decided this issue. Hence, the reason I wrote of the need for discussion or legislative action to clarify what I believe to be the Legislature’s original intent: Go after the UNLICENSED contractor not the licensed company who may have a short-term suspension. However, until a ruling or legislative action clarifies this section, a threat remains for contractors.

Q: I am a roofing contractor and have a question that you may know the answer to. As of the first of the year, the State Contractors Board has started requiring that all Roofing Contractors (with employees or not) have an active Workman’s Comp Policy. I would like to know why no other trades have been required to follow this policy. Don’t get me wrong on this matter. I think it’s for the good. Thank you for your response.

A: This is a good question. From information presented at a recent CSLB meeting, it is my understanding that there are two main reasons roofers were singled out. First, there were relatively more problems with Worker’s Comp exemptions being filed by “C-39” contractors when in fact the company had employees. Second, the “industry” asked for this as a way to self-regulate and protect those “C-39” contractors that are playing by the rules. Depending on how this turns out, other trades may be next.

Those working without benefit of a contractor’s license should likely steer clear of Yolo County. In addition to the undercover efforts of the CSLB’s SWIFT enforcement stings to catch unlicensed contractors, a recent Sacramento Bee story noted 60 people arrested by the URAT program. The Yolo Unlicensed Response Apprehension Team –URAT- mounted four undercover stings in February. This is a county-based effort to reduce unfair competition for local business and protect county residents. As Jimmy Cagney is purported to have said, “take that you dirty rats!”

Is it right to do wrong?

Is it right to do wrong, if it’s only once in a while? ‘Are you only guilty if you get caught?’ I saw that ‘philosophy’ on a T-shirt recently and that may explain the first question. If you ‘bet’ on working in Nevada, it’s a little more difficult than dropping a chip on the table…

Q: My question is what could happen to me if I do some work outside of my classification? It would be rare since I almost always use subs, but I was recently asked to perform this work and would like to know what is the worse problem I might face?

A: This is a tough question, since there are so many variables. It would also help if I knew what classification you hold and what work you consider “outside of my class”. If in fact this work is beyond the scope of your license and the work is self-performed, you may have a problem in court (if it gets that far) collecting any money you are owed. You could also face an investigation by the CSLB and subsequent citation if the work results in a complaint being filed by the property owner.

Since you are aware that these projects may require a different license than you hold, I would suggest applying for this additional classification as soon as possible. Why take any chances when in a few months, you can likely apply, test and be issued the proper classification. Based on our brief discussion, you appear to have the required experience qualification for this trade.

Q: Our RME just left the company after working for us over 10 years. We understand that after 90 days if we have not qualified someone new, our license will be suspended. Is this correct? Also, what is the best and quickest way of getting someone new listed on our license? At this point, it will likely be one of our officers.

A: You are correct. The CSLB allows 90 days to replace a qualifier who has disassociated from the license. In most instances, the new RME or RMO can become qualified within this time period. If it appears the process will take over 90 days, you can request (in writing) a second 90-day extension.

Since your license is over 5 years old, your new qualifier (in this case one of the officers), is likely eligible for a waiver of the law and trade exams. This is allowed under B&P Code 7065.1(c). The officer must be able to show that he or she has been employed with the corporation – in a supervisory capacity — for at least 5 of the prior 7 years and the license has been in good standing during this same period of time.

Q: I would like more information on getting my Nevada state contractor’s license for remodeling homes. Other than passing the exams, what obstacles am I likely to encounter during this process.

A: The Nevada license application spans 23 pages. Among the requirements are securing a statement from your bank; providing a detailed financial statement (or one compiled by your CPA); and getting 4 notarized references that attest to your 4 plus years experience in the building trades. Once the application is submitted and reviewed, the State Board will notify you regarding their testing requirements. After you pass both the business management and trade exams, the Board will notify you regarding the contractors’ bond amount. This bond is on a sliding scale and is tied to the bid limit you list on your application.

Dangers of Late Renewal

You will not hear any trumpets blaring, bells ringing or alarms sounding warning but I have a serious call to action for contractors. Don’t read this at your own peril, or to paraphrase John Donne, ‘don’t ask for whom the bell tolls; it tolls for thee’! Like blood in the water it doesn’t take ‘sharks’ long to find their prey and a recent change in law has created the perfect environment for a ‘feeding frenzy’ all at the expense of contractors…

As many long-time readers know, I have written about the danger of a late renewal, which results in your contractor’s license expiring – even for a short time. What is apparent, based on a number of recent phone calls to my office, is the peril that exists for contractors who are unaware their license history shows an expiration or (bond or workers comp) suspension.

This week several attorneys contacted me and the main topic was B&P Code Section 7031(b). For the uninformed, this law allows a contractor to be sued for full repayment of all monies paid on a contract if their contractor’s license was NOT in good standing for the entire duration of the project. Lawyers refer to it as “disgorgement”: an ironic term requiring repayment of “ill-gotten” gains that is imposed on “wrongdoers” by the courts.

According to the Contractors Board in one of their prior newsletters, “In its decision, the (CA Supreme) Court ruled that a contractor cannot sustain an action to recover payment for work performed unless he or she was properly licensed for the entire duration of the work. In MW Erectors, Inc. v Neiderhauser Ornamental and Metal Works Company Inc, the Court held that a subcontractor (MW Erectors) who performed approximately $1 million worth of structural steel work on a major hotel project could not recover payment for the work because he had worked without a license for the first 18 days of the project”.

You’re licensed so why worry? Well, if your license was expired or suspended for even one day, you could be subject to these penalties – even if the reason for the renewal lapse or bond suspension was inadvertent. Sometimes knowledge of these lapses are not known for years – until you’re embroiled in a lawsuit with attorneys fighting over your future existence.

It is time for the State Legislature to recognize this problem and pursue a solution. It’s hard to believe that when the Legislature enacted this statute, they wanted one of their constituents to suffer a terrible financial loss because of a one-day lapse in their bond or license renewal. It may be your fault for sending in a renewal the day after it expired or it may be that you sent in the renewal weeks prior to expiration (with one signature missing) and it was unacceptable; or your bonding company may have dated the bond such that it caused a lapse or your Worker’s Comp lapsed and the new certificate was a day or two late arriving at the CSLB. The reason doesn’t matter. If you were not “properly” licensed during the entire project, your future is in the hands of the court.

I may be just a lone voice in the wind. But unless contractors individually and collectively through their associations, builders exchanges, and related organizations take action, there are going to be fewer construction companies in the future. Lose one court action, which requires you to pay back all money on a project — in addition to not collecting money you feel you’re due – and you’re out of business! Don’t think it can happen to you? Think again.

If enough contractors write, call or email their state legislators and associations — and even the Contractors Board — to let them know this law -in light of the Supreme Court case – needs to be re-examined, it just may get done.

The status quo is not good government, regardless of what the Supreme Court says. 7031(b) was enacted to go after the unlicensed contractor; the guy who does not have a license; has never applied for a license; and has little intention of ever becoming licensed. This is the guy who is busted regularly by the CSLB for ripping off unsuspecting consumers and rightly should not be able to profit from these illegal activities. Unfortunately 7031(b) has become a ‘monster’ lurking in the shadows ready to rear its ugly head and to take a huge bite out of your, the legitimate contractor’s, bottom (line).