General Questions for Contractors

Some ‘general’ questions from our contractors this time. Are you an RMO? How much do you get paid for qualifying the license? A contractor is seeking ‘credit’ from the Board, while another wants to be ‘shown the money’. Finally, I’ll help a contractor find the fastest way to add some low voltage ‘juice’ to his bids.

Q: I am interested in getting a General contractor’s license. I do not want my application to be rejected when I apply, so would like some advice on completing the application to ensure that it will not be rejected. My experience all comes from fixing my own house for the past six years. This should give me at least 2 years of journeyman experience. I have an engineering degree that should equate to 2-3 years of experience.

A: While I would be happy to provide you with my expertise, there is no way to “ensure” that your application will “not be rejected.” I believe your assumption that the CSLB will give you “2 years journeyman experience” for fixing your own home is probably overly optimistic. In all likelihood they will give you a fraction of this (maybe a year). There is no way to determine this for sure without filing the application with the CSLB so they can conduct a complete review and, if needed, an investigation of your background. Your degree in engineering should get you 2 years credit but I don’t think the Board will give you more than this (for a “B” license).

Q: A friend recently approached me to become his RMO and I know that as a General Contractor I have legal responsibilities to the company that is being formed. I would like to know to what extent, and how they are normally compensated beyond the 20% of ownership of the newly formed company. Can you help me find material to read so I can be informed?

A: Compensation between a company and the Responsible Managing Officer (RMO) is typically negotiated by the two parties. There is NO “normal” compensation that I am aware of; however, I would assume that as a full time employee, you would be compensated commensurate with other company personnel. The 20% ownership you referenced is not a requirement unless you intend on keeping your existing contractor’s license active.

Q: Our attorney recommended you after I contacted him about a legal issue for our company. I then read a couple of your columns online and think they are most helpful on keeping up with the ever-changing regulations in California.

We specialize in low voltage install in which we hire sub contractors under our “B”. We now want to add this “C” classification to our current General contractor’s license or get a new “C-7” license, whichever is most expedient.

A: Thanks for your kind words. It is easier, faster and less costly to add a classification to an existing license than to apply for a new original license. Your qualifier must have 4 or more years experience (within the past ten years) in the “C-7” low voltage electrical trade and should complete an application for additional classification.

Suspected Fraud, Fictitious Names

Suspected fraud, fictitious names and ink stained fingers tell these contractors tales. Unfortunately, some stories don’t have a happy ending. For two of these contractor’s problems the solutions are relatively straightforward, but another will find my answer ‘stings’ and ignorance of the law is no excuse…

Q: I passed my exam and was given a letter that says I need to provide a $12,500 contractors bond, proof of Worker’s Comp and a completed asbestos open-book exam. I know I submitted all three of these items and also was fingerprinted. Do I need to provide the CSLB with these items again? By the way, I don’t plan on hiring any employees.

A: On most occasions, after a waiver application is posted (accepted) or the applicant on an exam application passes the license tests, the Contractors Board will issue what is referred to as “bond-and-fee letter”. This details what items are necessary before the Board will issue a license number. Unfortunately, on some occasions, the items being requested have previously been submitted as you indicated. It may be that the bond, asbestos exam and Worker’s Compensation exemption (because you will have no employees) are in the Board’s computer files but the testing center did not realize this. Or it could be the three items in question have not yet been entered into the Board’s computer system. I would suggest re- submitting copies of everything they requested along with your “pass” letter. While I realize it is not often feasible, it is advisable to hand-deliver documents to the CSLB and get a stamped copy.

Q: I went to renew my fictitious name statement and open a different business account because I discovered there was some fraud on my present business. I put my wife on the new business name. Do I need to notify the CSLB? Thanks for your input.

A: If your only goal is to do business under another fictitious business name (DBA) then you should notify the CSLB of this name change. It appears you are in the process of changing this with your Local County or city. On the other hand, if you will be creating an entirely new (i.e. second) business, then you will need to apply for a new contractor’s license.

Q: Our family business (Sole Owner) was approached by a CSLB agent posing as a consumer interested in purchasing a product that we sell. We were cited for violating a California CSLB law. The reason for the STING was that a competitor (not a consumer) filed a complaint with the CSLB. There are two parts to our company one for the marketing, fabricating and sales arm and the other is our installation side (which has a license in good standing).

Why can’t we sell to a customer with or without installation costs and have the work done by our contractor arm? Thank you for your time and consideration and we look forward to your input/direction.

A: If you are doing business under one name but advertising under a different name, this is likely the reason for the sting (regardless of whether it was initiated by a competitor or consumer). Not only do you need the proper license “in good standing” but the business name style you use to contract must be the same as listed in the CSLB records.

It would appear that all your advertising uses one name but the contracting is performed under a second business entity. Since the unlicensed business is not only selling but also contracting to “INSTALL”, both entities need a license.

I would suggest applying for a second license for the “marketing, sales, fabrication” business or discontinue all contracts that use the unlicensed business.

Working Across State Lines

Some of the most interesting questions, or strange twists, on contractors licensing law come to me from contractors interested in working across state lines. While California has its own comprehensive and complex rules for contractors, other states add their own unique requirements you need to know before you bid across the border…

Q. I am licensed in California and applying for a contractor’s license in Arizona. One of their licensing requirements is securing a Transaction Privilege Tax (TPT) Number. Is there an alternative to posting the required bond? Can the estimated tax be paid up front in lieu of a bond?

A. This is a very interesting question. Arizona does have a “License Application For Bond Exemption”, however, it may be very difficult to meet the State’s strict exemption guidelines. Specifically, an applicant would need to submit a “letter of good standing verifying timely payment of all sales AND transaction privilege taxes from another state…” Since California does not have a TPT, complying is easier said than done.

As I had indicated in a column a few years ago, Arizona may also consider issuing a TPT number if the applicant pre-pays ALL taxes that will be owed. In many instances this is a problem since it’s difficult to know the full extent of work to be performed. However, if you know your company will only be working on one job per year, and the tax owed can be calculated, this “pre-payment” might be a good option.

Q: I currently hold a “C-7” and “C-10” license in Calif. We install residential wiring, Fire alarm and voice/data communications cabling. Will Nevada consider me for a waiver of any exam?

A: The Nevada Contractors License Board will require a trade exam for all the work you describe. The “C-2” Electrical classification (and the 7 subclasses such as “C-2C” “fire detection”) does not fall under California’s reciprocity agreement with Nevada.

Q. We are applying for a new contractor’s license in California and Nevada and want two people to take the test (in case one fails to pass). Can we do this on one application?

A. I have been asked this on several occasions and the answer is, Yes for Nevada, No for California. Nevada will allow a corporation to file one application and list two (or even three) qualifiers. For instance, you can have one person qualify the trade portion while a second employee or officer takes the business management exam. You can even designate a third person to be the “back-up” for both the law and trade.

The same thing in California would take two applications; however, it may not accomplish your goal. Let’s say you file the first corporate application listing the #1 qualifier and all officers. The second applicant would then apply for an inactive sole owner’s license as a “back-up”. If the first qualifier fails and the second qualifier passes, you cannot switch qualifiers on the main application. You would need to start over by withdrawing the first application and filing a second corporate application listing the person who passed.

Cost of License

What’s it cost to get your license now? Those fees and associated costs have risen with some new requirements. Is there a ‘handywoman’ license? Every contractor with employees should take note of the important news regarding a recent court decision…

Q: I’m going to need a CA contractor’s license. I’ve been working as a cabinetmaker outside the State for a dozen years and would like to get a general contractor’s license or a license to only do cabinets and trim if there is such a thing. Could you please give me some information including how much it will cost and how long it will take?

A: You can install cabinets and trim with either a “B” (General Building) or “C-6” (Cabinet and Millwork) license. If you’re only going to do cabinets, and this is where your background is strong, I would recommend the specialty “C-6” classification. The Contractors Board fee is $400 (plus the cost of fingerprinting); figure on spending up to $200 on a 2-year contractors bond; and if you hire employees, factor in the cost of Worker’s Compensation. It is presently taking 12-14 weeks to secure a license from the date your application is submitted to the CSLB until your license is in hand. This assumes you pass your exams and clear fingerprinting without any “issues”.

Q: My individual license is inactive since I am the RMO on another license. My insurance company just sent me a bill to renew the bond. Does my inactive sole owner license still need this?

A: NO! An Inactive License does not need a $12,500 contractors bond. I suggest you bring this to the attention of your insurance company since it appears they do not realize your license is inactive.

Q: How do I obtain a handyman’s license for California? I would like to know how much money it would take, and where I would go for information about the license. Any info would help.

A: The State of CA does not have a ‘handyman’ or ‘handywoman’ license. Any work you perform over $499.00 requires a contractor license. Depending on the type of handyman work you perform, you may be able to get by with a general building (“B”) or you may need several specialty classes (such as plumbing, fencing, electrical, etc.) You will need to show at least 4 years experience (within the past 10 yrs) in the trade’s or craft you want to work in.

The CSLB requires that every new business applying for a contractor’s license “must have more than $2500 operating capital” (current assets minus current liabilities). Please call our office if you would like any further information.

Word just in from the law firm of Abdulaziz, Grossbart & Rudman regarding a recent decision by the State Court of Appeals. Here’s the scenario:

A contractor sues a homeowner for breach of contract. The homeowners file a cross complaint arguing among other things that the contractor was unlicensed. The contractor appeared to be licensed upon reviewing CSLB records; HOWEVER, the contractor greatly UNDER REPORTED payroll to his Worker’s Compensation insurance carrier. The Court determined that failure to “maintain worker’s compensation insurance” INCLUDES under-reporting payroll.

Accordingly, the contractor was judged to be “unlicensed” for a period of time and therefore could not collect his original claim of $11,000. In addition, the contractor was ordered to repay the owners $27,000; was hit with punitive damages of $10,000 and had to pay almost $100,000 in attorney’s fees.

The moral of the story: If you maintain worker’s compensation insurance, you must be truthful in reporting your payroll. This also goes for contractors who file an exemption from Worker’s Comp but, in fact, have employees.