‘bureaucratese’; promotions

Q: I happened upon your website ( www.cutredtape.com) and thought you may have some advice and or answer to a particular licensing question. Here is the situation: My Original CA license was issued in1997 and I had three Additional classes added in 2006 and 2007.

I will be applying to Nevada for all four of my CA classifications and attempting a trade exam waiver for three. The fourth, (“C-10”) which they have clearly published, is not part of the reciprocal agreement.

I have viewed the applicable forms online thru Nevada’s website. The language on the application forms is not clear. The language on the Nevada verification form states “must be licensed for 5 years within the last 7” and “use one form for each license number”.

In my situation all classes were added by passing the trade exams and are all under one number that was originally issued in 1997. To my knowledge they do not detail when the other classes were added.

Have you experienced this situation before? If so what was the result? I am wondering if I should be preparing to take the Nevada trade exams for three of the four classes, plus the law? Any feedback would be appreciated.

A: In my 20 years of helping contractors in Nevada, I have encountered this situation many times.

Based on the information you provided, it is unlikely the NV Contractors Board will grant you a waiver of the classifications that were added in 2006 and 2007 or as indicated, the electrical trade (a “C-2” in NV). You must have held the specific license classification — not simply a license — for 5 of the previous 7 years. Since you did not provide me with a license number or the other classes you hold, I cannot say how many exams you ultimately will need to take (note some classifications do not have a trade test). As for the verification of licensure, you can use one form since the CSLB WILL detail when each class was added.

If applying for 4 different trades, you will likely need to file 4 separate applications and detail your experience for each one. This means you’ll need to secure up to 16 notarized reference sheets (4 for each trade).

Q: I am presently the RME (Responsible Managing Employee) on our company license. I was just appointed as the VP for Operations. Do I need to notify the Contractors Board? If so, should we complete the Application to Report Current Officers?

A: Congratulations on your recent promotion. Ironically, even though a ‘change of officers’ has occurred, you do need to notify the CSLB but strangely enough in this case it cannot be done using a Change of Officers form. Because you are the qualifier, you must file an ‘Application to Replace the Qualifying Individual’. This, in effect, means you’ll be replacing yourself, and thereby become the ‘new’ qualifier as RMO, or Responsible Managing Officer.

Contractor On The Job Training

While most people become contractors after ‘on the job’ training, there are some who would like to approach it as a ‘second’ career. While becoming a licensed contractor is possible for most everyone, it’s rarely easy or immediate for anyone. When you buy a contracting corporation how you acquire the license depends on what you ‘bought’ in the deal…

Q: I have a question concerning license change requirements. I have recently purchased an existing corporation with a license of the same classification as my sole proprietor license. I am trying to figure out what applications/forms I need to complete to transfer the corporation license with me as the RMO. The CSLB website is confusing. Could you assist me in making sure I do this correctly?

A: Thank you for your email. “Transferring the corporation license” depends on whether this new business was a stock or asset purchase. If this was a stock purchase you should be able to take over the license number by completing an Application to Replace the Qualifying Individual. If you bought the assets only, you’ll need to file an (7065 Waiver) Application for Original Contractor’s License.

It may be a bit confusing since the CSLB has a second Original License Application – for those taking the exam – that looks nearly identical to the “waiver” forms. If applying for a new license, you will need to file a new bond and Worker’s Compensation certificate (or exemption).

Q: I would like to get a contractor’s license but do not have a construction background. I recently retired from a profession that is unrelated to construction and would like to try my hand at building. Is there any way to get a license in my name without having the experience?

A: Interesting, I received three separate calls in one week with the same question. The “Profession” referenced above was one that typically requires 7-8 years of college and advanced study – which in no way qualifies someone to be a contractor. Being a contractor, as is the case with many professions, is not something you “try your hand at”. Being a contractor takes years of on the job training and even more years of honing a chosen craft or trade. At minimum, the state requires 4 or more years experience at a journeyman level or above to qualify for the specific trade exam. While education can be used in lieu of (up to) two years experience, you cannot simply wake up one morning and become a contractor.

Decide which type of license you’re interested in and contact an established contractor to see if they have a training program. Many trades have an established apprenticeship program that would be very valuable. You always have the option of starting a company; hiring someone as your Responsible Managing Officer or Employee (RMO/RME) and gaining your “on-the-job” experience in this manner. It’s possible, but it’s not easy or immediate.

I would like to publicly thank Healdsburg Lumber Company for hosting the Redwood Empire Remodeler’s Association meeting in mid-July and for including me in their dinner program. I met a number of contractors and suppliers and fielded many interesting questions on how best to deal with California’s government bureaucracy.

Paying for Referrals

You probably have friends and relatives handing out your business cards for referrals. Is it legal to pay them? Anyone interested in forming an alliance with another contractor will benefit from an inquiry about ‘JV’s and GP’s’. A Nevada contractor catches a ‘waive’ to ride in California with our first question…

Q: I currently am a qualifier on a Nevada contractor’s license. I believe California has an agreement with Nevada to recognize the trade certificate from state to state. Can you see if I can get an exemption from the trade test? This would allow me to study for the law test only.

A: Thank you for your email. From my research, it appears a waiver of the trade exam is very likely under California and Nevada’s long-standing reciprocity agreement. This is based on your having been licensed in good standing for 5 of the previous 7 years. You’re correct, with an “exemption” from the trade test, you will only need to study for the law exam.

Q: My question is in regards to referral fees paid by contractors. I am a General Contractor who specializes in home remodeling and custom homes. We work with real estate agents quite often and I was wondering if paying a referral fee for them sending work our way is legal? These referrals simply involve giving a new homeowner my business card. Also, is it legal for contractors to pay referral fees to each other for passing on work? Thanks for your input!

A: B&P Code section 7157 addresses inducements or “kick-backs”. While I am not an attorney, based on my reading, my opinion is that it would be acceptable to pay a real estate agent a referral fee in the manner you describe. However, there may be some regulation against this in the code sections governing the real estate industry. NO kickback may be given to the new homeowner or to another contractor.

The above code section deals with home improvement contracts and states in part, “…no person may promise or offer to pay, credit, or allow to any owner, compensation or reward for the procurement or placing of home improvement business with others.” This Section goes on to say that no contractor shall pay any compensation of any kind to any other contractor except in the performance of his or her work as a subcontractor.

Q: We are two sole proprietor general contractors’ that want to form a business partnership. My research has taken me to the joint venture contractor’s license. Could you tell me if this is an appropriate way to put a partnership together? Will our present licenses be affected?

A: Forming a Joint Venture (JV)) would be one option. Forming a “general partnership” (GP) would be a second option. For contractor licensing purposes a JV consists of two or more licensed contractors both (or all) of which must be active and in good standing. A partnership can be formed as long as one listed individual holds a valid contractor’s license. Joint Ventures are the simplest type of license to apply for and usually take less than 10 days to be issued.

Because trouble often begins when partnerships break-up, whether you form a JV or GP, I would strongly recommend consulting an attorney to draw up a legal agreement. The new license will belong to both of you and should not impact your existing sole owner licenses.

LLCs and RMEs

You’re ‘liable’ to get ‘hot under the collar’ if you don’t know the rules for working in the sun. As this is written, temperatures in California, Nevada and Arizona are reaching 120 plus, under sunny blue skies. Several contractors get a healthy helping of expert ‘alphabet’ soup, including ‘Q&A’ loaded with LLC’s and RME’s…

Q: We currently have 3 branches here in California all of which are owned by our parent company under one license. We have just hired a new individual to be the RME. He will be working full time at one branch and training our installers at the other branches. He will be responsible to supervise and check installs for every branch. Is it proper for him to be the qualifier for all our branches? Can the qualifier (RME) be an employee of another division of our parent company? If these are dumb questions please let me know.

A: The only dumb question is the one NOT asked. As long as the work is being performed under one company name with one contractor’s license your Responsible Managing Employee (RME) can be responsible for all work performed by the different branches. However, if these “branches” were actually freestanding companies, then each one would need its own license and own qualifier.

Although the division you reference may be owned by the same parent company, the RME is supposed to be employed by the entity that holds the contractor’s license and is performing the work.

Q: We have an associate – “Dave” – with an active CA contractor’s license (“B” and “C-36”) and we would like to bring him on as an RME or RMO. Currently we have a sole proprietorship, and “Dave” has his own as well. We’re considering changing the business form to a LLC or LP and forming a subsidiary company with Dave to start working together. What is the best way to deal with making him an RME/RMO so we can bring in his contractor’s license, while giving everyone involved the maximum amount of liability protection?

A: You have several options. Since you hold a sole owner license, “Dave” can become the RME on one or both classifications (as long as this does not duplicate your current license class). You could form a Limited (LP) or General Partnership (GP) between you and Dave (with Dave as RME or qualifying partner) or you could form a corporation with him as the RME or RMO. The RMO option is by definition only for corporate licenses. Finally, both you and your associate could become licensed as a Joint Venture. Forming a Limited Liability Company (LLC) is not a good option since the CSLB will not issue a license to this type of entity.

If Dave is a RME on any of the options above, he will need to inactivate his current license. As a RMO (or qualifying partner) owning 20% or more, he has the option of keeping his license active.

I cannot address the issue of “liability protection” except to say that no matter what type of license he qualifies, Dave will be responsible for the work performed.

CONTRACTOR’S HEAT ADVISORY: The July 4th holiday week was the hottest of the year and likely the start of a long hot summer. With this in mind, I think it’s important for all employers to check out the latest information from Cal/OSHA to ensure that workers are protected from the heat.

According to Cal/OHSA, when employees work in hot conditions, employers must comply with new permanent heat illness prevention standards and take special precautions in order to prevent heat illness. Heat illness can progress to heat stroke and be fatal, especially when emergency treatment is delayed. An effective approach to heat illness is vital to protecting the lives of California workers.

To learn more, visit www.dir.ca.gov/dosh/HeatIllnessInfo.html

Taking a Partner

Life is often about changes. For our lives and our businesses. To paraphrase John Lennon, ‘life happens to you while you’re making plans’. Imagine these changes. Have you ever thought of taking a partner into your business? How would it work? Don’t you think the qualifier on your license would like to retire one day? If something happened in your earlier life that might affect your future plans?..

Q: I have read some of your past columns and found them very informative. Here is a question that I could not find a specific answer to. I’ve held a contractor’s license since 1997 and would like to add a General Partner. I would be the Qualifying Partner owning a majority of the business. I realize I need to fill out an application for an original license and pay $400 for the application fee. My questions: 1) would there be a problem with the General Partner only owning a small portion of the business (say 10%or less)? 2) Do I need to fill out the Cert of experience page since I’m a licensed contractor? 3) Would I need to retake the exam?

A: Thank you for your email. It would not be a problem if the GP owned 10% of the business. In fact, from my experience, the GP could own as little as 1% and this would be acceptable to the Contractors Board.

You’re correct; a new original license application must be completed. You must also post a new $12,500 bond and (if applicable) Worker’s Compensation certificate. The CSLB will issue you a new license number for the partnership. There is no need to complete the Certificate of Experience page or retake the exam. For your information, by definition the “Qualifying” Partner (QP) is also a “General” Partner.

Q: Our current contractor’s license is in the name of the President of our company. He is nearing retirement and I wanted to know: 1) Can his existing contractors license be transferred over to one of the other company officers? 2) Would this officer have to apply for his own new license first? 3) Is testing required? Thank you in advance for your expert advice.

A: As we discussed, the license belongs to the corporation, not individually to the company President. With him nearing retirement, one of the officers can apply to replace him as Responsible Managing Officer (RMO). This officer will NOT need to apply for his own license first. In fact, the only way to secure a waiver of the license exams, is for the qualifier to replace the President on this existing license.

As reported at a recent CSLB Licensing Committee meeting, the Board has received nearly 111,000 transmittals from Department Of Justice related to their Fingerprinting program. A surprising 15.3% (about 17,000) had a report of some criminal conviction in their past (either from the DOJ or FBI). To date, the Board has denied 660 applications based primarily on this information. All individuals listed on original, replacement, additional class, or home improvement salesperson applications are required to submit fingerprints as part of the licensing requirements. This also applies to applications to report new corporate officers.

Outgoing Board Member Paul Baldacci, requested that the CSLB investigate adding a requirement that all active contractors carry General Liability Insurance as a condition of licensure. The Committee took this under advisement and may discuss the topic at future meetings as part of the Board’s long-term Strategic Plan.