Inactive California Contractors Licenses, HAZ and RME

Who can add the HAZ to their license and who can’t? A contractor helps us learn those limits as another discovers he may have more time than he thought to replace his Responsible Managing Employee. While you can’t use someone else’s contractors license, you can work with it and I’ll explain how…

Q: My brother-in-law has an inactive general “B” sole proprietor license in California. Is it possible for me to use his license if it’s reactivated? Any information would be appreciated.

A: It is against CSLB regulations to use someone else’s license even if it’s a close relative. In fact, the CSLB could consider use of a contractor’s license in this manner to be a serious offense.

One option would be for your brother-in-law to reactivate his license and hire you as an employee. Of course, all work would be performed under the auspices of his license and would require him to secure Worker’s Compensation to cover you.

A better option might be for you both to form a new partnership or corporation with him as the qualifying individual and you as a general partner or officer respectively. In this way, the new company, which you’ll legally be a part of, can contract for general building work. Your brother-in-law’s current license does not need to be reactivated in this case because the entity will be issued a new license number.

Q: I currently hold a General Engineering “A” license and want to add the HAZ (Hazardous) addendum to it. I have operated an environmental consulting business for over 15 years including investigation and site remediation. I also previously owned and operated a large environmental testing laboratory for over 10 years. Would I need to take the exam to get this addendum?

A: The CSLB will not grant a waiver for the Hazardous Substance Removal Certification test. All applicants must sit for this exam. The application is one page and no certification of work experience is required. Contractors who want to add the certification to their existing licenses must hold the “A”, “C-12” (earthwork and paving), “B” (general building), “C-36” (plumbing), or the “C-61″/”D-40”, limited specialty category for service station equipment and maintenance.

Q: I applied to replace the Qualifying Individual on our license a few weeks ago. I know I must take both exams, which I hope will be scheduled soon. My concern is that since I only have 90-days to replace the RME (he left almost 2 months ago), our license might be suspended. Any suggestions on what we can do to prevent this from happening?

A: Yes, you can request a 90-day extension. In your situation, the Contractors Board should give your company the needed time to replace your RME with no suspension. However, it is important that your request be filed IN WRITING prior to the initial 90-day grace period. By law only one 90-day extension will be granted. By the way, my research indicates that your application was accepted a few days ago and you’ve been scheduled for an exam at the end of next month.

Contractors License Waiver, Fees and Liens

With aggressive ‘stings’ the CSLB is taking a toll on unlicensed contractors in seeking to protect California consumers from shoddy work, lawsuits and outright fraud. Will experience in this ‘underground economy’ stand the light of day when applying for a license? We also learn how a ‘family’ waiver applies to a corporate license. Two contractors help us recall some basics about ‘fees’ and liens…

Q: Can you please email me information regarding licensing a corporation as opposed to licensing an individual? Is there a difference?

A: Basically, there’s little difference administratively between licensing a corporation and sole owner with the CSLB. With both you’ll be required to complete and file an original license application; pay a $400 state fee; post a $12,500 Contractors Bond; test if required; and file a Certificate of Worker’s Compensation, if you have employees (for corporations, a registration number from the Secretary of State will also be necessary).

The key is becoming licensed for the type of business entity that will be handling construction and signing contracts. From a tax or legal perspective I recommend consulting a lawyer or tax specialist regarding any differences in business structure and organization.

Q: I just read one of your columns that references “working for cash”. My husband submitted his license application and has come up for investigation. Do you have any recommendations on how much we need to submit? How does he prove his time that was paid under the table by a company that is no longer in business?

A: I would suggest giving the Board as much information on your husband’s background as you can. This would include tax returns, W-2, 1099’s, permits, etc. Unfortunately, the Board rarely counts experience that cannot be verified including “working for cash” under the table.

Q: I have a general question regarding the Preliminary 20-Day Notice. Is this notice only submitted to the consumer or does a copy also need to be on record with the CSLB?

A: You do not need to file this or any other lien notice with the Contractor’s State License Board.

Q: I came across your web site and read about the “family waiver”. My father is retiring and I want to take over the family business. I have worked for him over 15 years. Can you give me more information and let me know if you think this waiver is possible.

A: The waiver is not only possible it would be likely given your background and the number of years (25) this license has been in existence. However, my research indicates that since your father is licensed as a corporation — not a sole owner — the “family waiver provision” (subsection b) of B&P Code section 7065.1 does not apply.

Nevertheless, a different portion of this section (Subsection c) still allows for an exam waiver because you have been working for the company for over 5 (of 7) years in a supervisory capacity and want to apply for the two classifications presently held by the corporation. As with any waiver request, there is no assurance it will be granted since this can only be determined after a completed application has been reviewed and accepted by the CSLB (in this case for Replacing the Qualifying Individual).

Q: What is the State fee to reactivate my CA contractor’s license? Also, how do I get the proper form to do this?

A: To reactivate an Inactive contractor’s license, you can call or write to the CSLB or visit their public counter in Sacramento. The Board prints these application forms upon request. The state fee is $300. Plus, in most cases, a current Contractor’s Bond will also be required to bring the license back to an Active status.

Multiple California Contractors Licenses and RMO

While contractors can ‘keyword’ search my website for some of the answers they need, you may need more personal assistance. That’s why we’re here. As contractors have learned from reading our Q&A over the years, the complexity and interpretation of licensing law can be confusing even in the simplest of situations. For instance, can you hold three licenses at one time? Can you bid for contracts without a license? Can a partnership and a corporation share the same license?

Q: I just saw your web site, cutredtape.com, and found there is a lot of great information. But, I hope I can get my questions answered here. Or maybe you can tell me where to find these answers?

My friend and I want to establish a company. This company will do the marketing and get job contracts from all sources. We don’t have a California contractor’s license, but we can find licensed contractors to work for the jobs we get. Do we need to register our company with the CSLB and have our own California contractor’s licenses to open this company? What type of company (LP, GP, JV, or others) should we register?

A: The answer to the first part of your question is YES, a license is required if you take a contract that involves any building, installation, repairs, additions, alteration, or improving property regardless of whether you self-perform or sub out the work. The second portion of your question regarding business structure may best be answered by consulting a tax professional. You may be licensed by the CSLB as a Limited Partnership (LP), General Partnership (GP), corporation or sole owner. A Joint Venture (JV) consists of two or more entities that are already licensed.

Q: Can we register three licenses (“A”, “C-10” & “B”) under one company name?

A: Yes, if you have one or more qualifiers that already hold these classifications you can apply using the Original 7065 (Waiver) application. On the other hand, if your qualifier(s) are required to sit for the appropriate exam, the CSLB will still allow this under one company name; but you can only apply for one classification at a time.

Q: I understand that a sole proprietor can get his license reassigned to a corporation (section 7065 waiver) if he owns at least 51%. Can a general partnership do the same if both partners jointly own at least 51% of the corporation?

A: Regarding your new entity, it must either be a general partnership (with partners) or a corporation (with officers) – it cannot be both. The Board will consider transferring an individual license to a corporation if the Responsible Managing Officer, or RMO, owns 51% or more of stock. Under no circumstances will the Board transfer this license to a partnership.

Q: I’m a California general contractor and recently met up with a friend of mine who has been in construction as long as I have. Things are really slow and I can’t afford to pay Workman’s Comp. If I made him a general partner of my sole proprietor, would I have to pay workman’s comp in order for us to work together on jobs?

A: You cannot make him a general partner on your sole owner license. You could however, form a partnership and apply for a new contractor’s license. If ONLY you and your partner will be handling the construction – and have NO employees — you could file an exemption from Worker’s Compensation with the CSLB.

Unlicensed Contractors CSLB Sting and “B” Licenses

What’s the Legislature cooking up to ‘serve’ contractors? Pending legislation and more on the ‘table’ at the latest CSLB Committee meetings held in Sacramento. A couple of “B” questions come first…

Q: I had a couple of questions regarding the licenses and was hoping you could point me in the right direction. First, there is a sole proprietor who holds a “B” license. Another individual with a “C-8” wants to add his license to the “B”. Can this be done? If so, how do I accomplish this?

A: Yes, it can be done. An application for additional classification must be filed with the CSLB. Both the “B” as owner and “C-8” as Responsible Managing Employee (RME) must sign this form. The “C-8” must also inactivate his current license and will need to post a $12,500 Bond of Qualifying Individual.

Q: My second question: An RME holds a “B” license for a company and has had it for seven years. What happens to the “B” license once the RME leaves? In other words, does the “B” license belong to the RME or to the company he worked for? Can the company assume the “B” in any way?

A: The license holder can remove himself but the license stays with the company. The corporation will then have 90-days to replace the RME or the license will become suspended. Since the company has held this license for seven years, a current officer or supervisory employee who has worked for the company for five of the seven years can likely become the new qualifier with no exam.

The CSLB held a series of Committee meetings in Sacramento on April 3rd. A variety of topics were covered including pending legislation, Enforcement activities, partnering with other state agencies to combat the ‘underground economy’ and even two proposals for a new license classification and certification.

There were some minor fireworks regarding a CSLB staff proposal to oppose SB 1698 (Romero). This legislation, sponsored by the State Building and Construction Trades Council of California, would require the CSLB to develop and administer an exam covering public works projects. If passed by the State Legislature (and signed by the Governor), a contractor would be prohibited from performing public projects (such as school classrooms, city sewers, highway construction, municipal buildings, etc.) unless the qualifier first obtained a ‘public works certification’. This is similar to the board’s current Asbestos and Hazardous certifications.

The issue was ‘tabled’ to allow for more input from interested parties (several of whom spoke in opposition to the legislation and in support of the staff report).

It bears repeating that the CSLB once again held a number of successful sting operations around the state. On March 12 and 13, the CSLB’s Statewide Investigative Fraud Team (SWIFT) –partnering with various state and local law enforcement agencies, conducted simultaneous stings in seven California cities. In Anaheim home to Disneyland –over 30 unlicensed contractors didn’t find it the ‘happiest place on Earth’. Dubbed the ‘California Blitz’, these operations resulted in the issuance of 175 notices to appear in court and arrest and jail for 15 other individuals.