California Contractors Business Licenses

As a contractor, do you know what you must file with the city or county where your business is licensed? With an increasing urgency to verify people working in the U.S. are here legally, how do contractors actually know when you’ve been given the person’s ‘vital’ numbers that they’re real? Those answers and more as we ‘cut red tape’ …

Q: Does it matter who signs on behalf of the entities that are Limited Partners (LP) and General Partners (GP)? It is time to file our renewal and I was going to have our general counsel sign on behalf of both entities. Will this be a problem?

A: The CSLB will only recognize signatures from those individuals who were listed on the license application originally filed with the Contractors Board. This applies to both the GP and LP entities. In addition, the qualifying individual (RME or Qualifying partner) must also sign.

Q: Is a licensed contractor exempt from obtaining a business license in each of the many cities where he may complete a job? Is a business license adequate in the city where his office is located? Does the CSLB regulate this aspect of running our business?

A: Having a contractor’s license does NOT exempt you from needing a business license in the city or county where your business is located. However, I do not believe you need an additional local business license simply because you have customers in neighboring municipalities. To be certain, I suggest that you contact these cities directly.

While the CSLB does not regulate business licenses, they do have a requirement (B&P Section 7033), which specifies that a contractor have on file — with the city or county where they are based — a signed statement that their license is in “full force and effect”.

Q: We are members of the local Builder’s Exchange and have a quick question regarding I-9s and Social Security numbers. My information about these events is sketchy but recently we heard of some construction companies who received big fines for hiring workers with bogus Social Security numbers. My question is just what is our responsibility regarding the Social Security numbers our new hires present to us? We are very faithful in filling out I-9s and making copies of all ID. Are we supposed to be checking the validity of these IDs as well? And, if so, where do you go to do that? Thank you!

A: Thank you for your email. Since Capitol Services specializes in handling issues related to CA, AZ and NV State government, I do not receive many questions involving federal government agencies. Nevertheless, since your question can impact virtually any employer, I am happy to provide you with some basic information.

As you know, the Form I-9 is used for Employment Eligibility Verification. Its purpose is to document that each new employee — both citizen and non-citizen — is authorized to work in the United States. Employers are required to examine one or more documents to determine employment eligibility. This may include a US or foreign Passport, permanent resident card, driver license, government ID (with photograph), domestic or foreign birth certificate, Social Security card, etc. As the employer, you must attest under penalty of perjury, that you have examined the documents presented by the employee (from a specified list), and that they “appear to be genuine”.

The I-9 form has a space to list an employee’s social security number; however, the instructions for completing the form state, “Providing the Social Security number is voluntary, except for employees hired by employers participating in an electronic verification program (E-verify).”

For more information, I suggest visiting the following US Citizenship and Immigration Services web site: http://www.uscis.gov/files/form/i-9.pdf.

Contractor licensing in CA RME and RMO

The balance between a contractor’s worksite and the surrounding community can sometimes become strained. Often it’s because of noise created by the work. Can a contractor be fined by the CSLB when the decibels rise and tempers flare? Why should a Responsible Managing Officer always file to disassociate from the company when he leaves? One contractor offers us an example, and another, some basics on financial responsibility for RMO and RME qualifiers…

Q: Love your Q&A!! Question – What are the legal hours of operation for a contractor to start banging around at the construction project next door to my house? Our local ordinance says 0700, but I wondered if the CSLB lets them start earlier?

A: Local governments regulate noise ordinances, including those affecting a contractor’s start time. To my knowledge, the CSLB has no rules or regulations addressing this issue.

Q: Can a Delaware corporation hold a California contractor’s license?

A: Yes, corporations from any State can become licensed in CA so long as the company registers as a “foreign corporation” with the Secretary of State (SOS).

Q: If we wanted to change the name of our corporation, what would that entail concerning the CSLB? Could we just show the change with the SOS or would more paperwork be involved?

A: Once you amend a corporate name with the Secretary of State (SOS), you must also officially change it with the CSLB. This involves filing an Application to Change Business Name.

Q: My Company is closed and was dissolved in 2008. However, there are several outstanding disputes and small claims that have come up over the years. The Responsible Managing Officer (RMO) disassociated in October 2007. If we choose not to defend all these small claims, what are the chances that the RMO will have a black mark on his record with the CSLB? I’m assuming someone will file a complaint and possibly make a claim on the company’s bond. We’re not concerned with the company, but how this affects the RMO’s record?

A: If there were judgments prior to the date your RMO disassociated, this would have an impact on his license record. On the other hand any judgments or bond claims after October 2007, will NOT likely cause any repercussions with the Contractors Board.

Q: I have a question regarding RME/RMO. I have a “C-10” license and somebody asked me to become a RME or RMO for his corporation. Please tell me if I’ll have any financial liability in case something goes wrong with the business in the future. Also, is it my responsibility to apply for a bond or is the owner supposed to handle this? Thank you for your help, any advice is welcome.

A: I am often asked about potential “liability” for a RME or RMO. There is no way to give you a definitive response because a court, arbitrator or the CSLB would ultimately determine financial liability. What I can tell you is that, a Responsible Managing Officer (RMO) would potentially be more “financially liable”. If “something goes wrong with the business in the future” a company officer would likely have some fiduciary responsibility. The Responsible Managing Employee (RME), on the other hand, should have no control over financial matters and therefore, less likely to be held responsible.

It is usually up to the company to secure a bond for the RME or RMO. This $12,500 Bond of Qualifying Individual is only required if the RMO owns less than 10% of the company and is in addition to the Contractor’s bond.

Advertising guidelines for California contractors

For contractors a customer referral is the best form of ‘advertising’. It costs nothing and is based on work you have accomplished successfully. When a contractor pays for advertising are you aware of the rules that must be followed? Can a cabinetmaker paint and plumb too? Does the Contractors Board have your picture on their wall? If you work on California State funded projects, will you be impacted by the partisan wrangling at the Capitol?..

Q: I have a question about advertising. I am a “C-6 “contractor and sometimes get asked to handle other work while on a job. This might include fixing a plumbing leak or painting a room adjacent to where I am installing cabinets. What would happen if I start running small ads indicating that I can also do these trades?

A: As specified in B&P Section 7027.1, advertising for work outside the scope of your license (even a small ad) could subject you to a fine of between $700 and $1,000. You could also be subject to other punishment as determined by a court or the Registrar.

The CSLB has just updated (05/08) its “Advertising Guidelines for Contractors” brochure. Among other things, this describes: the forms of advertising that are covered under CSLB regulations; what constitutes ‘false advertising’; how to properly display license numbers on commercial vehicles and restrictions on advertising – including that your company is bonded. For a free brochure contact Capitol Services and we will send one immediately.

Q: I noticed on the Nevada Contractors Board web site that they have a Ten Most Wanted page. Why doesn’t CA do the same thing?

A: They do! Modeled after the Nevada web site, California now has a “Most Wanted” page listing — as the CSLB indicates — the “Worst of the Worst”. In the Board’s ongoing efforts to protect California consumers, they have identified the worst unlicensed violators who are known to prey on vulnerable and unsuspecting homeowners. Complaints against these unlicensed individuals have been lodged with the CSLB, law enforcement agencies and District Attorneys around the state.

According to the Board, warrants have been issued for the arrest of all 14 people who currently appear in this section. Visit the CSLB web site http://www.cslb.ca.gov/GeneralInformation/Newsroom/MostWanted/ for more information.

According to a recent bulletin from the Associated General Contractors (AGC), “contractors currently working on a construction project funded all or in part by a state or local agency, should be aware that progress payments for work may be stopped if a state budget is not enacted by July 1”.

If history is any indication, there is a real possibility that enactment of the state budget could be delayed until late August or even into September if political differences between the Governor, Democratic and Republican Legislators are not resolved. Of course, the proverbial $64 million question is how to “balance” the state budget. A recent statewide poll shows how difficult this may be. While over 60% want budget cuts to be the prime focus, a majority of these same respondents surveyed, did not want cuts to all 13 specific budget areas (education, health and safety, etc.)

One primary issue is what are the responsibilities of the general contractor since under state law prime contractors are obligated to pay their subcontractors and material suppliers regardless of whether they get paid in a timely manner. FYI.

California Contractors Corporate Licensing Qualifiers

Can a specialty contractor work outside his licensed trade to complete a specific project? You might be surprised by my answer. Did you know that in some cases, a contractor must replace himself on the same California license? That is just one reason why contractors may be surprised by the rules that govern the use of RMO & RME’s. Another contractor has asked for a review of the differences between the two ‘alphabetic’ qualifiers…

Q: I have a sole proprietorship and want to get a license. I do not have the required experience at this time; however, I have someone who I often work with that is licensed. My question: what is the difference between a RME and RMO. I went on the CSLB web site but am still a bit confused.

A: Thank you for your call. As we discussed, since you’re a sole owner, this individual must be a RME. By definition, a RMO can only qualify a corporation. The RME must be permanently employed and actively engaged in your business operations 32 hours per week or 80% of the total hours per week you are actively working.

Q: We are looking to buy a company, which has a corporate license. We want to convert the existing Responsible Managing Officer (RMO) to a Responsible Managing Employee (RME). Is this possible? If so, which form do we need to file & how long does this take? The RMO has a license of his own which is inactive.

A: Once you purchase the company, the present qualifier can be changed from RMO to a RME. An application For Replacing the Qualifying Individual is needed even though the person is simply replacing himself. Note, if this is an “asset” purchase rather than a “stock” purchase”, you will need to apply for a new license — which requires a totally different application — and will be assigned a new license number. According to a recent industry meeting I attended the CSLB staff announced processing times, to review an application, are now generally taking between two and three weeks.

Q: I have a contractor’s license and often need to do work outside of my specialty. I understand this is okay if the work is incidental and supplemental to my job. Does the Contractors Board define “incidental and supplemental”, specifically as a portion of the overall contract?

A: You’re referring to B&P Code Section 7059, which says a specialty contractor can take a “contract involving the use of two or more crafts or trades”. They can do so if the work outside your primary trade is “incidental and supplemental”. The Board has loosely defined this (in Board rule 831) as “essential to accomplish the work in which the contractor is classified”. The work can be through your employees or you may use a properly licensed subcontractor. While there is no specific percentage used in either the Code section or Board rule, it is safe to say that “incidental and supplemental” can not involve a majority of the work to be performed.

Public Works Project Protests, RMO Qualifier Replacement

No matter how carefully the Legislature crafts the law that governs contractor licensing, someone can always get ‘buried’ in the bid process. Our first contractor has ‘dug up’ a problem in a recent public bid. As you might expect a protest followed. Does a college degree count as ‘work experience’ when applying for a contractor’s license? We also meet another member of your Contractor’s State License Board (CSLB)…

Q: Can a “C-12” subcontractor on a public project provide directional boring services to install PVC conduit?

This bid is under dispute because the second low bidder is claiming that the listed subcontractor is not allowed to perform any “tunneling” unless it’s incidental and not the main focus of the job.

I have reviewed the CSLB website but cannot find any reference to directional boring of PVC conduit for electrical projects. What is the correct license classification for this type of work? What would the CSLB find acceptable? Thanks for your helpful column!

A: Based on my recent discussion with a CSLB employee (and on the information provided), the second low bidder has a good point. It would appear a “C-12” (earthwork and paving) classification is NOT proper for this specific work (unless the boring were for the purpose of placing explosives or incidental to the main project). Depending on the contract, this work could be performed by a “C-7” if the project involves low voltage communications or a “C-10” since the project is electrical conduit. An “A” could also likely perform the work if it involves underground utilities.

This being said, as mentioned many times in this column, B&P Code Section 7059(b) gives public agencies the final say on which classification(s) they will accept regardless of whether these are also acceptable to the CSLB.

Q: I am the President of my corporation. We currently have a Responsible Managing Officer (RMO) that wants to retire soon. I have been in this business for 3 _ years and have been involved with every aspect of our contracting. My prior experience was as a manager at an electronics engineering firm. I am looking at applying for my license. Am I considered qualified at 4 years and if so will I need to take the test?

A: If you have been running this company as President since the license was issued 3 _ years ago, I believe the CSLB would consider you qualified once you hit the 4-year mark. You will need to have one or more people who are familiar with your work background certify that you have the requisite experience. Once your application is accepted, you’ll be required to pass the law and trade exams. If you have a college degree in engineering, business, a related science, etc, you may request up to two years credit in lieu of experience (which means you likely could apply now).

You indicated that you’re “looking at applying for my license”. This is an option or you can simply apply to replace the present RMO who “wants to retire”.

Meet Your Contractor’s Board Members

Matthew (Matt) Kelly is one of the longest serving current CSLB members having joined the Board in April 2003. After his initial appointment by the Senate Rules Committee to fill a partial-term, he was re-appointed in October 2005 to a full 4-year term. Although Mr. Kelly serves as a public member, he has a strong construction background. His career began as a carpenter apprentice over 20 years ago and he has worked on a variety of commercial and residential projects including as a construction manager for a large general contractor. Mr. Kelly serves as the Executive Secretary Treasurer of the Sacramento-Sierras Building and Construction Trades Council and was Board Chair from 2006-2007.