Keeping California Contractors CSLB Paperwork Current

Keeping up with the notification and paperwork required for most all contractors can be time consuming. However, failing to stay up to date with State government agencies on simple things like a change of address, a shuffle of corporate officers or an unexpected turn of events can be costly. As I have been asked our first question more than once, let me give new ‘life’ to a previous answer…

Q.: Our Responsible Managing Officer (RMO) recently died without notice. Since our contractor’s license must be renewed at the end of this month, what do you suggest we do to replace him ASAP?

A.: When a RMO leaves a contractor’s license for any reason, the company has 90 days to replace them or the license will be suspended. In your case, the former company president died 83 days ago. Since it is unlikely a replacement can be accomplished in the next week, I would advise requesting a 90-day extension. This must be done in writing and should be delivered to the CSLB within the initial 90-day “grace” period. A copy of the death certificate should accompany your request. I would also suggest filing the contractor’s license renewal prior to the expiration date along with the appropriate license application to qualify a new RMO.

While we often don’t want to consider the consequences of death, in our lives or business, the changes prompted by someone’s passing need to be part of our planning. In business, the ‘life’ of the company could also be at stake without realistic planning for this contingency. I am often contacted about a ‘backup’ license that may be in order for some reading this column.

Q: I just discovered the prime is not actually licensed, as I was ready to sign a sub contract. What now?

A: Despite the fact the company has an individual with a contractor’s license, they are still operating illegally because the corporation – with whom you would be signing the contract – does not have a valid license number. As a licensed subcontractor you could be fined or issued a citation for knowingly contracting with an unlicensed entity. B&P Code 7118 addresses the issue of Contracting with an unlicensed company: “Entering into a contract with a contractor while such contractor is not licensed constitutes a cause for disciplinary action”.

Q. The CSLB has twice rejected our Application To Report Current Officers. We are simply trying to notify them that we have a new President. What now?

A. In reviewing your Application, I noticed that you listed yourself as Vice President. Yet, you’re listed on the CSLB record as a Responsible Managing EMPLOYEE (RME). Board rules do not allow you to be OFFICER and RME. You must file an Application to Replace the Qualifying individual. In other words, you would need to replace yourself!

Adding Classifications to your California Contractors License

As times change contractors change with them. Many of the questions now coming to my attention regard adding to or expanding their licensed contracting opportunity. If you are looking for answers to a slowdown in your primary business these contractors may have shown the way to survive the downturn…

Q: I currently have a General “A” and a “C-4” Boiler license. Can I keep my “A” with my current company (I am the 100% owner of an S-Corp) and start another company with just the “C-4” (where I’ll also own 100%). Or do I have to find (and hire) a different person to be the RME? Thank you in advance.

A: As long as you own at least 20% of both entities, you can form a new company with the “C-4” classification only. This could be as a sole owner or second corporation. There is no need to hire a different person as your qualifier.

Q: I currently hold an “A” license and want to add a paving license to the dba.

How do I this without having to take a test. Thanks.

A: Since you hold the “A” license it should not be too difficult to add the “C-12” (Earthwork and Paving) classification to your license without taking an exam. You’ll need to file an Application for Additional Class and provide detailed information related to his trade. This includes a list showing that you have handled a significant number of “C-12” projects (earthwork, site grading, trenching, excavation, asphalt paving, etc.) and a letter requesting the waiver under B&P Code Section 7065.3. Someone who is familiar with your background will also need to certify your experience qualifications.

Q: Can a sole owner add me on to his license?

A: Yes, but only if you will be qualifying a second license classification. The Board only allows one individual to qualify a specific classification on each license

Q: I am a contractor who will be bidding work in Nevada. Are there any qualifications or authorities we need? I heard we would just need to contact the Secretary of State to do business in Nevada. At this point, we only want to do the necessary paperwork to bid.

A: The state of Nevada takes a dim view of companies “bidding” work without the proper registration or license. As a corporation, to legally pursue any contract in Nevada, you should FIRST become qualified with the Secretary of State and then secure a license with the NV Contractors Board. If the Contractors Board discovered that you had bid and signed contracts before licensing, they could delay or even deny your license application once you did apply.

General Engineering “A” California Contractor License

As regular readers know, the black and white of written rules and regulations for contractors are primarily created by the Legislature. How these laws are used however is subject to interpretation. Outside of medical and legal practices, the California State Contractors Board has one of the most complex sets of rules governing work. That is why even experts sometimes go to the source for the best answers…

Q: I’m interested in getting your expert opinion. Can an “A” general engineering contractor take a subcontract for specialty trades such as mechanical or plumbing on a water treatment plant or pumping station project?

In the instance I’m looking at a prime contractor (with an “A” license) who is subcontracting the mechanical work to another “A” licensed contractor. This raised the question within our company: what work can we do as a sub holding this license?

A: First, there is no rule against an “A” contractor subcontracting to another “A”. The key question is the project, which is a water treatment plant.

From my many discussions with CSLB personnel over the years, they have regularly indicated that an “A” can perform most if not all work on a general engineering project. This would include specialty work such as plumbing or mechanical on a treatment plant

Using the Board’s view as it relates to infrastructure projects, an “A” could, for instance, pour the structural concrete on a bridge or power plant; handle the paving (only) on a pipeline project; install the irrigation on a new golf course; or place and hook-up underground electrical on a light rail extension. As an “A” I believe you could also install the machinery or mechanical on an industrial plant.

Even if the same type of work were being performed, it would not apply to a residential or commercial project. For instance, pouring a foundation on a new home or handling the plumbing or electrical on an office renovation would not be proper with an “A”.

While this is my expert opinion, I would suggest writing to the CSLB to secure their official determination prior to signing a contract of this nature.

Q: I read several of your previous columns from a few years ago on your web site. One said the use of referral fees might be allowed, but at the same time you cited code language that seemed to forbid the practice.

We would like to enter into solar contracts with both commercial as well as residential customers – and we were exploring the idea of paying past customers a referral fee for merely passing on our name and contact information — if that referral ended up in a sale. Is this allowed by the CSLB code?

A: As I indicated in the column you ‘keyword’ searched and quoted, I am not an attorney and therefore cannot give you a definitive answer. The example in my prior column involved a real estate agent giving a contractor’s business card to homeowners and I stated this did not appear to be a problem. The contractor implied he would give a “referral” fee to the agent if the homeowner hired him to do some work.

The key question becomes whether your payment of a referral fee to “past” customers is an inducement for them to enter into the contract in the first place. Since in your example, the inducement is directly with the homeowner this might cause a problem under B&P code section 7157. I have personally seen contractors offer a “discount” on future work for these types of referrals but this too may be skirting the law.

Because your question may impact many contractors, I have written a letter to the CSLB asking them for their “legal” opinion. I will share their response with you and readers of my column.

Adding Specialty Classifications to A & B Contractors Licenses

We are all hoping this New Year brings us new hope, new opportunity and new vision for prosperity and profit. As we move forward into this new calendar let’s work together to solve our problems, discover new prospects and build a better future because America is a ‘joint venture’ we all share. As contractors know and another Illinois Senator noted as our 16th President, a “house divided against itself cannot stand”…

Q: We are thinking of forming a joint venture and have two questions. 1) We have been told there are some business names the Contractors Board won’t allow. Could you explain this? 2) Between the two companies, we hold 3 license classifications but we only need one for the license. Will the CSLB allow us to apply for only once classification or are we required to list all three?

A: The CSLB does have some strict standards regarding what name styles they will allow for Joint Ventures (JV). For instance if you use the full legal names for BOTH JV partners, this is acceptable, as is listing a partial name for each entities. You can also apply under a completely fictitious name. However, using the FULL business name of one entity while only using the partial business name of the other is not allowed.

It is common for Joint Venture entities to collectively hold two or more classifications. There is no requirement that you list more than one classification on the JV application.

Q: I heard that you could get another license with no testing. I have a General building (“B”) and want to get a “C-36” (plumbing). Is there a way to add this to my license with no trade exam?

A: I think you’re referring to Code Section 7065.3, which allows the Registrar to consider issuing an additional classification to a licensed contractor with a waiver of the trade test. To be eligible for this waiver, you must be able to show the following: a) you were listed on the personnel of the license – which was active and in good standing — for 5 of the prior 7 years; b) you can conclusively show experience in the additional classification; and c) the classification being applied for is closely related to the class presently held by the contractor.

In my experience, plumbing is considered by the Board to be closely related to the “B”. In fact, general contractors applying for this type of related classification (concrete, painting, electrical, roofing, drywall, etc.) was one of the driving forces behind passage of this law back in 1990. It was – and still is – felt that general contractors who regularly perform this specialty work should be considered for exam waivers. As part of the application process, the CSLB requires a very detailed work and project history. The CSLB also will consider an additional class waiver for those holding the “A” and some specialty classifications.

Q: I was just awarded a job to do some renovation work. A portion of the job (about $2500) involves work that I would like to sub contract. My brother has applied for his license but has not taken the exam. Can I have him do the work even if he has no license yet?

A: I WOULD NOT suggest signing a subcontract with your brother at this time. You can make him an employee or wait until he has been issued a valid contractor’s license. Keep in mind that B&P Section 7118 states, “entering into a contract with a contractor while such contractor is not licensed …constitutes cause for disciplinary action.”