General & LLC Licensing

One question often leads to another. That’s the first sign you may need to ask an expert as our opening indicates. As the economy has slowed many contractors find they have more questions than bid opportunities. Serious questions need to be asked when someone wants you, as a licensed contractor, to be ‘responsible’ for their work…

Q: I am a California General Contractor running a small construction company. Our business took a hit with the economy, but I’ve managed to keep working.

A mold remediation company who needs to work with a contractor in order to get insured has approached me. I’m not sure in what capacity, but I’m assuming as a Responsible Managing Officer (RMO) or Responsible Managing Employee (RME). This may be a great opportunity for me, but I can’t help being a little concerned. My questions are as follows . . .

Is it ever advisable to become an RMO/RME for a company whose officers you don’t personally know? Is this commonly done, or should I be skeptical about being approached? Is there any way I can protect my license and limit liability? Would I be better protected to demand the 20%+ ownership and become their RMO?

A: I cannot say whether you should become an RMO/RME for a company whose officers you don’t personally know. This is something you’ll need to decide after weighing the potential risks and rewards. I would however highly recommend, that should you decide to qualify this new license, first consult with an attorney to assess legal issues and minimize your exposure.

As a RME or RMO, you will be responsible for the work performed. Another factor is what experience do you have with mold remediation? If the answer is little or none, I would be cautious about using your license in this type of work. While there is no specific contractor’s license covering mold remediation, safety or financial issues could arise that impact you and the company.

Choosing to become either RME or RMO is another issue I would discuss with legal council as this could relate to protecting your license and limiting liability.

Q: I read on your ‘Q&A’ page where a person asked if they could work on the weekends with their license. My situation is that I know a gentleman who is starting up a solar installation company and wants me to be the RME using my license number. I want to still operate my electrical sub contracting business at the same time. Since he is just starting and only has one install over the next two months, I would not want to give up my business just to work on one job with him. Am I allowed to do this?

A: Whether it’s one job or a hundred, CSLB policy does not allow you to operate one contracting business while simultaneously being a RME for a second company.

Q: I am a licensed General Contractor and a sole proprietor. I want to abandon the sole proprietorship and start a Limited Liability Company. I have searched the CSLB website and have not found the proper forms to do so. Can you help?

A: Not yet. The reason you cannot locate the proper form is that one does not exist. The CSLB cannot grant a license to a LLC. There is however pending legislation which if passed and signed by the governor, would allow licensing of a LLC beginning in January 2011. Unlike the other 4 attempts to get this through the Legislature, it appears the fifth time may be the charm? Look for more detail on this legislation in a future column.

Sole Proprietor to Corporate License

If you give your license number to a corporation can you ever get it back? Even attorneys seem confused about this issue. Another contractor needs renewals in two states and an out-of-state builder has a ‘short’ question about certifying electricians in California…

Q: My boss wants me to take care of renewing our Contractor License in CA. and NV. Will he need to take a test? Please Advise. Thank You.

A: Your boss will not be required to re-test to renew his license. In both States the company is required to complete the state-issued renewal form and submit to the Contractors Board with the proper signatures and fee. In most instances this means the qualifying individual and owner (or company officer). Since it may take several weeks for the renewal to be processed, I highly recommend filing both renewals as early as possible prior to the expiration date.

Q: I am calling on behalf of my client. About 8 years ago, he assigned his sole owner license to his corporation but now wants it back. Is there any way he can get this back in his name?

A: In researching your client’s licensing history, it appears he did NOT assign his sole owner license to the corporation. His personal license simply expired. In order to get his license back (Active), your client will need to file an application for Original License, pay the required fees and post a new Contractors Bond. It is also advisable to write a short letter officially requesting his old license number. Had he opted to re-assign his license to the company, the CSLB would NOT re-issue it under any circumstances.

Q: We’re an out-of-state “A” contractor that worked on a variety of transportation projects in California a decade ago. A portion of these projects involved electrical work however our employees were not certified or licensed. No one objected. We now have an opportunity to handle the same type of work using the same electricians but they are still unlicensed.

Our management team raised a number of questions and it appears you’re the person to ask on this type of issue. If necessary, we are prepared to seek expert legal advice and would appreciate a recommendation for an attorney in CA.

First, can we self-perform the electrical portion of this project; second how do the DAS regulations impact our employees? I would appreciate your calling me to discuss our needs. Thank you in advance for your help.

A: As we discussed, it appears your primary question relates to the Division of Apprenticeship Standards (DAS), which handles the certification of electricians in CA. This program (linked at curedtape.com/resources), which was established several years ago, was not in effect when you first worked in CA. Nevertheless, it does not impact your company since only Electricians who work for a contractor with a class “C-10” license are covered by this requirement. As an “A” contractor your employees are not required to go through the certification process.

Regarding your initial question, as an “A” contractor you can self perform the electrical portion of this transportation job. In most cases, general engineering contractors can handle the entire project or any portion of an “A” contract.

Secretary of State Contractors Filing

In assisting contractors with licensing for more than 25 years, I occasionally run into those ‘peculiar’ situations that only crop up now and then as law is translated into actual practice. However, don’t think you’re safe because, as I share with you here, you could be that ‘one-in-a-million’. A son will need to show some extra ‘class’ if he wants to begin working with his licensed contractor Dad…

Q: We sent a Statement and Designation to the California Secretary of State. Once we learned it would take a month or more to process, we filed a second Statement in person at the front counter and paid an expedite fee. It was our understanding that the Secretary of State would not approve both applications and that they would send back the original and keep the application filed in person. Well we now have two corporations with the exact same name filed a couple weeks apart. I need to know how to go about receiving a refund for the second application. We of course only need one company to conduct business.

A: I am at a loss to tell you why the Secretary of State (SOS) did not catch this obvious duplication. In my years handling thousands of document filings, this is the first time I have seen them accept two corporations with the same exact name. In fact, they are very careful to avoid accepting similar (let alone exact) names so there will be no confusion to the public.

I discussed your situation in person with the Sacramento SOS Office and they admitted their error; however, they said they are powerless to reverse this situation (or issue a refund of your $100.00). To fix the problem I was told you’d need to file a Certificate of Surrender, which will allow the Secretary of State to eliminate one of your two “corporations”.

In the case described above, the two companies were the same corporation and after one of the entities has surrendered, there will be no lasting problem. On the other hand, had the two corporations been unrelated, I was told they would “need to go to court” to resolve what would obviously be a dispute. If in fact the Secretary of State’s Office is powerless to correct this type of administrative error, legislation should be introduced to fix what could have become a very sticky – and costly — situation.

Q: A father has his Class “B” – General Contractor’s License under his own name as a sole proprietor. He is not incorporated. How does the son go about adding his name to that license? Would he be working with his father in some sort of Responsible Managing Employee (RME) capacity? Thanks in advance.

A: The Board will NOT allow more than one qualifier for each classification on a given license. If this is a sole owner license, the only way anyone can be added to the father’s general license, including a son, is to qualify a second classification as RME. For instance, if the son has 4 years experience in electrical, plumbing, painting or another trade, he could file an Application for Additional Classification. The qualifier would need to pass both the law and trade exams; post a $12,500 Bond of Qualifying Individual and be fingerprinted.

Prime Payments & Public Works Regulation

Will public works contractors face more regulatory hurdles in the future? A ‘partnership’ taking a new direction may need help. But first, subs will appreciate reading more about legal requirements that they get paid on time without any excuses…

Q: I am a plumbing subcontractor and do a lot of work for General Contractors (GC). Lately some of the GC’s have been late on their payments. A few (who I know have been paid by the owner) are more than 60 days past due. Isn’t there a law which states they have to pay a sub on time?

A: You’re correct! B&P Code 7108.5 requires a prime contractor to pay their subcontractors within 10 days of receiving a statement for each progress payment (unless otherwise agreed to in writing). I know times are tough for many contractors, but that’s no excuse not to pay a sub in a timely manner. According to the CSLB, violation of this statute is a cause for disciplinary action and can result in an administrative citation up to $2000. In addition, with any action to collect funds that are wrongfully withheld, “the prevailing party shall be entitled to his or her attorney’s fees and costs.”

This code section goes on to state, that these sanctions “shall be separate from and in addition to all other remedies either civil, administrative or criminal”.

Q: My partner and I both own 50% of a corporation. We have both been active participants in the business since 2000. I no longer want to have an active role in the day-to-day operations; however, my partner wants to continue the business. Can she replace me as the qualifying officer and would any testing be involved?

A: Thank you for the email. Since the company has been active, and in good standing for nearly a decade your “partner” (i.e. the remaining officer) should be able to replace you with a waiver of the law and trade exams. The new Responsible Managing Officer (RMO) will need to file the appropriate application and show at least 5 years experience in the trade presently held by the corporation. A written request for waiver under B&P Code Section 7065.1(c) should also be submitted with the application.

According to the California Legislature’s Senate Committee on Business, Professions and Economic Development, Senate Bill 258 (Oropeza) would Establish a public works certification requirement under a “yet to be determined state agency” for licensed contractors and subcontractors who perform public works projects.

The Committee’s analysis, should it become law, says this bill would establish the Legislature’s intent that “only the most qualified contractors perform on public works projects in order to promote the safety of California’s publicly owned facilities and ensure the best use of tax dollars”.

In addition, beginning January 1, 2012, the bill would prohibit a contractor or subcontractor from handling a public work project (state or any other public agency), unless the contractor has obtained this public works certification.

There are many details to work out in this legislation and it is a long way from becoming law. The bill has a hearing pending in the Senate Appropriations Committee.