California Contractors License Suspension

For contractors a suspended license may mean suspended payment. Getting back to business is going to be a job for this contractor who can’t work until he ‘builds’ a case to explain what happened. How you ask the question will often determine what answer you get. When I am helping contractors with real-world worksite and bureaucratic problems they encounter, knowing more is always better for both of us…

Q: I just received a call from a customer that my license is suspended. Apparently this involved a judgment from several years ago that I thought had been paid. Isn’t the Contractors Board supposed to notify a contractor before they suspend a license? What can I do to fix this problem immediately? The customer won’t pay me as long as my license is not in good standing.

A: Based on my research, this is apparently what happened. The judgment was entered by the court nearly two years ago but was never filed with the CSLB — until last week. Since it had been more than 90-days since the judgment was entered, the Board immediately suspended your license. Had the judgment been filed with the Contractors Board in a timely manner, they would have sent you a warning letter giving you a few months to resolve the issue.

At this point, you need to show the CSLB official documentation from the Court that the judgment has been paid in full. Once they have this on file, the CSLB Judgment Unit will be able to clear your record and immediately lift the suspension. You can send this to the Board or – to speed things along – have the documentation hand-delivered to CSLB Headquarters in Sacramento.

Q: I’m in the process of selling my business and would like one of my employees to take over for me. He has worked for the company for over 15 years. How would I go about doing this?

A: I am not sure from your question if your intention is to sell the business to this employee. Assuming this is the case, the “buyer” who is presently a part of your business, can apply to replace you and likely obtain a waiver of the law and trade exams. B&P Code 7065.1 allows for a waiver of the exam if the new qualifier has been employed in a supervisory capacity for more than 5 years in the same classification presently held by the company.

The CSLB requires a completed application detailing the new qualifier’s background. They will evaluate this and determine if he is qualified and eligible for the waiver.

I must caution readers that the above only applies if the sale of the company is a stock purchase. If this were an asset purchase, the buyer would need to apply for a new license and sit for the license exam.

Q: I have a client who is a sole owner contractor. Ideally, I would like to see him form a LLC; however, this is not feasible since the Contractors Board won’t issue a license to this type of entity. Therefore, I recommended that he incorporate. My main questions are: should he assign his current license over to the company and if so, should he be a Responsible Managing Employee (RME) or Responsible Managing Officer (RMO)? He’ll own 49% of the corporation.

A: Since he will own less than 51% of the new company, he cannot reassign his sole owner license to the new corporation. Assuming the qualifier will be a company officer, he would be the RMO by definition.

Q: A quick question: Are we required to notify he CSLB when we change company officers?

A: A short answer: YES, in writing within 90-days.

California License Reciprocity

If you could get a contractor’s license without lots of testing wouldn’t it be great? Well you probably can if you cross the California border. When does ‘managing’ a construction project for an owner cross the line and require a contractor’s license? These are just a few of the many questions contractors need to answer, and we all learn from their inquiries…

Q: I understand that as a CA contractor I can apply for a NV or AZ license without any exam. Where can I find out about how this works and which license classifications apply (I hold the “A”, “B”, “C-10” and “C-36”)?

A: California, Nevada, Arizona and Utah have had license reciprocity agreements in place for over 15 years. While changes can be made regarding which classifications are covered under this agreement, the last time trades were added was in May 2003. Each State has this information on its web site or if interested, contact my office and I’ll send you detailed information on how the process works and a list of classifications that each state will recognize.

To secure a waiver of the trade test in NV or AZ you must be able to show that you’ve been licensed continuously in CA for at least the past 5 years. An applicant must complete an entire application package, provide proof of licensure from the CSLB and meet all other licensing requirements (including financial statements, tax ID Number, etc.). You will still be required to pass the business/law exam.

Regarding the classifications you hold, Arizona should grant a waiver for all four trades. On the other hand, Nevada will only waive the General Engineering (“A”) and General Building (“B”), since they do not issue exam waivers for Plumbing (“C-36”) or Electrical (“C-10”) licenses.

Q: The company I work for has been in business for many years and has worked under an “A” license performing structural steel work. The General’s are now asking for a “C-51”. My question: is the “A” license good enough or should I become a RME/RMO for the company (I hold an active “C-51” license)?

A: While there are exceptions, generally the “A” license is NOT proper to handle “C-51” structural steel work. Therefore, it would be wise — especially since other GC’s are now asking for a “C-51” — to add this class to the company license. Please note that if you become a Responsible Managing Employee (RME) or RMO, with less than 20% ownership, you’ll need to inactivate your personal license.

Q: I own two companies: One holds a “B” and several other classifications while the other does project management without a contractor license. The unlicensed company in most cases typically supports an owner. We assist with all aspects of the project for a fee and they approve the general and pay the GC or subs direct.

There have been instances where the customer wants us to take on more responsibility including hiring and paying the GC or sub directly. Is there a conflict with the CSLB?

A: The bottom line is that if your “unlicensed” company hires and pays the GC and/or subs directly, you are acting in the capacity of a contractor and should be licensed accordingly.

California Contractors License Renewal

Like Winston Smith in Orwell’s “1984”, contractors are also discovering that government wants them to believe that ‘less is more’ when it comes to fees they pay for licensing. The fees remain the same, but you’ll be getting less for them. First, a lawyer discovers that government workers can also give the ‘wrong’ answer to the ‘right’ question…

Q: A few days ago, my client phoned the CSLB and asked about his license. Whoever answered looked up the license history and told him his license was renewed retroactively because the expiration date had not changed. As you can see from the attached license verification, the license was renewed to January 31, 2010 or 2 years from the expiration date of January 31, 2008. However, the attached Certificate does not show a retroactive reinstatement of the license.

In your opinion, based on the information summarized above, is there a reasonable probability that the license either was retroactively reinstated or that it could be retroactively reinstated before an upcoming trial date?

A: Unfortunately your client was misinformed. When a license is renewed late, the expiration date does NOT change.

I am sorry to say, that I do not see any “reasonable probability that the license could be retroactively reinstated”. There was no retroactive renewal last year and with a five-month gap, I cannot see the CSLB changing their records. There does not appear to be any error on the part of the Board, which as we discussed, would be the primary reason they would reverse themselves at this juncture.

Q: I have a corporation that was suspended due to problems with the Franchise Tax Board (FTB) and Secretary of State (SOS). I just resolved these issues and my company should be back in good standing within a week. My problem is that the CSLB will not process my renewal application while the corporation’s status is suspended. Is there a way to retroactively renew the license so this expiration will not show on my record? My attorney informed me that even if a license is expired for one day this can cause problems months or even years down the road.

A second question: What happens if a corporate license is suspended for this same reason prior to expiration of the license?

A: The Board’s procedures allow a company to continue operating under a prior renewal even if they discover the corporation is suspended by the SOS/FTB. The Board would be justified in immediately suspending the license but they rarely do so. On the other hand, if an application for renewal is submitted it will not be renewed due to unpaid FTB taxes or issues with the SOS. The Contractors Board requires that these issues be resolved prior to renewing the license. According to section 7141.5 (B&P Code), The registrar may grant a retroactive renewal of a license if the licensee files a petition within 90-days of the renewal date and shows that “the failure to renew was due to circumstances beyond the control of the licensee”.

According to a recent governor’s press release, beginning July 10, most state offices will be closed the first, second and third Friday of every month through June 2010. This requirement that state employees take unpaid furloughs will undoubtedly slow up the processing of license applications, testing, and complaint investigations. I have written this before, but it bears repeating: contractors are paying for the privilege of getting less service. The CSLB is totally funded by contractors through their renewal, application and other fees. While I understand that it would be difficult to single out the CSLB, forcing them to close does not save the State one-dollar of general fund money and does little or nothing to close the huge budget deficit.

Disadvantaged Business Enterprises

While the 3% goal for including certified disabled-veteran owned companies (DVBE) remains in place, goals for other ‘disadvantaged’ businesses providing goods and services in California have changed. Remember Proposition 209? We also open a ‘vent’ to let some fresh air in on unlicensed activity being promoted online…

Q: I would like to get certified as a Woman-Owned Business. I’ve operated this business for over 10 years and have heard there may be some benefit to getting certified as a WBE. Can you tell me anything about this program?

A: I have received a number of calls lately regarding woman-owned businesses, a program administered for over 20 years by CalTrans Division of Civil Rights. The Woman Business Enterprise (WBE) and Minority Business Enterprise (MBE) programs were discontinued and are now incorporated under the DBE (Disadvantaged Business Enterprise) category.

Until 1996, there were a significant number of opportunities for W/MBE (DBE) companies. This was the year however, where CA voters passed Proposition 209 that amended the state constitution to prohibit public institutions from considering race, sex, or ethnicity in public contracts. What many people do not know is that a provision of this ballot initiative stated “Nothing in this section shall be interpreted as prohibiting action which must be taken to establish or maintain eligibility for any federal program, where ineligibility would result in a loss of federal funds to the state”. In other words, if the Proposition had included restrictions on projects with federal funding, CA risked losing billions of federal dollars in road, water and other infrastructure construction projects.

Jump ahead to 2009 with the passage of the Recovery Act. The stated purpose of this Act (i.e. Federal Stimulus Bill) “is to create and save jobs, jumpstart the economy, and build the foundation for long-term economic growth—including measures to modernize the nation’s infrastructure”. With the potential of billions of federal dollars rolling into CA and NO Prop 209 prohibitions, opportunities for DBE companies could be significant.

I would suggest contacting the Division of Civil Rights for information on their application procedures. Based on my prior experience dealing with the Civil Rights Division, it is generally not an easy process to navigate. A few things they will focus on: do you own at least 51% of the company; are you listed as owner or company President; do you have the authority to make all day to day decisions; and are you the qualifying individual on the contractors license? If you are a disabled California veteran, learn more and get free assistance in becoming certified as a DVBE at www.cadvbe.org.

Q: Here’s a good one for your column. I looked on Craig’s list in my area San Luis Obispo County and saw where a guy was advertising that he’s a handyman with years of experience and there was “no need to pay a contractor his outrageous fees”. Craig’s list is full of people such as him. Just need to vent!!

A: Thank you for your email. Unfortunately, all too often, Craig’s list and other “media” publish information soliciting ‘contractor’ work without requiring that a license number be listed. With Craig’s List, I believe the contractor only has to state that he is “unlicensed”. In all fairness, Craig’s list does provide a link to the CSLB where prospective customers can look to see when a license is needed and an admonition to “Inquire before you hire”.

Not sure if the Board will be able to nail these guys, however, if you know where an unlicensed “handymen” is working, report him to the CSLB using a S.W.I.F.T. HOT LEAD REFERRAL. You may also want to contact your local law enforcement including the County DA since they have the authority to pursue various types of illegal activities. As a Craig’s user, you may be able to ‘flag’ the post to have the service remove it as an illegal activity.