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.