Specialty Work & General Rules

Walking a fine ‘line’ is one of the skills some contractors ‘utilize’ in taking on work that may be a little outside their specific license. The question of how many trades a General can take on is sometimes subject to debate when contract dollars are at stake. First, I suggest all those who qualify a license learn to protect themselves in this contractor’s question…

Q: I will be leaving my company at the end of the month. Must a company advise the California State Licensing Board in writing that they have dismissed their Responsible Managing Employee (RME)? I would assume they do, but would appreciate your advice.

A: The Company should notify the CSLB in writing within 90-days that the RME has left the license. I would suggest however, that as the Qualifier, you take it upon yourself to complete and file the required ‘Disassociation Notice’.

Q: According to CSLB…”A general building contractor may take a prime contract or a subcontract for a framing or carpentry project. However, a general building contractor shall not take a prime contract for any project involving trades other than framing or carpentry unless the prime contract requires at least two unrelated building trades or crafts other than framing or carpentry, or unless the general building contractor holds the appropriate license classification or subcontracts with an appropriately licensed specialty contractor to perform the work.”

If a “B” contractor is going to do a number of “different” jobs for the same homeowner including work in various trades like painting, masonry, and concrete then does that fall under the above definition or would the “B” contractor be going against the rules since the jobs are done separately? Thank you.

A: In my opinion, if a “B” intends on doing a number of different jobs over a period of time then he should hold the proper specialty class or “subcontract with an appropriately licensed specialty contractor to perform the work”. I believe these contracts for painting, masonry, concrete and any other trade would be considered separately and therefore the General would not be performing “at least two unrelated building trades or crafts” on each project.

Q: An issue may be arising regarding our “C-10” license. Our company has been working on a project involving a power generation facility. We hold the Electrical classification; however, someone has now told us we should hold the “A” instead. Some of our folks are beginning to worry and I was hoping you could shed some light on this issue.

A: Thank you for your email. Without knowing all the particulars, I cannot tell for certain if either the “C-10” or “A” or both classifications would be proper. However, a number of years ago, I was an expert witness involving a case where the main issue appears to be similar to yours.

In that dispute the primary question hinged on whether a “C-10” could install large overhead utility transmission lines and towers. One side said the “A” was absolutely required while the other party argued either class was proper. My expert position was that while the “A” can certainly perform work on “powerhouses, power plants and other utility plants and installations”, by definition, the “C-10” could legally “place, install, erect or connect any electrical wires, fixtures, ……which generate, transmit, transform or utilize electrical energy in any form or for any purpose” – including transmission lines and poles. Please call me if your folks are still worried.

Expired Licenses, Joint Ventures & Waivers

One of the best weapons in my arsenal of contractor assistance is simple. I’m here in Sacramento. I can go directly to the ‘source’ while contractors often are too far away or busy to carry their paperwork into CSLB Headquarters. In some cases, contractor’s license concerns won’t be satisfied no matter where they ‘stand’ in line…

Q: I never received my renewal in the mail. Do you have any idea when the Contractors Board would have sent this out? Assuming it was more than a few weeks ago, would you be able to pick up a renewal for my company? I don’t want to take any chances that the license may expire.

A: Normally, the CSLB sends license renewals between 60 and 75 days prior to expiration. In your case, it appears the renewal application went out about two weeks ago. You can call the Board and order a replacement or I can go to CSLB headquarters and pick one up on your behalf.

Since the Postal Service generally does not forward renewal applications, be sure to notify the CSLB immediately if you have moved or changed your mailing address.

Q: Thank you for reviewing the application for adding an additional “C” class. Your email response stated that Jim would be required to sit for the exam. Are you sure? Or can we ask for a waiver so he does not need to take the test?

A: You can always submit a waiver request in writing; however, based on the information I reviewed, it would appear he would need to take the exam. I think you’re hoping the CSLB would allow for the waiver under B&P Section 7065.3. Unfortunately, with the classification Jim presently holds (“C-6” Cabinets), there is no way the CSLB will waive the painting (“C-33”) test. Even under the best of circumstances, the Board is granting few waiver requests for additional classifications.

Q: Our Company wants to apply for a Joint Venture (JV) license along with two other corporations. If I recall from the last time we spoke, you said all parties must be licensed. One company does not have a license yet. Is there any way around this?

A: There is no way around this requirement. All Joint Venture “partners” must be licensed and in good ‘standing’. Not only must they have a license but also it cannot be expired or suspended for any reason. This third entity will need to first file an Application for Original License and once it is issued you can submit an Application for a Joint Venture.

Q: I’m a homeowner and hired a contractor to perform some roofing work. The job ended up being $7000 but I’m not very happy with the results. I paid over $4000 up front then another $2300. I refuse to pay the remainder until he fixes the problem. The contractor has threatened to put a lien on my property. He doesn’t have a “C-39” license – only a “B”. My question: Is he working outside of his classification and do you think I’ll get a ruling in my favor if I go to court?

A: I would never presume to guess what a court or judge would rule on any given matter. However, I’m aware of cases where a contractor appeared to be operating outside their classification only to see the judge rule in his favor. Based on the stated facts, the contractor does not appear to have the correct license. To perform roofing ONLY on a given project, a General Building contractor should either hold a “C-39” classification or hire a licensed “C-39” subcontractor. Also, as required by law, your contractor should only have taken a down payment of 10%, not 57% of the contract price.

DBA, Worker’s Comp Exemption

I’m not a doctor, nor do I play one on TV. However, you almost always want a second opinion when a medical question arises. That policy is also a wise course when dealing with the complexities of law and regulations contractors must ‘survive’ to keep their business ‘alive’. A new rule may put more reach into the long arm of contracting law…

Q: I applied for a second contractor’s license a few years ago as a ‘dba’. I had one license for my corporation (I’ll call it XYZ Plumbing Inc.). The second license was issued as XYZ Plumbing Inc. ‘dba’ Jones Plumbing Service. I just purchased another local plumbing company and want to retain the business name. Therefore, I’m interested in applying for another ‘dba’; but was told by the CSLB that I couldn’t. In fact, the person I spoke with on the phone told me I should never have been given my ‘dba’ license two years ago. Can they go back years later and take my license? Do you think I’ll have any problems when I file my new application? I read your column every week and would like your opinion. Thank you.

A: Don’t worry; based on what you describe, the Contractors Board cannot ‘terminate’ your license, since there is no limit to the number of ‘dba’s’ you can have under one corporation. Likewise, you should have no problem securing this new license. If you do, give me a call. A second opinion is always a worthwhile choice.

I’m aware of one company that purchased 5 different businesses over a several year period and the corporation became licensed and operated as a different dba for each one of them. Like you, the buyer wanted to retain the good will and name recognition built up over the years by the seller. While not part of your question, it is also advisable to file as a fictitious business name (FBN) with your local city or county government.

Q: I don’t have a contractor’s license and don’t believe I need one for the work I handle. All of my contracts are under $500 and when they go over that amount, I only charge time and materials and have the homeowner act as the owner builder. He will hire my crew and me and take out all permits, so why should I need a license? Do you agree?

A: No I do not agree. On the contrary, I believe you should be licensed for those jobs $500 and above. Switching to “time and materials” in no way lessens the need for a contractors license and designating the homeowner as “owner-builder” to evade applying for a license is asking for trouble. I seriously doubt each of these homeowners hires you “and your crew” as employees and withholds taxes, pays your Social Security and covers you and the homeowner for on the job injury through Worker’s Compensation.

A bill in the State legislature is being strongly supported by the CSLB. If passed and signed by the Governor, SB 1254 (Leno) would put some teeth behind the State’s efforts to require Contractors with employees to carry Workers’ Compensation Insurance coverage. Contractors’ License Law requires every licensed contractor to have on file at all times with the CSLB a current and valid Certificate of Workers’ Compensation Insurance; a Certification of Self-Insurance, or a statement certifying that he or she has NO employees.

This bill would authorize the Registrar of Contractors to issue a stop order, effective immediately upon service, to any licensed or unlicensed contractor who has failed to properly secure Workers’ compensation coverage for his or her employees. The bill would also authorize the Director of Consumer Affairs to designate 12 persons as Peace Officers (up from the current 3) for assignment to the Special Investigations unit of the Board.

Unlicensed Contractors Enforcement

The benefit of having the latest news from important government meetings often means you have to attend. For contractors time is money, and that’s why I’m your ‘eyes and ears’ in these meeting rooms. Reducing unfair competition for licensed contractors is one of the ‘hang ups’ government regulators are making the ‘call’ on in these sessions…

The CSLB held several Committee meetings in Sacramento on May 25 and 26. As someone who attends many of these, I must admit this is not the most exciting way to spend an afternoon. However, for contractors, the actions taken (or even discussed) by the Board can impact their livelihood.

The Enforcement Committee, chaired by Ed Lang, reviewed several ‘Strategies to Combat Unlicensed Practices’. Among the suggestions were a recommendation that CSLB staff meet with the California Public Utility Commission (CPUC) to develop policies and procedures that would allow business telephone numbers to be disconnected. The thought is that if an identified phone being used by an unlicensed contractor could be disconnected, this would reduce unlawful competition for legitimate licensed contractors and enhance consumer protection.

A second suggestion was to continue urging newspapers, Yellow page directories, and other publications to not accept ads from contractors unless a contractor’s license number is listed. Again, the strong belief is that reducing the number of print and online ads from unlicensed individuals would improve consumer protection and diminish unlawful competition. The problems are convincing news organizations that are struggling financially to forgo a paid advertisement of any kind, or to confirm the license number is legitimate.

As part of the 2009-2010 Enforcement Strategic plan, the CSLB worked closely with the Department of Industrial Relations (DIR) to develop a Web-based Public Works tool kit. This can be used to educate prospective bidders as well as winning contractors on their responsibilities under CA law regarding prevailing wage, Cal/OSHA’s Consultation Service, health and safety issues, etc. A link to this tool is on my web site (www.cutredtape.com).

As part of the 2010-2011 Strategic Plan, the CSLB Enforcement Division is looking to establish a dedicated Public Works Investigative Unit in an effort to further enhance partnerships with local government agencies and private industry associations. The focus would be to address egregious regulatory violations by public works contractors including illegal sub-contracting violations and contractors working without a license or outside their classification. Both reports were discussed in detail and the Committee unanimously recommended approval to the full Board.

CSLB staff delivered a detailed report to the Licensing Committee, chaired by Joan Hancock. For the first time that anyone can remember, applications for an original license are being pulled for review almost as quickly as they are coming into the Board’s headquarters. One reason is an overall 13% decrease in applications received. The Board members present offered congratulations to licensing and enforcement staff for their hard work especially in light of staff reductions and furlough days.

Chairman Robert Brown and the Public Affairs Committee were given a detailed listing of CSLB activities covered by newspapers, television and other publications during the past few months. This included extensive coverage of sting operations around the State to nab unlicensed contractors; ‘scam’ warnings for homeowners, especially senior citizens; and court actions (against both licensed and unlicensed contractors), which resulted in heavy fines and jail time.

One last item that was briefly discussed involved instituting a requirement that all active licensed contractors – with a Worker’s Comp exemption on file – be required to confirm every year or two that they in fact have NO employees. Contractors that carry Worker’s Compensation must present a new certification each year or risk having their license suspended. Those who file an “Exemption” stating they have no employees may have initially filed this document when they were first licensed (and legitimately had no employees), but have since hired one or more workers.

RME Qualifiers & Business Name

Doing business as a contractor is difficult and rewarding, but the learning curve never ends. The complex rules that govern contracting matters both large and small can extend to a single word in your company name…

Q: I formed a new solar company and submitted my application to the CSLB well over a month ago. I called the Board and was told it was referred to someone three weeks ago to “review my business name”. I need this license to go to work and I can’t get anyone to tell me why there is a delay. My corporation is registered with the Secretary of State; I have my business license; so what could be the problem?

A: Code Section 7059.1(a) gives The Contractors Board the right to review any business name to determine if it is misleading or incompatible with the classification or type of business entity. The fact that the Secretary of State or your local government allows a name has little impact on what the CSLB may determine.

In your case, my guess is they’re looking at the word ‘solar’ to determine if it’s compatible with the general building classification you’ve applied for. While a “B” can legally perform all types of ‘solar’ work, the Board may not allow you to use the word in your business name since it implies you hold the “C-46” (Solar) classification. This being said, I cannot explain why the Board has delayed your application processing for several weeks. The Board is to be praised for knocking down much of its backlog for reviewing applications but this appears to be a weak link in the processing chain.

You may want to call the Board a second time and ask to speak with the person who is reviewing your file. Hopefully, you’ll get an answer and move forward or change the name style if necessary.

Q: We have a Responsible Managing Employee (RME) on payroll whose employment contract is due to expire in 6 weeks (July 1st). The project we’re working on at the present time is due to be completed no later than August 30th. What happens with our license if our employee in fact leaves? Will we legally be able to complete the project? When I called the Contractors Board they told me this was a “legal issue” and could not give me an answer.

A: The person you spoke with could have informed you that your company will automatically be granted 90-days to replace the Qualifier (RME) from the day he disassociates from your license. During this time period, the license will remain in good sanding as if the RME were still employed. Your company will in no way be limited in your ability to work on this project or any other project (assuming all other requirements such as bonding, Worker’s Comp, etc. are still in place), and, no unexpected delays in completion occur.

Your company can file an application to replace the qualifying individual and, if necessary, request an additional 90-day extension (bringing the total to 180 days). This extra time to replace your RME is evaluated on a case-by-case basis; however, in my many years of experience, I have rarely seen them deny this type of request.