License Class Disputes & Family Waivers

As times have gotten tougher for contractors and consumers more disputes can be expected to arise. We will revisit a previous question to remind readers to keep their documents in order and their work in line with the license they hold in hopes of preventing ‘history’ from repeating itself. Another question reminds us of the importance of planning ahead so your business can get ‘back to the future’…

Q.: I have been working on a project and a dispute has arisen. The owner’s attorney said they are refusing to pay money owed to me for work performed. They also said something about going after money that was already paid to me months ago. What are they talking about? Can they honestly go after me to get their money back? They say I was not properly licensed. I have a license in good standing and have never had any problem. Could you call me to discuss this?

A.: Thank you for your email. As we discussed, the first thing you must do is retain an attorney that is experienced in matters related to the Contractors Board. Your attorney will surely explain that Section 7031 of the Business and Profession Code allows for an owner or another contractor to take you to court on the grounds that you were not properly licensed “at all times during the performance of the contract”. While your license has indeed been in good standing the project owner is contending that you were working outside of your designated classification. Of course, the owner can allege anything they want but it is up to a judge or arbitrator to determine the validity of their claim.

Lawyers often use Section 7031 as a ‘sledgehammer’ whenever there is a dispute. They will try to prove that a contractor is unlicensed, had a suspended license, or was improperly licensed during some portion of a contract. They will argue the client can refuse to pay you and/or go after monies that were previously paid. This can be done even though there is no dispute regarding the quality of your work.

This law says, in part, no person engaged in the capacity of a contractor can bring or maintain any action or recover any compensation in any court in this state unless it can be proved that he or she was a duly licensed contractor. Your attorney may want to contact me to further discuss your case. It will hinge on whether your present license can properly be used to perform the trades listed in the contract.

A Word of Warning to ALL contractors. It is critical for you to review your present classification(s) and determine if the work you’re performing — in each and every one of your contracts — is proper, legal and within the scope of your license definition. Even a slight deviation from the work you are licensed to perform can cause you numerous headaches.

Q: I am not in very good health and will be retiring soon. I just brought my life insurance up to date and want my company to continue running after I’m gone. What steps should I take to make this possible?

A: I am sorry to hear about your health condition. As we discussed, it’s your intention to have your wife take over after you retire. Since she has a construction background, you can start the process immediately by informing the CSLB of your health problems and having your wife file a license application in the same class you presently qualify. She will need to document her trade experience and should write a letter requesting a “family waiver”. You may also need to write a letter giving up all rights to your license and stating that your wife is authorized to take over this company and the license number.

Contractor’s Advertising Rules

I often see contractor’s advertising. Unlike most people, I also see what’s missing and what’s inappropriate within those ads. Is your ad up to the test? Does it meet the legal requirements? You might be surprised. We also put the CSLB to the test in reviewing their job performance on behalf of contractors and consumers…

The Contractors State License Board (CSLB) just released a document entitled “Sunset Review”. This 76-page report covers a multitude of issues including the Board’s Enforcement Activities; Licensure Requirements; Consumer Outreach and Education; and the Board’s response to issues identified in their prior sunset review, or job performance evaluation.

All Boards and Bureaus within the CA Dept of Consumer Affairs (DCA) are subject to a ‘sunset review’. The State Legislature has established this process in order to evaluate the 38 regulatory agencies under their jurisdiction, including the CSLB.

The ‘sunset review’ process provides an opportunity to conduct a regular systematic performance review and evaluation of DCA boards and bureaus and a formal mechanism for the Legislature, the boards and bureaus, stakeholders, and the Department to make advisory recommendations for Board and Bureau improvements. In theory, if it is determined that a given agency is not meeting its regulatory mission; it can be “sunset” out of existence.

One interesting section of the report details all examination passage rates and number of candidates during the past four fiscal years. This is broken down by classification, number sitting for each exam and the percentage of those that passed. Virtually every classification has shown a marked decrease in the number of applicants – except one. For example, from 2006 to 2010 those taking the General building (“B”) exam decreased by 32% and Concrete (“C-8”) showed a reduction of nearly 46%. However, Solar (“C-46”) test takers increased by 450%. In the last fiscal year (2009-10), “B” contractors led the way by far with over 9600 candidates, followed by Electrical (2625), HVAC and Landscaping (1575 each) and Plumbing (1450). The overall Exam passage rate was roughly 50%. If you would like to see a copy of this report please contact my office or the Contractor’s Board.

I recently attended homecoming weekend at my Alma Mater. While reading one of the local newspapers, I came across a Directory of Business and Service advertisements. A quick review and 15 minutes of research showed that while some of the contractor ads were spot on, several others had apparent problems. For instance, a “B” contractor advertised that he performed projects that fall under the “A” classification. A second contractor advertised for masonry specialty work without holding the specific “C-29” classification. Another contractor’s ad listed an incorrect license number, or a number ‘borrowed’ from another contractor. A quick online check shows the advertised license number is a different class of work for a contractor based in southern CA not on the North Coast. Lastly, while most contractors correctly listed if they were “unlicensed” one advertiser listed a business license rather than a contractor’s license, apparently to pull a ‘fast one’ on unsuspecting consumers.

This is not meant to single out these contractors. The same issues would likely be found in most local newspapers. I would suggest that if a contractor anywhere in the state may be in doubt about this, a review of their print advertising would be in order.