National Contractor Licensing, Reciprocity, General & JV Licenses

While your California Driver’s license is good almost anywhere in the U.S. the contractor’s license has definite limits. Do you know which states will recognize your credentials without further testing? As contractors seek out opportunity across State borders, others are coming into California searching for business and looking for ways to unite for mutual profit…

Q: I was wondering if New Mexico (NM) has updated their Reciprocity agreement with any states in regards to Contractors Licensing? Can you help our company with determining which states reciprocate with Nevada (NV)? Is there a good place to find out more general information on which states require our company to be licensed (we’re looking to expand)?

A: NM only has a reciprocal agreement as it relates to journeyman electricians but none for contractors licensing. NV has reciprocity agreements with CA, UT and AZ. Check out www.cutredtape.com for how best to find information on contractors licensing nationwide.

Q: I should know this but wanted to confirm just what a “B” contractor can do. There is an upcoming project, which involves building a structure plus all related site work. For the structure, I plan on either performing or subbing the concrete, painting, drywall, flooring, roofing, etc. I also plan on hiring an “A” to do all the site work and utilities. Do you see any problems with that?

A: As a General “B”, you can certainly take on this project and self-perform or subcontract the various trades mentioned as well as virtually any other trade or craft (except fire sprinklers and well drilling). There is no problem as long as the project includes two or more unrelated trades (other than framing or carpentry). There is also no problem hiring a General “A” to perform all site work, utilities, streets, curbs, etc.

Q: We would like to form a Joint Venture with another corporation. They’re licensed in CA but our company is not (we’re from outside the State). I see on the Contractor’s Board web site that there is a Joint Venture application. Is this the one we should use? Since their company already has a Responsible Managing Employee, can we use the same person for the Joint Venture? Also, I read about a fingerprint requirement. Who has to go through this?

A: You can only use a Joint Venture (JV) application if all entities are licensed and in good standing in CA. Since one of the two entities is presently unlicensed, your first step would be to file an Application for Original Contractors License with the Contractors Board (CSLB). Once you have completed all testing, filed the appropriate Bond and Worker’s Compensation Certificate, and all listed personnel have cleared fingerprinting; a license number would be issued. Only then can a JV application be filed. As for the qualifying individual, the Board does not require that you designate a RME or RMO on a Joint Venture (although you must list one on the original application).

Because this overall process will likely take a few months, if you’re looking to bid on an upcoming project before then, it may be advisable to apply for a Partnership license. While not the most common avenue, the CSLB will accept an application for a partnership of entities (in your case two corporations). The CSLB may allow the RME on the existing license to be the Qualifier on a second license; however, this is determined on a case-by-case basis.

Roofing, General Licenses & Qualifiers

While my focus is assisting contractors, particularly those who have run into difficulty through government regulation or licensing, more and more consumers are using the Internet for research when they need to hire a builder. As both contractors and consumers may know, working through ANY government regulations is not going to be easy or quick. That’s why there are experts in many fields whose sole purpose is to help navigate and interpret those complex rules…

Q: I found this answer on Capitol Services web site and I had a similar question about contractors doing roofs. Your response in part was as follows: “…However, 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”.

So, are you saying that if I hire a contractor who only has a “B” license and he doesn’t use a sub with a “C-39” license, will my roof be illegal? We are having a roof put on our house in Los Angeles County soon and I’m in the process of getting bids. If the contractor’s license states he is exempt from Worker’s Comp because he states all his employees are family, then if he does have someone (who is not family) work on my house and I don’t know it, could I be liable if they get hurt?

A: By definition, a General building contractor should be handling two or more unrelated trades on a given project or subcontract the work to a licensed specialty contractor (in your case a “C-39” roofing contractor). If you were to use a “B” who is performing the work, it would not mean your roof would be ‘illegal’, only that the contractor may be working improperly.

If he is exempt from Worker’s Compensation insurance, but still “employs a non-family member” you could be liable if they get hurt — even if you are unaware. Ask to see a copy of the contractor’s Worker’s Comp certificate and check carefully with the CSLB that it is still valid. In reality, chances are to do a complete tear-off and re-roofing, there will be at least one employee who should be covered.

Whether a “B” hires a “C-39”, or you hire a roofer directly, please note that all “C-39” contractors must carry adequate Worker’s Compensation insurance coverage for their employees (or a Certificate of Self-Insurance). They cannot file an “Exemption”.

Q: I have a “C-17” (Glazing) license that I just activated. The thing is that I’m setting up a commercial glass shop for a good friend of mine that started a company out-of-state but wants to do work in California.

What is the best way to get my license in his name, or make me a Responsible Managing Employee (RME) or a Responsible Managing Officer (RMO)? I’ve been trying to understand the Contractors State License Board forms, but it only confuses the hell out of me.

A: If you want to help your friend to get a contractor’s license in CA, have him first decide how he wants to conduct business (corporation, partnership or sole owner). Once this decision is made, you’ll be able to better determine your options on becoming his Qualifier. For instance, as a sole owner, you can ONLY be a RME. If a corporation, you have the option of being a RME or RMO. If you form a partnership, you can be the “Qualifying partner” or RME.

The CSLB paperwork and overall licensing process can often be confusing. For instance, depending on your title and percentage of ownership, you may need to INACTIVATE the “C-17” license you just re-activated. Call me and I’ll be happy to discuss your options and help you navigate through the CSLB forms.

Fire Sprinklers, Electrical Signs & Scam Warning

An eternal question requires the ‘wisdom of the ages’ to answer. With only 30 years experience helping contractors I’ll give it my best shot. You will also ‘witness’ some expert assistance as a contractor battles a city over their license classification. We wind up with a warning to all contractors about a new wrinkle in a ‘scam’ I’ve alerted you to in past years…

Q: I understand there are new requirements for installing fire sprinklers. This is an area I would like to expand into; however, when I called the CSLB they said I would need 4 years experience to qualify before taking the “C-16” exam. I have a plumbing license but I’m not allowed to install fire sprinklers so how do I get the experience?

A: 
Beginning January 1, 2011, an automatic fire sprinkler system will be mandatory in all new one and two-family dwellings throughout the state. This is in line with the 2009 International Building, Fire and Residential Code, and comes from modifications to the California Building Code through the State Building Standards Commission.

The CSLB has issued a warning to “A” General Engineering, “B” General Building, and “C-36” Plumbing contractors that only the “C-16” Fire Protection classification is legally permitted to lay out, fabricate or install fire protection systems. The new residential code does not affect home remodel, only new construction; however, I understand there are currently about 100 local ordinances related to residential fire sprinklers so it would be a good idea to check with your local jurisdiction before beginning any projects.

This is an ‘ages-old’ question; How do I get the experience if I cannot perform the type of work required by the State? Unless you have been installing fire sprinkler systems with your “C-36” or have been working full time for 4 of the prior 10 years for a “C-16” contractor, you may want to consider a partnership or joint venture with a licensed fire sprinkler contractor.

Q: A City is questioning our ability to install electrical signs with a “C-10” license. They are also separately questioning the manufacturing of electrical signs without the “C-45” explicitly stated on our license. What is covered with the “C-10”?

A: As my company is often called on as an “Expert Witness” when the complex rules of licensing wind up in court, I have heard this type of question many times. According to the CSLB, a “C-10” (Electrical) contractor can perform all “C-45” (Electrical Sign) work. This being said, you’re not required to have a contractor’s license to simply manufacture the signs. A license is only necessary if installing, erecting or servicing the signs. The City may be confused since the definition for the “C-45” uses the word “fabricates” but this does not mean you need a license if only handling the “fabrication” (i.e. manufacturing). The installation is what triggers the need for this classification.

Readers of my column may recall that in 2009 and 2010, I issued a warning not to fall for a scam whereby companies were sending bogus Information Statements to file for the CA Secretary of State. Well, now according to the CSLB and Better Business Bureau, these companies have reportedly been doing the same thing with some CSLB renewals.

The Contractors Board sends renewal notices to a contractor’s address of record approx. 60 days before it is due to expire. If you have not received your renewal or suspect that you’ve been sent a fraudulent form, contact the CSLB or call my office (866-443-0657) for help.

Contractor Bonds & Family License Waivers

If a faucet says ‘off’ it can’t be ‘on’, but in the complex world of contractor’s licensing you may be surprised to learn ‘minimum’ can also be the ‘maximum’. Keeping a construction business in the family can be subject to some special options in licensing. I will share the ‘truth’ with one contractor who has discovered ‘consequences’ about license bonding…Q: We’re looking to expand into the construction market and found someone that has the bonding we are looking for. Since our existing Responsible Managing Officer (RMO) only has the minimum $12,500 bonding, do we have to replace him with a new RMO? Can we reduce him to an RME? We are using his license so we would like to keep him on in some capacity.A: The $12,500 Bond Of Qualifying Individual (BQI) for your RMO is required since he owns less than 10% of the corporation. This is not only the “minimum” bond amount but also the “maximum” bond accepted by the CSLB (with a few exceptions). Virtually any active contractor is required to carry a $12,500 Contractors Bond. If the license is qualified by a RME, or as in your case a RMO with minimal ownership, an additional BQI is required.If your Qualifier is no longer an “Officer”, then you’ll need to change his status to RME. Your company will need to file an application for replacing the qualifying individual. If your Qualifier becomes a RME, this triggers at least one new requirement: he must work at least 32 hours or 80% of the time the business is active — per week. Keep in mind the CSLB only allows one Qualifier per classification on each license.Q: My husband has been working for his parents family-owned company for the past ten years. My husband is interested in starting up his own business seeing as his parents will be retiring within the next few years. I read somewhere that he would be able to work under a “grandfather” license. I haven’t really been able to find out too much information about the process and what he needs to qualify or how to go about doing that. Any advice would be appreciated.A: There is no formal “grandfather” license. I think you’re referring to a law (7065.1) that allows a close relative to take over an existing license. If the family owned business is a sole proprietorship, this is commonly referred to as a “family waiver”. This would allow your husband to become the new Qualifier — with a likely exam waiver — while effectively “starting up his own business”.On the other hand, if the family business is a corporation, your husband can apply to replace the present Qualifier (his father or mother) with a waiver. In this scenario, if your husband were to become the new Qualifier, he could eventually apply for his own business. Once a waiver is granted on one license it can be carried over to other licenses.Q: What are the consequences for failing to renew both contractor bonds on a timely basis? Both our license and qualifying individual bond expired last month.A: It appears from my research that both your bonds are still in good standing. Generally, contractor bonds stay in effect until cancelled by the bonding company. They must notify the CSLB in writing (or electronically) that a bond has been cancelled and in turn the Board will send you a letter stating this fact. They will likely give you a set amount of time to resolve this problem before suspending the license.If it turns out there was a “cancellation”, have your bonding company rescind this. The CSLB will accept such a notice up to 90 days from the – license suspension date. The ‘truth’ is if this were done on a timely basis, there would be no lapse and therefore no negative ‘consequences’.