Updated Exams, Nevada & C-10

It’s nice to know people benefit regularly from our back and forth. Helping contractors overcome challenges is one of the primary goals of this Q&A. Readers also know where to find answers they need when questions come up. This contractor’s first inquiry may provide significant help to others looking to increase the reach of their business. Another contractor helps illustrate that what works in California isn’t always applicable over the state border…

Q: This is the first time I have contacted you with a question, although I’ve been reading your column for years and even have your book.

I’ve been an “A” contractor for over 30 years and would like to get the “C-10” (Electrical) license. I’ve talked to a few “schools” and all they want to do is sell me a study course. I know I’ve read about getting a waiver of the exam and want to know if you think this would be possible?

A: You could apply for an additional classification and take the trade exam or you can apply for a waiver under Code Section 7065.3. You should be in a good position to secure a “C-10” exam waiver if in the course of your general engineering projects, you’ve performed electrical work such as placing underground electrical wiring, erecting transmission lines, installing signals or connecting electrical wires, fixtures, apparatus, etc. A portion of 7065.3(c) allows for a waiver if the qualifying individual is associated with a licensed General Engineering (“A”) or General Building (“B”) contractor and is applying for a classification that is a “significant component of the licensed contractors construction business as determined by the Registrar”.

It is my understanding that the registrar has determined that the “C-10” is “a significant component” of the “A” class. There are over a dozen other classifications that fall within the “significant” category including the ‘C-34” (pipeline), “C-8” (concrete), ‘and “C-51” (structural steel) classifications.

If you have further questions regarding the CSLB requirements to apply for this “C-10” or which classifications may be subject to a waiver, please call me toll free at 866-443-0657. Keep in mind that although the Registrar has made this determination, the CSLB is under no obligation to approve a waiver request (i.e. you could still end up being required to sit for the trade test).

Q: I have had the “A” license for many years in CA and NV. Can I waive the Electrical exam in NV if I want to add that classification?

A: Unlike CA, Nevada will not allow a waiver of the electrical classification under any circumstances. However, my understanding is that the NV Contractors Board may consider a waiver of the following trade tests if you already hold the General Engineering classification: Concrete, Landscape, Steel Reinforcing and Erection, Masonry, Fencing & Equipping Playgrounds, Individual Sewerage, Fabricating Tanks, and Installing Industrial Machinery. As with CA, this determination is on a case-by-case basis and dependent on various factors including years of experience and project background.

FYI: A joint CSLB and Nevada Contractors Board sting netted 13 unlicensed contractors in Truckee recently. $86,000 in bids were made by these criminals who were crossing state lines in the mistaken belief they wouldn’t get caught taking work away from those operating legally.

The CSLB regularly updates their exams and tries to address each classification at least once every 5 years. They’re presently in the process of updating the “C-4” (boilers), “C-16” (fire sprinklers), “C-21” (building moving and demolition) and “C-47” (manufactured housing) trades. The Board is seeking contractor participation and will be mailing letters to all licensed contractors in these four classifications. If you’re interested in participating, look for details in the mail or call the CSLB at 916-255-3221.

Revoked License, HIS, Solar & Public Agency Bids

Life is full of questions. The answers are often difficult to know without a resource to consult. For contractors these questions often make the difference in profit or loss, especially when interpretations may vary or seem illogical to most. Success is knowing for certain, and where this column begins…

Q: My client has a “B” license. Can they legally perform solar work even though this is one trade or would they be required to first apply for a “C-46” license?

A: The CSLB passed a regulation, which states that a solar energy system “constitutes use of more than two unrelated building trades or crafts within the meaning of Code Section 7057” (i.e. definition of a General Building contractor). Therefore, a “B” or “C-46” (solar) contractor should be able to perform this work.

Q. I am hoping you can clarify something for us. We recently came across a public works project in which the awarding authority is requiring a “C-12” (Earthwork and Paving) license. This is the only acceptable classification listed. It appears we cannot bid with our General Engineering license. Since the “A” license includes “C-12” trade work shouldn’t we be able to bid this job? Am I missing something?

A: A public agency can specify (logically or not) that only a “C-12” license can pursue this project; however, in my expert opinion, they should allow “A” contractors to also submit a bid. You’re correct, an “A” (General Engineering) contractor can properly perform ALL earthwork and paving within the “C-12” class. Unfortunately some government agencies look at CSLB classifications literally. For example, over the years, I’ve seen: where “C-10” (electrical) contractors were excluded from bidding a low voltage (“C-7”) job; an “A” was excluded from bidding on a “C-34” pipeline project; and where one local government designated that only a “C-61”/”D-06” (concrete related services) contractor could handle concrete restoration — to the exclusion of “C-8” (concrete) licensees. This does not compute, but it’s the law.

For your information, according to an attorney I spoke with last month, there was a recent court case where one side tried to contend that an “A” contractor could not legally perform “C-12” work and therefore was not duly licensed to pursue a court action. The Court rightly denied the motion saying that a General Engineering contractor could legally perform earthwork such as grading and trenching.

Q: My license was revoked several years ago. Do you think the Contractors Board will allow me to become a Home Improvement Salesperson (HIS)? Also, I see where the Board now requires applicants to be fingerprinted. What can you tell me about this new requirement?

A: I doubt the CSLB will allow you become a HIS at this time since your prior license was revoked. I would anticipate that the Board would require you to resolve whatever issues caused the revocation before they let you become listed on any contractor’s license. You can either contact the Board prior to filing an application or you can apply and the Board will pull your application for investigation.

Fingerprinting became mandatory in January 2005. All applicants must be fingerprinted prior to issuance of a new license or additional classification, replacement of a qualifying individual, or filing an application for a Home Improvement Salesperson. The California Department of Justice and the FBI will review all fingerprints and issue a report as to whether or not an applicant has a past criminal conviction. According to the CSLB, there have been more than 39,700 applicants with past criminal convictions out of more than 200,000 fingerprinted. Just over 1,000 applicants have been denied and about an equal number were issued probationary licenses.

Fingerprinting, LLC Licensing & Partnerships

A major change in California contractor licensing is coming. S-l-o-w-l-y. Another contractor helps ‘clear up’ some general rules on partnerships. As we have advised before honesty is the best policy when applying for a contractor’s license…

Q: We have an existing Partnership license; however, my company would like to add me as a new partner. I am a little ‘fuzzy’ on our ability to get my “B” license added to the “A” license. Would this require that we apply for a new partnership? Can I be added as another partner and bring my General Building license in? What are my options?

A: The CSLB will not allow an existing General Partnership to add (or for that matter subtract) a partner. This would change the partnership and require you to apply for a new license. If applying for a new license you have the option of listing as many partners as you wish. As we discussed, these can be entities like a corporation and/or individuals like you. As an individual you must either be designated as a full partner (i.e. ‘Qualifying partner’) or RME (Responsible Managing Employee). As we also discussed, a RME is NOT a partner.

There are exceptions to the above. The CSLB will allow a General Partnership (GP) to replace its RME without being required to apply for a new license. Further, a ‘Limited Partnership’ (LP) can replace the “limited” partner and maintain its existing license.

Q: What’s the latest information on getting a license for a Limited Liability Company (LLC)? I represent an out-of-state LLC who is interested in applying for a CA contractor’s license. I know the new law allows the Contractors Board to issue a LLC license but understand this hasn’t taken place as yet. Can you provide me with an update regarding where this stands? Thank you.

A: I continue to get calls and emails regarding the licensure of Limited Liability Companies (LLC). As referenced in a prior column, last year the State legislature passed and the Governor signed legislation allowing the CSLB to issue a license to a LLC. While the law took effect January 1, 2011, it is not due to be implemented until the end of December (January 1, 2012 at the latest).

Unlike all other contractor licenses, LLC licenses will be required to: 1) maintain a $100,000 surety bond (rather than the normal $12,500 contractors bond); 2) maintain liability insurance coverage of at least $1 million (which is not a current requirement for licensure). According to recently enacted Code Section 7071.6.5, the increased bond requirement is “for the benefit of any employee damaged by his or her employer’s failure to pay wages, interest on wages, or fringe benefits and is intended to serve as an additional safeguard for workers employed by or contracted to work for a Limited Liability Company”.

Q: I’m applying for a new contractor’s license. My Sole Owner license was issued over 20 years ago and I recently incorporated. I see on the application where they’re asking about my criminal background and I’m worried because I had 2 DUI’s when I was in my early 20’s. These are the only incidents in my background but I don’t believe I mentioned this on my first application. I have never had a complaint against my license. Do you think the Contractors Board will hold this against me?

A: I doubt the Contractors Board will hold this against you. According to my discussions with CSLB personnel, yours would not be the first application since 2005 (when fingerprinting was implemented) where a contractor came clean about his past criminal background. If these incidents over 25 years ago are the only ones on your record, you should receive this new license without any difficulty. To paraphrase a familiar line, ‘the truth shall set you free.’

License Fees, Family Waiver & Bonds

While government requires a ‘fixed’ contractor’s bond, the marketplace operates on a slightly different ‘scale’. The cost of doing business as a contractor in CA is about to go up significantly, but quick action could save some money. Another contractor asks for advice on keeping the business ‘all in the family’…

Q: In our previous conversation regarding our new GC license, you mentioned the state’s bonding requirement. My notes indicate this was a $12,500 bond for about $250. Can you please point me to a specific citation or other source in the licensing rules that governs this requirement? Is $12,500 a fixed amount for all GC’s or is there any kind of sliding scale or other situations that might require a larger bond (separate and apart from owner/developer/lender requirements for specific projects).

A: All new contractors (General and Specialty) must file a Contractor’s bond in the amount of $12,500. This requirement is specifically addressed in Business and Professions Code Section 7071.6. This is a fixed amount regardless of the size of the company and applies to any active Sole Owner, Corporation or Partnership license (Inactive licenses do not need a bond). If an application or license is qualified by a Responsible Managing Employee (RME) — as yours will be — a $12,500 Bond of Qualifying Individual is also required. Again, this is a fixed amount and is referenced in Business and Professions Code Section 7071.9.

There are no fixed costs for these bonds. Each insurance company sets their own price. The company we deal with typically charges $129.00 for two years. This cost is based on passing a credit check; poor credit history usually results in a much higher premium.

Q: If a contractor’s license is in a husband’s name only, can a wife be added? In the event that he should be unable to run the business and the wife’s name is not on the license can she take over the business and run it? Your advice would be very much appreciated.

A: Based on your description it would appear this husband is licensed as a Sole Owner. If this is the case, a wife (or for that matter anyone else) could only be added to his license if she qualified a different classification. For instance, let’s assume the licensee holds the “C-39” roofing class. If someone could qualify for a second trade (such as the “C-20” HVAC or “C-46” solar), this could be added as an additional class.

In the event a husband were not able to run the business due to becoming disabled for instance, B&P Code Section 7065.1(b) might allow his wife (or another close relation such as son, daughter, son-in-law, etc.), to become the Qualifier and take over. This would require filing a new license application and having someone certify that the person succeeding him has been directly involved (i.e. employed) in the family business for five of the last seven years. In other words, someone will need to qualify his or her own license and have the requisite supervisory experience in the classification held by the present license holder. This is commonly known as the “family waiver”.

ALERT: Most contractor license application fees increase up to 50% effective July 1st. Your application must be hand-delivered or postmarked to the CSLB by June 30th to take advantage of the current fee structure. This affects anyone applying for a new original contractor’s license, adding a classification or replacing the qualifying individual. Fees for renewing an existing license are also going up; however, the present fee structure only applies to licenses whose renewal is through June 30th. Any license whose renewal date is after July 1st must pay the increased fee regardless of when the renewal application is delivered to the Contractors Board