Service Disabled CA Veterans, Experience Credit &License Expiration

As an expert I often find myself correcting mistaken impressions, outdated ideas or erroneous ‘knowledge’ because the complex rules of contracting are not ‘concrete’ but change over time. It’s practically a full time job to keep up! In this session, we will revisit some of the problems that arise from ‘knowing’ too much and understanding too little…

 

Q:    Mr. Kalb, I received your name and contact information from a friend and checked your website. I’m in the process of buying a stone countertop business that requires a California contractor’s license. I have the opportunity to keep the owner as RME but would rather have the license in my name.  After reviewing the contractor board’s website, I believe I currently qualify to take the exam. I have a Bachelor of Science degree in Mechanical Engineering and I ran my own concrete contracting business for a year and a half.

 

A:   Thank you for your email.  To install stone counter tops, you need a C-29 (Masonry) or C-54 (Tile) license.  While the CSLB should give you two years credit for the engineering degree, it does not appear your contracting background will give you the remaining two years needed to qualify for a license.  Concrete would likely not be considered for either of the above classifications.

 

It appears you will need to keep the current owner on board for a while or hire someone that has the appropriate license.  After two years, you should be able to qualify for your own license.

 

 

Q: I have had a California Contractors License for many years. I closed my business; inactivated my license and went to work as a project manager. Can my license be used as the license for a new corporation assuming I am an owner (to some percentage) or RMO/RME?

If so what happens to my license upon my retirement or the termination of the corporation?

A: I sometimes receive calls from people in your position who allow their license to expire and then years later ‘discover’ they must retake the state exams.

 

Your present license cannot be used for this new corporation; however, you can serve as the Qualifier- Responsible Managing Employee (RME) or Responsible Managing Officer (RMO).  The corporation will be issued a new license number while your sole owner license remains inactive.  Therefore, nothing happens once you retire or the corporation is terminated.  Further, you’re not required to own any of the company even if acting as the RMO.  There is one situation where your individual license could be reassigned to the corporation. This would require you to own 51% or more of this new corporation, however after it was transferred you would lose the Sole Proprietor license forever.

 

 

Q: I am a contractor with a “B” license and was under the impression that I would qualify for some of The Disabled Veteran Business Enterprise (DVBE) ‘goals’ offered in state and federal contracts.  I served in the military and have since become disabled. I understand that I may qualify for some jobs where contractors are seeking to hire companies owned by veterans?

 

A.  While ‘service-disabled’ veterans can qualify, your injury occurred after leaving the military and unfortunately this would make you ineligible. The Department of Veterans Affairs certifies service-disabled veterans when they leave the military while the State Department of General Services is the State’s certifying agency that administers the DVBE program. Anyone interested in learning more about DVBE certification could contact either of these Departments or consider visiting the statewide Disabled Veteran Business Enterprise Alliance online at www.cadvbe.org.  This non-profit organization can provide valuable information you need to know regarding DVBE opportunities and how to become part of that contracting process.

Handyman Subcontractor, Corporate Name Changes & Qualifiers, Enforcement Action

Consumers may consider hiring a ‘handyman’ but how do the rules apply when a licensed contractor hires them?  I help a license qualifier find his way forward after walking away from a job. Finally, of interest to all, is our update on Board efforts to keep a level playing field for contractors …
 

Q:  As a licensed contractor, I try to play by the rules and carry Worker’s Comp, liability, and bonding.  Can I hire a ‘handyman’ as a subcontractor without having to pay ‘comp’ on him? He has a ‘handyman business license’ from our City and thinks this is adequate licensing. Also, does the law state a handyman can only charge $500 per day, per project, or per customer?   Thank you, I enjoy reading your posts.

A: I’ll answer your second question first.  If a project (time and materials) is $500 or more, a contractor’s license is required.  This is not by the day or customer.

If you hire anyone to work on your construction projects, he or she is either an employee or licensed contractor.  If he does not have a contractor’s license then you’ll need to cover him by Worker’s Compensation Insurance.  A ‘handyman business license’ has little or nothing to do with the issue.

 

Q: I resigned yesterday from the company where I have been the Qualifier for seven years.   I have an existing corporation and expect to have the new name soon.   Do you think I should apply under the current name or should I wait until the new name is finalized.  Your thoughts on the best route to follow?

 

A: Either route is acceptable.  You can apply for the license now and change the name later — after it’s issued — or wait until you have the “final” name registered with the State and then file the application.

The CSLB will check on the corporation name on file with the Secretary of State and this must be the same as on the contractor’s license application.

Contractor’s Note:  A local landscape contractor in Solano County has had enough.  As reported on a local Sacramento News station, he said unlicensed contractors are driving him out of business and he was looking for help from the Contractors Board.

CSLB spokesman Rick Lopes confirmed that authorities are putting together a sting operation as a result of multiple complaints lodged by this licensed contractor.  Lopes further stated that a statewide hiring freeze has hampered enforcement of unlicensed activity.  Out of 59 vacancies at the Contractors Board, half are in the enforcement division.

As I have highlighted several times in this column, the CSLB is completely funded by licensing fees paid by contractors.  The Board gets NO money from the State’s general fund.  This hiring freeze is not saving the State any money but is potentially costing legitimate contractors their livelihood.  While the Contractors Board is doing all it can to level the playing field, this hiring freeze is tying one arm behind their back.  If legitimate licensed contractors want more enforcement operations, they should contact their legislators and the Governor’s Office and demand that their licensing fees be used for their stated purpose.

Sometimes it is not the unlicensed individual that causes problems for consumers.  On occasion, it is the licensed contractor that comes to the attention of the CSLB Enforcement Unit.  In the Board’s most recent Newsletter, approx. 650 “former” contractors were listed as having their license revoked during the time period March 2010 to March 2011.  Some of the more common codes violated were Sections 7090.1 (failure to pay a civil penalty or comply with a correction order); 7107 (abandonment of contract); and 7085.6 (failure to comply with an arbitration award).

Employee Ownership & Worker’s Compensation, RMO/RME

Like rising summer temperatures, optimism is on the upswing as contractors begin to see opportunity again in the Golden State. Our first question comes from one such an optimistic Californian. Another contractor actually answers his own question, but for everyone’s benefit we ‘employ’ my expertise in explaining it for all…

Q:  I was reading your Kalb’s Column and I thought you would be the perfect person to answer my question.

I am currently living in California and want to open a construction company. My father has the experience and is willing to take the exam for a General “B” license. I want to form a S-corporation. I know I must form the corporation first before my father applies for the license. My question is does my father need to act as an RMO under my corporation and own 20% stock, or should he just apply for his own license. Thank you in advance,

A:  When forming a corporation, you have choices on the qualifier.  Your father can be a Responsible Managing Employee (RME) or Responsible Managing Officer (RMO).  If he will be the RMO, ownership percentage can be anywhere from 0 to 100%.  There is no requirement that he own 20% of the company.  To save time and money it is best to apply for the corporate license and have your father sit for the exam.  There is no need for him to first apply for ‘his own’ Sole Owner license.
Q:  We have noticed a trend towards some corporations becoming “100% employee owned”.  One of these general contractors recently submitted exemptions to a public agency, stating that since they were all “owners”, no Worker’s Compensation Insurance was required.  This is not the first time we have heard this, although this is the first time an agency has informed us that this has occurred.  As you know, under California law, any company with employees must provide Worker’s Compensation. I think the Exemption this company has on file with the Contractors Board is improper.  If you publish my question, please withhold my name.

A:  As many of my readers know, I never use anyone’s name or any identifying information in my columns.  When people ask me questions by email, phone or fax, I answer them as best I can and, if published, always make sure there is complete anonymity.

What you’re describing is likely an ESOP (Employee Share Option Plan).  This is a benefit plan that allows employees to become owners of stock in the company they work for.  Under a typical ESOP plan, companies usually provide their employees the opportunity to acquire the company’s shares over a period of time. Employee ownership can mean many things, ranging from a few executives owning stock in their companies to the ownership of a company by most or all of its employees.

Without knowing the specific make up of the company in question, I cannot speak to whether they’re acting properly or trying to ‘game the system’.   Nevertheless, you’re correct, simply being a “100% employee owned” would not exempt them from needing Worker’s Compensation. Even the claim, ‘employee’ –owned suggests insurance would be necessary.

If in fact they have employees (but have filed an Exemption), this is a serious violation and may result in disciplinary action being taken by the CSLB and CA Department of Industrial Relations.  During several of the Contractor Board’s recent sting operations, companies that had employees but had filed an Exemption form (under penalty of perjury) were targeted.

SWIFT Enforcement Action

You likely won’t know them, hear about them or see them, but CSLB investigators are waiting to ‘sting’ criminals pretending to be contractors in CA. As State budgets are impacted by reductions across the board, SWIFT agents are allying with local law enforcement in their efforts to protect consumer and contractor alike from damages caused by fraudulent criminal activity…

Unlicensed contractors have always been a problem for the construction industry and will unfortunately never totally be eliminated.  I have read and heard from some legitimate contractors that the CSLB is not doing enough to combat unlicensed activities.  For those that are playing by the rules, seeing a homeowner hire someone who is not licensed or bonded is upsetting to say the least.

The present enforcement activities against those that are unlicensed, uninsured and uncovered by Worker’s Compensation is the strongest I’ve seen in my 30 years dealing with the CSLB.

Two recent examples show how active the Board is throughout the State.  On June 9, 2011, The CSLB in conjunction with the Santa Cruz County District Attorney’s Office and California Department of Insurance conducted a sting operation at a home near the Santa Cruz Harbor.  They netted seven people suspected of violating state consumer protection and labor laws. Santa Cruz County District Attorney Bob Lee stated, “We strive to maintain a level playing field in a difficult economic environment by trying to prevent subjects who lower costs by not abiding by the law from undercutting licensed contractors.”

 

The day before, on June 8th, the Contractors Board in partnership with the Yolo County District Attorney’s Office and State Dept. of Insurance caught 11 unlicensed operators in an undercover sting in Woodland.

 

Investigators from the CSLB’s Statewide Investigative Fraud Team (SWIFT) and the DA’s office posed as homeowners seeking bids for home improvement projects such as roofing, painting, fencing and general building. Those who submitted bids for more than $500 for labor and materials received citations from the DA’s office for misdemeanor contracting without a license. Those who claimed they had workers will also face misdemeanor charges for failure to obtain Worker’s Compensation Insurance.

One unlicensed individual from Santa Cruz bid for roofing work and did not have a license, or worker’s comp insurance (which roofing contractors must have even if they certify to CSLB that they have no employees).

An unlicensed painter was trapped by the Woodland sting and received a Notice to Appear for contracting without a license.  This individual is no stranger to CSLB in that he has a pending court case in October, on charges of – yes you guessed it — contracting without a license.

According to CSLB Registrar Steve Sands “these sting operations are a prime example of how violations of state consumer protection laws will not be tolerated by CSLB and its partnering agencies”, He went on to say that, “Hopefully these stings will help educate consumers about the importance of checking that a person they hire to work on their home or property has the appropriate license for the job they are undertaking and appropriate insurance coverage for themselves and their workers”.

FYI-Best wishes in retirement to Gwen Wells, one of the longest serving most knowledgeable Builder’s Exchange executives I have had the pleasure to know. Gwen leads the Monterey area’s Builder’s Exchange of the Central Coast serving the best interests of contractors for more than 43 years.