Limited Speciality Licensing, DAS Electrical Certification & Worker’s Comp Exemptions

Changes in ‘limited’ specialty licensing in CA has created ‘unlimited’ numbers of relevant questions for contractors. In sharing his disturbing story another contractor will discover there are still a few good options open to him…

Q: I was checking the CSLB website for information on the “C-61/D-51”, classification.  It’s showing: “D-51” – Waterproofing and weatherproofing — under relevant class.  Do you know what the “relevant class” is?

 

A: The “D-51” (waterproofing and weatherproofing) was a “C-61” (limited specialty) category eliminated by the CSLB a number of years ago. This work now falls under any of several classifications, depending on the specific project you’re doing. The “relevant” classifications are “C-39 (roofing), “C-33” (painting), “C-29” (masonry), or “C-54” (tile). Therefore, if the waterproofing/weatherproofing you’re doing relates to roofing, you’ll need a “C-39”; if painting is your specialty, you’d need the “C-33”, and so on.

Q:  Do you have any experience dealing with the CSLB relating to certification of electricians? I was trying to get some idea on what kind of enforcement action is typically taken and what penalties might be expected for non-compliance.

A: According to the 2012 License Law and reference book, “Upon referral by the Chief of the Division of Apprenticeship Standards (DAS) alleging a violation under this section, the Registrar of Contractors shall open an investigation”.  The Registrar may also initiate an investigation and disciplinary action on his own.

We’re knowledgeable about the history of these certifications through the DAS but have not directly handled any.  The CSLB only gets involved as it relates to enforcement actions for “C-10” contractors that do not comply.  Enforcement of this certification is relatively new for the CSLB and we’re not aware of any stats regarding how often the CSLB has taken action for non-compliance and what penalties, if any, have been levied.

Q: Thanks for what you do with the industry!  I have three questions.

1. We recently had to downsize and lay off all our employees. If I’m the only employee, can I hold a license, be incorporated and not have Worker’s Compensation Insurance?  2. Can I switch my Responsible Managing Officer (RMO) status to a new and different corporation and still keep all my classifications? The new corporation would be an “S” or a “C”, if that made any difference. And again the same insurance question if I’m the only employee on this new company. Finally, is there a form to file if I have no employees?

A: Thank you for the kind words.  We’re sorry to hear you’ve had to lay off your employees.

If you’re the only Officer (and employee) on a corporate license as well as the Qualifier, you can hold the license without needing Worker’s Compensation. This would be true for your existing company or “new and different” corporation (“S” or “C”).  The form you’ll want to file with the Board is the “Exemption from Workers’ Compensation”.

 

Applying for Multiple Classifications & Social Security Number Requirement

In the global economy sometimes business comes calling with a ‘foreign’ accent. Some of the legal requirements for becoming a licensed contractor in California are uniquely American and may be ‘lost in translation’…

Q:  Our company has been selected to provide a product as part of a building project in Southern California.  The General contractor has asked that we look into getting a California contractors’ license to install the product and suggested we speak with you.

We’re a foreign manufacturer that has worked in the US but has not registered in California.  Based on some research, it appears we might have a problem.  We do not have a State tax number in California nor personnel with a Social Security number.  Will we still be able to apply for a California Contractors License?

A: This is an issue that has impacted a number of foreign contractors.  The question of how to get a license when no one with the company has a US Social Security number (SSN) is one we’re often asked.  Prior to addressing this, let me say that the CA Contractors Board requires all corporate contractors to register with the CA Secretary of State, which results in being assigned a CA tax ID. This should not be a problem and can be handled by Capitol Services.

However, all out-of-state corporations are required (at a minimum) to list a President (or CEO) and the Qualifying individual who will sit for the exams (this can be the same person).   Since the fingerprint/Social Security requirement took effect in 2005, foreign companies have either had their President apply for a US SSN (which can be a lengthy process) or appointed someone with a SSN to that office.  The Social Security number is an absolute requirement.

I wish I could give you more positive information; but a company cannot secure a CA Contractors license unless all listed personnel have a United States SSN.

An alternative would be to only act as a manufacturer/supplier, which does not require a contractor’s license.   However, you could not sign a contract to INSTALL your product.  Registration with the CA Secretary of State is still necessary.  I hope this information helps.  Please get back with us if you have any further questions.

 

Q: I recently submitted an application for a new contractor’s license.  I applied for a “B” General Building, “C-54” Tile, and “C-20” HVAC.  I have been doing this work for over 20 years.  The CSLB rejected my application due to the fact that I was applying for multiple classifications.  Being that (from what I hear) it takes them several months to process applications, it could be a year long process to obtain these three licenses!  Is there any way around this?

A: Unfortunately, you are only permitted to apply for one classification at a time if you are testing for each of these classifications.   Your first application for an Original License may take up to three months from start to finish.  However, at this time, the CSLB is processing Additional Class applications much more quickly.   These remaining two will likely take 6-7 weeks each.  In other words, while not a yearlong process, it could take a total of 6 months.

 

 

RME & Inactive Licenses, RMO & Partnerships & Waiver Applications

One word can often make the difference in success or failure in having a contractor’s license. ‘Inactive’ and ‘expired’ are good examples one contractor brings to our attention. Adding a class to your existing license is a way to extend your opportunity and may be possible without taking a test. We also share some ‘general’ observations about license qualifiers…

Q:  I currently hold a “B” (General Building) and “C-36”(Plumbing) license. I would like to add the “C-20”(HVAC) classification.   I consider HVAC installation a significant portion of my business since almost every permit I pull includes mechanical work, not to mention the fact that plumbing and mechanical are closely related trades. Do you think I can add the “C-20” without taking the test?

A: Over the years Capitol Services has handled hundreds of these 7065.3 waiver applications.   This is the statute that allows the CSLB to waive the trade exam for some additional classifications.  While the CSLB has established general internal guidelines for these trade waivers, each applicant is evaluated based on his or her experience and detailed project background.

This being said, I can tell you that based on our extensive experience at Capitol Services, a “B/C-36” contractor applying for an additional HVAC class is in a good position to receive a waiver. It is important to keep in mind that detailed project descriptions covering at least 4 years are required, as is a detailed written waiver request on company stationary.

Q:  We have a couple of questions if you don’t mind. As a General (50/50) partnership, can we change the percentage of ownership and keep the same license number?  As I am the Qualifier I will need to pursue a Qualifiers bond because my ownership will drop to less than 10%.  Unfortunately, some personal issues have affected our business ability to get bonds so I have been trying to figure a way to fix this.  Is there a State fee to make this change?

 

A:   You can change the percentage each partner owns without impacting the license number.  If you, as Qualifying Partner (QP), also qualify another license, and will now own less than 20%, this could impact one or both entities. Licensing law generally allows the Qualifier to act as the Responsible Managing Officer (RMO) or QP on one license at a time unless ownership is 20% or more for each entity.  The CSLB does not charge any fee to change a Qualifiers ownership percentage.

Regarding your “personal issues” these may not be an issue since a Bond of Qualifying Individual (BQI) is not required on a partnership license if you’re a QP. It is required if qualified by a Responsible Managing Employee/ (RME).

Q:  We have a contractor’s license, which was inactivated a few years ago.  Now that the economy is turning around, we want to reactivate the license.  Our problem is that the RME, is no longer employed with the company. Can we replace him or must we reactivate the license first?  What do you suggest?

A:  It makes little sense to reactivate the license without a Qualifier (i.e. it would immediately be listed as “suspended”).  I suggest designating an individual to take the license exam (as the new RME or RMO) and file an Application to Replace the Qualifying Individual.  The CSLB will accept applications for additional class and replacing the Qualifier for a license that is “inactive” as long as the license is not expired.

 

HIC Contracts, Mechanic’s Liens & CA Civil Code 8200, 8204

It’s a short question with a long important answer that will impact licensed contractors throughout the State of California. While every Capitol Connection is a ‘must read’ for contractors, this is information you absolutely don’t want to miss…

Q: I regularly read your column in my local Builders Exchange’s Construction Weekly and I appreciate your insight. My attorney informed me that, as of July 1st, there would be new preliminary notice forms and requirements for both private and public works. Are you aware of this?

A: Your attorney is correct.  Effective July 1 of this year, there will be some significant changes to the 20-day notice requirement and for that matter the requirements for home improvement contracts and “mechanic’s lien” laws.  A review of the 2012 License Law and Reference Book includes two sets of laws: one, which is operative until July 1, 2012, and the second that becomes effective on the same day.

Presently, the “preliminary 20-day notice (private work)” is addressed in Civil Code Section 3097, which will be repealed on July 1, 2012.  Not being able to locate the new code sections in the same License Law and Reference Book, we turned to a trusted former CSLB employee, Michael Brown, who worked on this type of state legislation.  In its place the State added an entirely new group of code sections (civil code 8200-8216) that deal with the new preliminary notice.  Included below are a few EXCERPTS from these new Sections.  For the entire wording, we have put a link on our web site (www.cutredtape.com).

As with any lien or notice issue, it is critically important that you meet all the deadlines and procedures prescribed by law.  Because of the large volume of information AND STRICT REQUIREMENTS, we highly recommend consulting a construction attorney with a background in mechanic lien laws.

CA Civil Code 8200.  (a) Except as otherwise provided by statute, before recording a lien claim, giving a stop payment notice, or asserting a claim against a payment bond, a claimant shall give preliminary notice to the following persons:  (1) The owner or reputed owner;  (2) The direct contractor or reputed direct contractor to which the claimant provides work, either directly or through one or more subcontractors; (3) The construction lender or reputed construction lender, if any.

(b) The notice shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1.  (c) Compliance with this section is a necessary prerequisite to the validity of a lien claim or stop payment notice under this title…

CA Civil Code 8204: (a) A preliminary notice shall be given not later than 20-days after the claimant has first furnished work on the work of improvement. If work has been provided by a claimant that did not give a preliminary notice that claimant shall not be precluded from giving a preliminary notice at any time thereafter. The claimant shall, however, be entitled to record a lien, give a stop payment notice, and assert a claim against a payment bond only for work performed within 20 days prior to the service of the preliminary notice, and at any time thereafter….

 

As always, call with any questions and Shauna or I will help you get this figured out.