Adding DBA’s, Contracting without a License & Worker’s Compensation Alternatives

While we often share answers offering good news to contractors in a jam sometimes it’s ‘un- possible’. Common wisdom says most rules have an ‘exception’ but you shouldn’t ever count on getting a second, and sometimes you just can’t fix what is ‘brokered’…

 

 

Q:   I am a Sole Owner, roofing contractor with no current employees. I missed a payment to State Fund and they cancelled my policy. At this point they completed another routine audit and they say I owe them $43,000. I don’t have that kind of money.

 

They say they won’t insure me until I pay it. If this is the case my license is now suspended and I can’t work until I have Worker’s Comp and they are the only company who writes for small roofing companies. What can I do to get my licensed un-suspended so I can get back to work?  If I can’t work I won’t be able to pay that and I will need to go out of business

 

A: Thank you for contacting Capitol Services.  Your situation is an unfortunate one because it is my understanding that State Fund is the major market for small roofing companies and without any employees, it is unlikely that you will be able to obtain a policy elsewhere.  Since roofing contractors are required to have Worker’s Compensation Insurance, even with no employees, the CSLB will not ‘un-suspend’ your license until you have a new policy in place.  This insurance requirement is very heavily enforced for roofing contractors.

 

If it is at all possible for you to put someone on payroll, opening the door to policies at other potential insurers, then you can contact an insurance company other than State Fund to write you a new policy.  Or, I see that you have a “C-33” Painting classification on your license. As an option, and I have to assume that you don’t want to do this, you could remove the “C-39” Roofing classification from your license so that the Worker’s Comp insurance is not required, and just operate your painting business.

 

I’m sorry that I can’t give you better news, but unfortunately there just aren’t many options for small roofing companies when it comes to Worker’s Comp.

 

Q:  I have a sole owner license issued in the name of Smith Construction.  I’d like to do business as West Coast Builders, but I’d also like to keep the original name on the license since it’s been around so long and many of my old customers know me as Smith Construction.  Can I change my business name to Smith Construction dba West Coast Builders?

 

A: I understand your predicament – you may not be completely happy with your original name choice, but you want your returning customers to be able to find you.  But, since you are a Sole Proprietor, Smith Construction is already considered a dba, so you cannot add a second dba of West Coast Builders to the license.

 

Q: I am a solar broker, meaning I sell solar energy system to residential and small commercial clients, as well as design the system.  Can I hire a sub-contractor (specialty/electrical) to do the installation for my clients, without having General / Prime contractor license myself, since I would not provide any kind of fabrication or labor?

 

A:  Thank you for contacting Capitol Services Inc.  Even if you are sub-contracting out the work to a specialty contractor, you cannot sign contracts for any type of solar/electrical installation without a contractor’s license.  Both the individual/entity signing the contract as well as the individual/entity performing the work need to have the appropriate contractor’s license.

Degrees of Experience, RME Replacement, DAS & NV Electrical

Duplication of effort is always frustrating, especially when your license is at risk as a result, as our first contractor demonstrates.  While a college degree is great preparation, if you want a ‘general’ engineering license in California you are going to have to spend some time in the trenches, so to speak. Sparks may fly when we plug in a couple answers every electrical contractor should know…

Q:  We are a large company with a General Building license in CA.  We keep running into the same issue where our Responsible Managing Employee (RME) leaves the company and then we are stuck rushing to replace him so that our license doesn’t lapse.  Can I, as an Officer of the company, take a class to pass the exams so that we can avoid having to go through this every time someone leaves?  I have been in the business for many years but have never framed or built a house.

 

A: We understand your frustration; it can certainly be a hassle when your Qualifying individual terminates his/her employment unexpectedly.  While you don’t have the “hands-on” work background, if you can show at least four years of experience supervising/managing your company’s General Building projects, then you can apply to become the Responsible Managing Officer (RMO) for your company. If you can show that you’ve been acting in a supervisory capacity for the company for the past 5 of 7 years, then you may be able request a Waiver of the examination.  Please contact us if you have further questions or would like assistance with this process.

Q: I have a degree in Engineering.   Will that suffice for qualification to obtain a General Engineering contractor’s license in CA?

 

A:  In order to qualify for a General Engineering contractor’s license, you’re required to show at least 4 years of experience.  The CSLB will give you up to three years of work experience credit for your Engineering degree, so you would need to show another year of Journeyman level or above work experience to sit for the exam.

Q:  We currently have a “C-10” license with an RME.  He also has an electrical certification with the Department of Industrial Relations, Division of Apprenticeship Standards (DAS).  Of course we are waiting until the last minute, but his electrical certification expires very soon.  Is that going to cause our “C-10” contractor’s license to go suspended?

A:  If it weren’t for the last minute many of us wouldn’t get anything done, right?  Lucky for you, the “C-10” contractor or Qualifier does not need to hold an Electrical certification.  If you have employees that work under your license then they need to get certified, but your RME is not required to keep his DAS registration.

Q: As you know, you are helping us get our “C-7” (low voltage) contractor’s license in CA.  When we get the CA license squared away we plan to apply for a Waiver in Nevada and take the Business and Law exam only.  Any reason this wouldn’t work that way?

 

A: Unfortunately, there are two reasons why it won’t work that way.  First of all, the reciprocal agreement between CA and NV allows you to waive the trade exam and experience requirements only if you have been licensed for 5 out of the last 7 years in CA, AZ, or UT.  Since you will be newly licensed in CA, you won’t meet the 5-year requirement.  Secondly, Nevada doesn’t reciprocate for electrical.  Since the “C-7” is part of the electrical classification, even after five years you still won’t qualify for a Waiver of the trade test. Sorry if this has ‘shorted out’ your plan!

RME ‘Fees’, Section 7057 for Generals & CSLB Stings

When something sounds too good to be true you know the likely results. We ‘strip the cover off’ rules on who can and can’t do electrical work with- or without- the proper license. A ‘swift’ review of an unlicensed contractor’s recent bid for work…

Q:  I found Capitol Services on the Internet.  You look to be experienced in licensing matters.  I was asked to become a RME on a new license.  The person wants to use my Sole Owner license and pay me a fee each month.  He said I did not even need to be involved in the company.  I’m not using the license at this time, but can you tell me if this is legal?  I thought I was supposed to work a certain amount of time each week?

A:  There are several significant problems with the above ‘proposal’.  First, to become a Responsible Managing Employee (RME) you should be involved in the day-to-day operations of your “employer”.  Second, as an employee, you should be working at least 32 hours a week (or 80% of the time the company is operating).  Third, “loaning” your contractor’s license to someone can get you into trouble with the CSLB.  Also, keep in mind that you’ll be required to inactivate your Sole Owner license in order to act as the Qualifier on this new license.

 

Q:  I am writing about Section 7057.  Can a supervising contractor for a new house do JUST electrical work without doing any other work?  Is he required to have a special license for getting electrical work done by his employee or an unlicensed sub contractor?

A: I suspect you’re asking if a “B” contractor can just do electrical (“C-10”) work on a residential construction project.  The answer is NO, since he/she must perform two or more unrelated trades (not including framing) or hold the specialty classification.  You can however, take on the project and use a licensed “C-10”sub to do the electrical work.  Under no circumstances should you use an unlicensed subcontractor.

Q:  I have a quick question that hopefully you could answer. If someone has been acting in the capacity of a General contractor, overseeing subcontractors and laborers in various specialties, but has not had a license, could that “illegal” experience be used to qualify towards applying for a legitimate license?

 

A:  Yes, the CSLB will accept self-employed (illegal) experience as long as it can be certified by someone who has worked with this individual.  In a small number of cases the CSLB will also ask for verifiable proof such as pay stubs, signed contracts or tax returns. The CSLB regularly conducts “stings” to catch unlicensed contractors so it is a good idea to quickly get a license and contract legally.

The CSLB SWIFT Unit recently conducted a sting operation in the Central Valley.  Two of the suspects did not provide bids at the sting location, but said they would e-mail/fax their bid to the investigator (who was posing as a home owner) within a few days. After measuring the kitchen and both bathrooms, “Mr. Smith” left.  True to his word, the investigator received a bid and then asked “Mr. Smith” to come to her place of employment to review it.  The unlicensed individual “contractor” arrived without ever noticing that he was at the CSLB office.  He confirmed the estimate and was immediately issued a Notice To Appear (NTA) for illegal advertising and contracting without a license.

 

BX Assistance, Work Experience Credit & Expired or Revoked Licenses

As we have stated for years, ‘knowing where to go for the answers is half the battle’ in getting good information. In most areas of California, one of the best places to start when looking for a contractor is with the local Builder’s Exchange. For those with an expired or revoked license is it necessary to show recent work experience when re-applying? …

 

Q:  I wanted to make a suggestion regarding a question in a recent issue; but first, let me say how much I enjoy reading your column and what a fantastic resource it is for our Builder’s Exchange members.

The suggestion was regarding the request for a ‘list of plumbers’.  This person could also get this information for free from their local Builder’s Exchange (assuming there was one in their area; most of CA is covered).  Builder’s Exchanges aren’t able to provide a list of 100% of the companies in a given trade in their area but they are a great resource for companies that are involved in the industry.  Like I always tell people who call us, we can’t make guarantees about our members but they are ‘waving their hands to be seen’, rather than hiding under a rock, as so many ‘underground’ contractors are.  In addition, we always tell consumers about the CSLB website too, so they can take advantage of all the consumer protection info and pamphlets and check the license of any company they consider hiring.

 

We may predominantly serve the construction industry, but working with consumers is an important part of that.   To start with, those looking for a contractor can start by calling an Exchange, before paying $245 to the State for that ‘list of plumbers’.

 

A:  An excellent suggestion!  While a local Builder’s Exchange or Contractor Association would not have a ‘list of all plumbers’ these organizations are a great resource to locate contractors from any number of trades.  The question was very brief and we do not know where he was located or whether this was from a consumer or contractor.  Either way, as you stated, while an Exchange may predominantly serve the industry, consumers can generally depend on these organizations to have a list of quality contractors.  Again, thank you for pointing this out and for your kind words.

 

 

Q:  My license expired about 7 years ago. It was officially revoked a few years later.  I’ve paid all the necessary restitution and I know I must post a $15,000 Disciplinary Bond (DB) and $12,500 Contractor’s Bond.  I want to apply to get my Sole Owner license back and am prepared to sit for the law and trade exam.

 

My question is how do I get work experience to cover 4 of the prior 10 years?  I’ve gotten conflicting information from the CSLB regarding whether I must even file a new “Certification of Work Experience”.

 

A:  Over the past 30 years, we’ve handled a number of applications where someone is reapplying for a license after it had been expired for more than 5 years.  In our experience, and as we’ve always been told by the Board, applicants who have an expired (even revoked) license – no matter how many years ago — do NOT need to file a new Certification of Work Experience when reapplying (although they must retake the exams).

 

However, when I inquired with the Board regarding their current policy, they referenced “CCR Section” (Board rule) 825(b), which states the ‘work cert’ would still be required, but the documented four years of experience does not need to have been within the last 10 years.  You can therefore list the time worked while licensed a decade or more ago.

Selling a License, Corporate Names & RMO Shares

There is a price to pay when a consumer asks the Board to help find a contractor with a particular trade. We take ‘stock’ of the situation confronting a Responsible Managing Officer and help a family chart a course for the future in selling their contracting business…

 

Q: Do I have to own any shares in a Corporation as RMO in order to qualify for a license?

 

A: There is no requirement that a RMO own any shares of the corporation.  This being said, an existing contractor should notify the CSLB regarding any change in ownership. Owning less than 10% of corporate stock will require the company to post a $12,500 Bond of Qualifying Individual.  If applying for a new license, this ‘ownership’ question is asked on the application.  Please contact us if you have further questions.

 

 

Q: Can you provide me with a list of plumbers in my area?

A:  While we don’t have that information readily available, the CSLB will provide you with a list of specific contractors based on certain criteria.  The form allows you to pick parameters such as classification, business type, county, etc. There is a $245 fee for this service.   The form can be found on the CSLB web site.

 

 

Q: It’s been a long time… hope you are doing well.  We are surviving…actually more than surviving.  Our landscape business, which had been very slow the past two years, is picking up now. In fact we are thinking of re-tooling for a final push to sell it before I retire…  that is the nature of my inquiry.

 

Can I change the name of a corporate license?  I think having my name as the business name may limit our possibilities to expand and ultimately sell the whole business to a non-family member.  My boys are in completely different fields and really don’t want to carry on with this business.   Or perhaps we do a DBA with a different name?  Got any ideas?  Thanks.

 

A:  Nice to hear that things are going well.  Have you decided how you’re going to sell the business — asset or stock sale?  If an asset sale, the buyer will likely set up their own corporation; purchase the assets, and continue operating as you have been doing for years. The buyer may want to keep your existing name or change it.  Either way, it should not matter what official name you’re using at the time of sale.

With a stock sale, again, the buyer can continue using your existing business name or amend it.  You certainly could add a dba, however, I’m not sure it would make a big difference since the buyer will be looking at your profitability and other financial considerations.  They may even want to maintain the existing name because it is known in the community.

We recommend that you contact a professional business broker or your legal council.  Discuss these questions with him or her, including the issue of the business name.  We can give you a few referrals in your area if you like.  Again, thank you for your email.  Good luck as you move forward with the sale.