Subcontractor Payments, License Partners, Education Experience Credit and Low Voltage Cabling Rules

While Capitol Services has assisted contractors for more than 30 years and authored more than a thousand Q/A columns, what is old is also new again. Welcome to those of you who are new readers. A reminder about many of the complex rules contractors must work under is always helpful for many including those with low numbers or those still seeking that first license number. From first application to help for industry leaders we remain vigilant in Sacramento…

Q:  What are the requirements in CA for our company to bid on cabling projects?

A:  In order to bid on cabling project over $500 in California, your company would be required to obtain a “C-7” (Low Voltage) contractor’s license.  You will need to have a Qualifying Individual who can document at least four years of full time work experience doing low voltage work.

Q:  If an out of State firm is a subsidiary of a CA licensed company, can they do contracting work in CA as part of the Parent Company?

A:  This subsidiary would need to have their own license in order to do contracting work.  One company can’t work with another entity’s license, even if the two entities are related. Get in touch to learn more.

Q:  I am looking to purchase a contracting business in CA which holds a “C-17” (Glazing) license.  The current Responsible Managing Officer (RMO) does not want to remain on the license.  I am a licensed real estate agent and I have many years of property management experience. I also have a Bachelor’s degree.  I do not however, have any direct experience doing glazing work.  Based on my background, is there any way to waive the experience requirement so I can be the RMO on the license?

A:  Your Bachelor’s degree will grant you some credit towards the experience requirement (up to two years), however there is no way to waive the requirement altogether.  Of the four years of work experience required, at least one year needs to be hands on practical experience doing the work.

Q: I’m starting up a new company with a business partner.  He will not be involved in the business, I will be running the Company, however he is part owner.  Is there any advantage to listing him as an Officer on the license, or should it just be me?

A:  That is a decision you’ll have to make.  Keep in mind that only personnel who are listed on a license have signing authority for the license.  One advantage to listing him on the license is if you are unavailable to sign a particular document (such as a license renewal, address change, etc.), your partner can sign. It’s a practical idea in case of medical emergencies, etc.

Q:  When is a Contractor required to pay their subcontractor upon completion of work?  Does it matter whether the Homeowner has the paid the contractor?

A:  B&P Code section 7108.5(a) states that “a prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing…”

LLC Contractor Licensing and Exam Waivers

Like landing a plane a hopeful new Qualifier gets the ‘waive’ off before crashing in this first ‘test’ question.  Getting a new license, and an exam waiver has been a frequent inquiry, but like all rules there is almost always an exception, including those specifically for LLC’s as we are reminded here…

Q:  In 2014 you helped one of our Officers replace the former owner of the company when he retired and he was able to Waive the exam based on his years of experience with the company.  Now he wants to obtain his own license and so I have been designated to be the new Responsible Managing Officer (RMO).  I have been with my company for over 15 years with various positions; Foreman, Supervisor, Project Manager, Estimator, and now hold the title of Vice President.  Can you assist me with process of replacing the current RMO and asking for a Waiver of the Exams like you did for the current Qualifier a couple of years ago?

A:  Yes and no. Let me clarify. We would be happy to assist you with the process of replacing your current Qualifier.  It sounds like you have the requisite experience.  Your current RMO requested a Waiver based on B&P Code Section 7065.1c, which allows for a Waiver of the Exam if you have worked for the company in a supervisory capacity for five out of the last seven years.  Unfortunately, you will not qualify for the same Waiver of the Exams because 7065.1c further states that a company cannot make this request if they have requested a Waiver under that subdivision within the past five years.

Q:  We are going to be applying for a Limited Liability Company (LLC) license using an individual who was previously licensed three years ago.  Will the license only show her name, or will all the partners’ names also show on the license?

A:  First of all, the license is issued in the name of the LLC as registered with the California Secretary of State.

In order to obtain an LLC Contractor’s License, you will be required to register the LLC with the CA Secretary of State. In addition, you must file a Statement of Information with the Secretary of State within 90 days of your Registration.   The Statement of Information must list any Manager(s) appointed, or if no Managers have been elected or appointed, each member of the LLC.  The personnel you list on the Statement of Information is the same personnel you must list on your contractor’s license application, which in turn will be reflected as personnel on your Contractor’s License.  So, as long as the Partners are listed on the Statement of Information, they will also be listed, and have signing authority, for the LLC Contractor’s License.

CA License History, Qualifying Officer, HAZ & ASB Certification and Comp Certificates

Sometimes panic is appropriate, but our first contractor will escape the ‘suspense’ if he follows thru as I suggest. One is better than none, especially when it comes to taking exams as these contractors learn, and we wrap with a little ‘history’…

Q:  Our Worker’s Compensation insurance expired on November 1st.  We renewed our policy but when I called the CSLB, they said they never received an updated certificate.  Our Certificate shows the effective date of 11/1/17, but since the CSLB doesn’t have it on record yet, our license status is currently “suspended”. It is also my understanding they are backlogged processing the insurance certificates.  I am worried about having our license status “suspended” for any length of time.

A:  As long as the CSLB receives your certificate within 90 days of the effective date and there is no lapse in coverage, they will retroactively reinstate your license back to active/good standing as of 11/1/17.

Q:  I currently am a licensed General Engineering (“A”) contractor.  I also have the HAZ and ASB certifications.  I plan to retire soon and my son is going to take over the business.  I understand he can ask for a Waiver of the exams.  Am I correct?

A:  Yes, B&P Code Section 7065.1 allows for him to request a Waiver of the “A” and Law exams if he has been actively engaged in the business for at least five out of the last seven years.  However, the HAZ and ABS certifications are not subject to Waivers.  He will need to apply for the certifications separately and take the exams.  Please note the waiver request is a request and is not guaranteed.

Q:  We have a license that holds the “B” and the “C-36” classification with two separate RME’s.  I have been an Officer on the license since 2010 and I want to replace both the RME’s.  Is it possible to request a Waiver of the exams?  If so, can this be done on one application or will we be required to file two separate applications?

A:  Because you have been an Officer on the license for over five years, you can request a Waiver of the Law and Trade exams based on B&P code Section 7065.1. This can be done on one application, just be sure to submit two separate Work Experience pages, one for the “B” and one for the Plumbing (“C-36”).

Q:  I am an Attorney and involved in a case right now where it appears the opposing side had employees but did not have Worker’s Compensation Insurance on file with the CSLB, however I cannot tell from their website.  How would I go about finding out if they had a policy in place during a particular project in the past?

A:  You can request a Certified License History from the CSLB which will give you the entire history of the license.  We can request this for you and pick it up in person if you’d like.  There is a box to check on the request stating you would like to see information on Workers Comp.  If you have court documents to accompany the request, it may speed up the processing time. Further assistance is always available when you call us.

 

AZ Reciprocity, Death of a Qualifier and LLC vs Corporate Applications for CA Licensing

Always a good idea to ‘look’ before you leap into new business! Protecting your license and bid opportunity beyond an unexpected turn of events should be part of your business plan, as we learn from these contractors…

Q:  We are forming a new entity to obtain a new Contractor’s License.  We haven’t decided whether we are going to apply as a ‘C’ Corporation, ‘S’ Corporation, or LLC.  We are still discussing the options with our Attorney.  Do we need to decide first before applying for the license?

A:  You do need to decide whether you want to operate with the license as a corporation vs. an LLC prior to submitting an application, however the CSLB doesn’t distinguish between a ‘C’ Corporation and an ‘S’ Corporation.  I am not a tax expert, and you should consider consulting one, however, it is my understanding the difference between a ‘C’ and an ‘S’ Corp is the entity’s filing status with the Internal Revenue Service, which the CSLB doesn’t get involved in.

Q:  Our Qualifying Individual passed away and we in the process of putting the paperwork together to update the license.  We filled out an application to replace the Qualifying Individual, but on the Disassociation Request form it asks for the signature of the disassociating person, which is obviously not possible.  What do you suggest?

A:  Sorry to hear that.  Any individual listed on the license is authorized to sign for changes to the license.  I looked up your license and you have several other Officers listed, so any of them can sign the Disassociation.  However, since you are filing the Replacement of Qualifier application, there is a section which allows you to list a date of disassociation for the current Qualifier, therefore you don’t need to submit the Disassociation Request form.

Q:  We have a family business which has been licensed in Arizona for over 30 years and we now need to get a license in California.  My father who was the Qualifying party for our Arizona license passed away three years ago.  Because we have been licensed for so many years, we have been Exempt from having a Qualifying party since he passed.  All that being said, can we apply in California for reciprocal agreement with me as the Qualifying Party?

A:  In order to qualify for reciprocity, your Qualifier has to have been actively licensed in the equivalent classification for five out of the last seven years.  Since you haven’t been listed as the Qualifying individual on your Arizona license, you will not qualify for Reciprocity.  You will be required to take both the law and trade exams.

 

Rules for Consumers in Disasters, Sole Owner & Corporate RME and Purchase of A Contracting Business

Sometimes, it’s yes and no as conditions dictate. Either way may be right. It takes a skilled expert to tell the difference. As builders know, ‘it’s measure twice, cut once’ but contractors complex law is sometimes all about ‘splitting hairs’…

Q:  I will be purchasing the corporation I work for in April 2018.  We are a “C-20” Heating and Air Conditioning company. What do I need to do in regards to licensing? I understand the license stays with the corporation, but is there anything I need to do in order to become Qualified?  What are the fees associated with this?

A:  Whether the license stays with the corporation or not depends on what type of sale it is.  If it’s a Stock sale, then yes, the license remains with the corporation.  However, if it’s an Asset sale you will need to apply for a new license number.  To become the Qualifying Individual on the license, you will need to submit an application which must document at least four years of full time work experience doing HVAC work.  You will also need to take the exams (Law and Trade) and be fingerprinted.  If you will be replacing the Qualified Individual on the existing license, the State fee is $150.  If you will be applying for a new contractor’s license, the State fee is $530.

Q:  I currently work for a construction company and their Responsible Managing Officer (RMO) is resigning from the company.  They will be left without a contracting license.  Knowing I have my own license, they approached me asking if I would like to become the Responsible Managing Employee (RME) for the company and operate under my license.  Can this be done without reissuing a new license number?  If I leave the company, will the Disassociation Request be dependent upon a signature from the company to be granted/approved?

A:  I looked up your company’s license and it is a corporation, in which case the license belongs to the company.  Therefore, they will not lose their license/license number and they will not be operating under yours.  In fact, since you would be acting as the RME, you will be required to Inactivate your Sole Owner license.  You can Reactivate it in the future if you decide to leave the company. The Disassociation Notice can either be signed by you or an Officer listed on the license, either way will be acceptable.

 Consumer and Contractor Alert!

Amid all the recent disasters which have caused massive property destruction in CA, the CSLB recently circulated a brochure with tips for consumers looking to hire a contractor.

1. Hire only State-licensed contractors.

2.  Check the contractor’s license number online at www.cslb.ca.gov, or by calling 800-321-CSLB (2752).

3.  Get at least three bids.

4.  Get three references from each bidder and review past work in person.

5.  Make sure all project expectations are in writing and only sign the contract if you completely understand the terms.

6.  Confirm that the contractor has Worker’s Compensation Insurance for employees.

7.  Never pay more than 10% down or $1000, whichever is less. *Don’t pay in cash.

8.  Don’t let payments get ahead of the work.

9.  Keep a job file of all papers relating to your project, including all payments.

10.  Don’t make the final payment until you’re satisfied with the job.

A season of terrible loss in our state, it would be doubly tragic to have our neighbors stricken again by unlicensed work. And criminal penalties are harsh.

Reciprocity Rules, RME & Partnership Qualifying, Handy Limits and LLC Transfers

When changing your company structure some choices are ‘limited.’ A ‘handy’ answer next with some ‘inactive’ answers to follow including a cool ‘detour’ for an AZ question…

Q:  We have a corporate license and are in the process of transferring the license to an LLC.  Our corporate license expires at the end of the month, and according to the CSLB’s backlog, it appears the expiration will occur before the new LLC application will be processed.  We aren’t currently doing any work in California, but I just want to make sure it will not cause any problems if we let the corporate license expire.

A:  It depends.  If your intention is to transfer the corporate license number to the LLC (assuming you meet the other requirements to make this happen), the corporate license must be in good standing.  If you intend on getting a new license number for the LLC, the fact your corporate license is expired is not a concern.

Q:  Can you please give me the code that says that if a business does more than $500 work of business per contract that a state contractor’s license is required?

A:  B&P Code Section 7027.2 states “a person who is not licensed pursuant to this chapter may advertise for construction work or a work of improvement covered by this chapter only if the aggregate contract price for labor, material, and all other items on a project or undertaking is less than five hundred dollars, and he or she states in the advertisement that he or she is not licensed under this chapter.”

Q:  I am currently looking to form a new business. It requires a Qualifier in order to obtain my license. This Qualifying Individual currently has an existing Partnership license Active. Does he have to Inactivate his current license to apply to be RME (Responsible Managing Employee) for my new business?

A:  Yes, he would need to either Inactivate his current license or Disassociate from the license.  Except in rare circumstances, an RME can only qualify one Active license at a time.

 

Q:  I currently have my Arizona “C-39” which covers all aspects of HVAC. I want to get my California license as well. Would I need to take both exams or only Business and Law?

A:  California has a Reciprocal agreement with Arizona, Nevada, and Utah for most classifications.  If you can document that you took the HVAC exam in Arizona and you have been Actively licensed in Arizona for five out of the last seven years, you will only be required to take the law exam.

Q:  My company currently has an Active license and the Qualifier will be retiring soon.  I have my own personal license, which is Active, and they have requested to use me as the new RME.  Will their company name be listed on my license?

A: No, the company name will not be listed on your license, your license can remain in place with your business name.  However, acting as your company’s RME will require that you Inactivate your personal license.  Please contact our office if you would like assistance with the process.

Inducements, AZ & NV Qualifiers and Disassociation on Multiple Licenses

We often work with attorneys on behalf of contractors and industry clients, so you can probably guess we get a lot of ‘what if’ questions in the office. Here’s one for you! We qualify three questions with one answer and another contractor answers his own question…

Q:  We need to obtain a new license for a new entity we are forming in California.  We will be using one of our employees to act as the RME (Responsible Managing Employee).  I know there are rules about an RME only Qualifying one license at a time.  Does this apply from State to State as well?  In other words, can we use the same person to Qualify our licenses for Arizona and Nevada?

A:  Yes, you can use the same Qualifying Individual for Arizona and Nevada.  While you are required to list your licenses in other States on the applications, they do not have a rule as to how many licenses you can Qualify outside of Nevada and Arizona.

Q:  You had informed me that when a Responsible Managing Officer (RMO) is on three active licenses at the same time, he has to wait a full year from the time he Disassociates from one of them to be added to another.

What about if someone is on three active licenses and wants to Disassociate from all three and act as the RME on another?  Is that allowed?  Or does he also have to wait a year?

A:  He would also have to wait a full year.  The statute applies regardless of whether an individual is an RMO or RME.

Q:  We are a product manufacturer who would like to derive some money from the installation of our product.  We are thinking of setting up a group of “preferred installers” who we could refer customers to.  Is that permissible and are there any rules about what referral fees we might be able to charge?

A:  B&P Code Section 7157(d) states that is not legal for one contractor to pay any type of inducement (referral fee) to another contractor.  The law does not apply to non-contractors.  While the CSLB generally frowns upon “kickbacks”, the scenario you suggested where a contractor pays a supplier/manufacturer a fee for referrals doesn’t violate the law.  There is no statutory requirement limiting the amount they can charge.  The law only applies to licensed contractors.

License Continuance, NV Alien Applications and Financial Capital Requirements

While some ‘quick’ questions require lengthy answers here, we start with some easy ones this go-round!  We ‘add’ to contractor’s knowledge, ‘frame’ a General, help sort out some other issues including a cancelled license and who can and who can’t get a ‘continuance’ to finish up contract work…

Q:  Quick question I was hoping you could answer/confirm for me:  Are there any capital / financial requirements a contractor must satisfy (other than application fees) in order to qualify for a license?  In other words, is the contractor required to provide any proof of financial stability or past financial records in order to qualify for the license?  I suspect no, but was simply hoping to confirm.  Thanks in advance.

A:  No, there is no financial requirement for Contractors to qualify for a license.

Q:  If I file for a new corporate license with me being the sole corporate Officer/President, can I add someone later?
A:  Yes, you can always update the Officers on the license.  If there is a change in Officers, you are required to notify the CSLB within 90 days.

Q:  I’m going to be using your company to assist me with obtaining my General Building (“B”) license.  I’m wondering if I should apply for additional licenses as well such as a framing license.  I’m going to be building homes and I want to make sure I’m covered.

A:  You will be covered to build homes with the “B” (General Building) license. You will also be covered to do framing with your license.  A General Building Contractor may take a prime contract or a subcontract for a Framing or Carpentry project.  However, a General Building Contractor cannot take a prime contract or a subcontract for any project involving trades other than Framing or Carpentry unless the contract requires at least two unrelated building trades or crafts other than those two, or unless they hold the appropriate classification, or subcontracts the work to an appropriately licensed specialty contractor.

Q:  I noticed on the Nevada Contractor’s License application that one of the questions asks if our Officers are US citizens.  Is that a requirement for a Nevada License?  One of our Officers is a permanent resident of US, but he’s not a citizen.

 

A:  No, US citizenship is not required to obtain a Nevada Contractors License.  Just be sure he includes his INS card and Social Security Card when submitting the application.

Q:  My license expires at the end of the month and I have the renewal here ready to send.  I want to change my business name.  Can I just cross off the name they have on the renewal form and list the new name I want to use?

A:  No, you cannot use the renewal application to change your business name.  You will need to complete an Application to change your business name.

Q:  When a corporate license is cancelled, is there a way to request a continuance of the license in order to finish contracts/work in progress?

A:  No.  Only Sole ownership, Partnership, or Joint Venture entities may apply for a continuance.  Corporations and Limited Liability Companies are not eligible for a continuance.

RME Compensation, Partnership Licensing and Professional Engineers

A question this contractor’s expert won’t answer! But, first several I will. Sometimes you don’t need a ‘pro’ to engineer an update on your license, and we share condolences over a loss, that for a ‘partner’ also causes collateral damage beyond death…

Q:  We need to obtain an “A” (General Engineering) license in California.   Are we required to have an employee who is a licensed Professional Engineer prior to getting a contractor’s license?

A:  No, it is not necessary to employ a Professional Engineer to qualify for a contractor’s License.  You are required to have a Qualifying individual who is a bona fide employee or Officer, who can document at least four years of experience in the General Engineering trade.

Q: My Dad and I have a Contractor’s License, we are a Partnership.  My Dad is the General Partner and I am the Limited Partner on the license.  My father recently passed away.  What are the options me with regards to the license?  It is my understanding that when a Partner disassociates from the license or passes away, the license is cancelled because the Partnership no longer exists.  However, is it possible for me to request a continuance to complete existing projects?

A:  You are correct that when a Partner disassociates or passes away (or if the Partnership dissolves), the license is cancelled.  With regards to a continuance, B&P Code Section 7076 allows for a General Partner to request a continuance of the license to complete projects contracted for or in progress prior to the date of disassociation or dissolution.  The Code does not provide for Limited Partners to request a continuance.

Be sure to notify the CSLB in writing within 90 days of the dissolution of the Partnership.  Failure to notify the Registrar within 90 days of the disassociation/dissolution is grounds for disciplinary action.

You will need apply for and obtain a new license to undertake new work and continue contracting. Sorry to hear of your loss.

Q:  My Dad is going to be retiring and I am replacing him as the RMO on our license.  He obtained the license over 40 years ago.  We have nine classifications, several which fall under the “C-61” (Limited Specialty) category.  When I was researching the classifications on the CSLB’s website, I see that one of our classifications, “C-61/D-51” no longer exists and it shows “Waterproofing and Weatherproofing – under relevant class.”  What is the “relevant class”?

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. Let us know if we can help further.

Q:  My employer has asked me to be the RME (Responsible Managing Employee) on the company’s license.  Do you know what the typical salary/compensation is for assuming the role of RME?

A:  We are asked this question frequently and unfortunately, we cannot address it.  We don’t get involved in that, it is up to you and your employer.

Electrical, Plumbing & “B” Licensing and Business Names

Whenever you visit a ‘foreign’ place like CA, it’s good to get a guide! Let me point the way. Assisting contractors would be ‘dbaa’ for Capitol Services, or doing business as always, for some with ‘unacceptable’ business names a ‘dba’ is the way…

Q: We recently applied for a California Contractor’s License.  We have licenses in several other States including Florida, Nevada, Washington, and Arizona.  We applied under our corporate name which is the President’s last name followed by “Commercial Contracting Services”.  The CSLB rejected our application stating we cannot use “Contracting Services” in our business name.  This is how we are licensed in all other States.  We are already registered with the CA Secretary of State with this name.  What do we do?  The rejection letter didn’t give us much guidance.

A:  The CSLB’s guideline is your business name must either identify the trade classification you hold, or be a completely fictitious name that has no meaning.  In addition, you cannot use vague terms in your business name such as “services”, “improvements”, “contractor”, or “solutions”. “Contracting Services” is considered a vague term.  You will need to either change your name with the Secretary of State, or come up with a ‘dba’ (doing business as) name to add to the license application.

Q:  We are a General Engineering contractor and our range of services include site engineering, industrial and wastewater treatment, water utility and technical services, water conditioning, water purification systems, and laboratory services.  We recently formed an LLC to take over the operations of our currently licensed Corporation.  Our application was rejected due to our business name not being “compatible.”  The letter instructed us to come up with a few ‘dba’ (doing business as) names and submit them for review, which we did, and the CSLB responded by saying none of the names were acceptable.  Can you give us any direction?

A: After reviewing your submission, I see the issue is each Business name you presented included the word “water”.  The CSLB has been strongly implementing B&P Code Section 7059.1(a) which states “A licensee shall not use any business name that indicates the licensee is qualified to perform work in classifications other than those issued for that license, or any business name that is incompatible with the type of business entity licensed.”  While you do need an “A” (General Engineering) license to perform the work you do, using the word “water” in your business name could imply that you are a swimming pool Contractor.  I suggest you come up with a business name without the word “water”, or somehow incorporate “engineering” in the business name.

Q:  We have a license that holds the “B” (General Building), “C-10” (Electrical), and “C-36” (Plumbing) classifications.  Our Qualifier left the company and we only have until the 15th of next month to replace him.  We have employees who hold the Electrical and the Plumbing licenses (Inactive) who are willing to be added to our license.  What will happen to the “B” classification if we don’t have someone to replace in time?

A:  If you do not replace the Qualifying Individual for the “B” classification within 90 days of his disassociation date, the classification will be removed from your license.  If you find someone and submit the application prior to the 90-day cut off, you can request a one-time 90 day extension to allow for processing time and testing if needed.