Reciprocity, Indemnity Exposure and “A”/”B” Exam Waiver Rule

What the company wants the company gets! Another contractor gets a ‘stranger things’ feeling, while another gets ‘referred’ for a second opinion. A reminder for all contractors on ‘reciprocity’ state by state…

Q:  My company wanted me to ask whether a CSLB licensed Class “A” Engineering Contractor can obtain a classification as a Class “B” General Building Contractor without taking an exam, if the Class A Engineering Contractor has had more than 10 years of experience in design, remodeling, real estate, and general construction?

A:  Thank you for contacting Capitol Services Inc.  You cannot waive an exam based on experience, unless the classification you are adding is closely related to the classification you’ve held for years.  Class “A” and Class “B” are not considered closely related so the Qualifying Individual would be required to take the trade exam for the General Building classification.

Q:  Can a Responsible Managing Employee (RME) own a percentage of the business?  I’m an employee of my company and I submitted an application stating I own 9% of the company and it was rejected.  I received a letter stating that I needed to change my percentage of ownership to zero, which I feel strange doing being that I own 9%, but at the same time, I’m not an Officer.

A:  You may internally have ownership as an employee, but in the CSLB’s “eyes”, an RME does not have any ownership in the company.  So, for your application to be deemed acceptable as an RME, you will need to change your ownership to zero.  

Q:  I had a contracting business for over 30 years and I retired and sold the company to one of my employees.  It’s been over five years since that transaction took place.  Now I’m getting told that I owe money against a judgement because my name and information is on the original bond application paperwork as the indemnitor.  Wouldn’t that have been transferred to the new owner upon purchase of the business?

A:  You would think so, but I’m not so sure that is automatic.  I would suggest contacting the bonding company who issued the original bond for this question.  

Q:  I am a CA contractor and I have a “B” (General Building) and a “C-39” (Roofing) license.  One of my customers moved to Nevada and wants me to re-do his roof.  I read online there is a reciprocal agreement between CA and NV.  Does that mean I’m permitted to go there and replace his roof?

A:  Nevada has a reciprocal agreement with California, Arizona, Louisiana, Alabama, Utah, Connecticut, Florida, Hawaii, New Mexico, North Carolina, South Carolina, Tennessee, and West Virginia.  They also will permit you to apply for reciprocity based on passing the NASCLA exam. However,no, that does not mean that you can utilize your CA license to do work in NV automatically.  

You need to go through the licensing process. The reciprocal agreement allows you to waive the trade exam if you’ve been licensed in one of those States actively for at least 4 years out of the last ten, and that you’ve passed the equivalent exam in that State.  Let me know if you need assistance with the process we primarily assist contractors in CA, NV & AZ. 

License Processing, LLC General Liability and Federal Bids

It’s good to be ‘ahead’ of the curve! A question of ‘liability’, before a ‘two for one’ inquiry. Two other contractors get an answer and a solution as we assist contractors every day…

Q: My license will expire in about 9 months or so.  I wanted to ask if you have any suggestions about how to make the renewal process go smoothly or have any thoughts on the matter?

A:  That’s certainly thinking ahead!  Most of the time I’m contacted a couple days before someone’s license expires asking for advice.  The CSLB will send you the renewal approximately 60 days before the expiration.  Both you (as the RME) and the officer listed on the license will be required to sign.  I would recommend sending it in soon after you receive it because it takes the CSLB usually several weeks to process.

Q:  We have a client interest in forming a Limited Liability Company (LLC) to perform general contracting services.  Does your company provide Agent for Service of process services?  Also, do you know if the $1,000,000 liability insurance requirements of the CSLB is for general liability insurance or professional liability insurance?

A:  Yes, we do offer Agent for Service of process.  The liability insurance requirement for LLC’s is $1 million in General liability coverage.

Q:  With my “B” (General Building) License, can I contract for structural metal framing? (not light gauge framing which is covered under the “C-9”).  Secondly, my friend who is a “C-35” (Lathe and Plaster) contractor believes that he can contract for structural metal framing with his license.  Is he correct?

A:  To answer your first question, yes, you can do all types of framing and carpentry with your “B” license.  However, it is not appropriate for a “C-35” (Lathing and Plastering) classification contractor to perform any metal framing. They can install lath, which the plastering materials adhere to, but not metal or wood framing. A “C-35” contractor can install metal studs that are used to install or support the lathing and/or solid plaster partitions.

Q:  Is a Nevada State Contractor’s license required for performing work on a Federal Government project in Nevada?

A:   The Nevada State Contractor’s Board doesn’t have jurisdiction over Federal projects.  You would need to contact the person(s) where the bids are submitted to determine what they require. 

Q:  I am starting a new Construction company that will be an LLC.  I only have three years of qualifying experience however my partner does have the experience so he will Qualify the license.  Is there a way for me to be put on the Contractor’s License application and be able to test with him?  Or does he just get the license and then add me later when I gain the necessary experience?

A: No, without the requisite four years of experience, you will not qualify to take the exams.  However, you can be on the license as a “member” or “manager” of the LLC.  While there is only one Qualifier per classification, you can have as many Members/Managers/Officers as you’d like on the license.  Once you gain the experience, you can apply to replace your partner on the license

Unrelated Trades, Qualifier Risk and Unwritten Rules on HOA Contracting

While the rules are written in contractor law sometimes the interpretation can be challenged and changed. That also applies to licensing questions here. We go back to the future for a new take on a previous question updated by ‘legal’ expertise! Another question takes us into an arena where an attorney should be part of a ‘tag team’ to complete the answer. A final contractor question is also ‘related’ to interpretation…

Q:  Does the California Law on Home Improvement contracts (Bus. & Prof. C. 7159) apply to contracts between a contractor and a Home Owner’s Association (HOA)?

A:  Last week I stated that the way I read B&P Code 7159(b) regarding Home Improvement contracts, I didn’tbelieve it would apply to a contract between a contractor and a Home Owner’s Association (HOA).  I had several attorneys offer an updated interpretation as they pointed out that since the HOA acts as an agent for the unit owner’s and the property is owned by the HOA, the HOA becomes the De Facto owners, and therefore B&P Code 7159(b) does in fact apply. I always appreciate the feedback!

Q:  I presently hold an Active “A” (General Engineering) and “B” (General Building) Contractor’s License in California. I am in the process of becoming a Responsible Managing Officer (RMO) for a Corporation. I was wondering if you would recommend that I speak with an attorney prior to finalizing the agreement or is this a relatively “low risk” situation? 

A:  Thank you for contacting Capitol Services Inc.  I wouldn’t necessarily call it a “low risk” situation.  There are responsibilities that come along with acting as an RMO/RME for a company. I’d be happy to discuss the general differences with you informally however I am not a legal expert, and ‘risk’ is always relative. However, I suggest you seek legal advice in this by contacting an attorney.

Q:  I understand that a General “B” Contractor may only take a job if there are at least two “unrelated” trades or crafts involved.  How can you determine if they are “related” or not? In particular, how can you determine if “C-10” (Electrical) work is “related” to “C-7” (Low-Voltage) work?

A:  While the term “related” is somewhat subjective, “C-10” work would most definitely be related to “C-7” work. The fact that a “C-10” contractor is covered to perform low voltage work without needing the “C-7” classification specifically, means they’re related. A “C-5” (Framing and Rough Carpentry) contractor can do overhead doors, staircases and railings, sub-flooring, etc. which would make all of those related.  There’s no official “chart” or anything but if you are wondering about something else in specific, let me know. 

Disassociation Notice, Solar Disclosures and Unlicensed Subs

If your worker ‘subverts’ the truth about his licensing are you ‘generally’ in trouble? There’s no place like ‘homeowner’s association’, I enlighten a contractor on a solar question and prevent an ‘alteration’ that would get another nothing but ‘rejection’… 

Q: Does California have a requirement for General Contractors to ensure subcontractor licensing? We’ve recently become aware that a handful of states (Arkansas, Louisiana, etc.) have specific penalties against GC’s who hire subs who turn out to be unlicensed—I’m wondering if California does as well.

A:  The CSLB would certainly frown on General Contractors who hire an unlicensed subcontractor however I am unable to find an actual “law” in the regulations that requires that they must ensure a subcontractor is licensed.  

You could argue if a General does hire an unlicensed subcontractor for work which requires a license, technically that “subcontractor” is now the General Contractor’s employee.  The CSLB also has the authority to cite the “subcontractor” for doing contracting work without a license.  I don’t see that the General Contractor would receive any specific penalty besides the liability that comes with hiring unlicensed contractors, but bottom line, hiring unlicensed contractors/subcontractors is not a good idea!

Q:  Does the California Law on Home Improvement contracts (Bus. & Prof. C. 7159) apply to contracts between a contractor and a Home Owner’s Association (HOA)?

A: The way I read the law, no, it would not apply.  7159(b) states that a home improvement contract is an agreement between a “contractor and an owner or between a contractor and a tenant”.  Since an HOA is not an owner or a tenant, it doesn’t seem to apply.

Q:  As you probably are aware, as of January 1, 2019, the CSLB has a requirement that all contractors installing solar energy systems provide a consumer with a disclosure document.  Do we need to provide the customer with the actual form provided by the CSLB?  Or would it be okay to just include that same language within our contract?

A:  I don’t believe it matters whether you use the CSLB’s actual form or create it yourself, however, it must be printed in boldface 16-point font on either the front or cover page of the Solar Energy contract.  Since 16-point font takes up a whole page, and being that it must be in the front, there is no reason not to use the form the CSLB has already created.

Q:  We received our Contractor’s License renewal in the mail and I’m realizing that the Officers listed on the license are not completely accurate.  Two of the individuals have left the company and have been replaced.  Is it okay to strike out two of the names showing on the form?

A:  No, the CSLB will reject the renewal if you alter it.  You will need to file disassociation notices for the two people who are no longer with the company.  If you want to list the new people on the license, you will want to file Applications for Adding Personnel. 

Qualifying Multiple Licenses, Fire Prevention Rule and SWIFT Justice

Props to a publisher who gets a ‘swift’ pat on the back, a good answer for a helpful pair and we get ‘real’, really…

It’s great to see the work of the CSLB SWIFT enforcement teams get front page coverage in the Sacramento area’s Messenger Publishing newspapers and websites. Unlicensed activity just hurts everyone, a harm to consumers and a foul for licensed contractors. According to the CSLB story in the Carmichael Times and other community editions, 13 were nabbed by SWIFT in an operation in the Gold River suburbs of Sacramento. A repeat offender was among those caught in the home improvements ‘bid’ sting conducted with the Rancho Cordova Police Department. 

Q:  I am a General Contractor and I purchase cabinets from a “one-man-show” company.  He is a supplier and doesn’t do any installations, he leaves that up to me.    He recently purchased a skid steer tractor that he uses to mow down weeds, grind out old stumps, and do some minor grading.  He does this for homeowners that are trying to keep weeds down to protect against fires. Does her need a specific classification or license to work done?

A:  Good question and we all appreciate the effort to prevent anymore disasters in CA!  As long as the method used to clear the brush does not alter the grade of the land, a Contractor’s license is not required. If they are performing grading and the cost of the project is $500 or more, a Contractor’s license is required. The “C-12” (Earthwork and Paving) classification would be the most appropriate. If the cost of a stump grinding project is $500 or more, a Contractor’s license is required. In that case, the most appropriate classification is the “D-49” (Tree Service) classification.  Have him contact us if he needs to obtain a license!

Q:  We recently applied for a new license using the same Qualifier as our subsidiary based on 7068.1.  They sent us a “rejection” letter stating we needed to provide an organizational chart, with several requirements including personnel, ownership percentages, signatures, etc.  Is all of that really required?  Because we don’t usually provide detailed org charts like this with Officers signing off on it. Are you able to provide me with the section of the law that requires this, only because I know my boss will ask for it for his review?

A:  Yes, it is required to provide an organizational chart when you are requesting to use the same Qualifier on multiple licensesbased on B&P Code 7068.1(2).  I had to inquire with the CSLB to see which code/law requires this and was informed it is CA Code of Regulations 816(c). 

Corporate to LLC Transfer and FTB Suspensions

When you are done, you’re done, but going away may take some added steps for a corporate contractor. Another contractor finds that license transfers only go one way in CA…

Q:  Your company helped me set up my Corporation back in 2003.  We haven’t done business in California for years and I need to close up the corporation.  I noticed that it’s suspended by FTB (Franchise Tax Board).  What is the process to shut it down at this point?

A:  Before you can close/surrender your corporation, you will first need to get it back in Good Standing with the Secretary of State.  You will need to contact the Franchise Tax Board to find out the reason for the Suspension, however it is likely that your company needs to either file back tax returns, pay taxes owed, or both.  Contact my office if you need assistance with this.  We are here in Sacramento and can visit the FTB on your behalf to determine what’s needed and file the appropriate items to lift the Suspension.  Once the Suspension is lifted, you can file to surrender the corporation.

Q:  We are an Oregon Limited Liability Company (LLC) and when we originally obtained our California Contractor’s License (in 1995) we had to form a corporation because California didn’t allow LLC’s to have a license.  In 2012 when the CSLB started licensing LLC’s, we registered our Oregon LLC in California and transferred our license number over to the LLC.  For tax purposes, our CPA has recommended that we convert back to a corporation.  I assume we can just transfer the number back to the corporation?

A:  Actually, while a corporation (under certain circumstances) can transfer their license number to an LLC, an LLC cannot transfer a license number to a corporation.  I believe the statute that allows for a corporation to transfer a license number to an LLC was only established due to the fact that the CSLB didn’t previously license LLC’s.  Your corporation will be required to obtain a new license number.  Contact our office if you’d like assistance with the process.