Title: Section 102 Contractor Licensing Law
1Section 102Contractor Licensing Law
- By Marion T. Hack, Esq.
- Gibbs, Giden, Locher Turner, LLP
2Who can become a Licensed Contractor?
- Individuals over 18 years with the requisite
experience - Corporations, Partnerships or Joint Ventures who
have an RMO or RME - LLCs cannot hold a license
3Who is a Contractor?
- Contractor Builder (any person undertaking to
construct, alter, repair, improve, move, wreck or
demolish any building highway, railroad,
excavation or other structure) - When in doubt, check to see if a license is
required for the work
4Who is Exempt from Licensing?
- Work on a project less than 500
- Employees who are paid wages
- Public personnel working on public projects
- Material Suppliers
- Owners/builders (if not building for spec)
5Federal Projects
- Do not need a license to perform work
- BUT if a subcontractor is not licensed with the
State, the employees of the sub are deemed the
employees of the general for unemployment
insurance, disability insurance etc. - Prudent practice be licensed and require that
your subs are
6Reciprocity from other states?
- Yes, for Arizona, Nevada, and Utah only
- still must apply for a license in California
--trade exam may be waived - Must have been licensed in good standing for the
previous 5 years - Must be applying for license that appears on
Reciprocal Classification list see --
http//www.cslb.ca.gov/contractors/reciprocityList
s.asp
7License Classifications
- CLASS A General Engineering
- principal business is in connection with fixed
works requiring specialized engineering knowledge - EXCEPTION Cannot build foundations
- Public Works projects Since this class overlaps
with some specialty licensees when Public
Entities bid a project they can specify the
specialty license and are not required to include
this specification.
8License Classifications
- CLASS B General Building Contractor
- Contracting in connection with the building of a
structure requiring the use of 2 unrelated
building trades - Framing and Carpentry can be performed without
limitation
9License Classifications
- CLASS B (continued)
- Cannot take a contract for only one trade unless
the Contractor holds the specialty license or
subcontracts for that work. - BUT SEE --- Martin v. Mitchell Cement (1997) 74
Cal.App.3d The court allowed recovery for a
Class B contractor who subcontracted just for
masonry work - Cannot perform Well Drilling and Fire Protection
or work without specialty license - Cannot self-perform a contract just for Swimming
Pool work without Class A or C-53 license, or
subcontracting out to a C-53 subcontractor
10License Classifications
- CLASS C Specialty Contractors
- Limited to one trade only
- EXEPTION incidental and supplemental work that
is essential to accomplish the work in the which
the contactor classified - CLASS C-61 Limited Specialty
- Class D licenses very specialized licenses (see
www.cslb.ca.gov/services/Gclass.asp)
11Special Certifications
- Must be specially certified by the CSLB to
perform the following work - Asbestos Abatement
- Hazardous Substance Removal
- Only Class A, B, C-36 Plumbing, D-40 Service
Station Equipment, C-12 Earthwork/Paving or C-57
are eligible - Underground storage tank removal
- Only Class A and C-36 Plumbing are eligible
12New Developments in Classifications
- No longer need Home Improvement Certificate
- Split of Rough and Finish Carpentry into 2
classes - Landscaping contractors may subcontract out
swimming pool work
13Special Issues with Applications
- Fingerprinting Requirements
- The CSLB is requiring all new applicants
requiring an exam to be fingerprinted including - RMO, RME, each corporate officer, all partners
- Also fingerprints required for
- Current licensees applying for new additional
classifications - Change in corporate officers on the license
- See specific fees and requirements at
--http//www.cslb.ca.gov/applicants/FingerprintQA.
asp
14Special Issues with Applications
- Exam Waivers No longer allowed for new
applicants - Must use official forms to report licensing
changes - Failure to notify board of changes within 90 days
subjects licensee to discipline and changes the
effective date of the change
15Qualifying for a License
- Individuals or Partnerships either an owner or
Responsible Managing Employee (RME) can be the
qualifier - RME
- Employee
- Actively engaged in the business
- Working at least 32 hours a week
16Qualifying for a License
- Corporations either an RME or Responsible
Managing Officer (RMO) can be qualifier - RMO
- Officer of corporation
- Actively engaged in the work
- Exercises direct supervision and control
- Even though an officer has a license he must be
designated as the RMO in order for the license to
be valid.
17Qualifier on more that one license
- A person may act as a qualifier on more than one
active license only if one of the conditions
exists - Common ownership of at least 20 of the equity of
each firm - Additional firm is subsidiary or joint venture of
the first - A majority of the partners and officers are the
same - Cannot be a qualifier for more than 3 firms
18Qualifying for a License
- Joint Venture Both parties must be licensed and
the joint venture must be licensed - the joint venture can be licensed in any
classification that one of the joint venture
members is licensed - LLC cannot hold a license
19Responsibility of Qualifier
- Qualifier assumes, by law, the responsibility for
the direct supervision and control of the
entities construction operations to ensure
compliance with law. - Can be held liable for Contractors violation of
license law
20When a Qualifier Leaves
- Qualifiers sometime disassociate WITHOUT
informing management - Must replace the qualifier within 90 days
- License automatically suspended if not replaced
within 90 days - Can expedite applications request application
review from Expedite Committee
21Transfer of License
- Sale of Corporation If corporation number with
the Secretary of State stays the same, then same
license can be used. - Except for the above, the license cannot be
transferred if ownership of the business changes.
22Financial Requirements of Licensing
- Applicants must have more that 2,500 operating
capital - Bonding requirements
- Must have a Contractors Bond in the amount of
10,000 - If you have a RME or RMO, need a Bond of
Qualifying Individual in the amount of 7,500 - Not needed if RMO owns 10 or more of the
company or if the qualifier is the proprietor, a
general partner, or joint licensee.
23Length of License
- Initially issued for 2 year period
- Expires 2 years from the last day of the month in
which it was issued - THERE IS NO GRACE PERIOD FOR RENEWAL OF LICENSE
- 450 penalty
24Why do Licenses Matter?
- Only licensed contractors maintain an action to
collect unpaid contract balances - Only licensed contractors have mechanic lien,
stop notice and bond claims - NO LICENSE NO RECOVERY (even in arbitration)
- NO LICENSE Owner can sue Contractor to recover
all sums paid
25The Death Penalty
- No person engaged in the business or acting in
the capacity of a contractor, may bring or
maintain any action, or recover in law or equity
in any action, in any court of this state for the
collection of compensation for the performance of
any act or contract where a license is required
by this chapter without alleging that he or she
was a duly licensed contractor at all times
during the performance of that act or contract,
regardless of the merits of the cause of action
brought by the person. Cal. BP Code 7031(a)
26The Death Penalty Squared
- A person who utilizes the services of an
unlicensed contractor may bring an action in any
court of competent jurisdiction in this state to
recover all compensation paid to the unlicensed
contractor for performance of any act or
contract. Cal. BP Code 7031(b)
27MW ErectorsRecent Supreme Court Decision
- Appellate Court held that Contractor could
recover for time that he was properly license
even though he was not licensed for the whole
job. - Supreme Court reversed to recover damages a
contractor must allege and prove that he was
licensed AT ALL TIMES during the construction of
a project - Contractor does not have to be licensed at time
of execution of the contract just at all times
during performance
28Substantial Compliance
- duly licensed as a contractor in state prior to
the performance - acted reasonably and in good faith to maintain
proper licensure - did not know or reasonably should not have known
that he or she was not duly licensed when
performance of the act or contract commenced and - acted promptly and in good faith to reinstate his
or her license upon learning it was invalid.
29Fair? Equitable?
- ABSOLUTELY NOT
- THE COURTS DO NOT CARE
- Even if the party who hired the contractor knew
that the contractor was not licensed, and
specifically hired him with no intention of
paying the contractor, the contractor still is
not allowed to seek recovery in court.
Hydrotech Systems Ltd. v. Oasis Water Park, 52
Cal. 3d 988 (1991).
30Violations of License Law
- Contractor performs work without valid license
- Contractor, although licensed, performs work
outside his classification - Contractor performs work while under suspended
status due to lack of Workers Comp, a valid
qualifier, lapse in bonds
31Licensing in Public Works
- Public Entity must specify the type of license
required at the time of bid - Must be included in all plans prepared for bid
- Cannot award to specialty contractor whose
classification constitutes less than a majority
of the project - Public entity has wide latitude in determining
classification for projects
32Licensing in Public Works
- Contractor must be licensed prior to award of
contract - If not licensed at time of award, contractor is
deemed non-responsible contractor and the
contract is void - If the contract is void, contractor cannot
recover monies owed but also may have to repay
monies obtained under the illegal contract
33Checking on a License
- The public can check on any contractors license
by knowing either - Contractors name
- License number
- Personnel name
- http//www2.cslb.ca.gov/CSLB_LIBRARY/licensereque
st.asp
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37Checking a License
- When in doubt order a certified license history
from the CSLB - CSLB Record Certification, 9821 Business Park
Drive, Sacramento, CA 95827-3564 - Ask for expedited service if you need it as
evidence in a legal matter
38Home Improvement Contract Changes
- Legislature did a complete overhaul of Home
Improvement contract requirements - Article outlining all the changes included in
Powerpoint materials - Prudent practice have counsel redo your
standard Home Improvement Contracts
39Grounds for Disciplinary Action
- Abandonment of contract
- Misapplication of funds
- Failure to pay subcontractors timely unless there
is legitimate dispute - Willful departure from plans and specs
- Using, borrowing or paying for use of
someone elses license - Entering into contract with unlicensed contractor
40Penalties for Violation of Licensing Laws
- Jail time new law requires a repeat unlicensed
offenders confined in jail for at least 90 days - Monetary 5000 for each violation 10,000
for using someone elses license - Suspension of License for period of time
41Terminix Defense
- Contractor can avoid Disciplinary penalties if
the owner is made whole on legitimate claims - Prudent Practice send a written settlement
offer that makes the Owner whole