Recent Blog Posts

Don't Lose Your Lawsuit For Failure to Prove You are Licensed

Ashley Baron — Fri, 04 May 2012 21:10:00 GMT

When you file a lawsuit in California claiming you are a license contractor be ready to prove it at trial or lose. Business & Professions Code Section 7031(d) requires that you prove you were licensed at all relevate times during the contract you are trying to collect on and in the category of license that you would need to perform the work.

It states: "If licensure or proper licensure is controverted, then proof of licensure pursuant to this section shall be made by production of a verified certificate of licensure from the Contractors' State License Board which establishes that the individual or entity bringing the action was duly licensed in the proper classification of contractors at all times during the performance of any act or contract covered by the action. Nothing in this subdivision shall require any person or entity controverting licensure or proper licensure to produce a verified license. When licensure or proper licensure is controverted, the burden of proof to establish licensure or proper licensure shall be on the licensee."

So how does your opponent controvert licensure or proper licensure? All they have to do is file the normal general denial to your complaint and your license becomes an issue. If you and your attorney show up at trial and do not have a "verified certificate of licensure from the CSLB establishing you were licensed in the proper classification of contractors at all times during the performance of any act or contract covered by the action" you will lose by default. Think you can just run back to the office and make a quick call to the CSLB or get a continuance to produce the document? Think again! The Appeals Court in Advantec Group, inc., v. Edwin's Plumbing Co., Inc., 153 Cal. App.4th 621 (2007)ruled that on the cross-complaint filed by the plumber therein that because the plumber failed to have the certificate from the CSLB the trial court granted a nonsuit (i.e. the plumber lost his cross-complaint) and the Appellate Court confirmed the trial courts ruling. The plumber asked for a continuance of trial to obtain the certificate and the trial court denied the continuance and the Appellate Court ruled that the denial was proper. The appellate court held that by filing a general denial to the cross-complaint the cross-defendant controverted the licensing and the plumber was required to have the verified certificate ready at trial and that failure to do so constituted grounds for the nonsuit.

Don't get caught off guard with an attorney that does not do construction law on a regular basis. Protect yourself with an experienced construction law attorney.

Almost All LLC License Applications Rejected - Why?

Ashley Baron — Thu, 12 Apr 2012 22:36:00 GMT

Since the first of this year, CSLB's Licensing division has processed about three dozen limited liability company (LLC) license applications; to date, five licenses have been issued. This business classification became authorized to hold a California contractor license beginning January 1, 2012.

Cause for the high rejection rate so far mostly has been due to the missing LLC registration number issued by the Secretary of State (SOS), or the names and numbers of personnel listed are inconsistent with SOS records that are sent to CSLB. Do not submit your application until you have received an SOS registration number. CSLB cannot process the application until the information is identical to SOS records. Also, since the amount of liability insurance the LLC licensee must carry is determined by the number of officers, that information must be consistent.

SOS indicates there can be up to a four-month backlog in the processing times for the Statement of Information (Form LLC-12); however, expedited processing is available for additional fees.

Don't Falsify Experience to Add A Trade Classification it Could Cost Your Your License

Ashley Baron — Thu, 12 Apr 2012 22:31:00 GMT

Thinking about falsifing experience when applying to add a trade classification to their license? Don't do it the CSLB is checking. State law requires four years of journey-level experience (some of which can be substituted by education) in the licensure classification that you are seeking to add.

Falsely stating your experience is legally viewed as omitting or misrepresenting material fact, in violation of Business and Professions Code section 7112. An applicant-licensee who submits fraudulent information to CSLB or a licensee who provides false information about the applicant to CSLB risks license revocation.

RMO or RME - It is your Responsibility!

Ashley Baron — Thu, 12 Apr 2012 22:25:00 GMT

If you are the qualifying member of a construction business, you and your licenses will be held accountable for all activity and any violations committed by other members of the license. As the Responsible Managing Officer (RMO), Responsible Managing Employee (RME), or Qualifying Partner for a contracting business, you must exercise direct supervision and control of its contracting operations. If you are not doing so, or if any of the business's other officers, general partners, or employees break the law, you could lose this license and any other license on which you serve as qualifier for violating section 7068.1 of the Business and Professions Code (B&P).

Also, keep in mind that under B&P Code section 7122.5 any act or omission that is a cause for disciplinary action by any individual, partnership, corporation or firm is also a cause for disciplinary action against the RMO, RME, or Qualifying Partner, regardless of his or her knowledge and participation.

California Supreme Court Rules on Meal and Rest Periods

Ashley Baron — Thu, 12 Apr 2012 21:57:00 GMT

California employers got an unexpected gift from the California Supreme Court today when it ruled on Brinker Restaurant Corp. v. Superior Court Case number S166350. In this labor case the Court ruled, affirming the Appellate Court, that while employers have a duty to provide workers with meal and rest breaks, they are not required to make sure that workers take them.

While the Supreme Court made it clear that employers do not have a duty to police the taking of meal and rest breaks by employees it still found that the employer cannot impede, discourage or dissuade employees from taking them. The Supreme Court said that the employees should be free of "all duty, with the employee thereafter at liberty to use the meal period for whatever purposes he or she desires."

The Brinker Restuarant Corp. and its parent corporation Binker International own the Chili's Bar & Grill and Romano's Grill chains.

This case marks a significant victory for companies who require flexiblity on the job for workers meals and breaks such as the restaurant and the construction industry.

Look for more detail on this case in our next newsletter.

CSLB Issues LLC Licenses and Rejects Many Application - What to Know Why?

Ashley Baron — Fri, 27 Jan 2012 18:07:00 GMT

SACRAMENTO, CA – The California Contractors State License Board (CSLB) issued the first state contractor license to a limited liability company (LLC) on January 19, 2012, as part of the new business type that became eligible for licensure following the passage of Senate Bill 392 in 2010. The recipient is from the state of Washington: Doyon Project Services LLC, License No. 969358.

“To date, CSLB has received 36 LLC applications,” said CSLB Registrar Steve Sands. “However, our Licensing division has had to reject many because they were submitted without the correct information. We want to alert applicants to the errors we’re noticing so they can correct them before submitting incomplete application forms and causing a delay in their business operations.”

A common reason for rejection is the missing LLC registration number, which is issued by the California Secretary of State’s office (SOS). That number must be included on page one of the application. Companies should not submit the LLC application to CSLB until the SOS number has been issued.

Another common problem is that the personnel listed on the application do not match those reported by SOS. The same names and number of personnel listed on the application must match all of the personnel information provided to CLSB by SOS.

An issue related to the LLC personnel is that SOS has a four-month processing backlog for the Statement of Information (Form LLC-12) initial filings and updates, which are essential for reporting the LLC’s personnel (members and managers). CSLB cannot process the LLC license application until all information is consistent with SOS records. The personnel information is necessary for CSLB to determine the appropriate amount of required LLC liability insurance (between $1 million and $5 million, depending on the number of personnel).

Businesses that are planning to submit an LLC application to CSLB should plan for the four-month processing delay before submitting their application if they have recently submitted an initial or updated Statement of Information to SOS. However, SOS does offer expedited processing for an additional fee ($350 for 24-hour processing, and $750 for same-day processing—in by 9:30 a.m., out by 4:00 p.m.) http://www.sos.ca.gov/business/be/preclearance-expedited-services.htm.

CSLB Fresno Sting Sends 21 to Court for Ripping Off Consumers Unlicensed, uninsured construction activity targeted during two-day undercover operation

Ashley Baron — Wed, 18 Jan 2012 21:42:00 GMT

Contractors - if you are contracting without a license, asking for more than $1,000 as a deposit or not carrying workers compensation Insurance you better be aware that the Contractors State License Board is looking to send you to Court and pay heavy fines!

SACRAMENTO – Most of the 21 individuals caught by the Contractors State License Board’s (CSLB) Statewide Investigative Fraud Team (SWIFT) during an undercover sting operation at a Fresno County home near Fig Garden on January 11 and 12, 2012, were found to be illegally charging excessive up-front payments. The Fresno County District Attorney’s Office, Employment Development Department, California Highway Patrol, and the Fresno Police Special Investigations Bureau assisted in the two-day operation.

Tips from the Central California Better Business Bureau, as well as suspected illegal print and online advertisements, helped identify the illegal operators. Investigators posed as homeowners, and contacted the suspected non-licensees, seeking bids for plumbing, painting, tree trimming, fencing, landscaping, and general construction projects. The 21 suspects who bid more than $500 for labor and materials received notices to appear in court for contracting without a license, in violation of California Business and Professions (B&P) Code section 7028. Contractors are also required to place their state contractor license number in all advertisements, under B&P Code section 7027.1.

Sixteen individuals solicited more than the legal down payment amount (10 percent of the contract price or $1,000, whichever is less) and will face additional charges for violating B&P Code section 7159.5 (a)(3)(b). The district attorney will also charge five of the sting suspects for failure to have workers’ compensation insurance coverage for their employees, in violation of Labor Code section 3700.5.

Two suspects are not strangers to CSLB. Hilario Ortiz, 52, of Larry’s Flooring and Home Repair in Fresno, said he was “through.” Ortiz was caught in two CSLB stings in 2010. James Lawrence Campbell, 40, of Fresno, had an outstanding warrant for not showing up for sentencing after entering a plea of contracting without a license and illegal advertising in a prior case. Unlicensed fencing contractor Martin Mendoza, 35, of Fresno, is a registered sex offender. Since 2005, state law has required that those applying for new licenses or an additional license classification must submit fingerprints for a Department of Justice background check.

Wilfull Misclassification of Employees as Independent Contractors - New CSLB Law

Ashley Baron — Thu, 29 Dec 2011 22:22:00 GMT

Senate Bill 459 authorizes the Labor and Workforce Development Agency to issue fines for the willful misclassification of employees as independent contractors, and requires the agency to notify CSLB of violators who are licensees. The legislation also requires the board to initiate actions against such licensees.

Mechanics' Lien Proof of Service Affidavit Clarified

Ashley Baron — Sat, 24 Dec 2011 22:58:00 GMT

Assembly Bill 456 (Chapter 673, amends sections 3084 and 8416 of the Civil Code) clarifies that the proof of service affidavit that must accompany a mechanic's lien filing to validate the lien must show the name of the property owner and the title or capacity in which the person or entity was served the claim of lien.

Be Ready to Recertify: Proof of Workers' Compensation Insurance Coverage or Exemption Required with Each License Renewal

Ashley Baron — Sat, 24 Dec 2011 22:45:00 GMT

As part of CSLB's ongoing effort to level the playing field for licensees who comply with workers' compensation insurance laws, the Board this year sponsored a pair of bills that became law: Assembly Bills 397 and 878. Starting January 1, 2012, Assembly Bill 397 requires a contractor who has certified that he/she has no employees and is exempt from carrying a workers' compensation policy must submit a new certification, or proof of workers' compensation insurance coverage or self-insurance, each time the license is up for renewal. C-39 Roofing contractors must still purchase workers' compensation insurance coverage even if they have no employees, as required by Business and Professions Code section 7125. CSLB will notify licensees once instructions on how to comply with this law and new renewal forms are available, which is anticipated by mid-2012.

Assembly Bill 878 will require workers' compensation insurers to report to CSLB if a licensee's policy is cancelled as the result of a premium audit or investigation, or a misrepresentation that results in harm to the insurer without reimbursement being made. This legislation further states that disregard and violation of workers' compensation insurance laws are cause for discipline by the Registrar.

Limited Liability Companies Licensing - What you need to Know

Ashley Baron — Sat, 24 Dec 2011 22:37:00 GMT

Limited Liability Company Licensing Begins in Late December

Limited liability companies (LLCs) will be able to apply for a CSLB license by January 1, 2012, as required by 2010 state legislation. The passage of Senate Bill 392 authorized CSLB to issue contractor licenses to LLCs.

CSLB's licensing and programming staff has nearly completed the new application processes, which will add new types of personnel to this license category: officers and members. The LLC license will also require a $100,000 employee bond and $1,000,000 to $5,000,000 in liability insurance.

LLC applicants will have to fill out a separate application for licensure as a sole owner, partnership, or corporation. Those interested in applying for an LLC license should periodically check the Forms & Applications section of the CSLB website; the form will appear there as soon as CSLB is prepared to process the new LLC applications.

The separate LLC application is specifically designed for LLCs to obtain an original license (exam or waiver), to add a classification, or to replace a qualifying individual.

Below are some primary requirements for and components of LLC licenses that will apply once CSLB begins processing applications for LLC licenses.

$100,000 Surety Bond

A $100,000 surety bond (in addition to the $12,500 contractor bond) is required for the issuance, reissuance, reinstatement, reactivation, and renewal of an LLC license for the benefit of any employee or worker damaged by the LLC's failure to pay wages, interest on wages, or fringe benefits, as well as other contributions (not required for inactive LLC licenses).

$1 Million Liability Insurance Minimum

Liability insurance with the aggregate limit of $1 million for licensees with five or fewer persons listed as members of the personnel of record is required; plus, an additional $100,000 is required for each additional member of the personnel of record, not to exceed $5 million total.

Personnel of Record

Every person who is an officer, member, or manager must be listed as personnel of record on LLC applications.

Qualifying Individual

LLC licenses must be qualified by appearance of a responsible managing employee (RME), responsible managing officer (RMO), responsible managing member, or responsible managing manager.

$1 Million Personal Liability during Secretary of State Suspension

If an LLC license is suspended for failing to be registered and in good standing with the Secretary of State, each person within the LLC may be held personally liable up to $1 million each during the time the LLC is suspended.

Liability Insurance Information on Contracts

Specific general liability insurance information is required to be included on the LLC's home improvement and service and repair contracts.

License Number Reissuance

Sole owner and corporate license numbers may be reissued to LLCs under certain circumstances.

Joint Venture Licenses

An LLC may be listed as an entity on a joint venture license.

Partnership Licenses

LLCs may serve as a general partner on a partnership license provided the LLC meets the above requirements relating to the additional surety bond and liability insurance. An LLC serving as a limited partner on a partnership license is not required to meet the additional surety bond and liability insurance requirements.

Business Name Styles

According to the Secretary of State's office, LLC business names have specific requirements and restrictions. Interested parties should visit the Secretary of State's website for full information about LLC business name issues. Briefly, LLC business names must comply with the following:

The name of an LLC must end with the phrase "Limited Liability Company" or the abbreviation "LLC" or "L.L.C." The words "Limited" and "Company" may be abbreviated to "Ltd." and "Co.," respectively.
The name of an LLC may not include the words "bank," "trust," "trustee," "incorporated," "Inc.," "corporation," or "corp."
The name of an LLC may not include the words "insurer" or "insurance company" or any words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.
If the name of a foreign (out-of-state or out-of-country) LLC does not conform to the requirements of California Corporations Code Section 17052, the foreign LLC must agree to transact intrastate business under an assumed name that meets CCC 17052 requirements in order to register with the Secretary of State.

Other Requirements

Most other requirements and provisions that apply to corporate licenses will also apply to LLC licenses. The best way to receive future updates is to sign up for CSLB Email Alerts on any page of the CSLB website. Be sure to sign up for "Industry Bulletin" or "All of the Above" to receive information on LLCs and other important news. You can also "like" CSLB on Facebook or follow the Board on Twitter. LLC updates will also be posted on CSLB's website.

Requiring Payment of Referral Fees is Prohibited

Ashley Baron — Mon, 22 Aug 2011 21:21:00 GMT

No matter what you call it-a referral fee, incentive, inducement, or kick-back, any time a fee is requested or required for referring contracting work, a state law is being violated and you risk having disciplinary action taken against your license.

CSLB is aware that referral fees in the disaster response industry are prevalent and are becoming more of a concern during the difficult economic times. There is evidence that such referral fees result in the artificial inflation of charges to homeowners and to the insurance companies called upon to reimburse homeowners for the costs. Contractors who abide by the law and refuse to pay these referral fees are losing out on business and are victims of an uneven playing field.

California Business and Professions Code Section 7157(d) Prohibited Inducement, says referral fees are considered to be illegal inducements, a violation of Contractors State License Law. If, after investigation, a license is found to be in violation of the law, CSLB may take a formal administrative disciplinary action and/or refer the matter to the local authorities for criminal prosecution.

Penalties for Home Improvement Inducements

The first offense could result in a citation with civil penalties ranging from $100 to $1,000. Subsequent violations will prompt an accusation that could result in further penalties, up to revocation of your contractor license.

Failing to Obtain Building Permits Could Cost You Money!

Ashley Baron — Mon, 22 Aug 2011 21:15:00 GMT

Before you begin work on any building project, you must check with your city or county building department to determine if your project requires a permit. Permits help ensure that work is performed according to established state and local building codes, and safety standards.

While disciplinary actions from building departments vary by jurisdiction, licensees can also be responsible for any fine issued to a property owner and the cost of complying with code requirements. Under Business and Professions Code sections and 7110, CSLB has the authority to assist in regulating building and safety laws and discipline any licensee who violates the law. This includes civil penalties of up to $5,000 per citation and/or suspension or revocation of a contractor license.

Complaints of unpermitted construction work are increasing among licensees. CSLB encourages you to report any violators, whether licensed or unlicensed.

Maximum Down Payment Allowed

Ashley Baron — Mon, 22 Aug 2011 21:14:00 GMT

The number of consumer complaints filed with CSLB for solicitation or receipt of a down payment in excess of the legal limit has doubled in the past four years. Remember, it is illegal to request or receive a down payment larger than 10 percent of the contract price or $1,000, whichever is less. Failure to adhere to of the Business and Professions Code section 7159(a)(3) is punishable by up to $5,000 in administrative fines or criminal penalties of up to $5,000 and/or up to one year in county jail.

Common Causes for CSLB Revocations and Suspensions

Ashley Baron — Mon, 22 Aug 2011 21:10:00 GMT

One of the most common reasons for contractor license revocation or suspension is failure to submit payments within the appropriate time frame following citations or CSLB arbitration decisions.

To avoid a license suspension, licensees must pay their citations within 15 days of issuance (barring appeal) and arbitration decisions within 30 days. If no payment or appeal has been made before the citation order is final, a Notice of Intent to Suspend is sent. After 30 days of non-compliance with a citation or arbitration decision, the license can be suspended immediately. If the citation or arbitration decisions are not satisfied 90 days following the suspension, CSLB will revoke the contractor license.

Remember: Licensees are required to report a construction-related civil court judgment to CSLB within 90 days of the judgment date. Under Business and Professions Code section 7071.17, failure to do so within 90 days can also suspend a license until that judgment is satisfied or the judgment is appealed.