BILL ANALYSIS
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|Hearing Date:June 24, 2002 |Bill No:AB |
| |264 |
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SENATE COMMITTEE ON BUSINESS AND PROFESSIONS
Senator Liz Figueroa, Chair
Bill No: AB 264Author:Correa
As Amended:June 17, 2002 Fiscal: Yes
SUBJECT: Contractors.
SUMMARY: Modifies various provisions of the Contractors'
State License Law relating to a specialty trade exam,
surety bond procedures, and Worker's Compensation Insurance
Reports.
Existing law, the Contractors' State License Law:
1)Provides for the licensing and regulation of contractors
by the Contractors' State License Board (CSLB).
2)Requires the CSLB to develop a written test for
contractor certification concerning asbestos removal.
3)Requires a contractor, as a condition of licensure, to
file with the CSLB a $7,500 bond and requires the bond to
be executed by an admitted surety. There are specified
exceptions where the bond may be higher, such as for
swimming pool contractors (a $10,000 bond is required) or
in cases where a disciplinary action requires a
contractor to increase his or her bond amount.
4)Requires the surety of a contractor to notify the CSLB
registrar of any payment on any claim against the
contractor's bond within 30 days of making the payment.
5)Provides that any judgment or admitted claim against, or
good faith payment from a bond shall constitute grounds
for disciplinary action against a contractor by the CSLB.
6)Requires contractors or applicants for contractor's
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licensure to have on file with the board a Certificate of
Workers' Compensation Insurance or a Certification of
Self-Insurance. Failure to comply with this requirement
results in an automatic license suspension and provides
specified procedures in this regard.
This bill:
1)Eliminates the requirement that the CSLB develop a
written test for an applicant for a license to perform
asbestos related work and specifies that no examination
be required for the limited specialty license (C-61).
2)Provides that, prior to a settlement of a claim through a
good faith payment by a surety, a contractor shall have
not less than 15 days to file a written protest
instructing the surety not to make the payment based on
certain specific grounds.
3)Requires the board to investigate the matter for
disciplinary violations when a licensee files a written
protest and a surety has suffered a loss regarding its
good faith payment.
4)Provides that, with respect to payments made by a surety
that are reported to the registrar, the contractor's
license shall be suspended by operation of law if proof
of payment of the amount owed to the surety has not been
made by the contractor within 90 days after the
contractor is notified to that effect by the CSLB.
5)Provides that a contractor's license may not be renewed,
reissued, or reinstated while any judgment or admitted
claim in excess of the amount of the contractor's bond
remains unsatisfied or while the surety remains
un-reimbursed for loss and expense sustained on the bond.
6)Clarifies that an applicant or licensee must have on file
at all times a current and valid Certificate of Workers'
Compensation Insurance or Certification of Self-Insurance
except in specified circumstances.
7)Requires the insurer to report to the registrar specified
information regarding workers' compensation policies.
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8)Clarifies that the failure of a licensee to maintain
workers' compensation coverage, if required, will result
in the automatic suspension of the license.
9)Clarifies that the license suspension is effective on the
date workers' compensation coverage lapsed or on the date
it was required to be obtained, and sets forth procedures
for license suspension.
10)Clarifies that a contractor shall be considered duly
licensed during all periods in which the registrar is
required to accept the certificate, provided the licensee
has otherwise complied with all other provisions of law.
11)Provides that the filing of a false statement or
exemption certificate, or after filing an exemption
certificate the employment of a person subject to
coverage under workers' compensation laws without first
filing a Certificate of Workers' Compensation Insurance
or Certification of Self-Insurance, or the employment of
a person subject to coverage under the workers'
compensation laws without maintaining coverage for that
person, constitutes a cause for disciplinary action.
FISCAL EFFECT: Unknown
COMMENTS:
1.Purpose. According to the sponsor, the Contractors'
State License Board (CSLB), this bill addresses three
important amendments to the Contractors' State License
Law relating to a specialty trade exam, surety bond
procedures, and Worker's Compensation Insurance Reports.
CSLB staff believes that these amendments will clarify
existing law, improve current procedures, and protect
workers.
2.Elimination of the Trade Exam for the Limited Specialty
License Classification (C-61). The CSLB indicates that
the elimination of a C-61 trade exam is appropriate
because the 29 subcategories under the C-61
classification are extremely diverse, ranging from
specialty trades such as fiberglass bathtub repairs to
installation of draperies. As such, this raises the
issue of relevancy for a trade exam and creates the
potential for legal challenge. Applicants would still
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have to meet all other licensing requirements.
3.Surety Bond Procedures. Current law requires surety
companies to notify the registrar whenever the surety
pays a claim filed against a license bond. This may
result in a suspension of the contractor's license for
failure to maintain the $7,500 license bond required by
law. In order to have the suspension lifted, the
contractor must pay the surety back and get a new bond.
The payment of the claim also becomes the basis for
disciplinary action against the licensee. Some
sophisticated licensees who know that a payout is
imminent will purchase a replacement bond from another
company prior to the surety payment. Since a full $7,500
bond is in place, CSLB can not automatically suspend the
license and must instead prosecute a disciplinary action.
This places an additional workload on the Enforcement
Division, and takes months. During this time these
unscrupulous licensees have avoided license suspension.
The proposed change would make the process more efficient
by shifting the burden of the resolution to the licensee.
It also provides an added measure of consumer protection
by suspending the right to do business for those
licensees who are intent on evading their obligations
under the license law.
4.Workers' Compensation Provisions. Licensees with no
employees must file a workers' compensation exemption
with the board certifying that status. A licensee must
notify the CSLB if he/she subsequently hires employees,
and file a workers' compensation policy with the board
within 90 days. This requirement is frequently
disregarded. Also, there are times when a workers'
compensation policy has been canceled and because of the
current statutory language, there will be no workers'
compensation coverage for a period of 30 to 60 days. The
license is then suspended 60 days after the coverage has
been canceled if the licensee does not provide a new
policy or exemption. The new language clarifies that the
license suspension is effective on the date workers'
compensation coverage lapsed or on the date it was
required to be obtained. The licensee is provided with a
notice from the registrar with all pertinent information
regarding the reason for, and the date of, the
suspension, with the procedures required to reinstate.
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SUPPORT AND OPPOSITION:
Support:
Contractors' State License Board (sponsor)
Surety Company of the Pacific
Opposition:
None reported to the Committee as of June 20, 2002.
Consultant:Robin M. Hartley