BILL ANALYSIS
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|Hearing Date:April 9, 2007 |Bill No:SB |
| |797 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Mark Ridley-Thomas, Chair
Bill No: SB 797Author:Ridley-Thomas
As Introduced: February 23, 2007 Fiscal: Yes
SUBJECT: Contractors.
SUMMARY: Includes within the definition of tree removal and
pruning contractor a person who offers to perform, purports to
perform or submits a bid to perform contracting work; clarifies
that the enhanced penalties for persons with prior unlicensed
activity convictions applies not only for performing work, but
also for offering to perform or submitting a bid to perform
contracting work; applies the enhanced penalties for unlicensed
activity to a culpable person named on a revoked license who
contracts without a license.
Existing law:
1)Provides for the licensure and regulation of contractors under
the Contractors State License Law (Contractors Law) by the
Contractors State License Board (CSLB) within the Department
of Consumer Affairs.
2)Defines contractor as any person who undertakes to or offers
to undertake to, or purports to have the capacity to undertake
to, or submits a bid to perform contracting services, as
specified.
3)Further defines several specific areas of contracting
including, performing tree removal, tree pruning, stump
removal, or engaging in tree or limb cabling or guying.
4)Defines "person" as an individual, firm, copartnership,
corporation, association or other organization, or any
combination of any thereof, and requires a person to be
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licensed as a contractor if he or she engages in the business
of contracting or acts in the capacity of a contractor, and
provides that it is a misdemeanor for any person to act as a
contractor without a license.
5)Requires that a qualifying individual must be named for each
contractor license, and the qualifying individual must show a
specified degree of knowledge and experience, and meet
prescribed qualifications. Further requires the qualified
individual to be held responsible for exercising direct
supervision and control over the operation of the contractor's
business as necessary to ensure full compliance with the
Contractors Law.
6)Establishes enhanced penalties imposed by the court for a
repeat unlicensed contractor offender:
a) For a second conviction, a fine of 20 percent of the
price of the contract "under which the unlicensed person
performed contracting work" or $4,500, whichever is
greater, and imprisonment in the county jail for not less
than 90 days, as specified.
b) For a third or subsequent conviction, a fine of $4,500
to $10,000 or 20 percent of the contract price "under which
the unlicensed person performed contracting work" or by
imprisonment in the county jail for 90 days to one year, as
specified.
This bill:
1)Clarifies that any person who performs, offers to perform,
purports to have the capacity to perform or submits a bid to
perform tree removal and pruning services must be licensed, as
specified.
2)Clarifies that the enhanced penalties for repeat convictions
for unlicensed contracting applies to unlicensed persons who
perform or who offer to perform contracting work.
3)Clarifies that misdemeanor penalties for unlicensed
contracting, including the enhanced penalties, also apply to
an unlicensed person who has been named on a previously
revoked license and was the person found responsible for the
act or omission which resulted in the revocation.
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FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1.Purpose. This bill is sponsored by the Contractors State
License Board (CSLB) to clarify the licensing law regarding
contracting without a license.
The CSLB states that the bill conforms the provisions relating
to tree trimming and tree removal contracting with the general
definition of a contractor which includes both those who
perform and also those who offer to perform contracting
services. Additionally, the bill clarifies the enhanced
penalties for non-licensees to apply for both performing or
offering to perform contracting work. The bill further
subjects the named qualifying individual on a revoked license
to the enhanced penalties if they act as a contractor without
a license.
The CSLB states that the key elements of the Contractors Law
define those activities that constitute "acting in the
capacity of a contractor," including submitting a bid for
contracting services (BPC 7026), and acting in the capacity
of a contractor without a license is a misdemeanor. However,
the provisions dealing with tree trimming and removal (BPC
7026.1) were added at a later time and do not conform to
Section 7026 relative to "submitting a bid" for services. The
CSLB states that this discrepancy is hampering undercover
enforcement activities (sting operations) because unlicensed
tree service operators submit bids to the undercover officers,
but perform no services. Because of this technicality in the
current language of Section 7026.1, some district attorneys
are refusing to accept criminal complaints against tree
service operators where proactive action has been taken by the
CSLB.
Similarly, the CSLB states, the enhanced penalties against those
who have been previously convicted of contracting without a
license are predicated on the "performance" of work, rather
than the submission of a bid. Clearly, those with prior
convictions for contracting without a license, who are caught
in a sting operation should be subject to the more stringent
penalties prescribed by the law. The submission of a bid at a
sting operation represents a continued disregard for the law.
The CSLB argues that revoked licensees who were found to be
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culpable in the acts resulting in the license revocation, and
who subsequently were caught offering or performing services
without a license should also be subject to the enhanced
penalties.
2.Battling the Underground Economy. The underground economy is
an ongoing threat to California's citizens and legitimate
businesses. Illegal and unlicensed operators who fail to pay
taxes and comply with licensing and insurance laws take
revenues earmarked for public schools, law enforcement, and
other public services. It is estimated that California loses
between $60 to $140 billion in revenues and unpaid taxes each
year as a result of the underground economy.
In battling the underground economy, in 2006, the CSLB joined
with various state and federal regulators to form the Economic
and Employment Enforcement Coalition (EEEC) performing 12
construction sweeps. In addition the CSLB continued its
proactive enforcement efforts with its Statewide Investigative
Fraud Team (SWIFT) carrying out more than 40 undercover sting
operations in 2006, targeting unlicensed operators and repeat
offenders.
Through these efforts, the CSLB is able to initiate action
against numerous unlicensed contractors, and repeat unlicensed
offenders. These unlicensed persons are typically cited or
arrested, and cases are referred to local district attorneys
for prosecution.
Since the violations occur during a sting operation, no
contracting work is actually performed, regardless of the
expressed intention to perform the services. District
attorneys have been unwilling or unable to press misdemeanor
charges in certain cases of tree trimming and tree removal
services because the licensing law is not specific regarding
offering or bidding for these services. Furthermore, district
attorneys have been unable to apply the enhanced misdemeanor
penalties under existing law for repeat unlicensed offenders
who only offer, but do not actually perform contracting work,
or to those unlicensed repeat offenders who have had licenses
previously revoked.
3.Prior Legislation. SB 488 (Soto) Chapter 205, Statues of
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2005, enhanced penalties for third and subsequent convictions
for contracting without a license and established a
misdemeanor penalty for the qualifying person of a
contractor's license to violate workers' compensation
insurance requirements.
4.Tree Contracting Exceptions. The tree removal and pruning
contracting requirements apply to those persons who perform
tree removal, tree pruning, stump removal, or engage in tree
or limb cabling or guying. The licensing requirements do not
include a person performing the activities of a nurseryperson
who in the normal course of work does incidental tree pruning,
or guying of trees or tree limbs. The licensing requirements
also do not include a gardener who in the normal course of
work does incidental pruning of trees that are less than 15
feet in height.
Furthermore, the Contractor's Law does not apply to a project,
whether of one or more contracts, in which the aggregate price
which for labor, materials, and all other items, is less than
$500.
5.Arguments in Support. The Engineering Contractors'
Association , the California Fence Contractors' Association ,
the Marin Builders' Exchange , the Flasher/Barricade
Association , and the California Chapter of the American Fence
Contractors' Association , believes that this is an extremely
important bill for every licensed contractor as well as
consumers in California. Applying the enhanced penalties for
unlicensed contractors who have been found to be a culpable
party on a revoked license would serve to protect the public
by adding a significant deterrent to the Contractors Law.
Prescribing the enhanced penalties for unlicensed contractors
who have prior convictions would also serve as an added
deterrent and serve to protect the public through the CSLB's
proactive enforcement efforts.
The California Landscape Contractors Association (CLCA) states
that unlicensed landscape contracting is a growing problem.
It is relatively easy for unlicensed individuals to legally do
landscape maintenance, however many expand into contracting
for installation and renovation projects that exceed the $500
limit for labor and materials that may be performed without a
license. CLCA states that often these unlicensed operators
don't have workers compensation insurance, don't deduct
payroll taxes, don't carry liability insurance, pay
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substandard wages, ignore worker health and safety laws,
exploit immigrant workers, and have criminal histories and
financial problems that put customers, employees, and the
public at risk. Since unlicensed contractors have a
significantly lower cost of doing business, they compete
unfairly against responsible contractors who abide by the law,
according to CLCA.
SUPPORT AND OPPOSITION:
Support :
Contractors State License Board (Sponsor)
Engineering Contractors' Association
California Fence Contractors' Association
Marin Builders' Exchange
Flasher/Barricade Association
California Chapter of the American Fence Contractors'
Association
California Landscape Contractors Association (CLCA)
Opposition :
None on file as of April 3, 2007.
Consultant:G. V. Ayers