BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 370
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          ASSEMBLY THIRD READING
          AB 370 (Eng)
          As Amended  March 23, 2009
          Majority vote 

           BUSINESS & PROFESSIONS      11-0                     
          APPROPRIATIONS      14-1                            
           
           ----------------------------------------------------------------- 
          |Ayes:|Hayashi, Emmerson,        |Ayes:|De Leon, Nielsen,         |
          |     |Conway, Eng, Hernandez,   |     |Ammiano,                  |
          |     |Nava, Niello,             |     |Charles Calderon, Davis,  |
          |     |John A. Perez, Price,     |     |Fuentes, Hall, Harkey,    |
          |     |Ruskin, Smyth             |     |John A. Perez, Price,     |
          |     |                          |     |Skinner, Solorio, Audra   |
          |     |                          |     |Strickland, Torlakson     |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |Nays:|Duvall                    |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 

           SUMMARY  :  Increases the maximum criminal penalties for  
          unlicensed contractors, imposes a mandatory jail sentence for a  
          third or subsequent conviction for unlicensed contracting, and  
          requires the court to order an unlicensed contractor to pay  
          restitution to its victims.  Specifically,  this bill  :  

          1)Makes a first conviction a misdemeanor punishable by a fine  
            not exceeding $5,000 or by imprisonment in a county jail for  
            no more than six months, or both. 

          2)Requires that the fine for a second conviction be the greatest  
            of 20% of the contract price, 20% of the aggregate payments  
            made to, or at the direction of, the unlicensed contractor, or  
            $5,000. 

          3)Requires that a third or subsequent conviction be punishable  
            by both a fine and imprisonment in a county jail for between  
            90 days and one year.  The fine must be no less than $5,000  
            and no more than the greatest of $10,000, 20% of the price of  
            the contract, or 20% of the aggregate payments made to, or at  
            the direction of, the unlicensed contractor. 









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          4)Clarifies that an unlicensed person who offers to perform  
            contracting work is subject to the specified penalties. 

          5)Provides that a person who used the services of an unlicensed  
            contractor is a victim of crime, regardless of whether that  
            person had knowledge that the contractor was unlicensed.

          6)Requires a court to order that a convicted unlicensed  
            contractor make restitution to all persons who utilized the  
            services of the unlicensed contractor.

           EXISTING LAW  :
           
          1)Creates the Contractors State License Board (CSLB) within the  
            Department of Consumer Affairs for the purposes of licensing  
            and regulating contractors in California.

          2)Allows CSLB to bring disciplinary actions against a contractor  
            who willfully or deliberately violates building laws of the  
            state.

          3)Makes it a misdemeanor for a person to engage in the business  
            or act in the capacity of a contractor without having a  
            license and makes a first offense punishable by imprisonment  
            in the county jail for no more than six months, or by a fine  
            not exceeding $1,000, or both.

          4)Requires that a second conviction be punishable by both a fine  
            and imprisonment in the county jail for not less than 90 days,  
            except as specified.  The fine must be the greater of 20% of  
            the price of the contract or $4,500.

          5)Requires that a third or subsequent conviction be punishable  
            by a fine or imprisonment in the county jail for between 90  
            days and one year, or both.  The fine must be no less than  
            $4,500 and no more than the greater of $10,000 or 20% of the  
            price of the contract. 

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, potential increase in fine revenue to local  
          governments from increased penalties and potential increase in  
          non-reimbursable costs for mandatory jail sentences upon a third  
          or subsequent conviction for operating without a contractor's  
          license.








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           COMMENTS  :  According to the author's office, "Contractor fraud,  
          most of which involves unlicensed contractors, consistently  
          ranks in the top ten lists of consumer complaints both  
          nationally and statewide.  According to the U.S. Office of  
          Consumer Affairs, unscrupulous contractors defraud consumers of  
          more than $100 billion annually.  In addition to the financial  
          loss they cause, unlicensed contractors generally do not obtain  
          proper insurance, leaving their workers without any protection  
          and the homeowner potentially liable."

          "Despite this immense harm, violators of this law are only  
          punishable by up to only six months in jail and a maximum fine  
          of $1,000 - regardless of how much money the victim paid that  
          unlicensed contractor.  Although second-time offenders must pay  
          an increased fine, the potential jail time is similarly  
          restricted to six months.  Only a third-time violator is subject  
          to up to one year jail sentence."

          Current law states that a person who uses an unlicensed  
          contractor may bring a civil action to recover all compensation  
          paid to the unlicensed contractor.  However, no statute  
          specifically addresses the issue of criminal restitution for  
          victims of unlicensed contractors.  Unlicensed contractors are  
          the beneficiaries, retaining the monies paid them by crime  
          victims which the civil statutes require to be disgorged.   
           
           According to the CSLB, unlicensed contracting is a considerable  
          part of California's estimated annual $60-$140 billion  
          underground economy.  Numerous approaches have been used to  
          address this problem, but it continues to impact legitimate  
          licensees and consumers alike with injurious economic results.   
          The victims of these violations include consumers, often the  
          elderly, who pay thousands of dollars to an unlicensed person  
          who never finishes the job or does incompetent or negligent  
          work.  Research conducted by the Department of Industrial  
          Relations, Economic and Employment Enforcement Coalition shows  
          that unlicensed contractors drive down wages, undercut  
          legitimate businesses, and avoid licensing requirements, and it  
          is often hard to find them and bring them into compliance with  
          state and local laws.


           Analysis Prepared by  :    Whitney Clark / B. & P. / (916)  








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          319-3301 
                                                                FN: 0000387