BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 370|
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THIRD READING
Bill No: AB 370
Author: Eng (D)
Amended: 6/29/09 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEVELOP. COMM : 7-0, 6/8/09
AYES: Negrete McLeod, Aanestad, Corbett, Correa, Romero,
Walters, Yee
NO VOTE RECORDED: Wyland, Florez, Oropeza
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 77-0, 5/11/09 - See last page for vote
SUBJECT : Unlicensed contractors
SOURCE : Los Angeles City Attorney
DIGEST : This bill increases the maximum criminal fines
for unlicensed contractors, requires a mandatory jail
sentence for a third or subsequent conviction for
unlicensed contracting and 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.
ANALYSIS : Existing law:
1.Licenses and regulates more than 250,000 contractors by
CONTINUED
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the Contractors State License Board (CSLB) within the
Department of Consumer Affairs.
2.Makes it a misdemeanor for an unlicensed person to engage
in the business or act in the capacity of a contractor
and makes a first offense punishable by imprisonment in
the county jail for up to six months, or by a fine up to
$1,000, or both.
3.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.
C. Provides that 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.
4.Makes it a felony or a misdemeanor (wobbler) for an
unlicensed person to engage in the business or act in the
capacity of a contractor when a state of emergency is
proclaimed by the Governor or the President of the United
States, punishable by a fine up to $10,000 or 16 months
to 3 years in state prison, or both fine and
imprisonment, or by imprisonment in the county jail for
up to one year, or by a fine up to $1,000, or both.
5.Requires the court to order defendants convicted of a
crime to pay restitution to the victim, as specified.
6.Provides that a person who uses an unlicensed contractor
may bring a civil action to recover all compensation paid
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to the unlicensed contractor.
This bill:
1.Makes a first conviction for unlicensed contracting
punishable by a fine up to $5,000 or by imprisonment in
the county jail for up to six months, or both.
2.Requires the fine for a second conviction be the greater
of 20 percent of contract price, 20 percent of the
aggregate payments made to, or at the direction of, the
unlicensed contractor, or $5,000.
3.Requires a third or subsequent conviction to be
punishable by both a fine and imprisonment in a county
jail for 90 days to one year. Requires a fine of $5,000
to $10,000, 20 percent of the price of the contract, or
20 percent of the aggregate payments made to, or at the
direction of, the unlicensed contractor.
4.Provides that, for any conviction of unlicensed
contracting, a person who utilized the services of the
unlicensed contractor is a victim of crime regardless of
whether the person knew the contractor was unlicensed,
and is eligible for restitution for their economic loss.
5.Clarifies that the enhanced penalties for repeat
convictions for unlicensed contracting applies to
unlicensed persons who perform or who offer to perform
contracting work.
Comments
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
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joined with various state and federal regulators to form
the Economic and Employment Enforcement Coalition
performing 12 construction sweeps. In addition the CSLB
continued its proactive enforcement efforts with its
Statewide Investigative Fraud Team 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 unable to apply the enhanced
misdemeanor penalties under existing law for repeat
unlicensed offenders who only offer but do not actually
perform contracting work.
Prior Legislation
SB 797 (Ridley-Thomas), Chapter 33, Statutes of 2008, among
other things, provides that the 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.
SB 488 (Soto), Chapter 205, Statutes of 2005, enhances
penalties for a third and subsequent convictions for
contracting without a license and provides that it is a
misdemeanor for the qualifying person of a contractor's
license to violate workers' compensation insurance
requirements.
SB 443 (Figueroa), Chapter 706, Statutes of 2003, requires
a court of law to sentence repeat offenders of unlicensed
contracting activity to county jail for not less than 90
days.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 7/15/09)
Los Angeles City Attorney Rocky Delgadillo (source)
AARP
American Federation of State, County and Municipal
Employees, AFL-CIO
Associated Builders and Contractors of California
California Alliance for Retired Americans
California Chapter of the American Fence Contractors
Association
California District Attorneys Association
California Fence Contractors Association
California Landscape Contractors Association
California Professional Association of Specialty
Contractors
California Spa and Pool Industry Education Council
California State Council of Laborers
California Statewide Law Enforcement Association
Congress of California Seniors
Construction Industry Legislative Council
Contractors State License Board
Engineering Contractors Association
Executive Council of Homeowners
Flasher/Barricade Association
Marin Builders Association
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : According to the Los Angeles City
Attorney Rocky Delgadillo, this bill requires that
restitution be made to victims of unscrupulous unlicensed
contractors regardless if that person had knowledge that
the contractor was unlicensed. This bill increases the
maximum potential fine for a first offense from $1,000 to
$5,000. For a second and subsequent offense, this measure
increases the mandatory fine up to $5,000. Third offenders
will also be required to serve a mandatory jail sentence.
Finally, the bill would clarify that mandatory minimum
sentence for repeat offender applies to unlicensed
contractors who submit bids for contracting work.
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ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber,
Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue,
Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava,
Nestande, Niello, Nielsen, John A. Perez, V. Manuel
Perez, Portantino, Price, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torres, Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: DeVore, Duvall, Torlakson
JA:nl 7/15/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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