BILL NUMBER: SB 263 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 1, 2013
INTRODUCED BY Senator Monning
(Principal coauthor: Assembly Member Achadjian)
FEBRUARY 13, 2013
An act to amend Sections 7028, 7031, 7028
and 7114 of, to add Section 7026.4 to, and to repeal and add
Section Sections 7031 and 7118 of, the
Business and Professions Code, relating to contractors.
LEGISLATIVE COUNSEL'S DIGEST
SB 263, as amended, Monning. Contractors: unlicensed activity.
The Contractors' State License Law provides for the licensure and
regulation of contractors by the Contractors' State License Board
within the Department of Consumer Affairs. The law prohibits a person
engaged in the business or acting in the capacity of a contractor
from bringing an action for collection of compensation for the
performance of an act or contract for which a contractor's license is
required without alleging that he or she was a duly licensed
contractor at all times during the performance of that act or
contract.
This bill, instead, would prohibit a person engaged in
the business or acting in the capacity of a contractor from bringing
an action for collection of compensation for the performance of an
act or contract for which a contractor's license is required without
alleging that he or she was duly licensed during the performance of
that act or contract for which the person is seeking compensation.
require as a condition of bringing an action to
collect payment for the performance of any act or contract that a
contractor be duly licensed during the performance of the act or
contract. The bill would define "duly licensed" for purposes of
these provisions, and would make other conforming changes.
The Contractors' State License Law makes it a misdemeanor for a
person to engage in the business or act in the capacity of a
contractor without having a license, unless the person is
particularly exempted.
This bill, instead, would provide that, unless exempted, it is a
misdemeanor for a person to engage in the business or act in the
capacity of a contractor if the person either has never been licensed
pursuant to the Contractors' State License Law, or the person was a
licensee, but performed acts covered by the law under a license that
was inactive, expired, revoked, or under suspension for any reason.
By changing the definition of a crime, the bill would impose a
state-mandated local program.
The Contractors' State License Law provides that entering into a
contract with a contractor while the contractor is not licensed
constitutes a cause for disciplinary action. That law also provides
that aiding or abetting an unlicensed person to evade the law, or
engaging in specified acts with an unlicensed person with the intent
to evade the law, constitutes a cause for disciplinary action.
This bill, instead, would provide that entering into a contract
with any person that is performed during a period in which that
person's license was inactive, expired, revoked, or under suspension
is a cause for discipline if the purpose of the contract is for that
person to perform an act subject to licensure under the law. The bill
also would define "unlicensed person" for purposes of these
provisions.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7026.4 is added to the Business and Professions
Code, to read:
7026.4. (a) A person shall be deemed "duly licensed" or "duly
licensed to act in the capacity of a contractor" for purposes of this
chapter if both of the following conditions are met:
(1) The act was performed under a board-issued license during a
period in which the license was not inactive, expired, revoked, or
under suspension for any reason.
(2) The act falls within a license classification in which the
licensee was authorized to engage, or is incidental and supplemental
as provided under Section 7059, and defined in Section 831 of
Division 8 of Title 16 of the California Code of Regulations.
(b) Any person that does not meet the conditions specified in
paragraphs (1) and (2) of subdivision (a) shall be deemed unlicensed,
except as otherwise provided in this chapter.
SEC. 2. Section 7028 of the Business and Professions Code is
amended to read:
7028. (a) Unless exempted from this chapter, it is a misdemeanor
for a person to engage in the business or act in the capacity of a
contractor within this state under either of the following
conditions:
(1) The person has never been licensed in accordance with this
chapter.
(2) The person was a licensee, as defined in Section 7096, but
performed acts covered by this chapter under a license that was
inactive, expired, revoked, or under suspension for any reason.
(b) A first conviction for the offense described in this section
is punishable by a fine not exceeding five thousand dollars ($5,000)
or by imprisonment in a county jail not exceeding six months, or by
both that fine and imprisonment.
(c) If a person has been previously convicted of the offense
described in this section, unless the provisions of subdivision (d)
are applicable, the court shall impose a fine of 20 percent of the
contract price, or 20 percent of the aggregate payments made to, or
at the direction of, the unlicensed person, or five thousand dollars
($5,000), whichever is greater, and, unless the sentence prescribed
in subdivision (d) is imposed, the person shall be confined in a
county jail for not less than 90 days, except in an unusual case
where the interests of justice would be served by imposition of a
lesser sentence or a fine. If the court imposes only a fine or a jail
sentence of less than 90 days for second or subsequent convictions
under this section, the court shall state the reasons for its
sentencing choice on the record.
(d) A third or subsequent conviction for the offense described in
this section is punishable by a fine of not less than five thousand
dollars ($5,000) nor more than the greater amount of ten thousand
dollars ($10,000) or 20 percent of the contract price, or 20 percent
of the aggregate payments made to, or at the direction of, the
unlicensed person, and by imprisonment in a county jail for not more
than one year or less than 90 days. The penalty provided by this
subdivision is cumulative to the penalties available under all other
laws of this state.
(e) A person who violates this section is subject to the penalties
prescribed in subdivision (d) if the person was named on a license
that was previously revoked and, either in fact or under law, was
held responsible for any act or omission resulting in the revocation.
(f) If the unlicensed person engaging in the business of or acting
in the capacity of a contractor has agreed to furnish materials and
labor on an hourly basis, "the contract price" for the purposes of
this section means the aggregate sum of the cost of materials and
labor furnished and the cost of completing the work to be performed.
(g) Notwithstanding any other law, an indictment for any violation
of this section by an unlicensed person shall be found, or an
information or complaint filed, within four years from the date of
the contract proposal, contract, completion, or abandonment of the
work, whichever occurs last.
(h) For any conviction under this section, a person who utilized
the services of the unlicensed person is a victim of crime and is
eligible, pursuant to subdivision (f) of Section 1202.4 of the Penal
Code, for restitution for economic losses, regardless of whether he
or she had knowledge that the person was unlicensed.
SEC. 3. Section 7031 of the Business and
Professions Code is amended to read:
7031. (a) Except as provided in subdivision (e), a person engaged
in the business or acting in the capacity of a contractor, shall not
bring or maintain any action, or recover in law or equity in any
action, in any court of this state for the collection of compensation
for the performance of any act or contract for which a license is
required by this chapter without alleging that he or she was duly
licensed during the performance of that act or contract for which the
person is seeking compensation, regardless of the merits of the
cause of action brought by the person, except that this prohibition
shall not apply to contractors who are each individually licensed
under this chapter but who fail to comply with Section 7029.
(b) Except as provided in subdivision (e), a person who utilizes
the services of an unlicensed person, as described in subdivision (b)
of Section 7026.4, may bring an action in any court of competent
jurisdiction in this state to recover compensation paid to the
unlicensed person for performance of any act or contract that
occurred during the period or periods in which the person was
unlicensed.
(c) A security interest taken to secure any payment for the
performance of any act or contract for which a license is required by
this chapter is unenforceable if the person performing the act or
contract was not duly licensed contractor during the performance of
the act or contract for which the person is seeking compensation.
(d) 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 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 certificate. When licensure or proper licensure is
controverted, the burden of proof to establish licensure or proper
licensure shall be on the licensee.
(e) The judicial doctrine of substantial compliance shall not
apply under this section if the person who engaged in the business or
acted in the capacity of a contractor has never been a duly licensed
contractor in this state. However, notwithstanding subdivision (b)
of Section 143 and subdivision (b) of Section 7026.4, the court may
determine that there has been substantial compliance with licensure
requirements under this section if it is shown at an evidentiary
hearing that the person who engaged in the business or acted in the
capacity of a contractor (1) had been duly licensed as a contractor
in this state prior to the performance of the act or contract, (2)
acted reasonably and in good faith to maintain proper licensure, (3)
did not know or reasonably should not have known that he or she was
not duly licensed when performance of the act or contract commenced,
and (4) acted promptly and in good faith to reinstate his or her
license upon learning it was invalid.
(f) The exceptions to the prohibition against the application of
the judicial doctrine of substantial compliance found in subdivision
(e) shall apply to all contracts entered into on or after January 1,
1992, and to all actions or arbitrations arising therefrom, except
that the amendments to subdivisions (e) and (f) enacted during the
1994 portion of the 1993-94 Regular Session of the Legislature shall
not apply to either of the following:
(1) Any legal action or arbitration commenced prior to January 1,
1995, regardless of the date on which the parties entered into the
contract.
(2) Any legal action or arbitration commenced on or after January
1, 1995, if the legal action or arbitration was commenced prior to
January 1, 1995, and was subsequently dismissed.
SEC. 3. Section 7031 of the Business
and Professions Code is repealed.
7031. (a) Except as provided in subdivision (e), no person
engaged in the business or acting in the capacity of a contractor,
may bring or maintain any action, or recover in law or equity in any
action, in any court of this state for the collection of compensation
for the performance of any act or contract where a license is
required by this chapter without alleging that he or she was a duly
licensed contractor at all times during the performance of that act
or contract, regardless of the merits of the cause of action brought
by the person, except that this prohibition shall not apply to
contractors who are each individually licensed under this chapter but
who fail to comply with Section 7029.
(b) Except as provided in subdivision (e), a person who utilizes
the services of an unlicensed contractor may bring an action in any
court of competent jurisdiction in this state to recover all
compensation paid to the unlicensed contractor for performance of any
act or contract.
(c) A security interest taken to secure any payment for the
performance of any act or contract for which a license is required by
this chapter is unenforceable if the person performing the act or
contract was not a duly licensed contractor at all times during the
performance of the act or contract.
(d) 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 certificate. When licensure or proper
licensure is controverted, the burden of proof to establish
licensure or proper licensure shall be on the licensee.
(e) The judicial doctrine of substantial compliance shall not
apply under this section where the person who engaged in the business
or acted in the capacity of a contractor has never been a duly
licensed contractor in this state. However, notwithstanding
subdivision (b) of Section 143, the court may determine that there
has been substantial compliance with licensure requirements under
this section if it is shown at an evidentiary hearing that the person
who engaged in the business or acted in the capacity of a contractor
(1) had been duly licensed as a contractor in this state prior to
the performance of the act or contract, (2) acted reasonably and in
good faith to maintain proper licensure, (3) did not know or
reasonably should not have known that he or she was not duly licensed
when performance of the act or contract commenced, and (4) acted
promptly and in good faith to reinstate his or her license upon
learning it was invalid.
(f) The exceptions to the prohibition against the application of
the judicial doctrine of substantial compliance found in subdivision
(e) shall apply to all contracts entered into on or after January 1,
1992, and to all actions or arbitrations arising therefrom, except
that the amendments to subdivisions (e) and (f) enacted during the
1994 portion of the 1993-94 Regular Session of the Legislature shall
not apply to either of the following:
(1) Any legal action or arbitration commenced prior to January 1,
1995, regardless of the date on which the parties entered into the
contract.
(2) Any legal action or arbitration commenced on or after January
1, 1995, if the legal action or arbitration was commenced prior to
January 1, 1995, and was subsequently dismissed.
SEC. 4. Section 7031 is added to the
Business and Professions Code , to read:
7031. (a) Except as provided in subdivision (e), a contractor
shall be duly licensed at all times during the performance of any act
or contract in order to bring an action to collect payment for the
performance of that act or contract. This provision does not apply to
contractors who are each individually licensed under this chapter
but who fail to comply with Section 7029.
(b) Except as provided in subdivision (e), a person who utilizes
the services of an unlicensed person who engages in the business or
acts in the capacity of a contractor may recover all compensation
paid to that person.
(c) If a security interest is taken to secure payment for the
performance of any act or contract for which a license is required by
this chapter, the security interest is unenforceable if the person
performing the act or contract is not duly licensed at all times
during the performance of the act or contract.
(d) If licensure or proper licensure is disputed, it is the burden
of a purported licensee to provide proof of licensure by production
of a verified certificate of licensure from the board.
(e) Notwithstanding subdivision (b) of Section 143, a court may
determine that there has been substantial compliance with licensure
requirements under this section if the person who engaged in the
business or acted in the capacity of a contractor was duly licensed
at the time the contract was executed, but who subsequently performed
work in a classification for which the person was not licensed,
under license suspension, or using an expired or inactive license.
That person may pursue payment for any work that was performed on the
contract while duly licensed but shall be precluded from pursuing
payment for work performed on the contract while found to be working
in a classification for which the person was not licensed, under
license suspension, or under an expired or inactive license. A person
who utilized the services of that person may recover the
compensation paid to that person for work performed on the contract
while found to be working in a classification for which that person
was not licenced, under license suspension, or under an expired or
inactive license.
SEC. 4. SEC. 5. Section 7114 of the
Business and Professions Code is amended to read:
7114. (a) All of the following shall constitute a cause for
disciplinary action pursuant to this chapter:
(1) Aiding or abetting an unlicensed person to evade the
provisions of this chapter.
(2) Combining or conspiring with an unlicensed person,
person with the intent to evade the provisions
of this chapter.
(3) Allowing one's license to be used by an unlicensed
person, person with the intent to evade the
provisions of this chapter.
(4) Acting as agent, partner, associate, or otherwise, of an
unlicensed person with the intent to evade the provisions of this
chapter.
(b) A licensee who is found by the registrar to have violated
subdivision (a) is subject, in accordance with this article, to the
registrar's authority to order payment of a specified sum to an
injured party, including, but not limited to, payment for any injury
resulting from the acts of the unlicensed person.
(c) For the purposes of this section, the term "unlicensed person"
shall apply only to a person that has never been licensed in
accordance with this chapter, or has performed acts covered by this
chapter under a license that was inactive, expired, revoked, or under
suspension for any reason.
SEC. 5. SEC. 6. Section 7118 of the
Business and Professions Code is repealed.
SEC. 6. SEC. 7. Section 7118 is
added to the Business and Professions Code, to read:
7118. It is a cause for discipline for any licensee to enter into
a contract with any person that is not in compliance with paragraph
(1) of subdivision (a) of Section 7026.4, if the purpose of the
contract is for that person to perform an act that is subject to
licensure under this chapter.
SEC. 7. SEC. 8. No reimbursement is
required by this act pursuant to Section 6 of Article XIII B of the
California Constitution because the only costs that may be incurred
by a local agency or school district will be incurred because this
act creates a new crime or infraction, eliminates a crime or
infraction, or changes the penalty for a crime or infraction, within
the meaning of Section 17556 of the Government Code, or changes the
definition of a crime within the meaning of Section 6 of Article XIII
B of the California Constitution.