BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 263| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 263 Author: Monning (D), et al. Amended: 4/22/13 Vote: 21 SENATE BUSINESS, PROF. & ECON. DEVELOP. COMM. : 10-0, 4/8/13 AYES: Price, Emmerson, Block, Corbett, Galgiani, Hernandez, Hill, Padilla, Wyland, Yee SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SUBJECT : Contractors: unlicensed activity SOURCE : Contractors State License Board DIGEST : This bill clarifies the misdemeanor penalty for a person engaging in the business or acting in the capacity of a contractor to also include a person who has never been a licensed contractor, or a person who was licensed but who acts under a license that is inactive, expired, revoked, or under suspension for any reason. Provides that entering into a contract with any person when that contract 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. Defines "duly licensed" and unlicensed person." ANALYSIS : CONTINUED SB 263 Page 2 Existing law: 1.Provides for contractor licensing under the classification of general engineering contractor (Class A license), general building contractor (Class B license), and specialty contractor (Class C license). In addition, there are 41 separate Class C license classifications for specialty contractors whose construction work requires special skill and whose principal contracting business involves the use of specialized building trades or crafts. 2.Makes it a misdemeanor for an unlicensed contractor to advertise for construction or work of improvements or act in the capacity of a contractor. Imposes specified civil penalties, including fines and imprisonment against the unlicensed contractor, and authorizes the Contractors State License Board (CSLB) to cite the unlicensed contractor. 3.Defines "licensee" under the Contractors State License Law (Contractors Law) to include an individual, partnership, corporation, limited liability company, joint venture, or any other authorized combination, and to also include any named responsible managing officer, responsible managing manager, responsible managing member, or personnel who is the qualifier for purposes of issuing the contractor license. 4.Provides that aiding or abetting an unlicensed person to evade the Contractors Law, or allowing one's license to be used by an unlicensed person, or acting as a partner with an unlicensed person with the intent to evade the law, constitutes a cause for disciplinary action. 5.Provides that it is a cause for disciplinary action for a person licensed pursuant to the Contractors Law to enter into a contract with a contractor while the contractor is not licensed. This bill: 1.Revises and clarifies the misdemeanor penalty for a person engaging in the business or acting in the capacity of a contractor to also include a person who has never been a licensed contractor, or a person who was licensed but who acts under a license that is inactive, expired, revoked, or CONTINUED SB 263 Page 3 under suspension for any reason. 2.Provides that entering into a contract with any person when that contract 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. 3.Revises and recasts the provisions which make it a cause for disciplinary action to aid or abet an unlicensed person to evade the Contractors Law, and defines "unlicensed person" for these purposes as a person who has never been licensed under the Contractors Law, or who has acted with an inactive, expired, revoked license or a license suspended for any reason. 4.Defines "duly licensed" or "duly licensed to act in the capacity of a contractor" under the Contractors Law if (a) 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; and (b) the person was authorized to engage in work in that license classification. Comments The author's office states that the CSLB and its industry partners are aware that contractors with suspended licenses are continuing to enter into contracts and creating a public safety risk. Many of these licenses were suspended due to failure to pay a civil judgment pursuant to BPC Section 7071.17, where such judgments were usually for unsatisfactory workmanship or unscrupulous business practices. During 2012 alone, CSLB suspended 1,843 licenses for outstanding civil judgments, with a combined total of $115,546,000 in judgments owed to consumers and other contractors. Additionally, the CSLB works with partnering agencies, including the Franchise Tax Board and the Employment Development Department, to identify contractors who have outstanding tax liens against them, and to suspend their licenses pursuant to BPC Section 7145.5. During calendar year 2012, CSLB suspended 877 licenses for outstanding tax liabilities for a combined total of $25,832,000 owed to the state. CONTINUED SB 263 Page 4 According to the author's office, administrative sanctions are a deterrent for most contracting violations, but it can take up to two years to implement once an offense is identified. Stronger, more clearly defined criminal sanctions would provide CSLB with an additional and more immediate enforcement tool to use against unscrupulous contractors. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 5/13/13) Contractors State License Board (source) California Association of Specialty Contractors California Legislative Conference of the Plumbing, Heating and Piping Industry California Spa & Pool Industry Education Council California State Association of Electrical Workers California State Pipe Trades Council Construction Employers' Association National Electrical Contractors Association, California Chapter Western States Council of Sheet Metal Workers ARGUMENTS IN SUPPORT : The bill's sponsor, the CSLB, states that this bill clarifies, for purposes of possible criminal prosecution, the definition of "unlicensed" contractor. This clarification is primarily intended to address contractors who have had their licensed suspended either for failure to pay an outstanding civil judgment or for an outstanding tax liability. Making this change in the law will allow CSLB to pursue criminal charges when appropriate against a contractor who continues to contract for work while holding a license suspended for outstanding civil judgments or tax liabilities. The California Spa & Pool Industry Education Council states that charging contractors who continue to do business with a suspended license with a misdemeanor will help keep the underground economy from growing. MW:nld 5/14/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE CONTINUED SB 263 Page 5 **** END **** CONTINUED