BILL ANALYSIS Ó
SB 315
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Date of Hearing: June 24, 2014
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Susan A. Bonilla, Chair
SB 315 (Lieu) - As Amended: June 18, 2014
SENATE VOTE : Vote not relevant
SUBJECT : Contractors
SUMMARY : Clarifies advertising provisions for unlicensed
persons seeking work, extends the period during which the
Contractors' State License Board (CSLB) must initiate
disciplinary action against a licensee upon a finding by the
Labor Commissioner of a willful and deliberate labor code
violation, and makes other changes to CSLB enforcement
provisions, as specified. Specifically, this bill :
1)Prohibits an unlicensed person from advertising for
construction work which exceeds the $500 aggregate contract
price cap, which includes the cost for labor, materials, and
all other items on a project.
2)Provides that it is a misdemeanor for a person to engage in
the business or act in the capacity of a contractor if he or
she has a suspended license for failure to pay a civil
penalty, to comply with an order of correction, or to resolve
all outstanding liabilities, as specified.
3)Authorizes CSLB enforcement to have free access to all places
of labor when participating in the enforcement activities of
the Joint Enforcement Strike Force on the Underground Economy
(JESF).
4)Extends the time period, from 30 to 180 days after
notification of a labor code violation, as specified, in which
CSLB must initiate disciplinary action against a licensee.
5)Makes technical and clarifying changes.
6)States that no reimbursement is required by this bill because
the only costs that may be incurred are due to a new crime or
infraction, as specified.
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EXISTING LAW :
1)Provides for the licensure and regulation of contractors under
the Contractors' State License Law (Law), administered by
CSLB. (Business and Professions Code (BPC) Sections 7000 et
seq.)
2)Exempts from licensure and regulation those who perform work
with an aggregate contract price under $500, but does not
exempt those who split work into multiple contracts to avoid
the $500 limit. (BPC 7048)
3)Authorizes unlicensed contractors to advertise for
construction work only if the advertisement states that he or
she is not licensed. (BPC 7027.2)
4)Authorizes CSLB enforcement representatives to enforce the Law
and issue notices to appear in court. (BPC 7011.4(a))
5)Provides that it is a misdemeanor to engage in the business or
act in the capacity of a contractor without a license, unless
exempted. (BPC 7028)
6)Requires CSLB to initiate a disciplinary action against a
licensee within 30 days of receipt of a certified copy of the
Labor Commissioner's finding of a willful or deliberate
violation of the Labor Code by a licensee. (BPC 7110.5)
7)Gives the Labor Commissioner, his deputies and agents free
access to all places of labor. (Labor Code 90)
8)Establishes JESF to coordinate efforts in targeting tax
evasion and cash-pay violations. (Unemployment Insurance Code
(UIC) 329)
9)Authorizes the sharing of investigative and enforcement
capabilities between JESF participant entities. (UIC
329(c)(1))
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill clarifies advertising
provisions for unlicensed persons seeking work, extends the
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period during which CSLB must initiate disciplinary action
against a licensee upon a finding by the Labor Commissioner,
and authorizes CSLB enforcement representatives to access all
place of labor while participating in JESF enforcement
operations. This bill streamlines and strengthens CSLB
enforcement and authorizes continued cooperation and increased
autonomy within existing joint enforcement operations. This
bill is sponsored by CSLB.
2)Author's Statement . According to the author, "This bill will
address a few issues CSLB has identified with existing law.
Construction is the number one trade contributing to the
underground economy?.CSLB is the appointed state agency
responsible for regulating construction and as such, needs
clear statutory authority to access business locations were
labor is present when Division of Labor Standards Enforcement
[DLSE] is not readily available to participate in joint
efforts to combat underground economy behavior.?Unlicensed
contractors routinely use the exemption provided in [current
law] to openly advertise their services for any and all
construction services, including large-scale projects that are
clearly in excess of the $500 limit prescribed by law.
"This [bill would] 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? Finally, the bill would [also]
amend the existing requirement for CSLB to act on certain
Labor Code violations within 30 days, as CSLB does not have
the resources to meet that timeframe for all referrals."
3)Contractors' State License Board. CSLB protects consumers by
licensing and regulating California's construction industry.
There are approximately 300,000 licensed contractors in the
state in 43 different licensing classifications. CSLB
activities include educating consumers about contractors and
construction law, administering examinations to test
prospective licensees, issuing licenses, investigating
complaints against licensed and unlicensed contractors,
issuing citations, suspending or revoking licenses, and
seeking administrative, criminal, and civil sanctions against
violators. In fiscal year 2012-13, CSLB helped recover nearly
$44 million in ordered restitution for consumers.
4)Disciplinary Backlog . The Labor Commissioner is required to
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send findings related to all willful or deliberate violations
of the Labor Code by licensed contractors to CSLB. Each year,
over 100 of these violations are sent to CSLB, the majority of
which are related to the failure to pay wages. In most cases,
CSLB reports that it issues an automatic license suspension as
a result of the notification. However, if a contractor is
debarred or has created significant financial harm, CSLB must
initiate its own investigation in order to revoke a license.
Although CSLB is currently required to initiate disciplinary
action within 30 days of the notification, it may take four to
six months if an investigation is required before discipline
may be issued. This bill would extend the period in which
CSLB is required to act to conform to their current capacity.
However, the extension of the statutory period will not
forestall communication of Labor Code violations to consumers.
CSLB has integrated into their public online licensure lookup
service public disclosures of violations identified by other
partner agencies, including the Labor Commissioner, with links
to the issuing agencies' Web site. This will allow consumers
to still be informed about violations by contractors while any
formal investigation takes place.
5)Unfair Advertisement. Current law prohibits unlicensed
persons from accepting projects which will cost in excess of
$500, including labor and materials. Unlicensed individuals
are also prohibited from breaking up larger projects into
portions of $500 or less. However, there is nothing
explicitly prohibiting them from advertising for large
projects such as new home construction, additions, or
extensive remodel that are clearly in excess of the $500
limit. While unlicensed persons must state they are
unlicensed, they do not have to state they cannot legally
complete the work they are advertising for. This leaves a
marketplace artificially bloated with actors that cannot
legally complete the solicited work, unduly increasing
competition with licensed contractors.
This bill will prohibit unlicensed persons from advertising
for work that would cost in excess of the $500 limit. This
will enable consumers to be confident that they are
contracting with actors who can legally complete the
advertised project, and will level the playing field for
licensed contractors.
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This bill also makes it a misdemeanor for individuals whose
license is suspended for failure to pay a civil penalty,
comply with an order of correction, or to resolve any
outstanding liabilities, to act as a licensed contractor.
6)Joint Enforcement Strike Force on the Underground Economy . The
current practice of CSLB's Statewide Investigative Fraud Team
(SWIFT) is to use proactive sting operations to find
unlicensed contractors. They partner with local sheriffs,
police departments and district attorney offices to stage
operations to lure unlicensed contractors. While this practice
does result in the discipline of numerous unlicensed
individuals, this is a small portion of the unlicensed
workforce. To extend their reach, CSLB joined JESF to further
enforce licensure, labor and safety laws.
JESF is a multi-agency strike force established in 1995 which
includes the Department of Justice, Board of Equalization, the
Internal Revenue Service, the Franchise Tax Board, Department
of Insurance, multiple divisions of the Department of
Industrial Relations, include DLSE, and the Department of
Consumer Affairs (including CSLB). Each entity is charged with
some aspect of enforcing prohibitions on underground economic
activity, and JESF optimizes the combination of joint
operations to achieve full enforcement of the law.
Member entities of JESF benefit during joint operations from
the DLSE's statutory authority to enter all places of labor
through an authority sharing provision of the law. CSLB
states, however, that DLSE's limited enforcement availability
hinders JESF enforcement actions. Access to places of labor is
a critical need of CSLB as they regulate construction. This
bill would grant CSLB the same strong authority to access
places of labor while working with JESF. By granting this
clear authority, the citations and notices issued during these
operations will be less vulnerable to challenges on the
grounds of improper access.
7)Argument in Support . According to CSLB, this bill, "?
provides CSLB clear statutory authority? CSLB does not have
the resources to meet [the 30 day] timeframe for all
referrals. To improve disclosure and enhance consumer
protection in this area CSLB recently initiated a new program?
the CSLB website is immediately updated to include a link [to
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violations]? We respectfully request the Committee's support
of SB 315."
8)Related Legislation . SB 263 (Monning) of 2013 made it a
misdemeanor for a contractor with a suspended license for
failure to pay a civil penalty, comply with an order of
correction, or to resolve all outstanding liabilities, to
engage in the business or act in the capacity of a contractor.
The bill was amended to addresses an unrelated topic.
9)Previous Legislation . AB 2554 (Berryhill), Chapter 85,
Statutes of 2012, amended BPC 7011.4 to provide all
enforcement representatives with the authority to issue a
notice to appear.
SB 1490 (Johnston), Chapter 1117, Statutes of 1994, codified
the JESF that was promulgated by Executive Order W-66-93.
10)Bill History . The language that passed out of the Senate,
which dealt with the Code of Civil Procedure and telephone
court appearances, has been deleted in its entirety and
replaced with this new language.
REGISTERED SUPPORT / OPPOSITION :
Support
Contractors State License Board (sponsor)
Air Conditioning Sheet Metal Association
Air-conditioning & Refrigeration Contractors Association
American Subcontractors Association California, Inc.
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California Professional Association of Specialty Contractors
Masonry Industry Joint Labor-Management Cooperation Trust
National Electrical Association, California Chapters
Northern California Tile Industry Joint Labor-Management
Cooperation Trust
United Contractors
Opposition
None on file.
Analysis Prepared by : Eunie Linden and Brandon Bjerke / B.,P.
SB 315
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& C.P. / (916) 319-3301