BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1793|
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THIRD READING
Bill No: AB 1793
Author: Holden (D)
Amended: 8/2/16 in Senate
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 8-0, 6/6/16
AYES: Hill, Bates, Block, Gaines, Galgiani, Hernandez, Mendoza,
Wieckowski
NO VOTE RECORDED: Jackson
SENATE JUDICIARY COMMITTEE: 7-0, 6/28/16
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for
vote
SUBJECT: Contractors: license requirements: recovery
actions
SOURCE: Author
DIGEST: This bill provides that a contractor may pursue or
obtain compensation for any work performed on the contract while
duly licensed, as specified.
ANALYSIS:
Existing law:
1)Establishes the Contractors State License Board (CSLB) within
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the Department of Consumer Affairs to implement and enforce
the Contractors State License Law (Contractors Law).
(Business and Professions Code (BPC) § 7000, et seq.)
2)Requires the CSLB to investigate complaints and enforce the
provisions of the Contractors Law, prohibit all forms of
unlicensed activity, and enforce the obligation to secure the
payment of valid and current workers' compensation insurance
in accordance with Labor Code Section 3700.5. (BPC § 7011.4;
7011.7)
3)Defines "contractor" to include any person, consultant to an
owner-builder, firm, association, organization, partnership,
business, trust, corporation, or company, who or which
undertakes, offers to undertake, purports to have the capacity
to undertake, or submits a bid to construct any building or
home improvement project, or part thereof. (BPC §
7026.1(a)(2)(A))
4)Provides that no person engaged in the business or acting in
the capacity of a contractor may bring or maintain any action
for the collection of compensation for the performance of any
act or contract where a license is required without alleging
that he or she was duly licensed. (BPC § 7031(a))
5)Provides that action may be brought against a contractor
during the performance of any act or contract during which the
contractor was unlicensed. (BPC § 7031(b))
6)Provides that proof of licensure is made by producing a
verified certificate of licensure from the CSLB that is valid
during all times of the performance of any act or contract;
provides that the burden of proof to establish licensure or
proper licensure is on the licensee. (BPC § 7031(d))
7)Authorizes a court to determine at an evidentiary hearing that
a contractor has substantially complied with licensure
requirements if the contractor: a) had been duly licensed as a
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contractor prior to performing the act or contract; b) acted
reasonably and in good faith to maintain proper licensure; c)
did not know or reasonably should not have known that he or
she was not duly licensed when commencing the act or contract;
and, d) acted promptly and in good faith to reinstate his or
her license upon learning it was invalid.
(BPC § 7031(e))
8)Provides that no license shall be issued to a corporation,
partnership, limited liability company, or other combination
or organization if a responsible officer or director of the
corporation, or other combination or organization, or a
partner of the partnership, or a manager or officer of the
limited liability company, or any member of an organization
seeking licensure does not meet the qualifications required of
an applicant other than those qualifications relating to
knowledge and experience. (BPC § 7071)
This bill provides that the judicial doctrine of substantial
compliance shall not apply 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, the court
shall determine that there has been substantial compliance with
licensure requirements if it is shown 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; and
(3) acted promptly and in good faith to remedy the failure to
comply with the licensure requirements upon learning of the
failure.
Background
The Contractors Law permits an individual that hires a
contractor, and later discovers the contractor to be unlicensed,
to seek recovery for the cost of all construction-related work
performed by the unlicensed contractor. In cases in which a
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previously valid contractors' license simply expired, the
contractor may assert in defense that they made a "good faith"
effort to comply with the licensing requirements and corrected
their licensure status immediately upon discovering a lapse.
In the CSLB's 2014 Sunset Review Report, submitted as part of
its sunset review by the Legislature, the CSLB stated, "existing
law requires that a contractor must be a 'duly licensed
contractor at all times' while working on a contracted project
in order to receive compensation (BPC Section 7031). The CSLB
indicates that the courts have interpreted the provisions of BPC
Section 7031 to deny all compensation to contractors who are in
violation of the licensing requirements even though the failure
to comply occurred during a brief period during which work was
performed."
The terms "duly licensed" (as used in subdivision (a)) and
"unlicensed" are not defined in the Contractors Law, but are
decisive terms under BPC Section 7031. Consequently, the legal
profession lacks clear guidelines when judging the license
status of a contractor, and the disgorgement provisions
authorized by subdivision (b) are being misinterpreted and
maliciously applied for personal gain, even when there is no
issue regarding the quality of work performed.
CSLB claims that the application of this statute in this manner
may facilitate "unjust enrichment" to public agencies, prime
contractors, and/or commercial/industrial project owners, an
unacceptable outcome within the spirit of the law. The CSLB
sponsored SB 263 (Monning, 2013) to modify BPC Section 7031,
which would have provided that a contractor may pursue payment
for any work on the contract while duly licensed, but preclude
payment for work performed in a classification in which the
contractor was not licensed, was under license suspension, or
was under an expired or inactive license when the work was
performed. The amendments to BPC Section 7031 were removed in
part because of the Senate Committee on Judiciary's concerns
about weakening the consumer protection provided by this
section. That bill was substantially amended to address an
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unrelated topic.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/2/16)
Air Conditioning Sheet Metal Association
Associated General Contractors
California Association of Sheet Metal and Air Conditioning
Contractors National Association
California Building Industry Association
California Chapters of the National Electrical Contractors
Association
California Landscape Contractors Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California Professional Association of Specialty Contractors
Construction Employers Association
Northern California Allied Trades
Southern California Contractors Association
State Building and Construction Trades Council, AFL-CIO
United Contractors
Wall and Ceiling Alliance
Western Line Constructors Chapter
OPPOSITION: (Verified8/2/16)
None received
ARGUMENTS IN SUPPORT: A coalition of several contracting,
construction, and building trade associations support this bill
because "AB 1793 clarifies existing law to ensure that properly
licensed and law abiding construction firms are not placed at
fatal monetary risk, by limiting the recovery time and
disgorgement amount to monies paid to the contractor for work
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performed while the contractor was not properly licensed. To be
clear, nothing in this measure allows an unlicensed contractor
to seek or retain any monies paid to them for the performance of
a construction contract while they were not duly licensed."
ASSEMBLY FLOOR: 78-0, 5/12/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Burke, Jones-Sawyer
Prepared by: Mark Mendoza / B., P. & E.D. / (916) 651-4104
8/3/16 19:22:36
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