BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: SB 465 Hearing Date: April 27,
2015
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|Author: |Hill |
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|Version: |April 21, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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Subject: Contractors' State License Board: Licensees: bond
requirement.
SUMMARY: Extends the sunset date for the Contractors State License
Board, under the Contractors State License Act, from January 1,
2016, until January 1, 2020; and, updates and strengthens
financial requirements placed on contractors.
Existing law:
1) Provides for the licensure and regulation of more than
300,000 contractors under the Contractors State License Law
(Contractors Law) by the Contractors State License Board
(CSLB) within the Department of Consumer Affairs (DCA). The
CSLB is under the direction of the registrar of contractors
(Registrar). (Business and Professions Code (BPC) § 7000 et
seq.)
2) Establishes the CSLB until January 1, 2016 to license and
regulate the practice of contracting. (BPC § 7000.5)
3) Authorizes CSLB to appoint, with DCA director approval, a
registrar of contractors as executive officer and secretary
of the Board until January 1, 2016. (BPC § 7011)
4) Requires that all applicants, and all licensees at renewal,
demonstrate, as evidence of financial solvency, that his or
her operating capital exceeds $2,500.
(BPC § 7067.5)
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5) Requires a licensed contractor to file or have on file a
contractor's bond in the sum of $12,500. (BPC § 7071.6(a))
This bill:
1) Extends CSLB and the authorization to appoint a registrar of
contractors until January 1, 2020.
2) Deletes the existing requirement that contractors maintain
$2,500 in capital.
3) Increases the existing surety bond requirement from $12,500
to $15,000.
FISCAL
EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Author . This bill is
one of five "sunset review bills" the Author is sponsoring
this session. According to the Author, this bill is
necessary to extend the sunset date of CSLB in order to
ensure continued oversight of the contractors industry. The
health, safety, and welfare of consumers are protected by a
well-regulated contractor profession. CSLB has shown over
the years a strong commitment to improve the Board's overall
efficiency and effectiveness and has worked cooperatively
with the Legislature and this Committee to bring about
necessary changes. While the Board needs to review some of
its enforcement practices to ensure they are appropriate,
legal, and warranted, CSLB should be continued with a
four-year extension of its sunset date so that the Committee
may review once again if the issues and recommendations in
the background paper and others of the Committee have been
addressed.
2. Oversight Hearings and Sunset Review of Licensing Boards and
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Programs. In 2015, the Senate Business, Professions and
Economic Development Committee and the Assembly Business and
Professions Committee (Committees) conducted joint oversight
hearings to review 12 regulatory entities: California
Accountancy Board; California Architects Board and Landscape
Architects Committee; California State Athletic Commission;
Board of Barbering and Cosmetology; Cemetery and Funeral
Bureau; Contractors State License Board; Dental Board of
California; Board for Professional Engineers, Land Surveyors
and Geologists; Board of Registered Nursing; Bureau of
Security and Investigative Services; and Board of Vocational
Nursing and Psychiatric Technicians.
The Committees began their review of the aforementioned
licensing agencies in March and conducted two days of
hearings. This bill and the accompanying sunset bills are
intended to implement legislative changes as recommended by
staff of the Committees and which are reflected in the
Background Papers prepared by Committee staff for each agency
and program reviewed by the Committees for this year.
3. Background on the CSLB. The Contractors State License Board
in the Department of Consumer Affairs is responsible for
implementation and enforcement of the Contractors State
License Law, including the laws and regulations related to
the licensure, practice, and discipline of the construction
industry in California. All businesses and individuals who
construct or alter, or offer to construct or alter, any
building, highway, road, parking facility, railroad,
excavation, or other structure in California must be licensed
by the Board if the total cost (labor and materials) of one
or more contracts on the project is $500 or more.
The Board licenses approximately 290,000 contractors in 44
license classifications and two certifications. CSLB issues
some 15,000 licenses each year, and more than 121,000
licenses are renewed each year. A license may be issued to
an individual, partnership, corporation, limited liability
company, or joint venture. All licenses must have a
qualifying individual (also referred to as "qualifier"). A
qualifying individual is the person listed on CSLB records
who satisfies the experience and examination requirements for
a license. Depending on the type of license, the qualifying
individual must be designated as an owner, responsible
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managing employee, responsible managing officer, responsible
managing manager, responsible managing member, or qualifying
partner in the license records. A qualifying individual is
required for every classification and on each license issued
by CSLB; the same person may serve as the qualifier for more
than one classification. The Board also registers some 9,600
home improvement salespersons (HISs) who are engaged in the
sale of home improvement goods and services.
CSLB has implemented important programmatic and operational
changes and enhancements since its last sunset extension, as
well as made important policy decisions and adopted
regulatory changes, including:
Offering a Veterans Application Assistance Program
for troops transitioning from military service to
civilian employment.
Requiring that, at the time of renewal (every two
years), an active licensee with an exemption from
workers' compensation insurance either recertify the
exemption or provide a current and valid Certificate of
Workers' Compensation Insurance or Certificate of
Self-Insurance (AB 397, Monning, Chapter 546, Statutes
of 2011).
Establishing a program to disclose on its website
any disciplinary action against contractors by partner
state agencies. CSLB's website now flags such licensees
and includes an advisory statement and an electronic
link to the partner agency's website. This disclosure
provides an accessible means for awarding authorities
and prime contractors to determine if a contractor is a
responsible and/or responsive bidder for public works
projects.
Launching a disclosure project with the Department
of Industrial Relations' Division of Labor Standards
Enforcement (DLSE) and Caltrans. DLSE issues Civil Wage
and Penalty Assessments (CWPAs) for Labor Code
violations, and Caltrans issues Stop Notices for
violations that include non-payment for labor, services,
equipment, or materials used at public work projects.
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Notifying the licensing division staff when a
complaint was received against a licensee who had an
exemption from workers' compensation (WC) insurance on
file but acknowledged employing workers. In such cases,
the Licensing division cancels the contractor's WC
exemption and informs him/her that CSLB will suspend the
license without further notice if proof of a valid
workers' compensation policy is not submitted within 30
days. The contractor may file a second exemption, but
is informed that doing so will subject the exemption to
verification by CSLB and partnering agencies, such as
the Employment Development Department (EDD) and Division
of Labor Standards Enforcement (DLSE).
Meeting with Pacific Gas & Electric Company
representatives to discuss a partnership to prevent
contractors from striking gas lines and jeopardizing
public safety. Almost all such strikes that were
referred to CSLB resulted from contractor negligence
(failing to call in advance to have the gas lines
properly marked). The new unsafe digging program
involves a coordinated outreach effort and a commitment
by PG&E to file complaints against contractors that fail
to call the 811 Dig Alert service before excavating. In
FY 2013-14, 78 complaints were filed, resulting in
increased contractor education and compliance. PG&E
reported no additional gas line strikes after a
complaint was filed against a contractor.
Implementing a program to take timely disciplinary
action against contractors found during the mediation
process to be participating in the underground economy.
Two Enforcement Representatives (ERs) were hired to
issue administrative citations for illegal contracting
in the areas of workers' compensation insurance,
building permits, and illegal advertising, demonstrating
CSLB's responsiveness to illegal activity trends. In
its first year, this program resulted in 30 workers'
compensation insurance citations, 27 building permit
citations, and 31 citations for illegal advertising.
Lowering the expenses of representation by the
Attorney General by utilizing mandatory settlement
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conferences (MSCs) to resolve appealed administrative
citations without incurring the cost of a formal
hearing. In 2013, 199 citations were settled through
this process. With appeal hearings averaging $5,000,
MSCs saved CSLB $995,000 in legal expenses.
Developing a complaint form with input from
building officials, industry groups, and other partner
agencies. Anyone with knowledge of a construction site
that lacks a building permit can use the online form to
file a complaint with CSLB. The complaint process
primarily is intended to be educational, since the
complaints require no evidence that the work was
completed. In response to a complaint, CSLB informs the
contractor, via letter, about the requirement to obtain
a building permit. With sufficient evidence of failure
to obtain a permit, CSLB takes appropriate disciplinary
action against the license.
Creating a "65 and older" voluntary check box on
the general complaint form to help protect elderly
consumers. When the box is marked, CSLB staff looks for
potential elder abuse. Since adding the box, about five
percent of complaints received by CSLB (2,333 complaints
against licensees and 499 complaints against non
licensees) involved a consumer that volunteered they
were aged 65 or older. From August 2011 through January
2014, the complaint information led to 107 licensee and
50 non-licensee criminal prosecution referrals to
district attorney offices for violation of California
Penal Code Section 368(d) (financial elder abuse).
Expanding the Public Works Unit from one full-time
investigator to three, and developed innovative
protocols, such as public disclosure of Stop Orders
issued by Caltrans and final DLSE Civil Wage and Penalty
Assessments. CSLB aims to add new resources and expand
the program in order to investigate and file formal
disciplinary action to revoke the license of contractors
who cause significant financial harm to employees.
Developing an instructional video about how to
properly complete the CSLB license application. The
online product is divided into chapters and provides a
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step-by-step tutorial that explains the required
information for each section of the application form.
The video is designed to help applicants avoid common
mistakes that result in the application being rejected
or returned as incomplete.
Creating an examination software upgrade. In July
2014, CSLB's Sacramento Test Center successfully
launched SCORE 1.5, an upgrade to its custom test
development and administration software, which was
created in-house by CSLB's Information Technology
division. (SCORE is the acronym for Statewide
Contractors Official Regulatory Examination.) The
software upgrade coincides with the implementation of
touch-screen computers, a new function that candidates
have welcomed. Shorter instructions allow candidates to
begin their examinations sooner and the ease of the
touchscreens, compared to the mouse, allows them to move
through and complete the examinations more quickly. The
SCORE upgrade also makes it easier to administer civil
service examinations at CSLB test centers, helping to
maximize state testing facilities and resources.
Continuing to expand its Senior Scam Stopper
program seminars which are conducted in conjunction with
legislators and provide information to senior citizens
from a variety of state and local government agencies.
From January 1 to September 30, 2014, CSLB conducted 69
seminars.
Receiving a state award for its emphasis on buying
from small businesses and disabled veteran business
enterprises (SB/DVBE) in fiscal year 2012-2013. CSLB's
Business Services Unit was presented with a bronze State
Agency Recognition Award (SARA). The SARA ceremony
honors state departments for outstanding achievements in
SB/DVBE advocacy and practices.
Launching a new website after in-house re-design
and rebuilding of the site's nearly 1,700 pages by the
Public Affairs Office and Information Technology
division. The new site uses the most current state
design template and technology, optimized for computers,
tablets, and smart phones. CSLB is among the first
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state agencies to adopt the new technology and template.
1. Review of CSLB: Issues Identified and Recommended Changes.
The following are some of the major issues pertaining to the
CSLB along with background information concerning the
particular issue. Recommendations were made by Committee
staff regarding the particular issue areas which needed to be
addressed.
a) Issue: Evidence of Financial Solvency.
Background: BPC § 7067.5 requires that all applicants, and
all licensees at renewal, demonstrate, as evidence of
financial solvency, that his or her operating capital
exceeds $2500. This requirement is never verified and
provides no consumer protection.
In any case in which further financial information would
assist the registrar in an investigation, the registrar may
obtain such information or may require any licensee or
applicant under investigation pursuant to the Contractors
Law to provide such additional financial information as the
registrar may deem necessary.
The financial information required by the registrar shall
be confidential and not a public record, but, where
relevant, shall be admissible as evidence in any
administrative hearing or judicial action or proceeding.
The Registrar may destroy any financial information which
has been on file for a period of at least three years.
Recommendation and Proposed Statutory Change : Given that
CSLB does not verify the capital requirement and that the
Registrar may obtain financial information, if needed, the
bill would delete this requirement and instead increase the
surety bond requirement by $2,500 (from $12,500 to
$15,000).
b) Issue: Surety Bond.
Background : BPC § 7071.6 requires that an applicant or
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licensee have on file at all times proof of a $12,500
contractor bond.
The surety bond requirement was last increased in 2007,
when it was raised from $10,000. Prior to that, in 2004,
it was increased from $7,500 to $10,000. A bond increase
of $2,500 would provide greater consumer protection than
the existing $2,500 capital requirement since a consumer
can make a claim against a contractor's surety bond.
Recommendation and Proposed Statutory Change : To provide
greater consumer protection, this bill would increase the
surety bond from $12,500 to $15,000.
1. Related Legislation This Session. SB 465 (Hill) extends the
operation of the Contractors' State License Board until 2020
and makes various changes to the Contractors' State License
Law. ( Status: The bill will also be considered by this
Committee at today's hearing.)
SB 466 (Hill) sunsets the Board of Registered Nursing.
( Status: The bill will also be considered by this Committee
at today's hearing.)
SB 467 (Hill) extends the operation of the California Board
of Accountancy until 2020 and makes other changes related to
the Department of Consumer Affairs. ( Status: The bill will
also be considered by this Committee at today's hearing.)
SB 468 (Hill) extends the operation of the Bureau of Security
and Investigative Services and the Alarm Company Act,
Locksmith Act, Private Investigator Act, Private Security
Services Act, Proprietary Security Services Act, and
Collateral Recovery Act until January 1, 2020. It subjects
the Bureau to review by the appropriate committees of the
Legislature and makes various changes to provisions in the
aforementioned Acts to improve the oversight, enforcement and
regulation by the Bureau of licensees under each Act.
( Status: The bill will also be considered by this Committee
at today's hearing.)
SB 469 (Hill) extends the operation of the California State
Athletic Commission until 2020. Makes changes to the laws
governing the Commission's operations and the Commission's
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oversight of professional and amateur boxing, professional
and amateur kickboxing, all forms and combinations of full
contact martial arts contests, including mixed martial arts
and matches or exhibitions conducted, held or given in
California. ( Status: The bill will also be considered by
this Committee at today's hearing.)
AB 177 (Bonilla) extends the operation of the Board for
Professional Engineers, Land Surveyors and Geologists and
California Architects Board and Landscape Architects
Committee until January 1, 2020. ( Status: The bill is
pending in the Assembly Committee on Business and
Professions.)
AB 178 (Bonilla) extends the operation of the Board of
Vocational Nursing and Psychiatric Technicians until January
1, 2020. ( Status: The bill is pending in the Assembly
Committee on Business and Professions.)
AB 179 (Assembly Committee on Business and Professions)
extends the operation of the Dental Board of California until
January 1, 2020. ( Status: The bill is pending in the
Assembly Committee on Business and Professions.)
AB 180 (Assembly Committee on Business and Professions)
extends the operation of the Cemetery and Funeral Bureau
until January 1, 2020. ( Status: The bill is pending in the
Assembly Committee on Business and Professions.)
AB 181 (Assembly Committee on Business and Professions)
extends the operation of the Board of Barbering and
Cosmetology until January 1, 2020. ( Status: The bill is
pending in the Assembly Committee on Business and
Professions.)
2. Arguments in Support. The California Professional
Association of Specialty Contractors (CALPASC) underscores
that "CALPASC appreciates the mission of the CSLB, which
protects consumers, while at the same time enforcing and
promoting professionalism among contractors. The CSLB and
its Registrar perform vital services to California's
consumers and construction community, and should have the
real dates extend to 2020."
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According to the Contractors State License Board , "CSLB
believes we are working hard to fulfill our consumer
protection mandate, and we look forward to continuing to work
with the Legislature, consumers and other interested parties
to further our efforts."
SUPPORT AND OPPOSITION:
Support:
California Professional Association of Specialty Contractors
Contractors State License Board (CSLB)
Opposition: None on file as of April 21, 2015.
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