BILL ANALYSIS Ó
SB 465
Page 1
Date of Hearing: June 21, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
SB 465(Hill) - As Amended June 8, 2016
SENATE VOTE: 40-0 [vote not reflective of this bill version]
SUBJECT: Building construction: contractors: discipline:
reporting: building standards
SUMMARY: Requires the Contractors State Licensing Board (CSLB),
by January 1, 2018, to enter into an interagency agreement with
the Division of Occupational Safety and Health (DOSH) and other
state or local agencies, as necessary, to ensure that specified
disciplinary information relating to a licensed contractor is
timely reported to the board; requires a licensee, within 90
days, to report to the Registrar of the CSLB in writing the
occurrence of any conviction of any felony or conviction of any
crime that is substantially related to the qualifications,
functions, and duties of a licensed contractor; requires the
California Building Standards Commission (Commission) to convene
a specified working group to investigate existing building
standards associated with the construction, inspection, and
maintenance, as specified, and recommend any statutory changes
or changes to the California Building Standards Code (CBSC);
and, requires the CSLB to report to the Legislature the results
of a study to determine if the CSLB's ability to protect the
public would be enhanced by regulations requiring licensees to
report judgments, arbitration awards against them, or settlement
payments of claims for construction defects they have made in
SB 465
Page 2
excess of a certain amount to be determined by the board, as
provided.
EXISTING LAW:
1)Provides for the licensure and regulation of more than 300,000
contractors under the Contractors' State License Law by the
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) Section
7000 et seq.)
2)Requires licensees to notify the Registrar in writing of any
unsatisfied final judgment imposed on the licensee, and
authorizes the Registrar to automatically suspend the license
on the date the Registrar is informed of an unsatisfied final
judgment if the licensee failed to notify the Registrar in
writing within 90 days of that judgment, as specified. (BPC
Section 7071.17(b))
3)Provides that a conviction of a crime, substantially related
to the qualifications, functions and duties of a contractor,
constitutes a cause for disciplinary action, and that the
record of the conviction shall be conclusive evidence thereof.
(BPC Section 7123)
4)Provides that a plea or verdict of guilty, or a conviction
following a plea of nolo contendere, is deemed to be a
conviction, and that the CSLB may order a license to be
suspended or revoked, or may decline to issue a license, when
the time for appeal has elapsed, or the judgment of conviction
has been affirmed on appeal, as specified. (BPC Section 7124)
5)Requires the Registrar to make available to the public the
SB 465
Page 3
date, nature, and status of all complaints on file against a
licensee that do either of the following:
a) Have been referred for accusation; or,
b) Have been referred for investigation, after a
determination by CSLB enforcement staff, that a probable
violation has occurred, and have been reviewed by a
supervisor, and involve allegations that if proven would
present a risk of harm to the public and would be
appropriate for suspension or revocation of the
contractor's license or criminal prosecution. (BPC Section
7124.6 (a))
6)Requires the CSLB to create a disclaimer that shall accompany
the disclosure stating that it is an allegation and any other
information the CSLB determines would be relevant to a person
evaluating the complaint. (BPC Section 7124.6 (b))
7)Provides that a complaint resolved in favor of the contractor
shall not be subject to disclosure. (BPC Section 7124.6(c))
8)Requires the Registrar to make available to the public the
date, nature, and disposition of all legal actions, subject to
the following:
a) Limits the disclosure of legal actions for citations
from the date of issuance for five years after the date of
compliance if no additional disciplinary actions have been
taken against the licensee during that period;
b) Limits the disclosure of accusations that result in
suspension, stayed suspension, or stayed revocation of the
contractor's license from the date accusation is filed for
seven years if no additional disciplinary actions have been
taken against the licensee during that period; and,
SB 465
Page 4
c) All revocations that are not stayed shall be disclosed
indefinitely from the effective date of the revocation.
(BPC Section 7124.6(e))
THIS BILL:
9)Requires the CSLB, by January 1, 2018, to enter into an
interagency agreement with the DOSH to ensure that specified
disciplinary information relating to a licensed contractor is
timely reported to the CSLB; requires the CSLB to enter into
an interagency agreement with any other state or local agency
the CSLB deems to be in possession of information relevant to
its priority to protect the public.
10)Requires a licensee to report to the Registrar in writing
within 90 days after the licensee obtains knowledge of the
occurrence of any of the of the following events:
a) Conviction of any felony; or,
b) Conviction of any crime that is substantially related to
the qualifications, functions, and duties of a licensed
contractor.
11)Specifies that failure of the licensee to report to the
Registrar the events in paragraph 2) above is grounds for
disciplinary action.
12)Requires the Commission to convene a specified working group
to investigate existing building standards associated with the
construction, inspection, and maintenance of exterior elevated
elements; and, requires the working group to report to the
Commission any findings and possible recommendations for
statutory changes or changes to the CBSC. By January 1, 2018,
the bill would also require the working group to provide that
report to the Senate Committee on Business, Professions, and
Economic Development (BPED).
SB 465
Page 5
13)Requires the working group to include, but not be limited to
representatives from the Department of Housing and Community
Development, the Division of the State Architect-Structural
Safety, the Office of the State Fire Marshal, local building
officials and plan checkers, structural engineers, apartment
owners and managers, building industry, wood, steel and
concrete industries, and any other interested parties.
14)Requires the working group to review related documents and
reports, including, but not limited to, forensic reports
related to exterior elevated element failures in California,
reports and studies used in the development of national and
state building codes, and any other material deemed relevant
to determine if any changes need to be made to the
construction specifications or inspection requirements,
excluding routine inspections that occur after project
completion, contained within the CBSC.
15)Requires the working group to submit any changes to the CBSC
that are needed as soon as possible in order to protect the
public to the Commission for consideration as soon as
possible.
16)Requires the board, by January 1, 2018, to report to the
Legislature the results of a study to determine if the boards'
ability to protect the public would be enhanced by regulations
requiring licensees to report judgments, arbitration awards
against them, or settlement payments of claims for
construction defects they have made in excess of a certain
amount to be determined by the board, as provided. The bill
would require the board to consult with licensees, insurers,
consumers, and other interested parties during the development
of the study.
SB 465
Page 6
17)Requires the state to reimburse local agencies and school
districts for certain costs mandated by the state and
establish procedures for making that reimbursement.
FISCAL EFFECT: Unknown. This bill has been keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill is sponsored by the author. According to the
author, this bill is needed to amend state law because,
"Currently, state law does not require contractors to report
defect settlement cases to the CSLB. Such disclosure
requirements are routine for such professionals as doctors,
architects, and engineers. This bill would empower the CSLB,
like other boards, to be made aware of licensee behavior for
which they may need to take swift action to promote public
health and safety. The bill additionally increases transparency
so that consumers have the tools necessary to make an informed
decision about the quality of the contractor they hire."
Background. According to the author, this bill increases
transparency so that consumers have the tools necessary to make
an informed decision about the quality of the contractor they
hire. The bill also establishes greater accountability for
contractors by ensuring the public has critical disciplinary
information about licensees. As an example of this need for
transparency, the author notes the tragic Berkeley, California
balcony collapse, which killed six people. According to the San
Francisco Chronicle, the company responsible for that project
reportedly paid out $26.5 million in construction defect
settlements in just three years, yet the CSLB, the state agency
tasked with protecting consumers from possibly lethal
construction, remained ignorant of such settlements. This is
because licensees are not required by law to report the result
SB 465
Page 7
of incidents that are not handled directly by the CSLB, to the
Registrar. As a result, information that can be used to help
consumers protect themselves from possible fraud or
misrepresentation is not known.
Complaint Investigation Process. The Registrar of the CSLB is
required to make available to the public civil action
settlements, binding arbitration awards, and administrative
actions that are required to be reported to the CSLB if the CSLB
refers those settlements or arbitration awards for investigation
after staff determines, and a supervisor has reviewed, that a
probable violation has occurred and involves allegations that,
if proven, would present a risk of harm to the public and would
be appropriate for suspension or revocation of the licensee, or
criminal prosecution.
Similar to other regulatory entities, in order to determine
whether a complaint is appropriate for investigation, the CSLB
reviews information on a case-by-case basis, looking at such
factors as the severity of the allegations, and whether a
licensee has a history of complaints or discipline. Complaints
involving a threat to the public's health and safety, and cases
where consumers have suffered a significant financial injury are
given the highest priority. As a result, only those settlements
or arbitration awards that are investigated, and would subject a
licensee to suspension, revocation, or criminal prosecution, not
merely just a citation, would be made available to the public,
which is the type of information that is already disclosed. In
addition, licensees are already required to report unsatisfied
final judgments to the CSLB, and are required to disclose
convictions when applying for licensure. For licensees that
have already been fingerprinted by the CSLB, the CSLB will
receive notifications from the Department of Justice when that
licensee is the subject to additional criminal action; however,
not all licensees have submitted their fingerprints to the CSLB.
SB 465
Page 8
California Building Standards Commission. The California
Building Standards Commission (Commission) is responsible for
developing building standards for state owned buildings,
including University and State College buildings, and for
developing green building standards for most buildings except
for housing, public schools, and hospitals. The Commission
publishes the CBSC in Title 24 of the California Code of
Regulations every three years and its supplements, such as the
California Green Building Standards Code, in intervening years.
According to the author, on April 19, 2016, the Commission
formally voted to assemble an ad hoc committee to examine the
facts of the Berkeley balcony collapse and determine whether the
CBSC needs to be updated. In July of 2015, the Berkeley City
Council sent a letter to the Commission urging the Commission to
revise CBSC to require steel reinforcements on all new balcony
designs, after experts determined dry rot was the cause of the
balcony collapse. This bill will require the CSLB to conduct a
study to determine if the CSLB's ability to protect the public
would be enhanced by greater regulations.
Similar Reporting Requirements Exist for Other Professions.
Architects, and the companies that insure them, are required to
report to the California Architects Board, any civil action
judgment, settlement, arbitration award, or administrative
action resulting in a judgment, settlement, or arbitration award
against the licensee in any action alleging fraud, deceit,
negligence, incompetence, or recklessness by the licensee in the
practice of architecture if the amount or value of the judgment,
settlement, or arbitration award is five thousand dollars
($5,000) or greater. The report is made within 30 days of
payment of all or any portion of the action. This also applies
if a party to the civil action, settlement, arbitration award,
or administrative action is or was a sole proprietorship,
partnership, firm, corporation, or state or local governmental
agency in which a licensee is or was an owner, partner, member,
SB 465
Page 9
officer, or employee and is or was a licensee in responsible
control of that portion of the project that was the subject of
the civil judgment, settlement, arbitration award, or
administrative action. The licensee will not be found to have
violated a confidential settlement agreement or other
confidential agreement by providing a report to the CSLB.
Similar reporting requirements exist for other licensed
professionals, including engineers (BPC Section 6770), land
surveyors (BPC Section 8776), medical professionals (BPC Section
801), and accountants (BPC Section 5063).
Prior Related Legislation. SB 467 (Hill), Chapter 656, Statutes
of 2015, among other things, extends the sunset date for the
CSLB until January 1, 2020, repeals a requirement relating to
evidence of financial solvency, and increases the amount for a
licensee to be bonded from $12,500 to $15,000, as specified.
AB 2570 (Hill), Chapter 561, Statutes of 2012, prohibited
licensees of any board, bureau or program under the DCA from
including a "regulatory gag clause" in civil settlement
agreements.
SB 679 (Berryhill), Chapter 471, Statutes of 2013, revised the
monetary threshold for a licensed engineer or land surveyor to
report a civil action settlement or administrative action to the
Board for Professional Engineers, Land Surveyors, and Geologists
(BPELSG) from "$50,000 or greater" to "greater than $50,000,"
and requires a licensed engineer or land surveyor to report any
civil action judgment or binding arbitration award or
administrative action of $25,000 or greater.
SB 1549 (Figueroa), Chapter 691, Statutes of 2004, required
licensed engineers and land surveyors to report to the BPESLG a
SB 465
Page 10
felony conviction or a civil judgment, settlement, arbitration
award, or administrative action award of $50,000 or more,
occurring on or after July 1, 2006, if funds are appropriated
for that purpose, as specified, and required a court rendering
the judgment or conviction and a local agency, if self-insured,
to report to the board.
ARGUMENTS IN SUPPORT:
The California Newspapers Publishers Association writes in
support, "By requiring contractors to report this information,
[this bill] will improve oversight of these operations and
assist the public in identifying repeat offenders, or the
existence of unsafe and unsettling patterns and practices in the
industry."
The Center for Public Interest Law writes in support, "Whereas
in every other example, the requirements for self-reporting are
set by fiat, in statute, by the Legislature, the author has
amended SB 465 to empower the expert CSLB to simply to review
the issue and offer its nonbinding observations?"
The City of Berkeley, Office of the Mayor , writes in support,
"[This bill] would provide transparency for the community when
dealing with contractors and will provide additional information
that might prevent future tragedies like the one that happened
in our community on June 16, 2015."
The Conference of California Bar Associations (CCBA) writes in
support, "For far too long, contractors, builders and their
lawyers, in cooperation with plaintiffs and their lawyers, have
been able to keep the facts about substandard, dangerous and
toxic conditions secret from public view by agreeing to
settlements in public litigation that keep the facts of the case
SB 465
Page 11
secret. [This bill] would take a small but crucial step towards
increased public protection by laying the groundwork for
prohibiting these dangerous secrets relating to builders and
contractors from being hidden from the [CSLB]."
ARGUMENTS IN OPPOSITION:
A coalition of associations * are Opposed-Unless-Amended stating,
"While we believe that [this bill's] requirements in Section 3
to investigate and pursue changes to the building code, are
likely to protect consumers and we support these provisions, we
don't believe the provisions of Section 2 of the bill will have
the same effect. The requirements in the bill that CSLB gather
information on construction defect case results will not provide
the Board with leads that have any significant chance of
identifying bad actors. Instead, it will only result in a waste
of staff time and resources."
POLICY ISSUES:
Some of the information to be collected in the CSLB's study may
be confidential. Although the CSLB has access to this
information, some information may not be appropriate to share
with the public in the final report to the Legislature. For
example, complaints referred to arbitration are not subject to
disclosure pursuant to BPC Section 7085.9. The author should
amend the bill to explicitly preserve confidentiality of that
information.
AMENDMENTS:
To address the confidentiality concern raised above, the author
should amend the bill to specify that any information or data
SB 465
Page 12
collected by the CSLB is to remain confidential to the fullest
extent of the law.
REGISTERED SUPPORT:
California Newspapers Publishers Association
Center for Public Interest Law
City of Berkeley, Office of the Mayor
Conference of California Bar Associations (CCBA)
REGISTERED OPPOSITION:
California Building Industry Association (CBIA)*
California Chapters of the National Electrical Contractors
Association (NECA)*
California Legislative Conference of the Plumbing, Heating and
Piping Industry (CLC)*
Northern California Allied Trades (NCAT)*
Southern California Contractors Association (SCCA)*
United Contractors (UC)*
Wall And Ceiling Alliance (WACA)*
Associated General Contractors of California*
CalSMACNA*
Construction Employers Association (CEA)*
Analysis Prepared by:Gabby Nepomuceno, Le Ondra Clark Harvey
Ph.D. / B. & P. / (916) 319-3301
SB 465
Page 13