BILL ANALYSIS Ó SB 465 Page 1 Date of Hearing: August 10, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 465 (Hill) - As Amended August 1, 2016 ----------------------------------------------------------------- |Policy |Business and Professions |Vote:|12 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: Yes SUMMARY: This bill requires contractors to report specific disciplinary information to the Contractors State Licensing Board (CSLB), and requires the CSLB to conduct a study to determine if CSLB's ability to protect the public could be improved, as specified. Specifically, this bill: 1)This bill requires the 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 information relevant to CSLBs duty to SB 465 Page 2 protect the public is reported to the board in a timely manner. 2)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. 3)Requires the CSLB to report to the Legislature the results of a study determining 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 excess of a certain amount to be determined by the board. 4)Requires records or documents obtained by CSLB during the course of the study that are exempt from public disclosure to remain exempt. 5)Requires the California Building Standards Commission (Commission) to convene a working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements, and recommend any statutory changes or changes to the California Building Standards Code and requires the working group, by January 1, 2018, to provide a report to the Senate Committee on Business, Professions, and Economic Development. FISCAL EFFECT: SB 465 Page 3 1)Total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB (special funds) for enforcement staffing costs, Attorney General referral costs, and reporting costs necessary to implement the requirements of this bill. 2)Annual ongoing costs to the Commission of approximately $193,000 for the development and ongoing maintenance required of additional building standards (special funds). COMMENTS: 1)Purpose. According to the author, "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." 2)Background. On June 16, 2015, a balcony at Library Gardens Apartments in Berkeley, California collapsed, killing six students and injuring seven others. 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. Current law does not require contractors to report defect settlements to the CSLB. In response to this incident, the City of Berkeley tightened SB 465 Page 4 and approved new building standards. The City Council voted to require that new balconies be made of corrosion-resistant material and be ventilated to prevent a buildup of moisture. At the time, the council also mandated that all balconies be inspected within the subsequent six months, and every three years after that. According to the author, on April 19, 2016, the California Building Standards Commission formally voted to assemble an ad hoc committee to examine the facts of the Berkeley balcony collapse and determine whether the Building Standards Code needs to be updated. In July of 2015, the Berkeley City Council sent a letter to CLSB urging them to revise Code to require steel reinforcements on all new balcony designs, after experts determined dry rot was the cause of the balcony collapse. 3)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 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 SB 465 Page 5 settlements in public litigation that keep the facts of the case 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." 4)Arguments in Opposition. A coalition of builders and contractors are opposed -unless-amended, stating "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." 5)Prior Legislation. a) 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. SB 465 Page 6 b) 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. c) 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), and required a licensed engineer or land surveyor to report any civil action judgment or binding arbitration award or administrative action of $25,000 or greater. d) SB 1549 (Figueroa), Chapter 691, Statutes of 2004, required licensed engineers and land surveyors to report to the BPESLG a 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. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081 SB 465 Page 7