BILL ANALYSIS                                                                                                                                                                                                    

                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            SB 560          Hearing Date:    April 13,  
          |Author:   |Monning                                               |
          |Version:  |April 6, 2015                                         |
          |Urgency:  |No                     |Fiscal:    |Yes              |
          |Consultant|Mark Mendoza                                          |
          |:         |                                                      |
                               Subject:  Contractors.

          SUMMARY:  Authorizes the Contractors State License Board's Enforcement  
          Representatives to issue a written notice to appear before a  
          court, to unlicensed individuals who fail to secure workers'  
          compensation insurance.

          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  

          2) Establishes an enforcement division in the CSLB and requires  
             the unit to rigorously enforce the Contractors Law  
             prohibiting all forms of unlicensed activity.  (BPC  7011.4  

          3) Provides that persons employed as enforcement representatives  
             in the enforcement division and designated by the Director of  
             DCA are not peace officers, are not entitled to safety member  
             retirement benefits, and do not have the power of arrest.   
             However, they may issue a written notice to appear in court  
             for misdemeanor violations of the Contractors Law.  (BPC   


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             7011.4 (b))

          4) 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)

          5) Authorizes an unlicensed contractor to advertise for  
             construction work only if the advertisement states that he or  
             she is not licensed.  (BPC  7027.2)

          6) Makes it a misdemeanor for an unlicensed contractor to  
             advertise for construction or work of improvements or act in  
             the capacity of a contractor.  Imposes specified civil  
             penalties, including fines and imprisonment against the  
             unlicensed contractor and authorizes CSLB to cite the  
             unlicensed contractor.  (BPC  7028) 

          7) 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. (BPC  7028).

          8) Requires CSLB to initiate a disciplinary action against a  
             licensee within 180 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)

          9) Authorizes CSLB enforcement division 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).  (BPC  7011.4 (c))

          10)Establishes the JESF to coordinate efforts in targeting tax  
             evasion and cash-pay violations, and authorizes the sharing  
             of investigative and enforcement capabilities between JESF  
             participants.  (Unemployment Insurance Code  329)

          This bill:  Authorizes the CSLB Enforcement Division to  
          additionally issue written notices to unlicensed contractors to  
          appear in court for failure to secure workers' compensation (WC)  


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          EFFECT:  Unknown.  This bill has been keyed "fiscal" by  
          Legislative Counsel. 

          1. Purpose.  This bill is sponsored by the  Contractors State  
             License Board  .  According to the Author, "CSLB's SWIFT  
             enforcement representatives are able to issue written notices  
             to appear when it is found that a contractor is operating  
             without a license, but do not have the authority to do it  
             when it is discovered they do not have WC insurance.  Without  
             the authority granted by SB 560, CSLB must depend on local  
             district attorneys' offices to issue the notices to appear -  
             delaying the process and often resulting with little  
             enforcement.  SB 560 makes it much more enforceable and  

          2. Statewide Investigative Fraud Team (SWIFT).  Unlicensed  
             contractors are part of a $60 to $140 billion annual  
             underground economy that takes money away from healthcare,  
             roads, and schools.  To combat unlicensed activity, CSLB  
             developed the Statewide Investigative Fraud Team (SWIFT).   
             This team seeks to identify and shut down unlicensed  
             operators in the construction industry by setting up stings  
             throughout the state.  The unit has the authority to visit  
             any job site without evidence, and ask contractors to produce  
             proof of licensure in good standing, citing those who are not  
             properly licensed.  

             Between July 2013 to October 2014, SWIFT performed 414 sting  
             and sweep days, which resulted in over 2000 legal actions.   
             Specifically, 930 suspects received notice to appear  
             citations for contracting without a license, illegal  
             advertising, and workers compensation insurance violations.   
             The number of convictions and arrests are unknown.  SWIFT  
             investigators mostly use Craigslist to locate suspected  
             illegal contractors in areas.  They invite suspects to the  
             home to submit bids for jobs that sometimes include tree  
             removal, a cement patio, an ornamental fence, painting, and  
             tile work for floors and countertops.  SWIFT investigators  
             visit the job site and take appropriate action, which may  


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             include the issuance of a Notice to Appear, a Stop Order, an  
             administrative citation, and/or an accusation.

          3. Prior Legislation.   SB 315  (Lieu, Chapter 392, Statues of  
             2014) enhanced CSLB enforcement activities by authorizing the  
             Board to have free access to all places of labor when  
             participating in JESF activities.

              SB 263  (Monning, 2013) in addition to other matters,  
             contained provisions which would have made it unlicensed  
             practice if a contractor with a suspended license failed 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.  (  Status  : SB 263  
             was held under submission in the Assembly Appropriations  

              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.

          4. Arguments in Support.  According to the  Contractors State  
             License Board , 
          "Under existing law, CSLB's enforcement representatives can  
             issue a written notice to appear to individuals who are  
             caught contracting without a license.  This occurs during  
             CSLB's undercover sting operations which are set up to target  
             unlicensed contractors.  Oftentimes, these unlicensed  
             contractors show up to a sting site with an employee.  In  
             those cases, the unlicensed contractor generally does not  
             carry WC insurance.  This bill would allow CSLB to  
             additionally cite for that violation, so that it becomes part  
             of the case that is forwarded to the local district attorney  
             for prosecution.  Failure to adequately insure employees  
             against work-related injuries is a significant component of  
             the underground economy.  This bill provides CSLB an  
             additional tool to help address this problem."



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          Contractors State License Board (Sponsor)
          Construction Employers' Association


          None on file as of April 7, 2015. 

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