BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: SB 560 Hearing Date: April 13,
2015
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|Author: |Monning |
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|Version: |April 6, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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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
seq.)
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
(a))
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 §
SB 560 (Monning) Page 2
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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)
insurance.
SB 560 (Monning) Page 3
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FISCAL
EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
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
timely."
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
SB 560 (Monning) Page 4
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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
Committee.)
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."
SUPPORT AND OPPOSITION:
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Support:
Contractors State License Board (Sponsor)
Construction Employers' Association
Opposition:
None on file as of April 7, 2015.
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