BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                        SB 560|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  SB 560
          Author:   Monning (D)
          Amended:  4/6/15  
          Vote:     21  

           SENATE BUS, PROF. & ECON. DEV. COMMITTEE:  9-0, 4/13/15
           AYES:  Hill, Bates, Berryhill, Block, Galgiani, Hernandez,  
            Jackson, Mendoza, Wieckowski


           SUBJECT:   Contractors

          SOURCE:    Contractors State License Board 

          DIGEST:  This bill 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.   
             (Business and Professions Code (BPC)  7000 et seq.)


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          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   
             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  


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             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  

          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 2,000 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 include the issuance of a notice to appear, a  
          stop order, an administrative citation, and/or an accusation.   
          However, while 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, they do not have the  


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          authority to issue one when it is discovered that the unlicensed  
          contractor does not have workers' compensation insurance.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          SUPPORT:   (Verified  4/29/15)

          Contractors State License Board (source)
          Air Conditioning Sheet Metal Association
          Air-Conditioning & Refrigeration Contractors Association
          California Chapters of the National Electrical Contractors  
          California Legislative Conference of the Plumbing, Heating, and  
          Piping Industry
          California Professional Association of Specialty Contractors 
          Construction Employers' Association
          Finishing Contractors Association of Southern California
          United Contractors
          Western Line Constructers

          OPPOSITION:   (Verified  4/29/15)

          None received

          ARGUMENTS IN SUPPORT:     The Contractors State License Board,  
          the sponsor of this bill, states that, "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  


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          work-related injuries is a significant component of the  
          underground economy.  This bill provides CSLB an additional tool  
          to help address this problem." 

          Prepared by:Mark Mendoza / B., P. & E.D. / (916) 651-1868
          4/29/15 16:07:35

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