BILL ANALYSIS Ó ----------------------------------------------------------------- |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 SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 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. ANALYSIS: 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.) SB 560 Page 2 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 § 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 SB 560 Page 3 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 insurance. Background 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 SB 560 Page 4 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 Association 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 SB 560 Page 5 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 **** END ****