BILL ANALYSIS
AB 370
Page 1
ASSEMBLY THIRD READING
AB 370 (Eng)
As Amended March 23, 2009
Majority vote
BUSINESS & PROFESSIONS 11-0
APPROPRIATIONS 14-1
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|Ayes:|Hayashi, Emmerson, |Ayes:|De Leon, Nielsen, |
| |Conway, Eng, Hernandez, | |Ammiano, |
| |Nava, Niello, | |Charles Calderon, Davis, |
| |John A. Perez, Price, | |Fuentes, Hall, Harkey, |
| |Ruskin, Smyth | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Duvall |
| | | | |
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SUMMARY : Increases the maximum criminal penalties for
unlicensed contractors, imposes a mandatory jail sentence for a
third or subsequent conviction for unlicensed contracting, and
requires the court to order an unlicensed contractor to pay
restitution to its victims. Specifically, this bill :
1)Makes a first conviction a misdemeanor punishable by a fine
not exceeding $5,000 or by imprisonment in a county jail for
no more than six months, or both.
2)Requires that the fine for a second conviction be the greatest
of 20% of the contract price, 20% of the aggregate payments
made to, or at the direction of, the unlicensed contractor, or
$5,000.
3)Requires that a third or subsequent conviction be punishable
by both a fine and imprisonment in a county jail for between
90 days and one year. The fine must be no less than $5,000
and no more than the greatest of $10,000, 20% of the price of
the contract, or 20% of the aggregate payments made to, or at
the direction of, the unlicensed contractor.
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4)Clarifies that an unlicensed person who offers to perform
contracting work is subject to the specified penalties.
5)Provides that a person who used the services of an unlicensed
contractor is a victim of crime, regardless of whether that
person had knowledge that the contractor was unlicensed.
6)Requires a court to order that a convicted unlicensed
contractor make restitution to all persons who utilized the
services of the unlicensed contractor.
EXISTING LAW :
1)Creates the Contractors State License Board (CSLB) within the
Department of Consumer Affairs for the purposes of licensing
and regulating contractors in California.
2)Allows CSLB to bring disciplinary actions against a contractor
who willfully or deliberately violates building laws of the
state.
3)Makes it a misdemeanor for a person to engage in the business
or act in the capacity of a contractor without having a
license and makes a first offense punishable by imprisonment
in the county jail for no more than six months, or by a fine
not exceeding $1,000, or both.
4)Requires that a second conviction be punishable by both a fine
and imprisonment in the county jail for not less than 90 days,
except as specified. The fine must be the greater of 20% of
the price of the contract or $4,500.
5)Requires that a third or subsequent conviction be punishable
by a fine or imprisonment in the county jail for between 90
days and one year, or both. The fine must be no less than
$4,500 and no more than the greater of $10,000 or 20% of the
price of the contract.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, potential increase in fine revenue to local
governments from increased penalties and potential increase in
non-reimbursable costs for mandatory jail sentences upon a third
or subsequent conviction for operating without a contractor's
license.
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COMMENTS : According to the author's office, "Contractor fraud,
most of which involves unlicensed contractors, consistently
ranks in the top ten lists of consumer complaints both
nationally and statewide. According to the U.S. Office of
Consumer Affairs, unscrupulous contractors defraud consumers of
more than $100 billion annually. In addition to the financial
loss they cause, unlicensed contractors generally do not obtain
proper insurance, leaving their workers without any protection
and the homeowner potentially liable."
"Despite this immense harm, violators of this law are only
punishable by up to only six months in jail and a maximum fine
of $1,000 - regardless of how much money the victim paid that
unlicensed contractor. Although second-time offenders must pay
an increased fine, the potential jail time is similarly
restricted to six months. Only a third-time violator is subject
to up to one year jail sentence."
Current law states that a person who uses an unlicensed
contractor may bring a civil action to recover all compensation
paid to the unlicensed contractor. However, no statute
specifically addresses the issue of criminal restitution for
victims of unlicensed contractors. Unlicensed contractors are
the beneficiaries, retaining the monies paid them by crime
victims which the civil statutes require to be disgorged.
According to the CSLB, unlicensed contracting is a considerable
part of California's estimated annual $60-$140 billion
underground economy. Numerous approaches have been used to
address this problem, but it continues to impact legitimate
licensees and consumers alike with injurious economic results.
The victims of these violations include consumers, often the
elderly, who pay thousands of dollars to an unlicensed person
who never finishes the job or does incompetent or negligent
work. Research conducted by the Department of Industrial
Relations, Economic and Employment Enforcement Coalition shows
that unlicensed contractors drive down wages, undercut
legitimate businesses, and avoid licensing requirements, and it
is often hard to find them and bring them into compliance with
state and local laws.
Analysis Prepared by : Whitney Clark / B. & P. / (916)
AB 370
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319-3301
FN: 0000387