BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2237|
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THIRD READING
Bill No: AB 2237
Author: Monning (D)
Amended: 4/9/12 in Assembly
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 8-0, 6/18/12
AYES: Price, Emmerson, Corbett, Hernandez, Negrete McLeod,
Strickland, Vargas, Wyland
NO VOTE RECORDED: Correa
SENATE APPROPRIATIONS COMMITTEE : 5-1, 7/2/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters
NO VOTE RECORDED: Dutton
ASSEMBLY FLOOR : 61-7, 5/25/12 - See last page for vote
SUBJECT : Contractors: definition
SOURCE : Contractors State License Board
DIGEST : This bill specifies that a consultant within the
definition of contractor as it relates to a home
improvement contract, is a consultant who schedules
subcontractors, reviews and makes recommendations on bids
and the selection of contractors, or who provides or
oversees a bid, or who arranges for and sets up work
schedules for contractors and subcontractors and maintains
oversight of a construction project.
CONTINUED
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ANALYSIS :
Existing law:
1. Licenses and regulates approximately 300,000 contractors
under the Contractors State License Law by the
Contractors State License Board (CSLB) within the
Department of Consumer Affairs. (Business and
Professions Code (BPC) Section 7000 et seq.)
2. Defines "contractor" as any person who undertakes to or
offers to undertake to, or purports to have the capacity
to undertake to, or submits a bid to perform contracting
services, as specified. (BPC Section 7026)
3. Further defines "contractor" to include, a consultant to
an owner-builder, firm, association, organization,
partnership, business trust, corporation, or company,
who undertakes, offers to undertake, purports to have
the capacity to undertake, or submits a bid, to
construct a building or home improvement project, or
part thereof. (BPC Section 7026.1 (b))
4. Classifies contracting in three different branches,
generally identified by letter identification:
A - general engineering contracting, B - general
building contracting, C - specialty contracting. (BPC
Section 7055 et seq.)
5. Defines "person" as an individual, firm, copartnership,
corporation, limited liability company, association or
other organization, or any combination thereof, and
requires a person to be licensed as a contractor if
he/she engages in the business of contracting or acts in
the capacity of a contractor. (BPC Section 7025)
6. Defines various terms relating to the home improvement
business, including:
A. "Home improvement contractor" as a licensed
contractor who is engaged in the business of home
improvement. (BPC Section 7150.1)
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B. "Home improvement" as including repairing,
remodeling, altering or adding to residential
property, as specified. The definition further
includes installing home improvement goods or
furnishing home improvement services. (BPC Section
7151)
C. "Home improvement contract" as an agreement,
whether oral or written, between a contractor (or
salesperson) and owner or tenant for the performance
of home improvement. (BPC Section 7151.2)
7. Makes it is a misdemeanor for any person to act as a
contractor without a license, and provides for enhanced
penalties for a second, third or subsequent conviction
of contracting without a license, as specified. (BPC
Section 7028)
This bill further specifies that a "consultant" within the
definition of "contractor," is person, other than a public
agency or an owner of privately owned real property to be
improved, who meets either of the following, relating to
work performed under a home improvement contract:
1. Provides or oversees a bid for a construction project.
2. Arranges for and sets up work schedules for contractors
and subcontractors and maintains oversight of a
construction project.
Background
The CSLB licenses and regulates the construction industry
in California. Anyone performing construction work that
totals $500 dollars or more in labor and materials must be
licensed by the CSLB. There are about 300,000 licensed
contractors in the state, in 43 different licensing
classifications.
According to the CSLB, unlicensed contracting is part of
California's estimated annual $60 to $140 billion dollar
underground economy. It is illegal for an unlicensed
person to perform contracting work and the law applies
criminal penalties to the conviction of acting as a
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contractor without a license, which escalate as an
individual has multiple convictions. Besides being
illegal, unlicensed contractors lack accountability and
have a high rate of involvement in construction scams.
They compete unfairly with licensed contractors who operate
with bonds, insurance and other responsible business
practices.
The CSLB's Statewide Investigative Fraud Team (SWIFT) is
set up to monitor and combat illegal activity. SWIFT has
teams around the state that conduct stings on a regular
basis and sweep construction sites. SWIFT also conducts
joint operations and sweeps with other state agencies
dedicated to combating underground activity. The
partnerships with other agencies raise the penalties and
fines for violators by increasing the scope of violations
to include taxes, illegal payrolls, workers compensation
and worker safety.
In 2008, the CSLB adopted Precedential Decision No. 1,
establishing that someone acting in the capacity of a
swimming pool consultant is a contractor. In 2009, the
Appellate Court decision The Fifth Day v. Bolotin found
that someone acting in the capacity of a construction
manager is not required to be licensed as a contractor.
The Fifth Day v. Bolotin decision undermines the CSLB's
Precedential Decision, and the CSLB believes the law should
be amended to clarify that an individual performing these
services is required to be licensed as a contractor and
comply with the law.
The CSLB further indicates that recently, an unlicensed
contractor facing criminal prosecution for violating BPC
Section 7028 (engaging in business of a contractor without
a license) claimed to have been a project coordinator and
asserted exemption from licensure, citing The Fifth Day v.
Bolotin decision. Although the unlicensed contractor was
not overseeing a contract between the project owner and a
general contractor as in the Fifth Day v. Bolotin case, the
defense strategy was nonetheless of concern to the
prosecutor and ultimately resulted in a plea bargain
dismissing the BPC Section 7028 charge, according to the
CSLB.
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FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Unknown, likely minor annual increase in penalty
revenue to the Contractors' License Fund.
Unknown, likely minor increased workload associated
with increased licensing and enforcement.
SUPPORT : (Verified 7/3/12)
Contractors State License Board (source)
Building Owners and Managers Association of California
California Building Industries Association
California Business Properties Association
California Chapter of the American Fence Association
California Fence Contractors Association
California Landscape Contractors Association
California Spa and Pool Industry Education Council
Construction Industry Legislative Council
Engineering Contractors Association
Flasher/Barricade Association
Marin Builders Association
ARGUMENTS IN SUPPORT : The CSLB, sponsor of this bill,
indicates that the intent of this proposal is not to
license consultants or construction managers but to protect
the public from persons presenting themselves as
"consultants" but acting in the capacity of a contractor by
scheduling subcontractors and exercising responsibility for
the construction project.
California Spa and Pool Industry Education Council (SPEC)
states that this bill requires individuals serving as
consultants to be license by the CSLB, if they exercise
control over, or maintain oversight of, a construction
project. This will clear any misconceptions caused by the
decision in The Fifth Day v. Boltin, according to SPEC.
California Landscape Contractors Association states that
under existing law, a contractor is any person who
undertakes or submits a bid to construct any building or
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work of improvement. Supervision and scheduling of work on
a construction project is a commonly understood function of
a contractor. It stands to reason that anybody who engages
in these activities should be licensed and subject to all
of the obligations of contractors under the Contractors
State License Law.
ASSEMBLY FLOOR : 61-7, 5/25/12
AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Conway, Cook, Davis, Dickinson, Eng, Feuer,
Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick,
Gatto, Gordon, Gorell, Halderman, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Lara,
Bonnie Lowenthal, Mendoza, Mitchell, Monning, Nestande,
Nielsen, Olsen, Pan, V. Manuel P�rez, Portantino,
Skinner, Smyth, Solorio, Swanson, Torres, Wagner,
Wieckowski, Williams, Yamada, John A. P�rez
NOES: Donnelly, Hagman, Jones, Logue, Miller, Morrell,
Norby
NO VOTE RECORDED: Atkins, Bill Berryhill, Fletcher, Grove,
Hall, Harkey, Knight, Ma, Mansoor, Perea, Silva, Valadao
JJA:k 7/5/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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