Homeowner and Contractor Protection, Responsibility Increase in 2012

Among the new laws that take effect this year -- -- are several that focus on homeowners and contractors, both in terms of their obligations and responsibilities.

SACRAMENTO – A bill sponsored by the Contractors State License Board (CSLB) and signed in the 2011 legislative session will assist homeowners in determining whether contractors they hire to work on their property have the appropriate workers’ compensation coverage.

Assembly Bill 397 (Monning-Santa Cruz) requires contractors to recertify they have no employees every two years when they renew their licenses or to show proof of workers’ compensation if they have them. This information is available to consumers on the Instant License Check on CSLB’s website.

State law requires contractors to purchase workers’ compensation insurance for all employees. C-39 roofing contractors are required to have coverage even if they certify they have no employees. Another CSLB-sponsored bill that protects consumers on the workers’ comp front is Assembly Bill 878 (Berryhill-Stockton). This legislation requires workers’ compensation insurers to report to CSLB if a licensee’s policy is cancelled due to a premium audit or investigation, or a misrepresentation that harms the insurer and reimbursement isn’t made. This bill also states that disregard and violation of workers’ comp laws are cause for discipline by the CSLB Registrar.

“Having uninsured workers on your property is one of the biggest risks a homeowner takes when hiring a contractor,” said CSLB Registrar Steve Sands. “These two new laws reinforce for our licensees the importance of workers’ comp. insurance and help demonstrate to homeowners why they need to make sure every worker is covered.”

Those hoping to cash in on incentives or rebates from their utility companies will have to certify that a licensed contractor performed the work and that the proper permits were obtained in compliance with Senate Bill 454 (Pavley-Agoura Hills). This bill also authorizes the California Energy Commission to assess civil or administrative penalties to contractors who violate state energy efficiency standards.

The following laws affecting consumers, contractors, and the construction industry take effect January 1, 2012, unless otherwise noted in bold italics:

CSLB Licensing and Board Operations

Senate Bill 392 (Florez-Shafter), which passed in 2010, authorizes CSLB to license limited liability companies (LLCs).  Applications are now being accepted.  A list of primary requirements to obtain a license as an LLC is listed on the CSLB website.

Assembly Bill 1091 (Morrell-Redlands) requires that CSLB be notified within 90 days of a Responsible Managing Officer's (RMO) or Employee's (RME) disassociation from the license. The bill also enables a 90-day extension in limited circumstances to replace the qualifier for the license.

Senate Bill 543 (Steinberg-Sacramento) continues CSLB’s operation as a board until January 1, 2016.

Senate Bill 944 (Committee on Business, Professions and Economic Development) makes technical changes and updates to Contractor License Law.

Employment and Payroll

Assembly Bill 551 (Campos-San Jose) increases the fines for contractors who fail to pay prevailing wage on a public works project and for failure to provide certified payroll records in a timely fashion. It also requires the Labor Commissioner to notify CSLB when it updates its lists for these violations, and to annually notify awarding bodies of the availability of debarred contractors.

Assembly Bill 766 (Monning-Santa Cruz), a companion to Assembly Bill 551, requires that certified copies of the payroll records be made available to members of the Joint Enforcement Strike Force on the Underground Economy or other law enforcement on request. If such records are requested by the public, information on the employees would not be included.

Senate Bill 459 (Corbett-San Leandro) authorizes the Labor and Workforce Development Agency to issue fines for the willful misclassification of employees as independent contractors, and requires the agency to notify CSLB of violators who are licensees. The legislation also requires the board to initiate actions against such licensees.

State Taxes

Assembly Bill 1307 (Skinner-Berkeley) states that CSLB may discipline a license for failure to resolve outstanding final liabilities assessed by the Board of Equalization, in addition to the current disciplinary laws coordinated between CSLB and the Franchise Tax Board, Employment Development Department, and Department of Industrial Relations.

Assembly Bill 1424 (Perea-Fresno) requires CSLB to state on its applications that the law allows the Board of Equalization and Franchise Tax Board to share information with CSLB and that a license may be suspended for failure to pay state taxes.

Mechanic’s Liens 

Senate Bill 190 (Lowenthal-Long Beach) makes technical changes to the mechanic's lien overhaul legislation passed last year (SB 189) that is to take effect on July 1, 2012.

Senate Bill 424 (Rubio-Bakersfield) enables a design professional lien to be converted to a mechanic's lien if the design professional lien expires and remains partially or fully unpaid. The converted lien is recorded and enforced as a mechanic's lien, except the design professional is not required to provide a preliminary notice to enforce the mechanic's lien and is done within 30 days of the design professional lien expiring.

Assembly Bill 456 (Wagner-Irvine) clarifies that the proof of service affidavit that must accompany a mechanic’s lien filing to validate the lien must show the name of the property owner and the title or capacity in which the person or entity was served the claim of lien.

Indemnification Clauses

Senate Bill 474 (Evans-Santa Rosa) restricts contractors from using indemnification clauses to pass through to subcontractors the liability for certain legal damages, beginning January 1, 2013. Subcontractors would not have to pay for either accidental or deliberate harm caused by contractors, other subcontractors, or other parties. The law does not apply to certain contracts such as those governing residential homes, public buildings, workers’ compensation agreements, and some insurance agreements.

Environment and Safety

Assembly Bill 341 (Chesbro-Arcata) requires businesses that generate more than four cubic yards of commercial, solid waste per week to arrange for recycling services by July 1, 2012.

Senate Bill 341  (Lowenthal-Long Beach) requires that construction vehicles with a gross vehicle weight rating of 14,000 pounds or more be equipped an automatic backup alarm audible from 200 feet under normal conditions.

Small Claims 

Senate Bill 221 (Simitian-Palo Alto) raises small claims court jurisdiction from $7,500 to $10,000.

Certification and Training

Senate Bill 56 (Corbett-San Leandro) changes some requirements for construction trade apprenticeship programs and the Division of Apprenticeship Standards responsibilities for oversight of such programs.

Assembly Bill 1346 (Atkins-San Diego) requires those seeking electrical certification from the Division of Apprenticeship Standards to include an employment history report from the Social Security Administration when submitting an application for certification and examination.

The Contractors State License Board operates under the umbrella of the California Department of Consumer Affairs.  More information and publications about hiring contractors are available on the CSLB website or by calling 800-321-CSLB (2752). You can also sign up for CSLB email alerts. CSLB licenses and regulates California's 300,000 contractors, and is regarded as one of the leading consumer protection agencies in the United States.  In fiscal year 2010-11, CSLB helped recover nearly $45 million in ordered restitution for consumers.