(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment. Existing law requires the division to transmit to the Registrar of Contractors copies of any reports made in any investigation, as specified, and authorizes the division, upon its own motion or upon request, to transmit copies of any other reports made in any investigation conducted involving a licensed contractor.

This bill would instead require the Division of Occupational Safety and Health, after consultation with the board, to transmit to the board copies of any citations or other actions taken by the division against a contractor, as defined. The bill would authorize the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

This bill would require the board to consult with licensees, consumers, and other interested stakeholders in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018, report to the Legislature the results of the study to determine if the boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims. This bill would specify that participation in the study by licensees and consumers is voluntary. The bill would require records or documents obtained by the board during the course of implementing this study that are exempt from public disclosure to remain exempt from disclosure.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill, until January 1, 2018, would require the working group formed by the California Building Standards Commission to study recent exterior elevated element failures in the state to submit a report to the appropriate policy committees of the Legislature containing any findings and possible recommendations for statutory or other changes to the California Building Standards Code and would require the working group to review related documents and reports, as specified. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would, until January 1, 2018, require the working group to submit the recommended changes to the California Building Standards Commission for consideration as soon as possible, as specified.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment. Existing law requires the division to transmit to the Registrar of Contractors copies of any reports made in any investigation, as specified, and authorizes the division, upon its own motion or upon request, to transmit copies of any other reports made in any investigation conducted involving a licensed contractor.

This bill would instead require the Division of Occupational Safety and Health, after consultation with the board, to transmit to the board copies of any citations or other actions taken by the division against a contractor, as defined. The bill would authorize the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

This bill would require the board to consult with licensees, consumers, and other interested stakeholders in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018, report to the Legislature the results of the study to determine if the boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims. This bill would specify that participation in the study by licensees and consumers is voluntary. The bill would require records or documents obtained by the board during the course of implementing this study that are exempt from public disclosure to remain exempt from disclosure.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill, until January 1, 2018, would require the working group formed by the California Building Standards Commission to study recent exterior elevated element failures in the state to submit a report to the appropriate policy committees of the Legislature containing any findings and possible recommendations for statutory or other changes to the California Building Standards Code and would require the working group to review related documents and reports, as specified. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would, until January 1, 2018, require the working group to submit the recommended changes to the California Building Standards Commission for consideration as soon as possible, as specified.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment. Existing law requires the division to transmit to the Registrar of Contractors copies of any reports made in any investigation, as specified, and authorizes the division, upon its own motion or upon request, to transmit copies of any other reports made in any investigation conducted involving a licensed contractor.

This bill, by January 1, 2018, bill would instead require the board to enter into an interagency agreement with the Division of Occupational Safety and Health to ensure that specified disciplinary information relating to a contractor is timely reported to the board. Health, after consultation with the board, to transmit to the board copies of any citations or other actions taken by the division against a contractor, as defined. The bill, by January 1, 2018, bill would also require authorize the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public. By requiring a local agency to enter into an interagency agreement with the board, the bill would impose a state-mandated local program.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

This bill would require the board to consult with licensees and consumers licensees, consumers, and other interested stakeholders in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018, report to the Legislature the results of the study to determine if the boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims. This bill would specify that participation in the study by licensees and consumers is voluntary. The bill would require records or documents obtained by the board during the course of implementing this study that are exempt from public disclosure to remain exempt from disclosure.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill bill, until January 1, 2018, would require the working group formed by the California Building Standards Commission to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance of study recent exterior elevated elements. By January 1, 2018, the bill would require the working group to report to the California Building Standards Commission any findings and possible recommendations for statutory changes or changes to the California Building Standards Code. By January 1, 2018, the bill would also require the working group to provide that report to a specified legislative committee. element failures in the state to submit a report to the appropriate policy committees of the Legislature containing any findings and possible recommendations for statutory or other changes to the California Building Standards Code and would require the working group to review related documents and reports, as specified. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would would, until January 1, 2018, require the working group to submit the proposed recommended changes to the California Building Standards Commission for consideration as soon as possible. possible, as specified.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment.

This bill, by January 1, 2018, would require the board to enter into an interagency agreement with the Division of Occupational Safety and Health to ensure that specified disciplinary information relating to a contractor is timely reported to the board. The bill, by January 1, 2018, would also require the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public. By requiring a local agency to enter into an interagency agreement with the board, the bill would impose a state-mandated local program.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

This bill would require the board to consult with licensees and consumers in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018, report to the Legislature the results of the study to determine if the boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims. This bill would specify that participation in the study by licensees and consumers is voluntary. The bill would require records or documents obtained by the board during the course of implementing this study that are exempt from public disclosure to remain exempt from disclosure.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill would require the California Building Standards Commission to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements. By January 1, 2018, the bill would require the working group to report to the California Building Standards Commission any findings and possible recommendations for statutory changes or changes to the California Building Standards Code. By January 1, 2018, the bill would also require the working group to provide that report to a specified legislative committee. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would require the working group to submit the proposed changes to the California Building Standards Commission for consideration as soon as possible.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment.

This bill, by January 1, 2018, would require the board to enter into an interagency agreement with the Division of Occupational Safety and Health to ensure that specified disciplinary information relating to a contractor is timely reported to the board. The bill, by January 1, 2018, would also require the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public. By requiring a local agency to enter into an interagency agreement with the board, the bill would impose a state-mandated local program.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

By January 1, 2018, this This bill would require the board to consult with licensees and consumers in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018, report to the Legislature the results of a the study to determine if the boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards against them, awards, or settlement payments of claims for construction defects they have made in excess of a certain amount to be determined by the board, as provided. The bill would require the board to consult with licensees, insurers, consumers, and other interested parties during the development of the study. those claims. This bill would specify that participation in the study by licensees and consumers is voluntary. The bill would require records or documents obtained by the board during the course of implementing this study that are exempt from public disclosure to remain exempt from disclosure.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill would require the California Building Standards Commission to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements. By January 1, 2018, the bill would require the working group to report to the California Building Standards Commission any findings and possible recommendations for statutory changes or changes to the California Building Standards Code. By January 1, 2018, the bill would also require the working group to provide that report to a specified legislative committee. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would require the working group to submit the proposed changes to the California Building Standards Commission for consideration as soon as possible.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment.

This bill, by January 1, 2018, would require the board to enter into an interagency agreement with the Division of Occupational Safety and Health to ensure that specified disciplinary information relating to a licensed contractor is timely reported to the board. The bill, by January 1, 2018, would also require the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public. By requiring a local agency to enter into an interagency agreement with the board, the bill would impose a state-mandated local program.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

By January 1, 2018, this bill would require the board to report to the Legislature the results of a study to determine if the boards boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards against them, or settlement payments of claims for construction defects they have made in excess of a certain amount to be determined by the board, as provided. The bill would require the board to consult with licensees, insurers, consumers, and other interested parties during the development of the study. The bill would prohibit the disclosure of confidential information received by the board in preparing this required study. require records or documents obtained by the board during the course of implementing this study that are exempt from public disclosure to remain exempt from disclosure.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill would require the California Building Standards Commission to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements. By January 1, 2018, the bill would require the working group to report to the California Building Standards Commission any findings and possible recommendations for statutory changes or changes to the California Building Standards Code. By January 1, 2018, the bill would also require the working group to provide that report to a specified legislative committee. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would require the working group to submit the proposed changes to the California Building Standards Commission for consideration as soon as possible.

(3)Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

(1)Existing law, the Contractors State License Law, provides for the licensure, regulation, and discipline of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board. Under existing law, protection of the public is required to be the highest priority for the Contractors State License Board in exercising its licensing, regulatory, and disciplinary functions.

Under existing law, the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment.

This bill, by January 1, 2018, would require the board to enter into an interagency agreement with the Division of Occupational Safety and Health to ensure that specified disciplinary information relating to a licensed contractor is timely reported to the board. The bill, by January 1, 2018, would also require the board to enter into an interagency agreement with any other state or local agency the board deems to be in possession of information relevant to its priority to protect the public. By requiring a local agency to enter into an interagency agreement with the board, the bill would impose a state-mandated local program.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee for any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor.

By January 1, 2018, this bill would require the board to report to the Legislature the results of a study to determine if the boards ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards against them, or settlement payments of claims for construction defects they have made in excess of a certain amount to be determined by the board, as provided. The bill would require the board to consult with licensees, insurers, consumers, and other interested parties during the development of the study. The bill would prohibit the disclosure of confidential information received by the board in preparing this required study.

(2)Under existing law, there exists the California Building Standards Commission. Existing law requires the California Building Standards Commission to, among other things, review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the commission for its approval, as provided.

This bill would require the California Building Standards Commission to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements. By January 1, 2018, the bill would require the working group to report to the California Building Standards Commission any findings and possible recommendations for statutory changes or changes to the California Building Standards Code. By January 1, 2018, the bill would also require the working group to provide that report to a specified legislative committee. However, if, at any time, it is determined by the working group that one or more changes to the California Building Standards Code are needed as soon as possible in order to protect the public, the bill would require the working group to submit the proposed changes to the California Building Standards Commission for consideration as soon as possible.

(4)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Existing law, the Contractors State License Law, provides for the licensure and regulation of contractors by the Contractors State License Board. Existing law requires the board, with the approval of the Director of Consumer Affairs, to appoint a registrar of contractors to serve as the executive officer and secretary of the board.

This bill would require a licensee to report to the registrar within 90 days of the date that the licensee has knowledge of the conviction of the licensee of any felony or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor, or any civil action settlement or administrative action resulting in a settlement worth $50,000 or more, or a binding arbitration or administrative action resulting in binding arbitration worth $25,000 or more, resulting from specified acts. Failure to comply with this requirement would be grounds for disciplinary action. The bill would also require any insurer providing professional liability insurance to a licensee or a state or local government agency that self-insures that licensee to, within 30 days of payment of all or any portion of a civil action settlement or binding arbitration award against the licensee, report to the registrar the name of the licensee, the amount of value of the settlement or binding arbitration award, the amount paid, and the identity of the payee. The bill would make these provisions operative if the Legislature appropriates moneys from the Contractors License Fund for these purposes and grants sufficient hiring authority to the board.

The bill would require the registrar to make available to the public all civil action settlements, binding arbitration awards, and administrative actions reported to it pursuant to these provisions that provision.

Under existing law, the Contractors State License Law, the Contractors State License Board is responsible for the licensure and regulation of contractors and is required to appoint a registrar of contractors. Existing law repeals these provisions establishing the board and requiring it to appoint a registrar on January 1, 2016.

This bill would extend these repeal dates to January 1, 2020.

Under existing law, the Contractors State License Law, the Contractors State License Board is responsible for the licensure and regulation of contractors and is required to appoint a registrar of contractors. Existing law repeals these provisions establishing the board and requiring it to appoint a registrar on January 1, 2016.

This bill would extend these repeal dates to January 1, 2020.

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2015 - 2016 Regular

Bill No: SB 465 Hearing Date: August 31, 2016

Subject: Building construction: contractors: discipline: reporting: building standards

SUMMARY:

Permits the Contractors State Licensing Board (CSLB or Board) to enter into an interagency agreement with state or local agencies to ensure that the Board receives specified disciplinary information relating to a contractor in a timely manner; requires a licensee to report to the CSLB the occurrence of any conviction of any felony or crime, as specified; requires the California Building Standards Commission (Commission) to convene a specified working group and recommend any statutory changes or changes to the California Building Standards Code (CBSC); requires the Division of Occupational Safety and Health (Division), after consultation with the CSLB, to transmit to the CSLB copies of any citations or other actions taken by the division against a contractor, as defined; and requires the CSLB to report the results of a study to determine if the CSLB's ability to protect the public would be enhanced by specified regulations.

NOTE: The Assembly amendments constitute a rewrite and this measure has been referred to this Committee pursuant to Senate Rule 29.10 (d) for consideration. The Committee may, by a vote of the majority, either: (1) hold the bill, or (2) return the bill to the Senate floor for consideration of the bill as amended in the Assembly.

Existing law:

1. Provides for the licensure and regulation of more than 300,000 contractors under the Contractors' State License Law by the CSLB within the Department of Consumer Affairs (DCA). The CSLB is under the direction of the Registrar of Contractors (Registrar). (Business and Professions Code (BPC) § 7000 et seq.)
2. Requires licensees to notify the Registrar in writing of any unsatisfied final judgment imposed on the licensee, and authorizes the Registrar to automatically suspend the license on the date the Registrar is informed of an unsatisfied final judgment if the licensee failed to notify the Registrar in writing within 90 days of that judgment, as specified. (BPC § 7071.17(b))
3. Provides that a conviction of a crime, substantially related to the qualifications, functions and duties of a contractor, constitutes a cause for disciplinary action, and that the record of the conviction shall be conclusive evidence thereof. (BPC § 7123)
4. Provides that a plea or verdict of guilty, or a conviction following a plea of nolo contendere, is deemed to be a conviction, and that the CSLB may order a license to be suspended or revoked, or may decline to issue a license, when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, as specified. (BPC § 7124)
5. Requires the Registrar to make available to the public the date, nature, and status of all complaints on file against a licensee that do either of the following:
   1. Have been referred for accusation; or,
   2. Have been referred for investigation, after a determination by CSLB enforcement staff, that a probable violation has occurred, and have been reviewed by a supervisor, and involve allegations that if proven would present a risk of harm to the public and would be appropriate for suspension or revocation of the contractor’s license or criminal prosecution. (BPC § 7124.6 (a))
6. Requires the CSLB to create a disclaimer to accompany the disclosure stating that it is an allegation and any other information the CSLB determines would be relevant to a person evaluating the complaint. (BPC § 7124.6 (b))
7. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC § 7124.6(c))
8. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:
   1. Limits the disclosure of legal actions for citations from the date of issuance for five years after the date of compliance if no additional disciplinary actions have been taken against the licensee during that period;
   2. Limits the disclosure of accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license from the date accusation is filed for seven years if no additional disciplinary actions have been taken against the licensee during that period; and,
   3. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC § 7124.6(e))
9. Provides that the Division of Occupational Safety and Health has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment. (Labor Code § 6307)
10. Creates the California Building Standards Commission under the Department of General Services. Provides that the Commission review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to the Commission for its approval, as provided. (Health and Safety Code § 18912;18931)

This bill:

1. Permits the CSLB to enter into an interagency agreement with any state or local agency the CSLB deems to be in possession of information relevant to its priority to protect the public.
2. Requires a licensee to report to the registrar of the CSLB in writing within 90 days after the licensee obtains knowledge of the occurrence of a conviction of any felony or a conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor.
3. Requires CSLB to consult with licensees, consumers, and other interested stakeholders in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018. Requires the CSLB to report to the Legislature, by January 1, 2018, the results of this study to determine if the Board’s ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims.
4. Requires that the records or documents obtained by the Board during the course of performing the study that are exempt from public disclosure under the California Public Records Act remain exempt from disclosure.
5. Requires the Commission to convene a working group to study recent exterior elevated element failures in California and requires the working group to report to the appropriate policy committees of the Legislature, by January 1, 2018, containing any findings and possible recommendations for statutory changes or changes to the CBSC.
6. Requires the working group to review related documents and reports, including, but not limited to, any available forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to make recommendations to the appropriate state agency or agencies for the development of proposed building standards for exterior elevated elements.
7. Requires the working group to solicit technical expertise as appropriate from, but not limited to, representatives from the Department of Housing and Community Development, the Division of the State Architect-Structural Safety, the Office of the State Fire Marshal, local building officials and plan checkers, structural engineers, apartment owners and managers, the building industry, the wood, steel and concrete industries, and any other interested parties.
8. Requires that if, at any time, it is determined by the working group that one or more changes to the CBSC are needed as soon as possible in order to protect the public, the working group will submit the recommended changes to the appropriate state agency or agencies for consideration as soon as possible.
9. Sunsets the composition and duties of the working group on January 1, 2018.
10. Requires the Division, after consultation with the CSLB, to transmit to the CSLB copies of any citations or other actions taken by the Division against a contractor as defined in the Contractors State License Law.
11. Provides that, by allowing records and documents exempt from disclosure to be shared with the Contractors’ State License Board and remain nonpublic under the Public Records Act, this act would encourage private individuals and entities to provide the board with information that is vital to the success of its study and report to determine whether additional regulations are appropriate. Provides that this act properly balances the public’s right to access to public records in the possession of the Board with the need for the state to obtain otherwise private information.

FISCAL EFFECT: According to the Assembly Committee on Appropriations analysis on August 10, 2016, this bill would result in total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB for enforcement staffing costs, Attorney General referral costs and reporting costs necessary to implement the requirements of this bill. The analysis notes that the bill will also result in annual ongoing costs to the Commission of approximately $193,000 for the development and ongoing maintenance required of additional building standards.

COMMENTS:

1. Purpose. The Author is the sponsor of this bill. According to the Author, “Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire.”
2. Background. According to the Author, this bill establishes greater accountability for contractors by ensuring the public has critical disciplinary information about licensees. As an example of this need for transparency, the Author notes the tragic Berkeley, California balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB was unaware of these settlements because licensees are not required by law to report to the Registrar the result of settlements that are not handled directly by the CSLB. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.
3. Complaint Investigation Process. The Registrar of the CSLB is required to make available to the public complaints if those complaints are referred for investigation to the Attorney General. These complaints typically present a risk of harm to the public and would be appropriate for suspension or revocation of the licensee, or criminal prosecution. This process is further detailed in BPC § 7124.6.

Similar to other regulatory entities, in order to determine whether a complaint is appropriate for investigation, the CSLB reviews information on a case-by-case basis, looking at such factors as the severity of the allegations, and whether a licensee has a history of complaints or discipline. Licensees are required to report unsatisfied final judgments to the CSLB (BPC § 7071.17) and are required to disclose convictions when applying for licensure. For licensees that have already been fingerprinted by the CSLB, the CSLB will receive notifications from the Department of Justice when that licensee is the subject to additional criminal action; however, not all licensees have submitted their fingerprints to the CSLB.

1. California Building Standards Commission (Commission). The Commission is responsible for developing building standards for state owned buildings, including University and State College buildings, and for developing green building standards for most buildings except for housing, public schools, and hospitals. The Commission publishes the CBSC every three years and its supplements, such as the California Green Building Standards Code, in intervening years.
2. Similar Reporting Requirements Exist for Other Professions. Architects, and the companies that insure them, are required to report to the California Architects Board any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is five thousand dollars ($5,000) or greater (BPC § 5588). The report is made within 30 days of payment of all or any portion of the action. This requirement also applies if a party to these actions is or was a sole proprietorship, partnership, firm, corporation, or state or local governmental agency in which a licensee is or was an owner, partner, member, officer, or employee and is or was a licensee in responsible control of that portion of the project that was the subject of the action(s). The licensee will not be found to have violated a confidential settlement agreement or other confidential agreement by providing a report to the CSLB.

Similar reporting requirements exist for other licensed professionals, including engineers (BPC § 6770), land surveyors (BPC § 8776), medical professionals
(BPC § 801), and accountants (BPC § 5063).

1. Informational Hearing. On April 26, 2016, the Senate Committee on Business, Professions, and Economic Development held an informational hearing on the Berkeley Balcony Collapse and discussed what next steps the Legislature should take to ensure the public’s protection against shoddy workmanship. While the hearing discussed a broad range of issues, it was agreed upon that this issue of reporting requirements for contractors required additional conversations and the inclusion of all interested stakeholders.
2. Arguments in Support. The California Newspapers Publishers Association writes in support, “By requiring contractors to report this information, [this bill] will improve oversight of these operations and assist the public in identifying repeat offenders, or the existence of unsafe and unsettling patterns and practices in the industry.”

The Center for Public Interest Law writes in support, “Whereas in every other example, the requirements for self-reporting are set by fiat, in statute, by the Legislature, the author has amended SB 465 to empower the expert CSLB to simply to review the issue and offer its nonbinding observations…”

The Conference of California Bar Associations writes in support, “For far too long, contractors, builders and their lawyers, in cooperation with plaintiffs and their lawyers, have been able to keep the facts about substandard, dangerous and toxic conditions secret from public view by agreeing to settlements in public litigation that keep the facts of the case secret. [This bill] would take a small but crucial step towards increased public protection by laying the groundwork for prohibiting these dangerous secrets relating to builders and contractors from being hidden from the [CSLB].”

SUPPORT AND OPPOSITION:

Support:

California Newspaper Publishers Association

Center for Public Interest Law

City of Berkeley, Office of the Mayor

Consulate General of Ireland

The Conference of California Bar Associations

Victims’ Families

Opposition:

None on file as of August 29, 2016.

-- END --

 UNFINISHED BUSINESS  

Bill No: SB 465

Author:

:

Vote:

PRIOR VOTES NOT RELEVANT

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: (pursuant to Senate Rule 29.10) (ROLL CALL NOT AVAILABLE)

ASSEMBLY FLOOR: 62-0, 8/31/16 (ROLL CALL NOT AVAILABLE)

SUBJECT:

SOURCE: Author

DIGEST: This bill permits the Contractors State Licensing Board (CSLB or Board) to enter into an interagency agreement with state or local agencies to ensure that the Board receives specified disciplinary information relating to a contractor in a timely manner; requires a licensee to report to the CSLB the occurrence of any conviction of any felony or crime, as specified; requires the California Building Standards Commission (CBSC) to convene a specified working group and recommend any statutory changes or changes to CBSC; requires the Division of Occupational Safety and Health (Division), after consultation with the CSLB, to transmit to the CSLB copies of any citations or other actions taken by the Division against a contractor, as defined; and requires the CSLB to report the results of a study to determine if the CSLB's ability to protect the public would be enhanced by specified regulations.

Assembly Amendments delete the Senate version of the bill, dealing with the sunset extension of the CSLB, and instead add the current language.

ANALYSIS:

Existing law:

1. Provides for the licensure and regulation of more than 300,000 contractors under the Contractors' State License Law by the CSLB within the Department of Consumer Affairs. The CSLB is under the direction of the Registrar of Contractors (Registrar). (Business and Professions Code (BPC) § 7000 et seq.)
2. Requires licensees to notify the Registrar in writing of any unsatisfied final judgment imposed on the licensee, and authorizes the Registrar to automatically suspend the license on the date the Registrar is informed of an unsatisfied final judgment if the licensee failed to notify the Registrar in writing within 90 days of that judgment, as specified. (BPC § 7071.17(b))
3. Provides that a conviction of a crime, substantially related to the qualifications, functions and duties of a contractor, constitutes a cause for disciplinary action, and that the record of the conviction shall be conclusive evidence thereof. (BPC § 7123)
4. Provides that a plea or verdict of guilty, or a conviction following a plea of nolo contendere, is deemed to be a conviction, and that the CSLB may order a license to be suspended or revoked, or may decline to issue a license, when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, as specified. (BPC § 7124)
5. Requires the Registrar to make available to the public the date, nature, and status of all complaints on file against a licensee that do either of the following:
   1. Have been referred for accusation; or,
   2. Have been referred for investigation, after a determination by CSLB enforcement staff, that a probable violation has occurred, and have been reviewed by a supervisor, and involve allegations that if proven would present a risk of harm to the public and would be appropriate for suspension or revocation of the contractor’s license or criminal prosecution.
      (BPC § 7124.6 (a))
6. Requires the CSLB to create a disclaimer to accompany the disclosure stating that it is an allegation and any other information the CSLB determines would be relevant to a person evaluating the complaint. (BPC § 7124.6 (b))
7. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC § 7124.6(c))
8. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:
   1. Limits the disclosure of legal actions for citations from the date of issuance for five years after the date of compliance if no additional disciplinary actions have been taken against the licensee during that period;
   2. Limits the disclosure of accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license from the date accusation is filed for seven years if no additional disciplinary actions have been taken against the licensee during that period; and,
   3. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC § 7124.6(e))
9. Provides that the Division has the power, jurisdiction, and supervision over every employment and place of employment in this state, which is necessary to adequately enforce and administer all laws and lawful standards and orders, or special orders requiring such employment and place of employment to be safe, and requiring the protection of the life, safety, and health of every employee in such employment or place of employment. (Labor Code § 6307)
10. Creates CBSC under the Department of General Services. Provides that CBSC review the standards of adopting state agencies and approve, return for amendment with recommended changes, or reject building standards submitted to CBSC for its approval, as provided. (Health and Safety Code § 18912;18931)

This bill:

1. Permits the CSLB to enter into an interagency agreement with any state or local agency the CSLB deems to be in possession of information relevant to its priority to protect the public.
2. Requires a licensee to report to the Registrar of the CSLB in writing within 90 days after the licensee obtains knowledge of the occurrence of a conviction of any felony or a conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor.
3. Requires CSLB to consult with licensees, consumers, and other interested stakeholders in order to prepare a study of judgments, arbitration awards, and settlements that were the result of claims for construction defects for rental residential units and, by January 1, 2018. Requires the CSLB to report to the Legislature, by January 1, 2018, the results of this study to determine if the Board’s ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims.
4. Requires that the records or documents obtained by the Board during the course of performing the study that are exempt from public disclosure under the California Public Records Act remain exempt from disclosure.
5. Requires CBSC to convene a working group to study recent exterior elevated element failures in California and requires the working group to report to the appropriate policy committees of the Legislature, by January 1, 2018, containing any findings and possible recommendations for statutory changes or changes to the CBSC.
6. Requires the working group to review related documents and reports, including, but not limited to, any available forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to make recommendations to the appropriate state agency or agencies for the development of proposed building standards for exterior elevated elements.
7. Requires the working group to solicit technical expertise as appropriate from, but not limited to, representatives from the Department of Housing and Community Development, the Division of the State Architect-Structural Safety, the Office of the State Fire Marshal, local building officials and plan checkers, structural engineers, apartment owners and managers, the building industry, the wood, steel and concrete industries, and any other interested parties.
8. Requires that if, at any time, it is determined by the working group that one or more changes to the CBSC are needed as soon as possible in order to protect the public, the working group will submit the recommended changes to the appropriate state agency or agencies for consideration as soon as possible.
9. Sunsets the composition and duties of the working group to January 1, 2018.
10. Requires the Division, after consultation with the CSLB, to transmit to the CSLB copies of any citations or other actions taken by the Division against a contractor as defined in the Contractors State License Law.
11. Provides that, by allowing records and documents exempt from disclosure to be shared with the CSLB and remain nonpublic under the Public Records Act, this act would encourage private individuals and entities to provide the Board with information that is vital to the success of its study and report to determine whether additional regulations are appropriate. Provides that this act properly balances the public’s right to access to public records in the possession of the Board with the need for the state to obtain otherwise private information.

Background

According to the author, “Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire.”

According to the author, this bill establishes greater accountability for contractors by ensuring the public has critical disciplinary information about licensees. As an example of this need for transparency, the author notes the tragic Berkeley, California balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB was unaware of these settlements because licensees are not required by law to report to the Registrar the result of settlements that are not handled directly by the CSLB. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.

Informational hearing. On April 26, 2016, the Senate Committee on Business, Professions, and Economic Development held an informational hearing on the Berkeley Balcony Collapse and discussed what next steps the Legislature should take to ensure the public’s protection against shoddy workmanship. While the hearing discussed a broad range of issues, it was agreed upon that this issue of reporting requirements for contractors required additional conversations and the inclusion of all interested stakeholders.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee, this bill would result in total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB for enforcement staffing costs, Attorney General referral costs and reporting costs necessary to implement the requirements of this bill. The bill will also result in annual ongoing costs to CBSC of approximately $193,000 for the development and ongoing maintenance required of additional building standards.

SUPPORT: (Verified 8/30/16)

California Newspaper Publishers Association

Center for Public Interest Law

City of Berkeley, Office of the Mayor

Consulate General of Ireland

The Conference of California Bar Associations

Victims’ Families

OPPOSITION: (Verified 8/30/16)

None received

ARGUMENTS IN SUPPORT: The California Newspapers Publishers Association writes in support, “By requiring contractors to report this information, [this bill] will improve oversight of these operations and assist the public in identifying repeat offenders, or the existence of unsafe and unsettling patterns and practices in the industry.”

The Center for Public Interest Law writes in support, “Whereas in every other example, the requirements for self-reporting are set by fiat, in statute, by the Legislature, the author has amended SB 465 to empower the expert CSLB to simply to review the issue and offer its nonbinding observations…”

The Conference of California Bar Associations writes in support, “For far too long, contractors, builders and their lawyers, in cooperation with plaintiffs and their lawyers, have been able to keep the facts about substandard, dangerous and toxic conditions secret from public view by agreeing to settlements in public litigation that keep the facts of the case secret. [This bill] would take a small but crucial step towards increased public protection by laying the groundwork for prohibiting these dangerous secrets relating to builders and contractors from being hidden from the [CSLB].”

Prepared by:

8/31/16 21:29:58

**** END ****

SENATE THIRD READING

STR Bill Id:SB 465

Author:(Hill and Hancock)

As Amended Ver:August 29, 2016

Majority vote

SENATE VOTE: 40-0

SUMMARY: Requires the Division of Occupational Safety and Health (division), after consultation with the Contractors State Licensing Board (CSLB), to transmit to the CSLB copies of any citations or other actions taken by the division against a contractor, as defined; permits the CSLB to enter into an interagency agreement with state or local agencies, as necessary, to ensure that specified disciplinary information relating to a contractor is timely reported to the board; requires a licensee to report to the CSLB the occurrence of any conviction of any felony or crime, as specified; requires the California Building Standards Commission (Commission) to convene a specified working group and recommend any statutory changes or changes to the California Building Standards Code (CBSC); and requires the CSLB to report the results of a study to determine if the CSLB's ability to protect the public would be enhanced by specified regulations. Specifically, this bill:

1. Requires the division, after consultation with the CSLB, to transmit to the CSLB copies of any citations or other actions taken by the division against a contractor, as defined.
2. Permits the CSLB to enter into an interagency agreement with any state or local agency the CSLB deems to be in possession of information relevant to its priority to protect the public.
3. Requires a licensee to report to the registrar of the CSLB in writing within 90 days after the licensee obtains knowledge of the occurrence of a conviction of any felony or a conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor.
4. Requires the Commission to convene a working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements and requires the working group to report to the appropriate policy committees of the Legislature containing any findings and possible recommendations for statutory changes or changes to the CBSC. By January 1, 2018, the bill would also require the working group to provide that report to the appropriate policy committees of the Legislature.
5. Requires the working group to include, but not be limited to, representatives from the Department of Housing and Community Development, the Division of the State Architect-Structural Safety, the Office of the State Fire Marshal, local building officials and plan checkers, structural engineers, apartment owners and managers, the building industry, the wood, steel and concrete industries, and any other interested parties.
6. Requires the working group to review related documents and reports, including, but not limited to, any available forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to make recommendations to the appropriate state agency or agencies for the development of proposed building standards for exterior elevated elements.
7. Requires the CSLB, by January 1, 2018, to report to the Legislature the results of a study to determine if the CSLB's ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims over a certain amount as determined by the CSLB. This bill would require the CSLB to consult with licensees, consumers, and other interested stakeholders during the development of the study.

FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill will result in:

1. Total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB for enforcement staffing costs, Attorney General referral costs, and reporting costs necessary to implement the requirements of this bill.
2. Annual ongoing costs to the Commission of approximately $193,000 for the development and ongoing maintenance required of additional building standards.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, this bill is needed to amend state law because, "Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire."

Background. According to the author, this bill establishes greater accountability for contractors by ensuring the public has critical disciplinary information about licensees. As an example of this need for transparency, the author notes the tragic Berkeley, California balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB remained ignorant of such settlements because licensees are not required by law to report to the registrar the result of settlements that are not handled directly by the CSLB. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.

Complaint Investigation Process. The registrar of the CSLB is required to make available to the public civil action settlements, binding arbitration awards, and administrative actions that are required to be reported to the CSLB if the CSLB refers those settlements or arbitration awards for investigation that a probable violation has occurred and involves allegations that, if proven, would present a risk of harm to the public and would be appropriate for suspension or revocation of the licensee, or criminal prosecution.

Similar to other regulatory entities, in order to determine whether a complaint is appropriate for investigation, the CSLB reviews information on a case-by-case basis, looking at such factors as the severity of the allegations, and whether a licensee has a history of complaints or discipline. Licensees are required to report unsatisfied final judgments to the CSLB, and are required to disclose convictions when applying for licensure. For licensees that have already been fingerprinted by the CSLB, the CSLB will receive notifications from the Department of Justice when that licensee is the subject to additional criminal action; however, not all licensees have submitted their fingerprints to the CSLB.

California Building Standards Commission (Commission). The Commission is responsible for developing building standards for state owned buildings, including University and State College buildings, and for developing green building standards for most buildings except for housing, public schools, and hospitals. The Commission publishes the CBSC every three years and its supplements, such as the California Green Building Standards Code, in intervening years.

Similar Reporting Requirements Exist for Other Professions. Architects, and the companies that insure them, are required to report to the California Architects Board, any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is $5,000 or greater. The report is made within 30 days of payment of all or any portion of the action. This requirement also applies if a party to these actions is or was a sole proprietorship, partnership, firm, corporation, or state or local governmental agency in which a licensee is or was an owner, partner, member, officer, or employee and is or was a licensee in responsible control of that portion of the project that was the subject of the action(s). The licensee will not be found to have violated a confidential settlement agreement or other confidential agreement by providing a report to the CSLB.

Similar reporting requirements exist for other licensed professionals, including engineers (Business and Professions Code (BPC) Section 6770), land surveyors (BPC Section 8776), medical professionals (BPC Section 801), and accountants (BPC Section 5063).

Analysis Prepared by: Gabby Nepomuceno / B. & P. / (916) 319-3301 FN: 0004940

Date of Hearing: August 24, 2016

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Rudy Salas, Chair

SBPCA Bill Id:SB 465

Author:(Hill) – As Amended Ver:August 19, 2016

SENATE VOTE: 40-0 [vote not reflective of this bill version]

SUBJECT: Building construction: contractors: discipline: reporting: building standards.

SUMMARY: Requires the Contractors State Licensing Board (CSLB) to enter into an interagency agreement with state or local agencies, as necessary, to ensure that specified disciplinary information relating to a contractor is timely reported to the board; requires a licensee to report to the CSLB the occurrence of any conviction of any felony or crime, as specified; requires the California Building Standards Commission (Commission) to convene a specified working group and recommend any statutory changes or changes to the California Building Standards Code (CBSC); and requires the CSLB to report the results of a study to determine if the CSLB's ability to protect the public would be enhanced by specified regulations.

EXISTING LAW:

1. Provides for the licensure and regulation of more than 300,000 contractors under the Contractors' State License Law by the CSLB within the Department of Consumer Affairs (DCA). The CSLB is under the direction of the registrar of contractors (Registrar). (Business and Professions Code (BPC) Section 7000 et seq.)
2. Requires licensees to notify the Registrar in writing of any unsatisfied final judgment imposed on the licensee, and authorizes the Registrar to automatically suspend the license on the date the Registrar is informed of an unsatisfied final judgment if the licensee failed to notify the Registrar in writing within 90 days of that judgment, as specified. (BPC Section 7071.17(b))
3. Provides that a conviction of a crime, substantially related to the qualifications, functions and duties of a contractor, constitutes a cause for disciplinary action, and that the record of the conviction shall be conclusive evidence thereof. (BPC Section 7123)
4. Provides that a plea or verdict of guilty, or a conviction following a plea of nolo contendere, is deemed to be a conviction, and that the CSLB may order a license to be suspended or revoked, or may decline to issue a license, when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, as specified. (BPC Section 7124)
5. Requires the Registrar to make available to the public the date, nature, and status of all complaints on file against a licensee that do either of the following:
   1. Have been referred for accusation; or,
   2. Have been referred for investigation, after a determination by CSLB enforcement staff, that a probable violation has occurred, and have been reviewed by a supervisor, and involve allegations that if proven would present a risk of harm to the public and would be appropriate for suspension or revocation of the contractor’s license or criminal prosecution. (BPC Section 7124.6 (a))
6. Requires the CSLB to create a disclaimer that shall accompany the disclosure stating that it is an allegation and any other information the CSLB determines would be relevant to a person evaluating the complaint. (BPC Section 7124.6 (b))
7. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC Section 7124.6(c))
8. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:
   1. Limits the disclosure of legal actions for citations from the date of issuance for five years after the date of compliance if no additional disciplinary actions have been taken against the licensee during that period;
   2. Limits the disclosure of accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license from the date accusation is filed for seven years if no additional disciplinary actions have been taken against the licensee during that period; and,
9. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC Section 7124.6(e))

THIS BILL:

1. Requires the CSLB, by January 1, 2018, to enter into an interagency agreement with the Division of Occupational Safety and Health (DOSH) to ensure that specified administrative information relating to a licensed contractor is timely reported to the CSLB; requires, at that time, the CSLB to enter into an interagency agreement with any other state or local agency the CSLB deems to be in possession of information relevant to its priority to protect the public.
2. Requires a licensee to report to the registrar of the CSLB in writing within 90 days after the licensee obtains knowledge of the occurrence of a conviction of any felony or a conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor..
3. Requires the Commission to convene a working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements and requires the working group to report to the Commission any findings and possible recommendations for statutory changes or changes to the CBSC. By January 1, 2018, the bill would also require the working group to provide that report to the Senate Committee on Business, Professions, and Economic Development.
4. Requires the working group to include, but not be limited to, representatives from state government entities, building officials, engineers, construction industry, and any other interested parties.
5. Requires the working group to review related documents and reports, including, but not limited to, forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to determine if any changes need to be made to the construction specifications or inspection requirements, excluding routine inspections that occur after project completion, contained within the CBSC and requires the working group to submit any changes that are needed as soon as possible to the Commission for consideration as soon as possible.
6. Requires the CSLB, by January 1, 2018, to report to the Legislature the results of a study to determine if the CSLB’s ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims over a certain amount as determined by the CSLB. This bill would require the CSLB to consult with licensees, insurers, consumers, and other interested parties during the development of the study.

FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill will result in:

1. Total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB for enforcement staffing costs, Attorney General referral costs, and reporting costs necessary to implement the requirements of this bill.
2. Annual ongoing costs to the Commission of approximately $193,000 for the development and ongoing maintenance required of additional building standards.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, this bill is needed to amend state law because, “Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire.”

Background. According to the author, this bill establishes greater accountability for contractors by ensuring the public has critical disciplinary information about licensees. As an example of this need for transparency, the author notes the tragic Berkeley, California balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB remained ignorant of such settlements because licensees are not required by law to report to the registrar the result of settlements that are not handled directly by the CSLB. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.

Complaint Investigation Process. The registrar of the CSLB is required to make available to the public civil action settlements, binding arbitration awards, and administrative actions that are required to be reported to the CSLB if the CSLB refers those settlements or arbitration awards for investigation that a probable violation has occurred and involves allegations that, if proven, would present a risk of harm to the public and would be appropriate for suspension or revocation of the licensee, or criminal prosecution.

Similar to other regulatory entities, in order to determine whether a complaint is appropriate for investigation, the CSLB reviews information on a case-by-case basis, looking at such factors as the severity of the allegations, and whether a licensee has a history of complaints or discipline. Licensees are required to report unsatisfied final judgments to the CSLB, and are required to disclose convictions when applying for licensure. For licensees that have already been fingerprinted by the CSLB, the CSLB will receive notifications from the Department of Justice when that licensee is the subject to additional criminal action; however, not all licensees have submitted their fingerprints to the CSLB.

California Building Standards Commission (Commission). The Commission is responsible for developing building standards for state owned buildings, including University and State College buildings, and for developing green building standards for most buildings except for housing, public schools, and hospitals. The Commission publishes the CBSC every three years and its supplements, such as the California Green Building Standards Code, in intervening years.

Similar Reporting Requirements Exist for Other Professions. Architects, and the companies that insure them, are required to report to the California Architects Board, any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is five thousand dollars ($5,000) or greater. The report is made within 30 days of payment of all or any portion of the action. This requirement also applies if a party to these actions is or was a sole proprietorship, partnership, firm, corporation, or state or local governmental agency in which a licensee is or was an owner, partner, member, officer, or employee and is or was a licensee in responsible control of that portion of the project that was the subject of the action(s). The licensee will not be found to have violated a confidential settlement agreement or other confidential agreement by providing a report to the CSLB.

Similar reporting requirements exist for other licensed professionals, including engineers (BPC Section 6770), land surveyors (BPC Section 8776), medical professionals (BPC Section 801), and accountants (BPC Section 5063).

ARGUMENTS IN SUPPORT:

The California Newspapers Publishers Association writes in support, “By requiring contractors to report this information, [this bill] will improve oversight of these operations and assist the public in identifying repeat offenders, or the existence of unsafe and unsettling patterns and practices in the industry.”

The Center for Public Interest Law writes in support, “Whereas in every other example, the requirements for self-reporting are set by fiat, in statute, by the Legislature, the author has amended SB 465 to empower the expert CSLB to simply to review the issue and offer its nonbinding observations…”

The Conference of California Bar Associations writes in support, “For far too long, contractors, builders and their lawyers, in cooperation with plaintiffs and their lawyers, have been able to keep the facts about substandard, dangerous and toxic conditions secret from public view by agreeing to settlements in public litigation that keep the facts of the case secret. [This bill] would take a small but crucial step towards increased public protection by laying the groundwork for prohibiting these dangerous secrets relating to builders and contractors from being hidden from the [CSLB].”

ARGUMENTS IN OPPOSITION:

None on file.

AMENDMENTS:

To address implementation issues in this bill, the author should amend this bill as follows:

1. On page 3, before line 1, insert:

Section 6313.5 of the Labor Code is amended to read:

6313.5. The division division, after consultation with the Contractor’s State License Board, shall transmit to the Registrar of the Contractors Contractor’s State License Board copies of any reports made in any investigation conducted pursuant to subdivision (a) of Section 6313, and may upon its own motion or at the request of the Registrar of Contractors, transmit copies of any other reports made in any investigation conducted pursuant to subdivision (b) of Section 6313 involving a contractor licensed pursuant to citations or other actions taken by the division against a contractor as defined in the Contractor’s State License Law (Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code).

1. On page 3, line 3, strike out “(a) By January 1, 2018, the board shall enter into an”, and strike out lines 4 through 7 inclusive.
2. On page 4, strike out lines 1 and 2, in line 3, strike out “(b) By January 1, 2018, the board shall” and insert “The board may”
3. On page 4, line 17, strike out “licensees and consumers” and insert “licensees, consumer, and other interested stakeholders”
4. On page 5, in line 6, strike out “(a) The California Building Standards Commission”, strike out lines 7 to 9, inclusive, and insert:

(a) By January 1, 2018, the working group formed by the California Building Standards Commission to study recent exterior elevated element failures in California shall submit a report to the appropriate policy committees of the Legislature containing any findings and possible recommendations for statutory changes or changes to the California Building Standards Code.

(b) The working group shall review related documents and reports, including, but not limited to, any available forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to make recommendations to the appropriate state agency or agencies for the development of proposed building standards for exterior elevated elements.

1. On page 5, strike lines 10 through 18, inclusive, and insert:

(c) The working group shall solicit technical expertise as appropriate from, but not limited to, representatives from the Department of Housing and Community Development, the Division of the State Architect-Structural Safety, the Office of the State Fire Marshal, local building officials and plan checkers, structural engineers, apartment owners and managers, the building industry, the wood, steel and concrete industries, and any other interested parties.

1. On page 5, strike out lines 19 through 27, inclusive.
2. On page 5, strike out lines 28 through 33, inclusive.
3. On page 5, in line 34, strike “(2) Notwithstanding paragraph (1)” and insert “(d) Notwithstanding the deadline in subdivision (a),”
4. On page 5, strike lines 38 and 39, and insert:

Recommended changes to the appropriate state agency or agencies for consideration as soon as possible according to this part.

(e) This section shall remain in effect only until January 1, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date.

1. On page 6, strike out lines 19-23, inclusive.
2. Make other technical and conforming changes.

REGISTERED SUPPORT:

California Newspapers Publishers Association

Center for Public Interest Law

Conference of California Bar Associations

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Gabby Nepomuceno / B. & P. / (916) 319-3301

SENATE THIRD READING

STR Bill Id:

Author:(Hill and Hancock)

As Amended Ver:August 15, 2016

Majority vote

SENATE VOTE: 40-0

SUMMARY: Requires the Contractors State Licensing Board (CSLB) to enter into an interagency agreement with state or local agencies, as necessary, to ensure that specified disciplinary information relating to a contractor is timely reported to the board; requires a licensee to report to the CSLB the occurrence of any conviction of any felony or crime, as specified; requires the California Building Standards Commission (Commission) to convene a specified working group and recommend any statutory changes or changes to the California Building Standards Code (CBSC); and requires the CSLB to report the results of a study to determine if the CSLB's ability to protect the public would be enhanced by specified regulations. Specifically, this bill:

1. Requires the CSLB, by January 1, 2018, to enter into an interagency agreement with the Division of Occupational Safety and Health (DOSH) to ensure that specified administrative information relating to a licensed contractor is timely reported to the CSLB; requires, at that time, the CSLB to enter into an interagency agreement with any other state or local agency the CSLB deems to be in possession of information relevant to its priority to protect the public.
2. Requires a licensee to report to the registrar of the CSLB in writing within 90 days after the licensee obtains knowledge of the occurrence of a conviction of any felony or a conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor..
3. Requires the Commission to convene a working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements and requires the working group to report to the Commission any findings and possible recommendations for statutory changes or changes to the CBSC. By January 1, 2018, this bill would also require the working group to provide that report to the Senate Business, Professions, and Economic Development Committee.
4. Requires the working group to include, but not be limited to, representatives from the Department of Housing and Community Development, the Division of the State Architect-Structural Safety, the Office of the State Fire Marshal, local building officials and plan checkers, structural engineers, apartment owners and managers, building industry, wood, steel and concrete industries, and any other interested parties.
5. Requires the working group to review related documents and reports, including, but not limited to, forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to determine if any changes need to be made to the construction specifications or inspection requirements, excluding routine inspections that occur after project completion, contained within the CBSC and requires the working group to submit any changes that are needed as soon as possible to the Commission for consideration as soon as possible.
6. Requires the CSLB, by January 1, 2018, to report to the Legislature the results of a study to determine if the CSLB's ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards, or settlement payments of those claims over a certain amount as determined by the CSLB. This bill would require the CSLB to consult with licensees, insurers, consumers, and other interested parties during the development of the study.

FISCAL EFFECT: According to the Assembly Appropriations Committee, this bill will result in:

1. Total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB (special funds) for enforcement staffing costs, Attorney General referral costs, and reporting costs necessary to implement the requirements of this bill.
2. Annual ongoing costs to the Commission of approximately $193,000 for the development and ongoing maintenance required of additional building standards (special funds).

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, this bill is needed to amend state law because, "Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire."

Background. According to the author, this bill establishes greater accountability for contractors by ensuring the public has critical disciplinary information about licensees. As an example of this need for transparency, the author notes the tragic Berkeley, California balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB remained ignorant of such settlements because licensees are not required by law to report to the registrar the result of settlements that are not handled directly by the CSLB. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.

Complaint Investigation Process. The registrar of the CSLB is required to make available to the public civil action settlements, binding arbitration awards, and administrative actions that are required to be reported to the CSLB if the CSLB refers those settlements or arbitration awards for investigation that a probable violation has occurred and involves allegations that, if proven, would present a risk of harm to the public and would be appropriate for suspension or revocation of the licensee, or criminal prosecution.

Similar to other regulatory entities, in order to determine whether a complaint is appropriate for investigation, the CSLB reviews information on a case-by-case basis, looking at such factors as the severity of the allegations, and whether a licensee has a history of complaints or discipline. Licensees are required to report unsatisfied final judgments to the CSLB, and are required to disclose convictions when applying for licensure. For licensees that have already been fingerprinted by the CSLB, the CSLB will receive notifications from the Department of Justice when that licensee is the subject to additional criminal action; however, not all licensees have submitted their fingerprints to the CSLB.

California Building Standards Commission. The Commission is responsible for developing building standards for state owned buildings, including University and State College buildings, and for developing green building standards for most buildings except for housing, public schools, and hospitals. The Commission publishes the CBSC every three years and its supplements, such as the California Green Building Standards Code, in intervening years.

Similar Reporting Requirements Exist for Other Professions. Architects, and the companies that insure them, are required to report to the California Architects Board, any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is $5,000 or greater. The report is made within 30 days of payment of all or any portion of the action. This requirement also applies if a party to these actions is or was a sole proprietorship, partnership, firm, corporation, or state or local governmental agency in which a licensee is or was an owner, partner, member, officer, or employee and is or was a licensee in responsible control of that portion of the project that was the subject of the action(s). The licensee will not be found to have violated a confidential settlement agreement or other confidential agreement by providing a report to the CSLB.

Similar reporting requirements exist for other licensed professionals, including engineers (Business and Professions Code (BPC) Section 6770), land surveyors (BPC Section 8776), medical professionals (BPC Section 801), and accountants (BPC Section 5063).

Analysis Prepared by: Gabby Nepomuceno / B. & P. / (916) 319-3301 FN: 0004198

Le Ondra Clark Harvey Ph.D.

Date of Hearing: August 10, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 465

Author:(Hill) – As Amended Ver:August 1, 2016

Urgency: No State Mandated Local Program: Yes Reimbursable: Yes

SUMMARY:

This bill requires contractors to report specific disciplinary information to the Contractors State Licensing Board (CSLB), and requires the CSLB to conduct a study to determine if CSLB's ability to protect the public could be improved, as specified. Specifically, this bill:

1. This bill requires the CSLB, by January 1, 2018, to enter into an interagency agreement with the Division of Occupational Safety and Health (DOSH) and other state or local agencies, as necessary, to ensure information relevant to CSLBs duty to protect the public is reported to the board in a timely manner.
2. Requires a licensee, within 90 days, to report to the Registrar of the CSLB in writing the occurrence of any conviction of any felony or conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor.
3. Requires the CSLB to report to the Legislature the results of a study determining if the CSLB's ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards against them, or settlement payments of claims for construction defects they have made in excess of a certain amount to be determined by the board.
4. Requires records or documents obtained by CSLB during the course of the study that are exempt from public disclosure to remain exempt.
5. Requires the California Building Standards Commission (Commission) to convene a working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements, and recommend any statutory changes or changes to the California Building Standards Code and requires the working group, by January 1, 2018, to provide a report to the Senate Committee on Business, Professions, and Economic Development.

FISCAL EFFECT:

1. Total costs of approximately $540,000 in 2017-18 and $490,000 ongoing to the CSLB (special funds) for enforcement staffing costs, Attorney General referral costs, and reporting costs necessary to implement the requirements of this bill.
2. Annual ongoing costs to the Commission of approximately $193,000 for the development and ongoing maintenance required of additional building standards (special funds).

COMMENTS:

1. Purpose. According to the author, “Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire.”
2. Background. On June 16, 2015, a balcony at Library Gardens Apartments in Berkeley, California collapsed, killing six students and injuring seven others. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years. Current law does not require contractors to report defect settlements to the CSLB.

In response to this incident, the City of Berkeley tightened and approved new building standards. The City Council voted to require that new balconies be made of corrosion-resistant material and be ventilated to prevent a buildup of moisture. At the time, the council also mandated that all balconies be inspected within the subsequent six months, and every three years after that.

According to the author, on April 19, 2016, the California Building Standards Commission formally voted to assemble an ad hoc committee to examine the facts of the Berkeley balcony collapse and determine whether the Building Standards Code needs to be updated. In July of 2015, the Berkeley City Council sent a letter to CLSB urging them to revise Code to require steel reinforcements on all new balcony designs, after experts determined dry rot was the cause of the balcony collapse.

1. Arguments in Support: The California Newspapers Publishers Association writes in support, “By requiring contractors to report this information, this bill will improve oversight of these operations and assist the public in identifying repeat offenders, or the existence of unsafe and unsettling patterns and practices in the industry.”

The Conference of California Bar Associations (CCBA) writes in support, “For far too long, contractors, builders and their lawyers, in cooperation with plaintiffs and their lawyers, have been able to keep the facts about substandard, dangerous and toxic conditions secret from public view by agreeing to settlements in public litigation that keep the facts of the case secret. This bill would take a small but crucial step towards increased public protection by laying the groundwork for prohibiting these dangerous secrets relating to builders and contractors from being hidden from the CSLB.”

1. Arguments in Opposition. A coalition of builders and contractors are opposed –unless-amended, stating “The requirements in the bill that CSLB gather information on construction defect case results will not provide the Board with leads that have any significant chance of identifying bad actors. Instead, it will only result in a waste of staff time and resources.”
2. Prior Legislation.
3. SB 467 (Hill), Chapter 656, Statutes of 2015, among other things, extends the sunset date for the CSLB until January 1, 2020, repeals a requirement relating to evidence of financial solvency, and increases the amount for a licensee to be bonded from $12,500 to $15,000, as specified.
4. AB 2570 (Hill), Chapter 561, Statutes of 2012, prohibited licensees of any board, bureau or program under the DCA from including a “regulatory gag clause” in civil settlement agreements.
5. SB 679 (Berryhill), Chapter 471, Statutes of 2013, revised the monetary threshold for a licensed engineer or land surveyor to report a civil action settlement or administrative action to the Board for Professional Engineers, Land Surveyors, and Geologists (BPELSG), and required a licensed engineer or land surveyor to report any civil action judgment or binding arbitration award or administrative action of $25,000 or greater.
6. SB 1549 (Figueroa), Chapter 691, Statutes of 2004, required licensed engineers and land surveyors to report to the BPESLG a felony conviction or a civil judgment, settlement, arbitration award, or administrative action award of $50,000 or more, occurring on or after July 1, 2006, if funds are appropriated for that purpose, as specified, and required a court rendering the judgment or conviction and a local agency, if self-insured, to report to the board.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: June 21, 2016

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Rudy Salas, Chair

SBPCA Bill Id:SB 465

Author:(Hill) – As Amended Ver:June 8, 2016

SENATE VOTE: 40-0 [vote not reflective of this bill version]

SUBJECT: Building construction: contractors: discipline: reporting: building standards

SUMMARY: Requires the Contractors State Licensing Board (CSLB), by January 1, 2018, to enter into an interagency agreement with the Division of Occupational Safety and Health (DOSH) and other state or local agencies, as necessary, to ensure that specified disciplinary information relating to a licensed contractor is timely reported to the board; requires a licensee, within 90 days, to report to the Registrar of the CSLB in writing the occurrence of any conviction of any felony or conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor; requires the California Building Standards Commission (Commission) to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance, as specified, and recommend any statutory changes or changes to the California Building Standards Code (CBSC); and, requires the CSLB to report to the Legislature the results of a study to determine if the CSLB's ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards against them, or settlement payments of claims for construction defects they have made in excess of a certain amount to be determined by the board, as provided.

EXISTING LAW:

1. Provides for the licensure and regulation of more than 300,000 contractors under the Contractors' State License Law by the CSLB within the Department of Consumer Affairs (DCA). The CSLB is under the direction of the registrar of contractors (Registrar). (Business and Professions Code (BPC) Section 7000 et seq.)
2. Requires licensees to notify the Registrar in writing of any unsatisfied final judgment imposed on the licensee, and authorizes the Registrar to automatically suspend the license on the date the Registrar is informed of an unsatisfied final judgment if the licensee failed to notify the Registrar in writing within 90 days of that judgment, as specified. (BPC Section 7071.17(b))
3. Provides that a conviction of a crime, substantially related to the qualifications, functions and duties of a contractor, constitutes a cause for disciplinary action, and that the record of the conviction shall be conclusive evidence thereof. (BPC Section 7123)
4. Provides that a plea or verdict of guilty, or a conviction following a plea of nolo contendere, is deemed to be a conviction, and that the CSLB may order a license to be suspended or revoked, or may decline to issue a license, when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, as specified. (BPC Section 7124)
5. Requires the Registrar to make available to the public the date, nature, and status of all complaints on file against a licensee that do either of the following:
   1. Have been referred for accusation; or,
   2. Have been referred for investigation, after a determination by CSLB enforcement staff, that a probable violation has occurred, and have been reviewed by a supervisor, and involve allegations that if proven would present a risk of harm to the public and would be appropriate for suspension or revocation of the contractor’s license or criminal prosecution. (BPC Section 7124.6 (a))
6. Requires the CSLB to create a disclaimer that shall accompany the disclosure stating that it is an allegation and any other information the CSLB determines would be relevant to a person evaluating the complaint. (BPC Section 7124.6 (b))
7. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC Section 7124.6(c))
8. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:
   1. Limits the disclosure of legal actions for citations from the date of issuance for five years after the date of compliance if no additional disciplinary actions have been taken against the licensee during that period;
   2. Limits the disclosure of accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license from the date accusation is filed for seven years if no additional disciplinary actions have been taken against the licensee during that period; and,
   3. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC Section 7124.6(e))

THIS BILL:

1. Requires the CSLB, by January 1, 2018, to enter into an interagency agreement with the DOSH to ensure that specified disciplinary information relating to a licensed contractor is timely reported to the CSLB; requires the CSLB to enter into an interagency agreement with any other state or local agency the CSLB deems to be in possession of information relevant to its priority to protect the public.
2. Requires a licensee to report to the Registrar in writing within 90 days after the licensee obtains knowledge of the occurrence of any of the of the following events:
   1. Conviction of any felony; or,
   2. Conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor.
3. Specifies that failure of the licensee to report to the Registrar the events in paragraph 2) above is grounds for disciplinary action.
4. Requires the Commission to convene a specified working group to investigate existing building standards associated with the construction, inspection, and maintenance of exterior elevated elements; and, requires the working group to report to the Commission any findings and possible recommendations for statutory changes or changes to the CBSC. By January 1, 2018, the bill would also require the working group to provide that report to the Senate Committee on Business, Professions, and Economic Development (BPED).
5. Requires the working group to include, but not be limited to representatives from the Department of Housing and Community Development, the Division of the State Architect-Structural Safety, the Office of the State Fire Marshal, local building officials and plan checkers, structural engineers, apartment owners and managers, building industry, wood, steel and concrete industries, and any other interested parties.
6. Requires the working group to review related documents and reports, including, but not limited to, forensic reports related to exterior elevated element failures in California, reports and studies used in the development of national and state building codes, and any other material deemed relevant to determine if any changes need to be made to the construction specifications or inspection requirements, excluding routine inspections that occur after project completion, contained within the CBSC.
7. Requires the working group to submit any changes to the CBSC that are needed as soon as possible in order to protect the public to the Commission for consideration as soon as possible.
8. Requires the board, by January 1, 2018, to report to the Legislature the results of a study to determine if the boards’ ability to protect the public would be enhanced by regulations requiring licensees to report judgments, arbitration awards against them, or settlement payments of claims for construction defects they have made in excess of a certain amount to be determined by the board, as provided. The bill would require the board to consult with licensees, insurers, consumers, and other interested parties during the development of the study.
9. Requires the state to reimburse local agencies and school districts for certain costs mandated by the state and establish procedures for making that reimbursement.

FISCAL EFFECT: Unknown. This bill has been keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, this bill is needed to amend state law because, “Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire.”

Background. According to the author, this bill increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire. The bill also establishes greater accountability for contractors by ensuring the public has critical disciplinary information about licensees. As an example of this need for transparency, the author notes the tragic Berkeley, California balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB, the state agency tasked with protecting consumers from possibly lethal construction, remained ignorant of such settlements. This is because licensees are not required by law to report the result of incidents that are not handled directly by the CSLB, to the Registrar. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.

Complaint Investigation Process. The Registrar of the CSLB is required to make available to the public civil action settlements, binding arbitration awards, and administrative actions that are required to be reported to the CSLB if the CSLB refers those settlements or arbitration awards for investigation after staff determines, and a supervisor has reviewed, that a probable violation has occurred and involves allegations that, if proven, would present a risk of harm to the public and would be appropriate for suspension or revocation of the licensee, or criminal prosecution.

Similar to other regulatory entities, in order to determine whether a complaint is appropriate for investigation, the CSLB reviews information on a case-by-case basis, looking at such factors as the severity of the allegations, and whether a licensee has a history of complaints or discipline. Complaints involving a threat to the public’s health and safety, and cases where consumers have suffered a significant financial injury are given the highest priority. As a result, only those settlements or arbitration awards that are investigated, and would subject a licensee to suspension, revocation, or criminal prosecution, not merely just a citation, would be made available to the public, which is the type of information that is already disclosed. In addition, licensees are already required to report unsatisfied final judgments to the CSLB, and are required to disclose convictions when applying for licensure. For licensees that have already been fingerprinted by the CSLB, the CSLB will receive notifications from the Department of Justice when that licensee is the subject to additional criminal action; however, not all licensees have submitted their fingerprints to the CSLB.

California Building Standards Commission. The California Building Standards Commission (Commission) is responsible for developing building standards for state owned buildings, including University and State College buildings, and for developing green building standards for most buildings except for housing, public schools, and hospitals. The Commission publishes the CBSC in Title 24 of the California Code of Regulations every three years and its supplements, such as the California Green Building Standards Code, in intervening years.

According to the author, on April 19, 2016, the Commission formally voted to assemble an ad hoc committee to examine the facts of the Berkeley balcony collapse and determine whether the CBSC needs to be updated. In July of 2015, the Berkeley City Council sent a letter to the Commission urging the Commission to revise CBSC to require steel reinforcements on all new balcony designs, after experts determined dry rot was the cause of the balcony collapse. This bill will require the CSLB to conduct a study to determine if the CSLB's ability to protect the public would be enhanced by greater regulations.

Similar Reporting Requirements Exist for Other Professions. Architects, and the companies that insure them, are required to report to the California Architects Board, any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is five thousand dollars ($5,000) or greater. The report is made within 30 days of payment of all or any portion of the action. This also applies if a party to the civil action, settlement, arbitration award, or administrative action is or was a sole proprietorship, partnership, firm, corporation, or state or local governmental agency in which a licensee is or was an owner, partner, member, officer, or employee and is or was a licensee in responsible control of that portion of the project that was the subject of the civil judgment, settlement, arbitration award, or administrative action. The licensee will not be found to have violated a confidential settlement agreement or other confidential agreement by providing a report to the CSLB.

Similar reporting requirements exist for other licensed professionals, including engineers (BPC Section 6770), land surveyors (BPC Section 8776), medical professionals (BPC Section 801), and accountants (BPC Section 5063).

Prior Related Legislation. SB 467 (Hill), Chapter 656, Statutes of 2015, among other things, extends the sunset date for the CSLB until January 1, 2020, repeals a requirement relating to evidence of financial solvency, and increases the amount for a licensee to be bonded from $12,500 to $15,000, as specified.

AB 2570 (Hill), Chapter 561, Statutes of 2012, prohibited licensees of any board, bureau or program under the DCA from including a “regulatory gag clause” in civil settlement agreements.

SB 679 (Berryhill), Chapter 471, Statutes of 2013, revised the monetary threshold for a licensed engineer or land surveyor to report a civil action settlement or administrative action to the Board for Professional Engineers, Land Surveyors, and Geologists (BPELSG) from “$50,000 or greater” to “greater than $50,000,” and requires a licensed engineer or land surveyor to report any civil action judgment or binding arbitration award or administrative action of $25,000 or greater.

SB 1549 (Figueroa), Chapter 691, Statutes of 2004, required licensed engineers and land surveyors to report to the BPESLG a felony conviction or a civil judgment, settlement, arbitration award, or administrative action award of $50,000 or more, occurring on or after July 1, 2006, if funds are appropriated for that purpose, as specified, and required a court rendering the judgment or conviction and a local agency, if self-insured, to report to the board.

ARGUMENTS IN SUPPORT:

The California Newspapers Publishers Association writes in support, “By requiring contractors to report this information, [this bill] will improve oversight of these operations and assist the public in identifying repeat offenders, or the existence of unsafe and unsettling patterns and practices in the industry.”

The Center for Public Interest Law writes in support, “Whereas in every other example, the requirements for self-reporting are set by fiat, in statute, by the Legislature, the author has amended SB 465 to empower the expert CSLB to simply to review the issue and offer its nonbinding observations…”

The City of Berkeley, Office of the Mayor, writes in support, “[This bill] would provide transparency for the community when dealing with contractors and will provide additional information that might prevent future tragedies like the one that happened in our community on June 16, 2015.”

The Conference of California Bar Associations (CCBA) writes in support, “For far too long, contractors, builders and their lawyers, in cooperation with plaintiffs and their lawyers, have been able to keep the facts about substandard, dangerous and toxic conditions secret from public view by agreeing to settlements in public litigation that keep the facts of the case secret. [This bill] would take a small but crucial step towards increased public protection by laying the groundwork for prohibiting these dangerous secrets relating to builders and contractors from being hidden from the [CSLB].”

ARGUMENTS IN OPPOSITION:

A coalition of associations* are Opposed-Unless-Amended stating, “While we believe that [this bill’s] requirements in Section 3 to investigate and pursue changes to the building code, are likely to protect consumers and we support these provisions, we don’t believe the provisions of Section 2 of the bill will have the same effect. The requirements in the bill that CSLB gather information on construction defect case results will not provide the Board with leads that have any significant chance of identifying bad actors. Instead, it will only result in a waste of staff time and resources.”

POLICY ISSUES:

Some of the information to be collected in the CSLB’s study may be confidential. Although the CSLB has access to this information, some information may not be appropriate to share with the public in the final report to the Legislature. For example, complaints referred to arbitration are not subject to disclosure pursuant to BPC Section 7085.9. The author should amend the bill to explicitly preserve confidentiality of that information.

AMENDMENTS:

To address the confidentiality concern raised above, the author should amend the bill to specify that any information or data collected by the CSLB is to remain confidential to the fullest extent of the law.

REGISTERED SUPPORT:

California Newspapers Publishers Association

Center for Public Interest Law

City of Berkeley, Office of the Mayor

Conference of California Bar Associations (CCBA)

REGISTERED OPPOSITION:

California Building Industry Association (CBIA)*

California Chapters of the National Electrical Contractors Association (NECA)*

California Legislative Conference of the Plumbing, Heating and Piping Industry (CLC)*

Northern California Allied Trades (NCAT)*

Southern California Contractors Association (SCCA)*

United Contractors (UC)*

Wall And Ceiling Alliance (WACA)*

Associated General Contractors of California*

CalSMACNA*

Construction Employers Association (CEA)*

Analysis Prepared by: Gabby Nepomuceno, Le Ondra Clark Harvey Ph.D. / B. & P. / (916) 319-3301

Date of Hearing: July 14, 2015

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Susan Bonilla, Chair

SBPCA Bill Id:SB 465

Author:(Hill) – As Amended Ver:July 8, 2015

SENATE VOTE: 40-0

SUBJECT: Contractors: discipline.

SUMMARY: Requires licensed contractors, within 90 days of a conviction or infraction, to report to the Contractors State License Board (CSLB) if the licensee has been convicted of any felony, or any other crime substantially related to the qualifications, functions, and duties of a licensed contractor, or has been subject to a civil action settlement or binding arbitration award above a certain amount resulting from specified acts, and requires that information to be made available to the public if the CSLB investigates that settlement or binding arbitration award, as specified. 

EXISTING LAW:

1. Provides for the licensure and regulation of more than 300,000 contractors under the Contractors' State License Law by the CSLB within the Department of Consumer Affairs (DCA). The CSLB is under the direction of the registrar of contractors (Registrar). (Business and Professions Code (BPC) Section 7000 et seq.)

2. Requires licensees to notify the Registrar in writing of any unsatisfied final judgment imposed on the licensee, and authorizes the Registrar to automatically suspend the license on the date the Registrar is informed of an unsatisfied final judgment if the licensee failed to notify the Registrar in writing within 90 days of that judgment, as specified. (BPC 7071.17(b))

3. Provides that a conviction of a crime, substantially related to the qualifications, functions and duties of a contractor, constitutes a cause for disciplinary action, and that the record of the conviction shall be conclusive evidence thereof. (BPC Section 7123)

4. Provides that a plea or verdict of guilty, or a conviction following a plea of nolo contendere, is deemed to be a conviction, and that the CSLB may order a license to be suspended or revoked, or may decline to issue a license, when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, as specified. (BPC Section 7124)

5. Requires the Registrar to make available to the public the date, nature, and status of all complaints on file against a licensee that do either of the following:

   1. Have been referred for accusation; or,

   2. Have been referred for investigation, after a determination by CSLB enforcement staff, that a probable violation has occurred, and have been reviewed by a supervisor, and involve allegations that if proven would present a risk of harm to the public and would be appropriate for suspension or revocation of the contractor’s license or criminal prosecution. (BPC Section 7124.6 (a))

6. Requires the CSLB to create a disclaimer that shall accompany the disclosure stating that it is an allegation and any other information the CSLB determines would be relevant to a person evaluating the complaint. (BPC Section 7124.6 (b))

7. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC Section 7124.6(c))

8. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:

   1. Limits the disclosure of legal actions for citations from the date of issuance for five years after the date of compliance if no additional disciplinary actions have been taken against the licensee during that period;

   2. Limits the disclosure of accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license from the date accusation is filed for seven years if no additional disciplinary actions have been taken against the licensee during that period; and,

   3. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC Section 7124.6(e))

THIS BILL:

1. Requires a licensee, within 90 days, to report to the Registrar in writing the occurrence of any of the of the following events:

   1. Conviction of any felony;

   2. Conviction of any crime that is substantially related to the qualifications, functions, and duties of a licensed contractor;

   3. A civil action settlement or administrative action resulting in a settlement, if the amount is $50,000 or greater, involving fraud, deceit, misrepresentation, breach or violation of a contract, negligence, incompetence, or recklessness by the licensee; or,

   4. A binding arbitration award or administrative action resulting in binding arbitration award, if the amount is $25,000 or greater, involving fraud, deceit, misrepresentation breach or violation of a contract, negligence, incompetence, or recklessness, by the licensee.

2. Specifies that failure of the licensee to report to the Registrar the events in paragraph 1) above is grounds for disciplinary action.

3. Defines “conviction” to mean a plea or verdict of guilty in a criminal proceeding, or a conviction following a plea of no contest.

4. Requires an insurer providing professional liability insurance to a licensee, to report to the Registrar, within 30 days of payment of a civil action settlement or arbitration award against a licensee, as described in paragraph 1) above, the name of the licensee, the amount of the settlement or arbitration award, the amount paid, and the identity of payee.

5. Requires a state or local government agency that self-insures to report to the Registrar within 30 days of payment of a civil action settlement or arbitration award against a licensee, as described in paragraph 1) above, the name of the licensee, the amount of the settlement or arbitration award, the amount paid, and the identity of payee.

6. Requires the Registrar to make available to the public all civil action settlements, binding arbitration awards, and administrative actions, as described in paragraph 1) above, reported to it if those settlements or arbitration awards have been referred for investigation, as specified.

7. Provides that all of these provisions shall only become operative if the Legislature appropriates money from the Contractors' State License Fund for the purposes of this section and grants sufficient hiring authority to the CSLB.

FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, this bill is needed to amend state law because “Currently, state law does not require contractors to report defect settlement cases to the CSLB. Such disclosure requirements are routine for such professionals as doctors, architects, and engineers. This bill would empower the CSLB, like other boards, to be made aware of licensee behavior for which they may need to take swift action to promote public health and safety. The bill additionally increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire.”

Background. According to the author, this bill increases transparency so that consumers have the tools necessary to make an informed decision about the quality of the contractor they hire. The bill also establishes greater accountability for contractors by ensuring the public has critical information about licensees. As an example of this need for transparency, the author notes the tragic Berkeley balcony collapse, which killed six people. According to the San Francisco Chronicle, the company responsible for that project reportedly paid out $26.5 million in construction defect settlements in just three years, yet the CSLB, the state agency tasked with protecting consumers from possibly lethal construction, remained ignorant of such settlements. This is because licensees are not required by law to report the result of incidents that are not handled directly by the CSLB, to the Registrar. As a result, information that can be used to help consumers protect themselves from possible fraud or misrepresentation is not known.

Specifically, SB 465 requires both licensees and insurers to report to the CSLB certain settlements, arbitration awards and administrative actions regarding a licensee as well as convictions of crimes related to a licensee’s practice as a contractor. The bill also requires the Registrar of the CSLB to make available to the public civil action settlements, binding arbitration awards, and administrative actions that are required to be reported to CSLB if the CSLB refers those settlements or arbitration awards for investigation after staff determines, and a supervisor has reviewed, that a probable violation has occurred and involves allegations that, if proven, would present a risk of harm to the public and would be appropriate for suspension or revocation of the licensee, or criminal prosecution. This standard is in existing law, which already requires CSLB to report complaints that meet this standard to the public.

Similar to other regulatory entities, in order to determine whether a complaint is appropriate for investigation, the CSLB reviews information on a case-by-case basis, looking at such factors as the severity of the allegations, and whether a licensee has a history of complaints or discipline. Complaints involving a threat to the public’s health and safety, and cases where consumers have suffered a significant financial injury are given the highest priority. As a result, only those settlements or arbitration awards that are investigated, and would subject a licensee to suspension, revocation, or criminal prosecution, not merely just a citation, would be made available to the public, which is the type of information that is already disclosed. In addition, licensees are already required to report unsatisfied final judgments to the CSLB, and are required to disclose convictions when applying for licensure. For licensees that have already been fingerprinted by the CSLB, the CSLB will receive notifications from the Department of Justice when that licensee is the subject to additional criminal action; however, not all licensees have submitted their fingerprints to the CSLB.

Similar Reporting Requirements Exist for Other Professions. Architects, and the companies that insure them, are required to report to their board any civil action judgment, settlement, arbitration award, or administrative action resulting in a judgment, settlement, or arbitration award against the licensee in any action alleging fraud, deceit, negligence, incompetence, or recklessness by the licensee in the practice of architecture if the amount or value of the judgment, settlement, or arbitration award is five thousand dollars ($5,000) or greater. The report is made within 30 days of payment of all or any portion of the action. This also applies if a party to the civil action, settlement, arbitration award, or administrative action is or was a sole proprietorship, partnership, firm, corporation, or state or local governmental agency in which a licensee is or was an owner, partner, member, officer, or employee and is or was a licensee in responsible control of that portion of the project that was the subject of the civil judgment, settlement, arbitration award, or administrative action. The licensee will not be found to have violated a confidential settlement agreement or other confidential agreement by providing a report to the board.

Similar requirements exist for other licensed professionals, including engineers (BPC Section 6770), land surveyors (BPC Section 8776), medical professionals (BPC Section 801), and accountants (BPC Section 5063). This bill is seeking to establish consistency with other occupations that have as much of an impact on the safety and well-being of the general public.

Current Related Legislation. SB 467 (Hill) of the current legislative session, among other things, extends the sunset date for the CSLB until January 1, 2020, repeals a requirement relating to evidence of financial solvency, and increases the amount for a licensee to be bonded from $12,500 to $15,000, as specified. STATUS: This bill is in the Assembly Appropriations Committee.

Prior Related Legislation. AB 2570 (Hill), Chapter 561, Statutes of 2012, prohibited licensees of any board, bureau or program under the DCA from including a “regulatory gag clause” in civil settlement agreements.

SB 679 (Berryhill), Chapter 471, Statutes of 2013, revised the monetary threshold for a licensed engineer or land surveyor to report a civil action settlement or administrative action to the Board for Professional Engineers, Land Surveyors, and Geologists (BPELSG) from “$50,000 or greater” to “greater than $50,000,” and requires a licensed engineer or land surveyor to report any civil action judgment or binding arbitration award or administrative action of $25,000 or greater.

SB 1549 (Figueroa), Chapter 691, Statutes of 2004, required licensed engineers and land surveyors to report to the BPESLG a felony conviction or a civil judgment, settlement, arbitration award, or administrative action award of $50,000 or more, occurring on or after July 1, 2006, if funds are appropriated for that purpose, as specified, and required a court rendering the judgment or conviction and a local agency, if self-insured, to report to the board.

ARGUMENTS IN SUPPORT:

California Newspaper Publishers Association (CNPA) writes in support, stating, “Following the recent balcony collapse in downtown Berkeley, an investigation by the San Francisco Chronicle uncovered that the firm who built the balcony paid $26.5 million in the last three years in construction defect settlements. Often, as here, these settlement agreements remain confidential until a catastrophic event occurs.”

City of Berkley, Office of the Mayor, writes in support, stating that, “On June 16, 2015 a balcony collapsed in the City of Berkley, tragically leading to the deaths of six young people. Compounding our community’s immense sadness is the belief that this unfortunate incident could have been prevented….The City of Berkeley supports SB 465 because of the increased transparency it will provide for the community when dealing with contractors, allowing for fully informed decisions about contracting work.”

Center for Public Interest Law writes in support, stating that, “There is simply no public policy reason why architects should be required to report settlements but not the licensees who actually build what the architects draw….If a pattern of settling cases for significant sums just might shed a poor light on a contractor’s competence, then the CSLB should know about the settlements, with licensee knowing that the CSLB will, like its sister boards, review such information proportionately and appropriately.”

Center for California Homeowner Association Law writes in support that, “[This information] will benefit consumers, local governments, the nonprofit developers of housing, and even the HUD, which can use [this information] to weed out builders and contractors who produce defective housing or make sub-standard repairs.”

ARGUMENTS IN OPPOSITION:

California Building Industry Association writes in opposition, stating that “We are strongly opposed to the disclosure of settlements and arbitration awards, at least in construction defect cases, because they are not an indication of "bad actors"….A settlement is not an admission of liability and is not decided by a neutral third party….The result of a construction defect claim, whether a settlement or arbitration award, arises from a fact well known and relied upon by the construction defect plaintiff's bar: the cost to defend these claims runs between 4 and 23 times the amount of the settlement…. The bill applies to damage even where the contractor unintentionally caused property damage or merely breached a contract provision to perform services or make a payment between contractors. These actions have nothing to do with public safety. Bad actors should not be determined based on actions without fault.”

Construction Employers' Association (CEA) writes in opposition that, “In a multi-employer environment where the general contractor is the only licensee under contract to the project owner, general contractors are a party to all settlements, regardless of which party caused the underlying problem….Pursuant to this measure, the general contractor would be required to report any settlements, even if they weren't at fault….It's also unclear what negligence, incompetence or recklessness mean. If someone is injured and the contractor found it more expeditious to reach a settlement versus fight, what is that considered?...The general contractor would effectively receive a black mark on their license through no fault of their own. This black mark would invariably be used to disqualify otherwise qualified contractors from bidding." The CEA also notes that while doctors and attorneys report such settlements, in those instances, the doctor or attorney is the one at fault, because there is no subcontractor.

United Contractors, Associated General Contractors and Southern California Contractors Association, in a joint letter also write in opposition, “In today's business environment, contractors often need to settle cases even if they are completely without fault. Settlements allow a party to avoid the costly expense of pretrial discovery and a trial. The expense of litigation often is in the hundreds of thousands of dollars, far outweighing even the amounts in dispute. Our contractors and their insurance carriers often settle for far more than $50,000 in order to avoid the expense and disruption of having to go to court…Contractors should not be punished for the litigious environment they are forced to navigate through in order to stay in business."

The Association of California Insurance Companies writes in opposition, stating that “The bill also requires professional liability insurers to report the information to the state as well. This is duplicative since the contractor is already required to report this information. This bill would add additional expense to the insurance transaction and could act as disincentive to insurers that may consider expanding into California for contractors’ professional liability [market].”

Civil Justice Association of California writes in opposition, stating that “SB 465 would make it easier for attorneys to target legitimate contractors for lawsuits. The bill will encourage drive-by litigation, pushing contractors to settle meritless cases for values below the applicable thresholds ($25,000 or $50,000)…We believe the State already has appropriate tools at its disposal through its regulatory powers. If it cannot do the job now, it should look to restructure the department’s operations rather than create both new burdens on contractors and new incentives for drive-by litigation.”

POLICY ISSUE:

According to the opposition, nearly all claims filed against contractors involve a "violation of contract," whether related to breach for non-payment, failure to grant time extensions or for delays, failure to issue change orders, or wages, and that "negligence" may be too broad and encapsulate other types of claims that are not related to the quality of the work. Opposition also notes many lawsuits are settled every year for a myriad of reasons, and that the vast majority of those lawsuits are settled out of court. Lawsuits that are settled typically do not assign fault to any of the parties involved, hence one reason for settling, and usually involve multiple parties regardless of the extent of their involvement in the claim. According to some estimates, there may be thousands of settlements that would have to be reported to the CSLB each year.

This bill would only go into effect if the CSLB was appropriated with additional staff. According to the CSLB, it may necessitate hiring three additional staff in order to implement this policy. This number is based upon the Board for Professional Engineers, Land Surveyors, and Geologists' (BPELSG) staffing levels. However it is unknown, at this time, how many settlements or arbitration awards would be reported. If the volume of reports is too large, it may be difficult for the CSLB to sift through this information to determine whether a contractor is truly incompetent, and because most settlements do not assign fault to the numerous parties involved in a lawsuit, it would be difficult to establish a pattern and assign fault or to determine whether to investigate a contractor without possible extensive research and data collection by the CSLB.

As a result, the Committee and author may wish to consider requiring the CSLB to conduct a study on the types and number of settlements and awards that would be reported, pursuant to these provisions, in order to understand the scope of this requirement, and whether the scope is too broad to make this information useful to the CSLB, and the factors that may be useful in helping the CSLB to properly investigate those risking public harm. Additionally, the author may wish to consider narrowing the scope of the bill to only apply to those settlements or arbitration awards that are related to the actual work product, and exempt non-work product related claims to focus the CSLB's attention on licensees who pose the most risk. Lastly, the author may wish to consider requiring the CSLB to adopt regulations that would further define the scope of these reporting requirements, as is required for the BPESLG, and delay the implementation of this bill to allow the CSLB time to prepare to implement these provisions in a meaningful way.

REGISTERED SUPPORT:

California Newspaper Publishers Association

Center for Public Interest Law

Center for California Homeowner Association Law

City of Berkeley, Office of the Mayor

The Miller Law Firm

REGISTERED OPPOSITION:

Air Conditioning Trade Association

American Fire Sprinkler Association

Associated Builders and Contractors – San Diego Chapter

Association of California Insurance Companies

Associated General Contractors

California Building Industry Association

California Professional Association of Specialty Contractors

Civil Justice Association of California

Construction Employers' Association

Plumbing-Heating-Cooling Contractors Association of California

United Contractors

Associated General Contractors

Southern California Contractors Association

Western Electrical Contractors Association

Analysis Prepared by: Robert Boykin and Eunie Linden / B. & P. / (916) 319-3301

 THIRD READING  

Bill No: SB 465

Author: Hill (D)

Amended: 4/21/15

Vote: 21

SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 4/27/15

AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen

SUBJECT: Contractors’ State License Board: licensees: bond requirement

SOURCE: Author

DIGEST: This bill extends the sunset date for the Contractors State License Board, under the Contractors State License Act, from January 1, 2016, until January 1, 2020, and updates and strengthens financial requirements placed on contractors.

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 (Registrar). (Business and Professions Code (BPC) § 7000 et seq.)

2. Establishes the CSLB until January 1, 2016, to license and regulate the practice of contracting. (BPC § 7000.5)

3. Authorizes CSLB to appoint, with DCA Director approval, a Registrar as executive officer and secretary of CSLB until January 1, 2016. (BPC § 7011)

4. Requires that all applicants, and all licensees at renewal, demonstrate, as evidence of financial solvency, that his or her operating capital exceeds $2,500.
   (BPC § 7067.5)

5. Requires a licensed contractor to file or have on file a contractor’s bond in the sum of $12,500. (BPC § 7071.6(a))

This bill:

1. Extends CSLB and the authorization to appoint a Registrar until January 1, 2020.

2. Deletes the existing requirement that contractors maintain $2,500 in capital.

3. Increases the existing surety bond requirement from $12,500 to $15,000.

Background

1. Oversight Hearings and Sunset Review of Licensing Boards and Programs. In 2015, the Senate Business, Professions and Economic Development Committee and the Assembly Business and Professions Committee (Committees) conducted joint oversight hearings to review 12 regulatory entities: California Accountancy Board; California Architects Board and Landscape Architects Committee; California State Athletic Commission; Board of Barbering and Cosmetology; Cemetery and Funeral Bureau; Contractors State License Board; Dental Board of California; Board for Professional Engineers, Land Surveyors and Geologists; Board of Registered Nursing; Bureau of Security and Investigative Services; and Board of Vocational Nursing and Psychiatric Technicians.

The Committees began their review of the aforementioned licensing agencies in March and conducted two days of hearings. This bill and the accompanying sunset bills are intended to implement legislative changes as recommended by staff of the Committees and which are reflected in the Background Papers prepared by Committee staff for each agency and program reviewed by the Committees for this year.

2. CSLB. CSLB in DCA is responsible for implementation and enforcement of the Contractors Law, including the laws and regulations related to the licensure, practice, and discipline of the construction industry in California. All businesses and individuals who construct or alter, or offer to construct or alter, any building, highway, road, parking facility, railroad, excavation, or other structure in California must be licensed by CSLB if the total cost (labor and materials) of one or more contracts on the project is $500 or more.

CSLB licenses approximately 290,000 contractors in 44 license classifications and two certifications. CSLB issues some 15,000 licenses each year, and more than 121,000 licenses are renewed each year. A license may be issued to an individual, partnership, corporation, limited liability company, or joint venture. All licenses must have a qualifying individual (also referred to as “qualifier”). A qualifying individual is the person listed on CSLB records who satisfies the experience and examination requirements for a license. Depending on the type of license, the qualifying individual must be designated as an owner, responsible managing employee, responsible managing officer, responsible managing manager, responsible managing member, or qualifying partner in the license records. A qualifying individual is required for every classification and on each license issued by CSLB; the same person may serve as the qualifier for more than one classification. CSLB also registers some 9,600 home improvement salespersons who are engaged in the sale of home improvement goods and services.

CSLB has implemented important programmatic and operational changes and enhancements since its last sunset extension, as well as made important policy decisions and adopted regulatory changes.

3. Review of CSLB: issues odentified and recommended changes.  The following are some of the major issues pertaining to the CSLB along with background information concerning the particular issue.  Recommendations were made by the Senate Business, Professions and Economic Development Committee staff regarding the particular issue areas which needed to be addressed.

1. Issue: Evidence of Financial Solvency

Background.  BPC § 7067.5 requires that all applicants, and all licensees at renewal, demonstrate, as evidence of financial solvency, that his or her operating capital exceeds $2500. This requirement is never verified and provides no consumer protection.

In any case in which further financial information would assist the Registrar in an investigation, the Registrar may obtain such information or may require any licensee or applicant under investigation pursuant to the Contractors Law to provide such additional financial information as the Registrar may deem necessary.

The financial information required by the Registrar shall be confidential and not a public record, but, where relevant, shall be admissible as evidence in any administrative hearing or judicial action or proceeding.

The Registrar may destroy any financial information which has been on file for a period of at least three years.  

Recommendation and Proposed Statutory Change:  Given that CSLB does not verify the capital requirement and that the Registrar may obtain financial information, if needed, this bill deletes this requirement and instead increase the surety bond requirement by $2,500 (from $12,500 to $15,000).

2. Issue: Surety Bond

Background. BPC § 7071.6 requires that an applicant or licensee have on file at all times proof of a $12,500 contractor bond.

The surety bond requirement was last increased in 2007, when it was raised from $10,000. Prior to that, in 2004, it was increased from $7,500 to $10,000. A bond increase of $2,500 would provide greater consumer protection than the existing $2,500 capital requirement since a consumer can make a claim against a contractor’s surety bond.

Recommendation and Proposed Statutory Change: To provide greater consumer protection, this bill increases the surety bond from $12,500 to $15,000.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, the projected expenditures of approximately $63 million annually (primarily Contractors License Fund), supporting 405.6 Personnel Year, until January 1, 2020, partially offset by annual fee revenues of approximately $55-56 million, based on the proposed 2015-16 Budget.

SUPPORT: (Verified 5/28/15)

California Professional Association of Specialty Contractors

Contractors State License Board

OPPOSITION: (Verified 5/28/15)

None received

ARGUMENTS IN SUPPORT: The California Professional Association of Specialty Contractors (CALPASC) underscores that “CALPASC appreciates the mission of the CSLB, which protects consumers, while at the same time enforcing and promoting professionalism among contractors. The CSLB and its Registrar perform vital services to California’s consumers and construction community, and should have the real dates extend to 2020.”

According to the Contractors State License Board, “CSLB believes we are working hard to fulfill our consumer protection mandate, and we look forward to continuing to work with the Legislature, consumers and other interested parties to further our efforts.”

Prepared by: Mark Mendoza / B., P. & E.D. / (916) 651-1868

5/31/15 12:05:52

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 465 (Hill) - Contractors’ State License Board: licensees: bond requirement.

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 465 would extend the sunset on the Contractors’ State License Board (CSLB) and the registrar of contractors (Registrar) until January 1, 2020. The bill would also revise the financial security requirements placed on contractors.

Fiscal Impact:

Projected expenditures of approximately $63 million annually (primarily Contractors License Fund), supporting 405.6 PY, until January 1, 2020, partially offset by annual fee revenues of approximately $55-56 million, based on the proposed 2015-16 budget.

Background:

The CSLB, within the Department of Consumer Affairs, is responsible for the implementation and enforcement of the Contractors State License Law, including the laws and regulations related to the licensure, practice, and discipline of the construction industry in California. All businesses and individuals who construct or alter, or offer to construct or alter, any building, highway, road, parking facility, railroad, excavation, or other structure in California must be licensed by the CSLB if the total cost (labor and materials) of one or more contracts on the project is $500 or more. The CSLB licenses approximately 290,000 contractors in 44 license classifications and two certifications, and also registers an additional 9600 home improvement salespersons who are engaged in the sale of home improvement goods and services. The CSLB issues approximately 15,000 new licenses each year, and renews more than 121,000 existing licenses. Existing law provides for a sunset of the CSLB and the Registrar on January 1, 2016, which provides for continued legislative oversight the regulatory board’s activities.

Existing law requires all applicants for a new or renewed license to demonstrate, as evidence of financial solvency, that his or her operating capital exceeds $2,500. Existing law also requires that a contractor, as a condition of licensure, have on file at all times proof of a $12,500 contractor’s surety bond, and authorizes the CSLB to temporarily require an applicant to post a bond of twice this amount it he or she has been convicted or cited for certain violations.

Proposed Law:

SB 465 would extend the sunset of the CSLB and the term of the Registrar until January 1, 2020. The bill would also delete the requirement that contractors maintain $2,500 in capital, and increase the surety bond requirement from $12,500 to $15,000.

Related Legislation:

This bill is one of five measures introduced this session by the Senate Business, Professions, and Economic Development Committee to extend the sunset on licensing boards within the Department of Consumer Affairs – including SB 466 (Hill), SB 467 (Hill), SB 468 (Hill), and SB 469 (Hill). Five additional bills that extend the sunset on DCA licensing boards and bureaus are being considered by the Assembly this year.

Staff Comments:

The Department of Consumer Affairs indicates that the provisions of the bill that extend the sunset on the CSLB, and revise the financial security requirements for contractors are minor and absorbable.

Staff notes that the Contractors License Fund, which supports the operations of the CSLB, is in a declining condition. According to the fund condition statement in the proposed 2015-16 budget, expenditures have been outpacing revenues by approximately $3 million to $6 million annually in recent years, and expenditures are expected to exceed revenues by nearly $7.7 million in 2015-16. The fund’s reserve has declined from $26.4 million at the end of 2013-14, to $19.2 million at the end of the current year. The reserve is projected to be at $11.5 million at the end of the 2015-16 fiscal year, which the equivalent of a two month reserve. At the current pace, and without corrective action or adjustment, the fund will be insolvent sometime during the 2017-18 fiscal year, which is approximately two years before the sunset date specified in the bill.

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SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2015 - 2016 Regular

Bill No: SB 465 Hearing Date: April 27, 2015

Subject: Contractors' State License Board: Licensees: bond requirement.

SUMMARY:

Extends the sunset date for the Contractors State License Board, under the Contractors State License Act, from January 1, 2016, until January 1, 2020; and, updates and strengthens financial requirements placed on contractors.

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 (Registrar). (Business and Professions Code (BPC) § 7000 et seq.)

2. Establishes the CSLB until January 1, 2016 to license and regulate the practice of contracting. (BPC § 7000.5)

3. Authorizes CSLB to appoint, with DCA director approval, a registrar of contractors as executive officer and secretary of the Board until January 1, 2016. (BPC § 7011)

4. Requires that all applicants, and all licensees at renewal, demonstrate, as evidence of financial solvency, that his or her operating capital exceeds $2,500.
   (BPC § 7067.5)

5. Requires a licensed contractor to file or have on file a contractor’s bond in the sum of $12,500. (BPC § 7071.6(a))

This bill:

1. Extends CSLB and the authorization to appoint a registrar of contractors until January 1, 2020.

2. Deletes the existing requirement that contractors maintain $2,500 in capital.

3. Increases the existing surety bond requirement from $12,500 to $15,000.

FISCAL EFFECT:

Unknown. This bill has been keyed “fiscal” by Legislative Counsel.

COMMENTS:

1. Purpose. This bill is sponsored by the Author. This bill is one of five “sunset review bills” the Author is sponsoring this session. According to the Author, this bill is necessary to extend the sunset date of CSLB in order to ensure continued oversight of the contractors industry. The health, safety, and welfare of consumers are protected by a well-regulated contractor profession. CSLB has shown over the years a strong commitment to improve the Board’s overall efficiency and effectiveness and has worked cooperatively with the Legislature and this Committee to bring about necessary changes. While the Board needs to review some of its enforcement practices to ensure they are appropriate, legal, and warranted, CSLB should be continued with a four-year extension of its sunset date so that the Committee may review once again if the issues and recommendations in the background paper and others of the Committee have been addressed.

2. Oversight Hearings and Sunset Review of Licensing Boards and Programs. In 2015, the Senate Business, Professions and Economic Development Committee and the Assembly Business and Professions Committee (Committees) conducted joint oversight hearings to review 12 regulatory entities: California Accountancy Board; California Architects Board and Landscape Architects Committee; California State Athletic Commission; Board of Barbering and Cosmetology; Cemetery and Funeral Bureau; Contractors State License Board; Dental Board of California; Board for Professional Engineers, Land Surveyors and Geologists; Board of Registered Nursing; Bureau of Security and Investigative Services; and Board of Vocational Nursing and Psychiatric Technicians.

The Committees began their review of the aforementioned licensing agencies in March and conducted two days of hearings. This bill and the accompanying sunset bills are intended to implement legislative changes as recommended by staff of the Committees and which are reflected in the Background Papers prepared by Committee staff for each agency and program reviewed by the Committees for this year.

3. Background on the CSLB. The Contractors State License Board in the Department of Consumer Affairs is responsible for implementation and enforcement of the Contractors State License Law, including the laws and regulations related to the licensure, practice, and discipline of the construction industry in California. All businesses and individuals who construct or alter, or offer to construct or alter, any building, highway, road, parking facility, railroad, excavation, or other structure in California must be licensed by the Board if the total cost (labor and materials) of one or more contracts on the project is $500 or more.

The Board licenses approximately 290,000 contractors in 44 license classifications and two certifications. CSLB issues some 15,000 licenses each year, and more than 121,000 licenses are renewed each year. A license may be issued to an individual, partnership, corporation, limited liability company, or joint venture. All licenses must have a qualifying individual (also referred to as “qualifier”). A qualifying individual is the person listed on CSLB records who satisfies the experience and examination requirements for a license. Depending on the type of license, the qualifying individual must be designated as an owner, responsible managing employee, responsible managing officer, responsible managing manager, responsible managing member, or qualifying partner in the license records. A qualifying individual is required for every classification and on each license issued by CSLB; the same person may serve as the qualifier for more than one classification. The Board also registers some 9,600 home improvement salespersons (HISs) who are engaged in the sale of home improvement goods and services.

CSLB has implemented important programmatic and operational changes and enhancements since its last sunset extension, as well as made important policy decisions and adopted regulatory changes, including:

• Offering a Veterans Application Assistance Program for troops transitioning from military service to civilian employment.

• Requiring that, at the time of renewal (every two years), an active licensee with an exemption from workers’ compensation insurance either recertify the exemption or provide a current and valid Certificate of Workers’ Compensation Insurance or Certificate of Self-Insurance (AB 397, Monning, Chapter 546, Statutes of 2011).

• Establishing a program to disclose on its website any disciplinary action against contractors by partner state agencies. CSLB’s website now flags such licensees and includes an advisory statement and an electronic link to the partner agency’s website. This disclosure provides an accessible means for awarding authorities and prime contractors to determine if a contractor is a responsible and/or responsive bidder for public works projects.

• Launching a disclosure project with the Department of Industrial Relations’ Division of Labor Standards Enforcement (DLSE) and Caltrans. DLSE issues Civil Wage and Penalty Assessments (CWPAs) for Labor Code violations, and Caltrans issues Stop Notices for violations that include non-payment for labor, services, equipment, or materials used at public work projects.

• Notifying the licensing division staff when a complaint was received against a licensee who had an exemption from workers’ compensation (WC) insurance on file but acknowledged employing workers. In such cases, the Licensing division cancels the contractor’s WC exemption and informs him/her that CSLB will suspend the license without further notice if proof of a valid workers’ compensation policy is not submitted within 30 days. The contractor may file a second exemption, but is informed that doing so will subject the exemption to verification by CSLB and partnering agencies, such as the Employment Development Department (EDD) and Division of Labor Standards Enforcement (DLSE).

• Meeting with Pacific Gas & Electric Company representatives to discuss a partnership to prevent contractors from striking gas lines and jeopardizing public safety. Almost all such strikes that were referred to CSLB resulted from contractor negligence (failing to call in advance to have the gas lines properly marked). The new unsafe digging program involves a coordinated outreach effort and a commitment by PG&E to file complaints against contractors that fail to call the 811 Dig Alert service before excavating. In
  FY 2013-14, 78 complaints were filed, resulting in increased contractor education and compliance. PG&E reported no additional gas line strikes after a complaint was filed against a contractor.

• Implementing a program to take timely disciplinary action against contractors found during the mediation process to be participating in the underground economy. Two Enforcement Representatives (ERs) were hired to issue administrative citations for illegal contracting in the areas of workers’ compensation insurance, building permits, and illegal advertising, demonstrating CSLB’s responsiveness to illegal activity trends. In its first year, this program resulted in 30 workers’ compensation insurance citations, 27 building permit citations, and 31 citations for illegal advertising.

• Lowering the expenses of representation by the Attorney General by utilizing mandatory settlement conferences (MSCs) to resolve appealed administrative citations without incurring the cost of a formal hearing. In 2013, 199 citations were settled through this process. With appeal hearings averaging $5,000, MSCs saved CSLB $995,000 in legal expenses.

• Developing a complaint form with input from building officials, industry groups, and other partner agencies. Anyone with knowledge of a construction site that lacks a building permit can use the online form to file a complaint with CSLB. The complaint process primarily is intended to be educational, since the complaints require no evidence that the work was completed. In response to a complaint, CSLB informs the contractor, via letter, about the requirement to obtain a building permit. With sufficient evidence of failure to obtain a permit, CSLB takes appropriate disciplinary action against the license.

• Creating a “65 and older” voluntary check box on the general complaint form to help protect elderly consumers. When the box is marked, CSLB staff looks for potential elder abuse. Since adding the box, about five percent of complaints received by CSLB (2,333 complaints against licensees and 499 complaints against non licensees) involved a consumer that volunteered they were aged 65 or older. From August 2011 through January 2014, the complaint information led to 107 licensee and 50 non-licensee criminal prosecution referrals to district attorney offices for violation of California Penal Code Section 368(d) (financial elder abuse).

• Expanding the Public Works Unit from one full-time investigator to three, and developed innovative protocols, such as public disclosure of Stop Orders issued by Caltrans and final DLSE Civil Wage and Penalty Assessments. CSLB aims to add new resources and expand the program in order to investigate and file formal disciplinary action to revoke the license of contractors who cause significant financial harm to employees.

• Developing an instructional video about how to properly complete the CSLB license application. The online product is divided into chapters and provides a step-by-step tutorial that explains the required information for each section of the application form. The video is designed to help applicants avoid common mistakes that result in the application being rejected or returned as incomplete.

• Creating an examination software upgrade. In July 2014, CSLB’s Sacramento Test Center successfully launched SCORE 1.5, an upgrade to its custom test development and administration software, which was created in-house by CSLB’s Information Technology division. (SCORE is the acronym for Statewide Contractors Official Regulatory Examination.) The software upgrade coincides with the implementation of touch-screen computers, a new function that candidates have welcomed. Shorter instructions allow candidates to begin their examinations sooner and the ease of the touchscreens, compared to the mouse, allows them to move through and complete the examinations more quickly. The SCORE upgrade also makes it easier to administer civil service examinations at CSLB test centers, helping to maximize state testing facilities and resources.

• Continuing to expand its Senior Scam Stopper program seminars which are conducted in conjunction with legislators and provide information to senior citizens from a variety of state and local government agencies. From January 1 to September 30, 2014, CSLB conducted 69 seminars.

• Receiving a state award for its emphasis on buying from small businesses and disabled veteran business enterprises (SB/DVBE) in fiscal year 2012-2013. CSLB’s Business Services Unit was presented with a bronze State Agency Recognition Award (SARA). The SARA ceremony honors state departments for outstanding achievements in SB/DVBE advocacy and practices.

• Launching a new website after in-house re-design and rebuilding of the site’s nearly 1,700 pages by the Public Affairs Office and Information Technology division. The new site uses the most current state design template and technology, optimized for computers, tablets, and smart phones. CSLB is among the first state agencies to adopt the new technology and template.

4. Review of CSLB: Issues Identified and Recommended Changes.   The following are some of the major issues pertaining to the CSLB along with background information concerning the particular issue.  Recommendations were made by Committee staff regarding the particular issue areas which needed to be addressed.

1. Issue: Evidence of Financial Solvency.

Background:  BPC § 7067.5 requires that all applicants, and all licensees at renewal, demonstrate, as evidence of financial solvency, that his or her operating capital exceeds $2500. This requirement is never verified and provides no consumer protection.

In any case in which further financial information would assist the registrar in an investigation, the registrar may obtain such information or may require any licensee or applicant under investigation pursuant to the Contractors Law to provide such additional financial information as the registrar may deem necessary.

The financial information required by the registrar shall be confidential and not a public record, but, where relevant, shall be admissible as evidence in any administrative hearing or judicial action or proceeding.

The Registrar may destroy any financial information which has been on file for a period of at least three years.  

Recommendation and Proposed Statutory Change:  Given that CSLB does not verify the capital requirement and that the Registrar may obtain financial information, if needed, the bill would delete this requirement and instead increase the surety bond requirement by $2,500 (from $12,500 to $15,000).

2. Issue: Surety Bond.

Background: BPC § 7071.6 requires that an applicant or licensee have on file at all times proof of a $12,500 contractor bond.

The surety bond requirement was last increased in 2007, when it was raised from $10,000. Prior to that, in 2004, it was increased from $7,500 to $10,000. A bond increase of $2,500 would provide greater consumer protection than the existing $2,500 capital requirement since a consumer can make a claim against a contractor’s surety bond.

Recommendation and Proposed Statutory Change: To provide greater consumer protection, this bill would increase the surety bond from $12,500 to $15,000.

5. Related Legislation This Session. SB 465 (Hill) extends the operation of the Contractors’ State License Board until 2020 and makes various changes to the Contractors’ State License Law.  (Status: The bill will also be considered by this Committee at today’s hearing.)

SB 466 (Hill) sunsets the Board of Registered Nursing.  (Status: The bill will also be considered by this Committee at today’s hearing.)

SB 467 (Hill) extends the operation of the California Board of Accountancy until 2020 and makes other changes related to the Department of Consumer Affairs.  (Status: The bill will also be considered by this Committee at today’s hearing.)

SB 468 (Hill) extends the operation of the Bureau of Security and Investigative Services and the Alarm Company Act, Locksmith Act, Private Investigator Act, Private Security Services Act, Proprietary Security Services Act, and Collateral Recovery Act until January 1, 2020.  It subjects the Bureau to review by the appropriate committees of the Legislature and makes various changes to provisions in the aforementioned Acts to improve the oversight, enforcement and regulation by the Bureau of licensees under each Act.  (Status: The bill will also be considered by this Committee at today’s hearing.)   

SB 469 (Hill) extends the operation of the California State Athletic Commission until 2020.  Makes changes to the laws governing the Commission’s operations and the Commission’s oversight of professional and amateur boxing, professional and amateur kickboxing, all forms and combinations of full contact martial arts contests, including mixed martial arts and matches or exhibitions conducted, held or given in California.  (Status: The bill will also be considered by this Committee at today’s hearing.)    

AB 177 (Bonilla) extends the operation of the Board for Professional Engineers, Land Surveyors and Geologists and California Architects Board and Landscape Architects Committee until January 1, 2020.  (Status: The bill is pending in the Assembly Committee on Business and Professions.)    

AB 178 (Bonilla) extends the operation of the Board of Vocational Nursing and Psychiatric Technicians until January 1, 2020.  (Status: The bill is pending in the Assembly Committee on Business and Professions.)    

AB 179 (Assembly Committee on Business and Professions) extends the operation of the Dental Board of California until January 1, 2020.  (Status: The bill is pending in the Assembly Committee on Business and Professions.)    

AB 180 (Assembly Committee on Business and Professions) extends the operation of the Cemetery and Funeral Bureau until January 1, 2020.  (Status: The bill is pending in the Assembly Committee on Business and Professions.)    

AB 181 (Assembly Committee on Business and Professions) extends the operation of the Board of Barbering and Cosmetology until January 1, 2020.  (Status: The bill is pending in the Assembly Committee on Business and Professions.)    

6. Arguments in Support. The California Professional Association of Specialty Contractors (CALPASC) underscores that “CALPASC appreciates the mission of the CSLB, which protects consumers, while at the same time enforcing and promoting professionalism among contractors. The CSLB and its Registrar perform vital services to California’s consumers and construction community, and should have the real dates extend to 2020.”

According to the Contractors State License Board, “CSLB believes we are working hard to fulfill our consumer protection mandate, and we look forward to continuing to work with the Legislature, consumers and other interested parties to further our efforts.”

SUPPORT AND OPPOSITION:

Support:

California Professional Association of Specialty Contractors

Contractors State License Board (CSLB)

Opposition: None on file as of April 21, 2015.

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