(1)Existing law, the Contractors State License Law, provides for the licensure and regulation of contractors by the Contractors State License Board. Existing law also provides for the registration and regulation of home improvement salespersons by the board. Existing law requires the board to appoint a registrar of contractors who is the executive officer and secretary of the board and is responsible for carrying out specified administrative duties. If, upon investigation, the registrar has probable cause to believe that a licensee or an applicant for a license under existing law has committed any acts or omissions that are grounds for denial, revocation, or suspension of license, he or she, in lieu of a specified proceeding, may issue a citation to the licensee or applicant.

This bill would authorize the registrar to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation if, upon investigation, the registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration. The bill would require the letter to inform the applicant, licensee, or registrant that he or she may submit a written request for an office conference to contest the letter of admonishment, subject to specified procedures, including a process to appeal a decision, or comply with the letter, as provided. The bill would prohibit the board from issuing a letter of admonishment when specified factors are present. The bill would authorize the board to adopt regulations to further define the circumstances under which a letter of admonishment may be issued.

Existing law requires the registrar to make available to members of the public the date, nature, and status of all complaints on file against a licensee that meet specific qualifications. Under existing law, complaints resolved in favor of the contractor are not subject to disclosure.

The bill would distinguish a letter of admonishment from a complaint resolved in favor of the contractor and would require a letter of admonishment to be disclosed for a year.

(2)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 and regulation of contractors by the Contractors State License Board. Existing law also provides for the registration and regulation of home improvement salespersons by the board. Existing law requires the board to appoint a registrar of contractors who is the executive officer and secretary of the board and is responsible for carrying out specified administrative duties. If, upon investigation, the registrar has probable cause to believe that a licensee or an applicant for a license under existing law has committed any acts or omissions that are grounds for denial, revocation, or suspension of license, he or she, in lieu of a specified proceeding, may issue a citation to the licensee or applicant.

This bill would authorize the registrar to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation if, upon investigation, the registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration. The bill would require the letter to inform the applicant, licensee, or registrant that he or she may submit a written request for an office conference to contest the letter of admonishment, subject to specified procedures, including a process to appeal a decision, or comply with the letter, as provided. The bill would prohibit the board from issuing a letter of admonishment when specified factors are present. The bill would authorize the board to adopt regulations to further define the circumstances under which a letter of admonishment may be issued.

Existing law requires the registrar to make available to members of the public the date, nature, and status of all complaints on file against a licensee that meet specific qualifications. Under existing law, complaints resolved in favor of the contractor are not subject to disclosure.

The bill would distinguish a letter of admonishment from a complaint resolved in favor of the contractor and would require a letter of admonishment to be disclosed for a year.

(2)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 and regulation of contractors by the Contractors State License Board. Existing law also provides for the registration and regulation of home improvement salespersons by the board. Existing law requires the board to appoint a registrar of contractors who is the executive officer and secretary of the board and is responsible for carrying out specified administrative duties. If, upon investigation, the registrar has probable cause to believe that a licensee or an applicant for a license under existing law has committed any acts or omissions that are grounds for denial, revocation, or suspension of license, he or she, in lieu of a specified proceeding, may issue a citation to the licensee or applicant.

This bill would authorize the registrant to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation if, upon investigation, the registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration. The bill would require the letter to inform the applicant, licensee, or registrant that he or she may submit a written request for an office conference to contest the letter of admonishment, subject to specified procedures, including a process to appeal a decision, or comply with the letter, as provided. The bill would prohibit the board from issuing a letter of admonishment when specified factors are present. The bill would authorize the board to adopt regulations to further define the circumstances under which a letter of admonishment may be issued.

Existing law requires the registrar to make available to members of the public the date, nature, and status of all complaints on file against a licensee that meet specific qualifications. Under existing law, complaints resolved in favor of the contractor are not subject to disclosure.

The bill would distinguish a letter of admonishment from a complaint resolved in favor of the contractor and would require a letter of admonishment to be disclosed for a year.

(2)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 and regulation of contractors by the Contractors State License Board. Existing law also provides for the registration and regulation of home improvement salespersons by the board. Existing law requires the board to appoint a registrar of contractors who is the executive officer and secretary of the board and is responsible for carrying out specified administrative duties. If, upon investigation, the registrar has probable cause to believe that a licensee, licensee or an applicant for a license under this chapter, existing law has committed any acts or omissions that are grounds for denial, revocation, or suspension of license, he or she may, she, in lieu of a specified proceeding, may issue a citation to the licensee or applicant.

This bill would authorize the registrant to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation if, upon investigation, the registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration, this bill would authorize the registrar to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation. registration. The bill would require the letter to inform the applicant, licensee, or registrant that he or she may submit a written request for an office conference to contest the letter of admonishment, subject to specified procedures, including a process to appeal a decision, or comply with the letter, as provided.

Existing law requires the registrar to make available to members of the public the date, nature, and status of all complaints on file against a licensee that meet specific qualifications. Under existing law, complaints resolved in favor of the contractor are not subject to disclosure.

The bill would distinguish a letter of admonishment from such a complaint and disclose these letters a complaint resolved in favor of the contractor and would require a letter of admonishment to be disclosed for a year.

(1)Existing law, the Contractors State License Law, provides for the licensure and regulation of contractors by the Contractors State License Board. Existing law also provides for the registration and regulation of home improvement salespersons by the board. Existing law requires the board to appoint a registrar of contractors who is the executive officer and secretary of the board and is responsible for carrying out specified administrative duties. If, upon investigation, the registrar has probable cause to believe that a licensee, or an applicant for a license under this chapter, has committed any acts or omissions that are grounds for denial, revocation, or suspension of license, he or she may, in lieu of a specified proceeding, issue a citation to the licensee or applicant.

If, upon investigation, the registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration, this bill would authorize the registrar to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation. The bill would require the letter to inform the applicant, licensee, or registrant that he or she may submit a written request for an office conference to contest the letter of admonishment, subject to specified procedures, including a process to appeal a decision, or comply with the letter, as provided.

Under existing law, complaints resolved in favor of the contractor are not subject to disclosure.

The bill would distinguish a letter of admonishment from such a complaint and disclose these letters for a year.

(2)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.

Date of Hearing: August 23, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 486

Author:(Monning) – As Amended Ver:April 20, 2017

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

SUMMARY:

This bill authorizes the Contractors State License Board (CSLB) to issue letters of admonishment to an applicant, licensee, or registrant rather than issuing a citation, and it sets specific conditions for issuing letters. Specifically, this bill:

1. Allows the CSLB to issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm or serious illness or injury.
2. Sets standards for the issuance of a letter of admonishment.
3. Allows parties that receive a letter of admonishment to respond and address violations and establishes the procedures for doing so.
4. Constrains the instances in which the CSLB may issue a letter of admonishment, including:
   1. If the licensee, registrant, or applicant was unlicensed at the time of the violation.
   2. If multiple violations have occurred and if the party has a history of similar violations.
   3. The violation resulted in financial harm.
   4. The victim is an elder or dependent adult.
   5. The violation is related to repair of damage caused by a natural disaster.
5. Provides that a complaint resolved through a letter of is not considered resolved in favor of the contractor for the purposes of public disclosure of formal disciplinary actions. A letter of admonishment issued to a licensee must be disclosed for a period of one year, as specified.

FISCAL EFFECT:

Absorbable costs within existing CSLB resources.

COMMENTS:

1. Purpose. The CSLB writes, “CSLB believes that this letter of admonishment will increase opportunities to settle the less egregious offenses before they result in the need for a formal administrative citation, while still providing correction of the offending behavior. It will also provide for public disclosure, by posting the issuance of a letter of admonishment online for one year. For the reasons stated above, we are in support of SB 486.”
2. Background. The CSLB is responsible for administering and enforcing the Contractors State License Law, including provisions related to licensing and practice. 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. The CSLB issues some 15,000 licenses each year, and more than 121,000 licenses are renewed each year.

A letter of admonishment is a tool that would allow the CSLB to address minor violations. As noted by CSLB, pursuing citations, even for minor violations, can be very costly, both financially and in staff resources. Issuing a letter of admonishment may allow the CSLB to more effectively and efficiently address minor violations with a lower financial impact. Additionally, issuing a letter of admonishment would not prevent CSLB from pursuing formal administrative action if the violation is not resolved.

1. Prior Legislation. AB 960 (Morell, Chapter 247, Statutes of 2014), created a similar authority for the California Board of Pharmacy to issue a letter of admonishment for minor violations.

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

Date of Hearing:

ASSEMBLY COMMITTEE ON

, Chair

SBPCA Bill Id:

Author:() – As Ver:

PROPOSED CONSENT

SENATE VOTE:

SUBJECT:

KEY ISSUE: for violations of the contractor state license law that do not involve financial harm to a consumer and are determined not to warrant greater formal discipline under the existing citation process, should the contractors' state license board be authorized to issue a "letter of admonishment", subject to an informal appeal to the board, rather than a formal accusation?

SYNOPSIS

The Contractors’ State License Board (CSLB) is responsible for administering and enforcing the Contractors State License Law, including provisions related to licensing and practice. Under existing law, for the most serious violations the CSLB can file an accusation to suspend or revoke a contractor's license. For lesser violations, the CSLB can instead issue the licensee a citation, which may contain an order of correction fixing a reasonable time for correction of the violation, or an order for the licensee to pay a specified sum to an injured party instead of correction, or an assessment of a civil penalty. According to the CSLB, the sponsor of this legislation, the existing citation program works well, but has become costly to operate. The CSLB contends that because a citation affords the same right to appeal as an accusation, there is no shortage of appealed citations every year, including many cases in which discipline could presumably be achieved and consumers protected without having issued a citation and defending a likely appeal. CSLB reports that about 43% of all citations are appealed administratively, and that the average cost to the board for an appeal is $9,860, whether or not the respondent appears at the hearing.

Accordingly, this bill would authorize the CSLB to issue a "letter of admonishment" to licensees and applicants under certain prescribed circumstances, instead of issuing an administrative citation. CSLB believes the "letter of admonishment" process, as detailed in this analysis, will increase opportunities to settle certain lesser offenses before they are appealed, while still providing correction of the offending behavior. Under this bill, the CSLB cannot issue a letter of admonishment when the violation resulted in financial harm to another or when the victim is an elder or dependent adult, among several criteria. The letter would be publicly disclosed for one year to provide greater transparency to consumers, and could be used by the CSLB as a basis for future disciplinary action. Most notably, a person appealing the letter of admonishment would not be entitled to a formal hearing before a court or an administrative law judge, but instead would engage in an "office conference" before the board. This informal, internal review is intended to provide the person an opportunity to be heard and to present evidence, while accompanied by his lawyer. Judicial review of the decision on the letter of admonishment is limited, however, to filing a petition for a writ of mandate on the issue of abuse of discretion. The bill is supported by a number of contractor associations and has no known opposition. It was approved by the Senate without a single "No" vote, and previously passed the Assembly Business and Professions Committee by a 15-0 vote.

SUMMARY: Authorizes the Contractors’ State License Board (CSLB) to issue a letter of admonishment to an applicant, licensee, or registrant, under certain prescribed circumstances, instead of issuing a citation, and establishes procedures for administrating or contesting such a letter. Specifically, this bill:

1. Allows the CSLB registrar to issue a letter of admonishment to an applicant, licensee, or registrant in lieu of issuing a citation if, upon investigation, the registrar has probable cause to believe that the person has committed acts or omissions that are grounds for denial, suspension or revocation of a license or registration. Requires the letter of admonishment to be in writing and describe in detail the nature and facts of the violation.
2. Provides that the letter of admonishment shall inform the licensee, registrant, or applicant that within 30 days of service of the letter, he or she may either submit a written request for an office conference to the registrar to contest the letter, or comply with the letter of admonishment and, if required, submit a corrective action plan to the registrar documenting compliance.
3. Establishes required procedures for the office conference described in 2) above. Provides, among other things, that the registrar has 14 calendar days from the date of the office conference to serve the licensee, registrant or applicant with a written decision, and this decision shall be deemed as the final administrative decision concerning the letter of admonishment. Allows a licensee or applicant to be accompanied by their legal counsel or authorized representative.
4. Permits judicial review of the decision by filing a petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure within 30 days after the date the decision was personally served or sent by certified mail, and authorizes the review to extend to the question of whether or not there was a prejudicial abuse of discretion in the issuance of the letter or in the decision after the office conference.
5. Prohibits the board from issuing a letter of admonishment when any of the following factors are present: (a) the licensee, registrant, or applicant was unlicensed at the time of the violation; (b) multiple violations have been established; (c) the licensee, registrant, or applicant has a history of the same or similar violations; (d) the violation resulted in financial harm to another; (e) the victim is an elder or dependent adult, as defined; (f) the violation is related to the repair of damage caused by a natural disaster.
6. Requires a letter of admonishment issued to a licensee to be disclosed for a period of one year from the date of services, and clarifies that a complaint resolved by issuance of a letter of admonishment under this bill shall not be deemed resolved in favor of the contractor for the purposes of this act.

EXISTING LAW:

1. Authorizes the registrar of the Contractors’ State License Board (CSLB) to investigate the actions of any applicant, contractor, or home improvement salesperson within the state and deny the licensure or the renewal of licensure of, or cite, temporarily suspend, or permanently revoke any license of registration if the applicant, licensee, or registrant is guilty of or commits any one or more of the acts or omissions constituting causes for disciplinary action. (Business & Professions Code Section 7090. All further references are to this code unless otherwise stated.)
2. Specifies a number of acts or omissions constituting causes for disciplinary actions against applicants, licensees, or registrants with the CSLB. (Sections 7090 et seq.)
3. Allows the CSLB registrar to issue a written citation to the licensee or applicant if, upon investigation, the registrar has probable cause to believe that a licensee or applicant has committed any acts or omissions which are grounds for denial, revocation, or suspension of license. (Section 7099.)
4. Requires the above citation to describe in detail the nature of the violation, including a reference to the provisions alleged to have been violated, and permits the citation to contain an order of correction fixing a reasonable time for correction of the violation, or an order, against the licensee only, for payment of a specified sum to an injured party in lieu of correction. In addition, the citation may include assessment of a civil penalty. (Section 7099.)
5. Requires the CSLB to promulgate regulations covering the assessment of civil penalties that give due consideration to the appropriateness of the penalty with respect to: (a) the gravity of the violation; (b) the good faith of the licensee or applicant for licensure being charged; and (c) the history of previous violations. Limits civil penalties to an amount not to exceed $5000, except as specified. (Section 7099.2.)
6. Allows any licensee or applicant served with a citation pursuant to 3) to appeal to the CSLB registrar within 15 working days from service of the citation. Provides that if the 15 day period passes and the licensee or applicant fails to notify the registrar that he or she intends to contest the citation, the citation shall be deemed a final order of the registrar and not be subject to review by any court or agency. (Sections 7099.3 and 7099.4.)
7. Requires the CSLB registrar to make available to the public the date, nature, and status of all complaints on file against a licensee that have been referred for accusation or that have been referred for investigation after a determination by the board or enforcement staff that a probable violation has occurred, that if proved 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. Provides that any complaints resolved in favor of the contractor are not subject to such disclosure. (Section 7124.6 (a) and (c).)
8. Requires the disclosure of citations from the date of issuance and for five years after the date of compliance, if no additional disciplinary actions have been filed against the licensee during the disclosure period. With respect to accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license, disclosure is required from the date the accusation is filed and for seven years after the accusation has been settled, if no additional disciplinary actions have been filed against the licensee during the disclosure period. (Section 7124.6 (e).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: This bill seeks to authorize the Contractors State License Board (CSLB) to issue a so-called "letter of admonishment" to licensees or applicants, under certain prescribed circumstances, as a new tool of discipline for lesser violations that do not involve financial harm to a consumer and are determined not to warrant greater formal discipline under the existing administrative citation process.

Background on the Contractors State License Board. The CSLB is responsible for administering and enforcing the Contractors State License Law, including provisions related to licensing and practice. 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 issues approximately 15,000 licenses and renews more than 121,000 licenses each year. In total, the CSLB licenses and regulates approximately 285,000 contractors in the state and receives nearly 20,000 complaints each year.

Under existing law, for the most serious violations the CSLB can file an accusation to suspend or revoke a contractor's license. For lesser violations, the CSLB can instead issue the licensee a citation, upon probable cause to believe he or she has committed any act or omission that would be grounds for suspension or revocation of a license. The citation may contain an order of correction fixing a reasonable time for correction of the violation, or an order for the licensee to pay a specified sum to an injured party instead of correction. A citation may also include an assessment of a civil penalty. The citation process was codified in 1979 to provide the CSLB a second option—other than filing an accusation—to discipline licensees who had committed violations of the Contractors State License Law. This bill would provide the board with another option of disciplinary action—a letter of admonishment, which is distinguished from an accusation or citation primarily by its informal, rather than formal, appeals process. The letter would be an intermediate form of discipline between an advisory notice, which is not disclosed to the public and cannot be used as a basis for future disciplinary action, and an administrative citation, which is publicly disclosed and may be used as a basis for future disciplinary action.

Need for additional tools of enforcement for lesser violations. Before the advent of the administrative citation process, the CSLB was limited to filing accusations against licensees, which were considered costly and time consuming because due process required licensees or applicants to first be granted the right to appeal and also have an evidentiary hearing before action could be taken. By contrast, administrative citations are seen as a way to work with licensees or applicants to satisfy consumer complaints, provide refunds on contracts or compensate the injured in less time and with less costs than accusations.

However, according to the author, even the administrative process of contesting a citation today presents high costs and delays resolution of the matter. Under current law, the licensee is given 15 days to notify the registrar that he or she intends to contest the citation; if notice of the intention to contest is not received, the citation is deemed a final order of the board and may not be subject to review by any court or agency. The contest process results in an opportunity for a hearing, after which the board issues a decision based on findings of fact, affirming, modifying, or vacating the citation or penalty, or directing other relief as deemed fit.

According to the CSLB, the sponsor of this legislation, establishing a third option of discipline that employs an informal appeals process, rather than a more expensive formal process, will help the board perform its enforcement duties in a more cost-effective manner. The CSLB states:

The existing citation program works well, however, it has become costly to operate. As a citation affords the same right to appeal as an accusation, there is no shortage of appealed citations every year. The average cost to CSLB for an appeal is $9,860, whether or not the respondent appears at the hearing. CSLB believes this letter of admonishment will increase opportunities to settle such offenses before they are appealed, while still providing correction of the offending behavior.

Data compiled by the CSLB and provided to the Committee show that from Fiscal Year 12-13 through Fiscal Year 15-16 ( a total of four years), CSLB issued 8622 citations, and of those 3,475 were appealed, or approximately 43%. They note that many citation appeals are for offenses that do not allege a financial injury or order of correction for consumers, such as failure to obtain a permit or workers’ compensation insurance policy.

According to the author, allowing the CSLB to handle the appeals internally will help "provide a more streamlined and cost-effective review process." The author also contends that the letter of admonishment process "will free up financial resources and provide additional funding to enforcement of more serious violations of the law, as well as further CSLB's efforts to address the underground economy in California." Finally, the author notes that the Legislature recently approved and the Governor signed legislation (SB 960, Ch. 247, Stats. 2014) granting the Board of Pharmacy authority to issue a letter of admonishment, subject to an office conference process, as an intermediate level of discipline for its licensees. This bill adopts many similar or identical provisions about the letter of admonishment process from SB 960.

Admonishment letters and the informal "office conference" process. As a preliminary matter, the CSLB may only issue a letter after completing an investigation and finding that the person committed an act or omission that would be grounds for denial, suspension, or revocation of a license. The bill requires the letter of admonishment to be in writing, to describe the nature and facts of the violation in detail, and to be served upon the licensee personally or by certified mail. The letter shall inform the licensee that within 30 days of service of the letter of admonishment they may either submit a written request for an "office conference" to the CSLB to contest the letter, or comply with the letter of admonishment and, if required, submit a corrective action plan to the CSLB documenting compliance.

As previously noted, the office conference is intended to be informal and involves an internal review process within the CSLB, rather than a formal hearing before a court or an administrative law judge. Proponents, including the California Professional Association of Specialty Contractors (CALPASC), contend that the office conference nevertheless "provides a reasonable opportunity for contractors who are accused of misconduct to appear before the [CSLB] and state their case." According to the author, the bill contains other measures intended to increase due process protections for licensees appealing an admonishment letter, namely: (1) the licensee may be accompanied by their legal counsel or authorized representative at the office conference; and (2) prior to the conference, the licensee may submit to CSLB any declarations and documents pertinent to the subject matter of the letter of admonishment. These two factors may provide the licensee an opportunity to be heard, albeit informally, and highlight evidence or legal arguments that could persuade the board to withdraw the letter or otherwise modify its conclusions.

After the office conference, CSLB may affirm, modify, or withdraw the letter of admonishment. The board has 14 calendar days from the date of the office conference to serve the licensee with a written decision, and this decision shall be deemed as the final administrative decision concerning the letter of admonishment. Importantly, the bill preserves some judicial review of the board's decision following the office conference. Under this bill, the licensee or applicant can obtain judicial review of the decision by filing a petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure, within 30 days after the date the decision was served or mailed. Review shall extend to the question of whether or not there was a prejudicial abuse of discretion in the issuance of the letter or in the decision after the office conference.

Applicability and scope of admonishment letter process. While the admonishment letter process may help the CSLB achieve some efficiencies in carrying out its enforcement functions, consumer protection would not truly be served if admonishment letters were used to address more serious violations more deserving of a citation or potential license suspension. Recent amendments to the bill better ensure that use of the admonishment letter is reserved to minor violations, as intended by the author. For example, the bill prohibits the board from issuing a letter of admonishment when, among other things: (1) the violation resulted in financial harm to another; (2) multiple violations have been established; and (3) the victim is an elder or dependent adult. Intent language in the bill also states that it is the Legislature's intent that the CSLB only issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm to the consumer and do not result in serious illness or injury.

The bill also allows the CSLB to adopt regulations in the future to further define when a letter of admonishment may be issued. However, it should be noted that the bill specifically provides that the office conference is intended to be informal and shall not be subject to the Administrative Procedure Act (APA), which would normally ensure due process to stakeholders subject to administrative regulations to participate or be heard in the creation of those regulations.

Public disclosure of admonishment letters. Consumer protection is best served when members of the public have access to records of disciplinary actions taken by the CSLB, whether they are citations, accusations that result in suspension, or even admonishment letters. Businesses are incentivized to comply with laws and regulations and correct violations more quickly if evidence of disciplinary actions is on record and available to the public, rather than protected from disclosure. Current law recognizes this principle and provides that citations are disclosed from the date of issuance and for five years after the date of compliance, and then no longer disclosed. For most accusations, disclosure is required from the date of issuance and an even longer period thereafter--- seven years after the date of compliance, and then no longer disclosed. This bill provides that admonishment letters shall be disclosed for a period of one year from the date the letter is served upon the licensee, and then no longer disclosed. Because the public disclosure period is significantly shorter than that for an administrative citation, it may be that many licensees will be less likely to pursue an appeal as a result. Finally, it should be noted that the CSLB may internally keep track of admonishment letters for a longer period, and could use them as the basis for future disciplinary action when considering a licensee's record in whole.

Previous related legislation. SB 960 (Morrell), Ch. 247, Stats. 2014, authorized the Board of Pharmacy to issue letters of admonishment to its licensees for certain violations, and created an office conference process to handle appeals informally within the jurisdiction of the board.

REGISTERED SUPPORT / OPPOSITION:

Support

Contractors State License Board (sponsor)

American Fire Sprinkler Association

Associated Builders and Contractors

California Landscape Contractors Association

California Legislative Conference of the Plumbing, Heating and Piping Industry

California Professional Association of Specialty Contractors

National Electrical Contractors Association, CA Chapters

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Southern California Contractors Association

United Contractors

Western Electrical Contractors Association

Opposition

None on file

Analysis Prepared by:

Date of Hearing: June 20, 2017

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Evan Low, Chair

SBPCA Bill Id:SB 486

Author:() – As Amended Ver:April 20, 2017

SENATE VOTE: 39-0

SUBJECT: Contractors’ State License Law: letter of admonishment

SUMMARY: Authorizes the Contractors State License Board (CSLB) to issue letters of admonishment to an applicant, licensee, or registrant rather than issuing a citation and sets specific conditions for issuing letters.

EXISTING LAW:

1. Provides for the licensure and regulation of 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. Provides that any entity authorized to issue a license or certificate may publicly reprove a licentiate or certificate holder thereof, for any act that would constitute grounds to suspend or revoke a license or certificate. Any proceedings for public reproval, public reproval and suspension, or public reproval and revocation shall be conducted in accordance with the Administrative Procedure Act, as specified. (BPC Section 495)
3. Authorizes the Medical Board of California to issue a public letter of reprimand after it has conducted an investigation or inspection, as specified. (BPC Section 2233)
4. Authorizes the Physical Therapy Board of California to issue a public letter of reprimand after it has conducted an investigation or inspection, as specified. (BPC Section 2660.3)
5. Authorizes the Board of Pharmacy to issue a letter of admonishment to an applicant for licensure or licensee for failure to comply with the Pharmacy Law or regulations, as specified. (BPC Section 4315)
6. 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:
7. Have been referred for accusation; or
8. 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))
9. 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 Section 7124.6 (b))
10. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC Section 7124.6(c))
11. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:
12. 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;
13. 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
14. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC Section 7124.6(d)-(e))

THIS BILL:

1. Allows the CSLB to issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm or serious illness or injury.
2. Sets standards for the issuance of a letter of admonishment.
3. Allows parties that receive a letter of admonishment to respond and address violations and establishes the procedures for doing so.
4. Constrains the instances in which the CSLB may issue a letter of admonishment, including:
   1. If the licensee, registrant, or applicant was unlicensed at the time of the violation.
   2. If multiple violations have occurred and if the party has a history of similar violations.
   3. The violation resulted in financial harm.
   4. The victim is an elder or dependent adult.
   5. The violation is related to repair of damage caused by a natural disaster.
5. Provides that a complaint resolved through a letter of is not considered resolved in favor of the contractor for the purposes of public disclosure of formal disciplinary actions. A letter of admonishment issued to a licensee shall be disclosed for a period of one year, as specified.
6. Makes Legislative findings and declarations that this measure imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the measure underscores that the Legislature makes following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:

“In order to allow the Contractors’ State License Board to fully accomplish its regulatory and disciplinary goals for minor violations, it is necessary to limit access to the letters of admonishment.”

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

Purpose. This bill is sponsored by the Contractors State Licensing Board. According to the author, “SB 486 provides CSLB the authority, after completing an investigation, to issue a letter of admonishment to a licensee that violates the Contractors’ State License Law. It would establish an informal appeals process, which would allow for a quick resolution of those complaints. While the existing citation system is effective, the process can be long, and at times costly. The average cost to CSLB for a citation that is appealed is $9,860, whether or not the respondent appears at the hearing. Many citation appeals are for offenses that do not allege a financial injury or order of correction for consumers. From fiscal year 12-13 through fiscal year 15-16, CSLB issued 8,622 citations, approximately 43% of which were appealed.”

Background. The CSLB is responsible for administering and enforcing the Contractors State License Law, including provisions related to licensing and practice. 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. The CSLB issues some 15,000 licenses each year, and more than 121,000 licenses are renewed each year.

A letter of admonishment is a tool that would allow the CSLB to address minor violations. As noted by CSLB, pursuing citations, even for minor violations, can be very costly, both financially and in staff resources. Issuing a letter of admonishment may allow the CSLB to more effectively and efficiently address minor violations with a lower financial impact. Additionally, issuing a letter of admonishment would not prevent CSLB from pursuing formal administrative action if the violation is not resolved.

Prior Related Legislation. AB 960 (Morell, Chapter 247, Statutes of 2014), created a similar authority for the California Board of Pharmacy to issue a letter of admonishment for minor violations.

ARGUMENTS IN SUPPORT:

The CSLB writes, “CSLB believes that this letter of admonishment will increase opportunities to settle the less egregious offenses before they result in the need for a formal administrative citation, while still providing correction of the offending behavior. It will also provide for public disclosure, by posting the issuance of a letter of admonishment online for one year. For the reasons stated above, we are in support of SB 486.”

ARGUMENTS IN OPPOSITION:

None on file.

REGISTERED SUPPORT:

Contractors State License Board

REGISTERED OPPOSITION:

None on file

Analysis Prepared by: Jimmy Fremgen / B. & P. / (916) 319-3301

 THIRD READING  

Bill No: SB 486

Author:

:

Vote:

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 3/27/17

AYES: Hill, Bates, Dodd, Galgiani, Glazer, Hernandez, Newman, Pan, Wilk

SENATE JUDICIARY COMMITTEE: 7-0, 4/18/17

AYES: Jackson, Moorlach, Anderson, Hertzberg, Monning, Stern, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT:

SOURCE: Contractors State License Board

DIGEST:

This bill authorizes the Contractors State License Board (CSLB) and its Registrar of Contractors (Registrar) to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant, instead of issuing a citation, when an investigation gives the Registrar probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration. This bill also provides for an office conference to contest the letter of admonishment and specifies circumstances under which the letter of admonishment may be issued as well as requires the letter of admonishment be disclosed to the public for a period of one year from the date of service.

ANALYSIS:

Existing law:

1. Provides that any entity authorized to issue a license or certificate may publicly reprove a licentiate or certificate holder thereof, for any act that would constitute grounds to suspend or revoke a license or certificate. Any proceedings for public reproval, public reproval and suspension, or public reproval and revocation shall be conducted, as specified. (Business and Professions Code (BPC) § 495)
2. 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. (BPC § 7000 et seq.)
3. Provides that the Registrar may issue citations containing orders of abatement and civil penalties against persons acting in the capacity or engaging in the business of a contractor within this state without having a license. (BPC § 7028.6)
4. Provides that the Registrar may, upon his or her own motion and shall upon the verified complaint in writing of any person, investigate the actions of any applicant, contractor, or home improvement salesperson within the state and applicant, contractor, or home improvement salesperson within the state and may deny the licensure or the renewal of licensure of, or cite, temporarily suspend, or permanently revoke any license of registration if the applicant, licensee, or registrant, is guilty of or commits any one or more of the acts or omissions constituting causes for disciplinary action. (BPC § 7090)
5. Enables the Registrar to issue a citation to the licensee or applicant if, upon investigation, the Registrar has probable cause to believe that a licensee or applicant has committed any acts or omissions which are grounds for denial, revocation, or suspension of license. (BPC § 7099)
6. Requires each citation to be in writing, describing in detail the nature of the violation, including a reference to the provisions alleged to have been violated. Additionally, each citation may contain an order of correction fixing a reasonable time for correction of the violation or an order, against the licensee only, for payment of a specified sum to an injured party in lieu of correction, and may contain an assessment of a civil penalty. (BPC § 7099)
7. Provides for the CSLB to promulgate regulations covering the assessment of civil penalties that give due consideration to the appropriateness of the penalty with respect to specified factors including the gravity of the violation and history of previous violations. (BPC § 7099.2)
8. Provides that the Registrar shall make available to members of the public the date, nature, and disposition of legal actions as specified, including citations, but that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC § 7124.6)
9. Authorizes the Medical Board of California to issue a public letter of reprimand after it has conducted an investigation or inspection, as specified. (BPC § 2233)
10. Authorizes the Physical Therapy Board of California to issue a public letter of reprimand after it has conducted an investigation or inspection, as specified. (BPC § 2660.3)
11. Authorizes the Board of Pharmacy to issue a letter of admonishment to an applicant for licensure or licensee for failure to comply with the Pharmacy Law or regulations, as specified. (BPC § 4315)

This bill:

1. Provides the Registrar, or his or her designee, with the ability to issue a letter of admonishment to an applicant, licensee, or registrant in lieu of issuing a citation if, upon investigation, the Registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension or revocation of a license or registration.
2. Requires the letter of admonishment be in writing and describe in detail the nature and facts of the violation. The letter shall inform the licensee, registrant, or applicant that within 30 days of service of the letter of admonishment they may either:
   1. Submit a written request for an office conference to the Registrar to contest the letter; or,
   2. Comply with the letter of admonishment and, if required, submit a corrective action plan to the Registrar documenting compliance. This compliance is not considered an admission of the violation.
3. Provides the procedure for an office conference when requested. The conference is intended to be informal and is thus not subjected to the Administrative Procedure Act. This bill provides that:
   1. At the office conference, a licensee or applicant may be accompanied by their legal counsel or authorized representative;
   2. Prior to the conference, the licensee, registrant, or applicant may submit to the Registrar declarations and documents pertinent to the subject matter of the letter of admonishment;
   3. After the conference, the Registrar may affirm, modify, or withdraw the letter of admonishment. The Registrar has 14 calendar days from the date of the office conference to serve the licensee, registrant or applicant with a written decision, and this decision shall be deemed as the final administrative decision concerning the letter of admonishment; and,
   4. Judicial review of the decision may be had by filing a petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure within 30 days after the date the decision was personally served or sent by certified mail, and the review shall extend to the question of whether or not there was a prejudicial abuse of discretion in the issuance of the letter or in the decision after the office conference.
4. Requires the letter of admonishment be served upon the licensee, registrant, or applicant personally or by certified mail. The licensee, registrant, or applicant shall maintain and have readily available a copy of the letter and corrective action plan, if any, for at least one year from the date of issuance.
5. Does not in any way limit the CSLB’s authority to issue a citation or institute a disciplinary proceeding, and the letter of admonishment shall not be construed as a disciplinary action or discipline for purposes of licensure or reporting of discipline for licensure.
6. Provides that the CSLB shall not issue a letter of admonishment when any of the following factors is present:
   1. The licensee, registrant, or applicant was unlicensed at the time of the violation.
   2. Multiple violations have been established.
   3. The licensee, registrant, or applicant has a history of the same or similar violations.
   4. The violation resulted in financial harm to another.
   5. The victim is an elder or dependent adult as defined in Section 368 of the Penal Code.
   6. The violation is related to the repair of damage caused by a natural disaster.
7. Specifies that the CSLB may adopt regulations to further define the circumstances under which a letter of admonishment may be issued.
8. Provides that a complaint resolved by the issuance of a letter of admonishment to not be deemed resolved in favor of the contractor and requires a letter of admonishment issued to a licensee to be disclosed for a period of one year from the date of service.
9. States that it is the intent of the Legislature that the CSLB only issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm to the consumer and do not result in serious illness or injury.

Background

The CSLB is the sponsor of this bill. The CSLB 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 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. 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.

This bill allows CSLB to issue a letter of admonishment to an applicant who has committed a violation that CSLB deems worthy of caution, but does not merit a license denial or probationary status, as specified. By further using the letters of admonishment to include applicants for licensure, this bill will reduce the costs associated with the formal investigatory and hearing process necessary for a probationary license, while still preserving public safety and granting the applicant full licensure.

According to the author, “In the last few years, CSLB’s costs to administer citations have grown significantly. CSLB issues over 2,000 citations a year; approximately 40% of citations are appealed, and the average cost per appealed citation is $10,000. The letter of admonishment will be less severe than a citation but still provide a means to correct a violation. It will also benefit licensees by providing a quicker, more streamlined process to resolve complaints.”

A letter of admonishment is being utilized by other boards under DCA and is issued to an applicant, registrant, or licensee for violations their respective practice acts or regulations that are not egregious enough to warrant formal discipline, but where the individual does need to take action to safely carry out the requirements of licensure. A letter of admonishment allows an individual to receive the privilege of a license yet serves as a tool for further public protection, as well as allows employers to know if a licensee has violated the law.

Currently the Board of Pharmacy, Medical Board of California, and Physical Therapy Board all have the ability to issue a letter of admonishment or letter of reprimand. All three boards have noted that these types of letters are an additional tool to address non-compliance and help reduce time and costs associated with minor violations.

CSLB indicates that by administering these letters of admonishment, they will be able to focus its enforcement efforts and resources on more egregious cases. CSLB estimates that out of the 2,000 citations, approximately 500 could have been letters of admonishments.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/10/17)

Contractors State License Board (source)

American Fire Sprinkler Association

Associated Builders and Contractors

California Landscape Contractors Association

California Professional Association of Specialty Contractors

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Southern California Contractors Association

Western Electrical Contractors Association

OPPOSITION: (Verified 5/10/17)

None received

ARGUMENTS IN SUPPORT: The Contractors State License Board writes that “CLSB believes that this letter of admonishment will increase opportunity to settle offenses before they are appealed, while still providing correction of the offending behavior. It will also provide for public disclosure, by posting the issuance of a letter of admonishment online for a year.”

The California Professional Association of Specialty Contractors (CALPASC) writes that this bill “provides a reasonable opportunity for contractors who are accused of misconduct, to appear before the Registrar, and state their case. It provides CSLB enforcement staff an intermediate level of enforcement, with a minimizing of resources.” CALPASC also notes that it has “seen that having a new, easier to process enforcement step can create an unintended incentive to just issue the lesser penalty/violation” and will continue to monitor CSLB’s letter of admonishment program if put in practice.

Prepared by: Bill Gage

5/10/17 15:26:39

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: SB 486 (Author:Monning)

Version: March 28, 2017

Hearing Date: April 18, 2017

Fiscal: Yes

Urgency: No

Consultant: MS

SUBJECT

Contractors’ State License Law: letter of admonishment

DESCRIPTION

Existing law creates the Contractors’ State License Board (CSLB) who provide for the licensure and regulation, including discipline, of contractors. Existing law requires the board to appoint a registrar of contractors who is the executive officer and secretary of the board and is responsible for carrying out specified administrative duties. Existing law allows the registrar to issue a citation to a licensee or applicant in lieu of a specified proceeding, if upon investigation the registrar has probable cause to believe the license or applicant has committed any acts or omissions that are grounds for denial, revocation, or suspension of a license.

This bill would provide the registrar with the ability to issue a written and detailed letter of admonishment to an applicant, licensee, or registrant instead of issuing a citation when an investigation gives the registrar probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension, or revocation of a license or registration. This bill would require the letter inform the applicant, licensee, or registrant that he or she may submit a written request for an office conference to contest the letter of admonishment, subject to specified procedures, or comply with the letter. The specified procedures for an office conference are contained in this bill, as is a provision providing the office conference is intended to be informal and thus not subject to the Administrative Procedure Act. This bill would require letters of admonishment be disclosed for a period of one year from the date of service. Additionally, this bill contains legislative intent language, stating it is the intent of the Legislature that the CSLB only issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm to the consumer and do not result in serious illness or injury.

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 makes legislative findings to that effect.

BACKGROUND

In 1979 the Contractors’ State License Board (CSLB) gained the ability to issue citations as a more progressive form of discipline for less serious violations. Prior to the additions of Business and Professions Code Section 7099, the CSLB’s only option to discipline was to file accusations to suspend or revoke a license. This codification of the citation process allows the registrar to issue a citation in lieu of a denial, revocation, or suspension if upon investigation the registrar has probable cause to believe that a licensee or applicant has committed any acts or omissions that would be grounds for denial, revocation, or suspension of a licensee. The licensees or applicants are given 15 days to notify the registrar that they intend to contest the citation, if notice of this intention to contest is not received, the citation is deemed a final order of the registrar and may not be subject to review by any court or agency. The contest process results in an opportunity for a hearing, after which the registrar issues a decision based on findings of fact, affirming, modifying, or vacating the citation or penalty, or directing other relief as deemed fit. Citations are disclosed to the public for five years, per the CSLB’s online posting, while an accusation is listed for seven.

CSLB’s registrar was granted the ability to issue citations in part because of the costly and time consuming nature of accusations, they require licensees or applicants first be granted the right to appeal and have an evidentiary hearing before action can be taken. Administrative citations were seen as a way to work with licensees or applicants to satisfy consumer complaints, provide refunds on contracts or compensate the injured in less time and with less costs than accusations. However, the contest process also presents high costs and delays in finding a resolution. The CSLB particularly sees this as an issue when contests occur for citations that are not related to financial injuries or orders of correction for consumers. Other boards within the purview of the Department of Consumer Affairs have been issued an additional tool for correcting lesser violations of their members.

Most recently, the Board of Pharmacy (BOP) was granted the ability to issue a letter of admonishment. (SB 960, Morrell, Ch. 247, Stats. 2014.) This allows the BOP to issue a letter in writing, detailing the nature and facts of the violation committed by the licensee or applicant. The letter may include what actions the licensee or applicant needs to take in order to come into compliance. The applicant or licensee then has 30 days from receipt of the letter to request an office conference to contest the letter, or else accept the letter without challenge. This office conference process is seen as an informal proceeding that gives the BOP greater flexibility and more progressive form of discipline for less serious violations, but still protects consumers by requiring some level of disclosure and creating an internal history in case of later violations.

This bill borrows from the language used by the Board of Pharmacy to grant the CSLB the right to issue letters of admonishment to licensees or applicants that violate the Contractors’ State License Law. Establishing an informal appeals process would allow for quicker resolution of complaints that are of a less serious nature, while still protecting consumers through public disclosure for one year.

CHANGES TO EXISTING LAW

Existing law creates the registrar of the Contractors’ State License Board (CSLB), to be appointed by the board, with the approval of the directors. This registrar is the executive officer and secretary of the board, and shall carry out all of the administrative duties as provided by the Contractors’ State License Law. (Bus. & Prof. Code Sec. 7011.)

Existing law provides that the registrar may, upon his or her own motion and shall upon the verified complaint in writing of any person, investigate the actions of any applicant, contractor, or home improvement salesperson within the state and applicant, contractor, or home improvement salesperson within the state and may deny the licensure or the renewal of licensure of, or cite, temporarily suspend, or permanently revoke any license of registration if the applicant, licensee, or registrant, is guilty of or commits any one or more of the acts or omissions constituting causes for disciplinary action. (Bus. & Prof. Code Sec. 7090.)

Existing law provides a number of acts and/or omissions constituting causes for disciplinary actions against applicants, licensees, or registrants with the CSLB. (Bus. & Prof. Code Sec. 7090 et seq.)

Existing law enables the registrar to issue a citation to the licensee or applicant if, upon investigation, the registrar has probable cause to believe that a licensee or applicant has committed any acts or omissions which are grounds for denial, revocation, or suspension of license. (Bus. & Prof. Code Sec. 7099.)

Existing law requires each citation be in writing, describing in detail the nature of the violation, including a reference to the provisions alleged to have been violated. Additionally, each citation may contain an order of correction fixing a reasonable time for correction of the violation or an order, against the licensee only, for payment of a specified sum to an injured party in lieu of correction, and may contain an assessment of a civil penalty. (Bus. & Prof. Code Sec. 7099.)

Existing law provides for the CSLB to promulgate regulations covering the assessment of civil penalties that give due consideration to the appropriateness of the penalty with respect to the following factors:

• the gravity of the violation;
• the good faith of the licensee or applicant for licensure being charged; and
• the history of previous violations. (Bus. & Prof. Code Sec. 7099.2.)

Existing law provides that any licensee or applicant served with a citation pursuant to Section 7099 may appeal to the registrar within 15 working days from service of the citation. If the 15 day period passes and the licensee or applicant fails to notify the registrar that he or she intends to contest the citation, the citation shall be deemed a final order of the registrar and not be subject to review by any court or agency. (Bus. & Prof. Code Secs. 7099.3, 7099.4.)

Existing law provides that those who contest citations should be afforded an opportunity for a hearing. After the hearing, the registrar shall issue a decision, based on findings of fact, affirming, modifying, or vacating the citation or penalty, or directing other appropriate relief. These hearings are to be conducted in accordance with the provisions of Chapter 5 of Part 1 of Division 3 of Title 2 of the Government Code, and the registrar shall have all the powers granted therein. (Bus. & Prof. Code Sec. 7099.5.)

This bill provides the registrar, or his or her designee, with the ability to issue a letter of admonishment to an applicant, licensee, or registrant in lieu of issuing a citation if, upon investigation, the registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension or revocation of a license or registration.

This bill requires the letter of admonishment be in writing and describe in detail the nature and facts of the violation. The letter shall inform the licensee, registrant, or applicant that within 30 days of service of the letter of admonishment they may either:

• submit a written request for an office conference to the registrar to contest the letter; or
• comply with the letter of admonishment and, if required, submit a corrective action plan to the registrar documenting compliance. This compliance is not considered an admission of the violation.

This bill provides the procedure for an office conference when requested. The conference is intended to be informal and is thus not subjected to the Administrative Procedure Act. This bill provides that:

• at the office conference, a licensee or applicant may be accompanied by their legal counsel or authorized representative;
• prior to the conference, the licensee, registrant, or applicant may submit to the registrar declarations and documents pertinent to the subject matter of the letter of admonishment;
• after the conference, the registrar may affirm, modify, or withdraw the letter of admonishment. The registrar has 14 calendar days from the date of the office conference to serve the licensee, registrant or applicant with a written decision, and this decision shall be deemed as the final administrative decision concerning the letter of admonishment; and
• judicial review of the decision may be had by filing a petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure within 30 days after the date the decision was personally served or sent by certified mail, and the review shall extend to the question of whether or not there was a prejudicial abuse of discretion in the issuance of the letter or in the decision after the office conference.

This bill requires the letter of admonishment be served upon the licensee, registrant, or applicant personally or by certified mail. The licensee, registrant, or applicant shall maintain and have readily available a copy of the letter and corrective action plan, if any, for at least one year from the date of issuance.

This bill does not in any way limit the CSLB’s authority to issue a citation or institute a disciplinary proceeding, and the letter of admonishment shall not be construed as a disciplinary action or discipline for purposes of licensure or reporting of discipline for licensure.

This bill states that it is the intent of the Legislature that the CSLB only issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm to the consumer and do not result in serious illness or injury.

Existing law requires the registrar make available to the public the date, nature, and status of all complaints on file against a licensee that have been referred for accusation or that have been referred for investigation after a determination by the board or enforcement staff that a probable violation has occurred, that if proved 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. These postings are to be accompanied by a disclaimer created by the board noting the complaint is an allegation. Any complaints resolved in favor of the contractor are not subject to disclosure. (Bus. & Prof. Code Sec. 7124.6(a)-(b).)

Existing law provides for the disclosure of citations from the date of issuance and for five years after the date of compliance, if no additional disciplinary actions have been filed against the licensee during the disclosure period. Additional disciplinary actions require the disclosure of all disciplinary actions for as long as the most recent disciplinary action is subject to disclosure. (Bus. & Prof. Code Sec. 7124.6(e)(1).)

Existing law provides for the disclosure of accusations that result in suspension, stayed suspension, or stayed revocation of the contractor’s license from the date the accusation is filed and for seven years after the accusation has been settled, if no additional disciplinary actions have been filed against the licensee during the disclosure period. Additional disciplinary actions require the disclosure of all disciplinary actions for as long as the most recent disciplinary action is subject to disclosure. (Bus. & Prof. Code Sec. 7124.6(e)(2).)

This bill provides that a complaint resolved by the issuance of a letter of admonishment will be disclosed for a period of one year from the date of service.

COMMENT

1. Stated need for this bill

According to the Author:

SB 486 provides CSLB the authority, after completing an investigation, to issue a letter of admonishment to a licensee that violates the Contractors’ State License Law. It would establish an informal appeals process, which would allow for a quick resolution of those complaints. While the existing citation system is effective, the process can be long, and at times costly. The average cost to CSLB for a citation that is appealed is $9,860, whether or not the respondent appears at the hearing. Many citation appeals are for offenses that do not allege a financial injury or order of correction for consumers. From fiscal year 12-13 through fiscal year 15-16, CSLB issued 8622 citations, approximately 43% of which were appealed.

In support, the California Professional Association of Specialty Contractors (CALSPASC) writes:

CALSPASC appreciates and respects the significant efforts of the Contractors’ State License Board [CSLB] members and staff in regards to fair enforcement against wrongdoing by contractors. There is a balance to be achieved by utilizing resources wisely. Another balance point is focusing on the truly bad actors in the industry, while not negatively impacting legitimate contractors whose staff or employees might make a mistake in judgment or action. CSLB scores well on all these points.

SB 486 is an effort to continue effective enforcement while keeping these factors in balance. It provides a reasonable opportunity for contracts who are accused of misconduct, to appear before the Registrar and state their case. It provides CSLB enforcement staff an intermediate level of enforcement, with a minimizing of resources.

1. CSLB’s discipline process

Existing law grants CSLB two levels of discipline for licensees or applicants. They may file an accusation to suspend, revoke, or deny a license, or they may issue a citation after completing an investigation. (Bus. and Prof. Code Sec. 7090 et seq.) This right to issue a citation was granted in 1979 to provide an intermediary system of discipline to CSLB, for the more progressive discipline of less serious cases. Additionally, the accusation process was seen as costly, in terms of both time and funds, and somewhat unwieldy in that it did not allow the CSLB to work with licensees to resolve complaints and correct problems reported by consumers.

The CSLB now reports that the citation process has resulted in a system that runs counter to its original goals. At their September 2015 Board Meeting, the CSLB reported that because the administrative citation process affords the same right to appeals as an accusation, there is no shortage of appeals. Since the average appeals costs $9,860 and delays CSLB’s ability to work with the licensee or applicant to correct the issue, they see the citation process as now adding to enforcement costs and time constraints it was created to alleviate.

Particularly of concern to the CSLB are citations provided for acts or omissions that do not result in financial injury or require an order of correction, which is when monies are owed to an injured party. They thus see the letter of admonishment as creating the intermediary level of enforcement that the citation was originally intended to be. Specifically, the CSLB sees the letter of admonishment “as increasing opportunities to settle offenses before they are appealed, while still providing correction of the offending behavior.”

The CSLB reports that approximately 43 percent of citations issued are appealed. Of these appealed citations only seven percent were decided in favor of the licensee, by either being withdrawn (six percent) or dismissed (one percent). An additional 30 percent were either modified or settled by the Attorney General, meaning there was some type of change to the citation originally issued, but that a citation was still issued. Furthermore, five percent of all appeals result in default, meaning the licensee appealed but then did not show for the appeal. The CSLB notes that even when the licensee defaults, the CSLB is still required to pay the costs of the appeal to the Attorney General’s office. The CSLB believes such a high number of cases are appealed because of the resulting five year disclosure period. They believe that this results in more licensees trying their luck with the appeals process, despite an outcome where the citation would no longer be disclosed is unlikely.

The existing statutory framework around the CSLB’s disciplinary proceedings gives the CSLB a great deal of discretion regarding their decision to move forward with a citation or began the accusation process for suspending or revoking a license. This bill would add to this existing framework an additional disciplinary tool that would allow the CSLB to be more progressive in handling acts or omissions made by their licensees.

1. The office conference process

There may be some concern stemming from the lack of a formal appeal process to the letter of admonishment. This bill would instead create the “office conference,” which is intended to be an informal review process. These concerns could raise the concept that the CSLB currently has such board authority in terms of determining whether to begin the accusation process or issue a citation, in response to a complaint or their own investigation, because both of these actions provide the licensee or applicant with the ability to engage in an administrative appeal process. Furthermore, this appeal process was subject to the Administrative Procedure Act (APA) Chapter 4.5 (commencing with Section 11400) or Chapter 5 (commencing with Section 11500 of Part 1 of Division 3 of Title 2 of the Government Code), while the office conference will not be subject to this act as it is intended to be informal.

Typically, the Administrative Procedure Act provides rules for state agencies to adopt regulations, which include public notice of the proposed regulation, an opportunity for comment by interested parties, and review by the Office of Administrative Law. The APA was enacted to establish basic minimum procedural requirements for the adoption, amendment or repeal of administrative regulations promulgated by administrative agencies (Government Code Section 11346). The purpose of the APA was to prevent administrative agencies from engaging in "underground regulation.” Administrative regulations are not subject to legislative or voter approval; therefore, the APA ensures that those who may be affected by the regulation have a voice in the creation and enactment of those regulations.

By not applying the APA to the regulations developed in response to the office conference process, there may be concerns that those affected by the office conference will not have had an opportunity to weigh in. The CSLB shared with this Committee their use of a working group, made up of members of the construction industry and representatives from the CSLB, to vet this idea of the letter of admission. The CSLB further suggested that industry support of this additional discipline tool can be seen through industry groups’ official support of this bill. Members of this Committee may want to consider whether this is enough involvement in the process by those who will ultimately be affected by the office conference process.

Additionally, this bill builds into the office conference process some potential protections for the interests of those regulated. For example, the office conference does allow the licensee or applicant to be accompanied by their legal counsel or official representative. Additionally, prior to the conference, this legislation provides for the licensee or applicant to submit declarations and documents pertinent to the subject matter of the letter of admonishment. This provides the licensee or applicant with some ability to protect their interests and perhaps change the contents of the letter of admonishment or have it completely withdrawn by the registrar.

1. Consumer protection

The CSLB sees the creation of a letter of admonishment as a way for them to take intermediary disciplinary action while still protecting consumers. This is because the letter of admonishment will be disclosed to the public for a period of one year. Additionally, the CSLB would internally track the issuance of letters of admonishment for a longer period and would consider them making future decisions regarding disciplinary actions.

The CSLB has shared with this committee their intent to use the letter of admonishment only for licensees, not both licensees and applicants, and only for offenses that do not allege financial injury or order of correction for consumers. The legislative intent language added in the Senate Business, Professions and Economic Development Committee seems to ensure that the CSLB will not use the letter of admonishment for violations beyond minor violations that do not involve financial harm to the consumer and do not result in serious illness or injury.

To further clarify when the CSLB may use the letter of admonishment, the Author has proposed the following amendments:

On page 5, between lines 7 and 8, insert:

(6) The board shall not issue a letter of admonishment when any one of the following factors is present:

1. The licensee, registrant, or applicant was unlicensed at the time of the violation.
2. Multiple violations have been established.
3. The licensee, registrant, or applicant has a history of the same or similar violations.
4. The violation resulted in financial harm to another.
5. The victim is an elder or dependent adult as defined in Section 368 of the Penal Code.
6. The violation is related to the repair of damage caused by a natural disaster.

(7) The board may adopt regulations to further define the circumstances under which a Letter of Admonishment may be issued.

Support: American Fire Sprinkler Association; Associated Builders and Contractors; California Landscape Contractors Association; California Professional Association of Specialty Contractors; Independent Roofing Contractors of California, Inc.; Plumbing-Heating-Cooling Contractors Association of California; Western Electrical Contractors Association

Opposition: None Known

HISTORY

Source: The Contractors State License Board

Related Pending Legislation: None Known

Prior Legislation: SB 960 (Morrell, Ch. 247, Stat. 2014.) see background

Prior Vote: Senate Business, Professions and Economic Development Committee (Ayes 9, Noes 0)

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SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2017 - 2018 Regular

Bill No: Hearing Date: March 27, 2017

Subject:

SUMMARY:

Authorizes the Contractors State License Board to issue letters of admonishment to an applicant, licensee, or registrant instead of issuing a citation; distinguishes such letters from certain complaints and requires the disclosure of such letters for one year.

Existing law:

1. Provides for the licensure and regulation of more than 300,000 contractors under the Contractors' State License Law by the Contractors State License Board 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. Provides that any entity authorized to issue a license or certificate may publicly reprove a licentiate or certificate holder thereof, for any act that would constitute grounds to suspend or revoke a license or certificate. Any proceedings for public reproval, public reproval and suspension, or public reproval and revocation shall be conducted, as specified. (BPC § 495)
3. Authorizes the Medical Board of California to issue a public letter of reprimand after it has conducted an investigation or inspection, as specified. (BPC § 2233)
4. Authorizes the Physical Therapy Board of California to issue a public letter of reprimand after it has conducted an investigation or inspection, as specified. (BPC § 2660.3)
5. Authorizes the Board of Pharmacy to issue a letter of admonishment to an applicant for licensure or licensee for failure to comply with the Pharmacy Law or regulations, as specified. (BPC § 4315)
6. 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:
7. Have been referred for accusation; or,
8. 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)(1)(2))
9. 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))
10. Provides that a complaint resolved in favor of the contractor shall not be subject to disclosure. (BPC § 7124.6(c))
11. Requires the Registrar to make available to the public the date, nature, and disposition of all legal actions, subject to the following:
12. 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;
13. 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,
14. All revocations that are not stayed shall be disclosed indefinitely from the effective date of the revocation. (BPC § 7124.6(e))

This bill:

1. Provides, if upon investigation, the Registrar has probable cause to believe that a licensee, registrant, or applicant has committed acts or omissions that are grounds for denial, suspension or revocation of a license or registration, the Registrar, or his or her designee, may issue a letter of admonishment to an applicant, licensee, or registrant in lieu of issuing a citation. Provides that nothing in this article shall in any way limit the Registrar’s discretionary authority or ability to issue a letter of admonishment.
2. Requires the letter of admonishment to be in writing and describe in detail the nature and facts of the violation, including a reference to the statutes or regulations violated. Requires the letter of admonishment to inform the licensee, registrant, or applicant that within 30 days of service of the letter of admonishment the licensee, registrant, or applicant may do either of the following:
3. Submit a written request for an office conference to the Registrar to contest the letter of admonishment. Requires, upon a timely request, the Registrar, or his or her designee, to hold an office conference with the licensee, registrant, or applicant and, if applicable, his or her legal counsel or authorized representative. Provides that no individual other than the legal counsel or authorized representative of the licensee, registrant, or applicant may accompany the licensee, registrant, or applicant to the office conference. Provides that prior to or at the office conference, the licensee, registrant, or applicant may submit to the Registrar declarations and documents pertinent to the subject matter of the letter of admonishment. Specifies that the office conference is intended to be informal and not be subject to the Administrative Procedure Act. Provides that after the office conference, the Registrar, or his or her designee, may affirm, modify, or withdraw the letter of admonishment. Requires that within 14 calendar days from the date of the office conference, the Registrar, or his or her designee, to personally serve or send the written decision by certified mail to the licensee’s, registrant’s, or applicant’s address of record. Requires the decision to be deemed the final administrative decision concerning the letter of admonishment. Provides that judicial review of the decision to be had by filing a petition for a writ of mandate in accordance with the provisions of Section 1094.5 of the Code of Civil Procedure within 30 days after the date the decision was personally served or sent by certified mail. Requires that the judicial review to extend to the question of whether or not there was a prejudicial abuse of discretion in the issuance of the letter of admonishment or in the decision after the office conference.
4. Comply with the letter of admonishment and, if required, submit a written corrective action plan to the Registrar documenting compliance. Requires that if an office conference is not requested pursuant to this section, compliance with the letter of admonishment does not constitute an admission of the violation noted in the letter of admonishment.
5. Requires the letter of admonishment to be served upon the licensee, registrant, or applicant personally or by certified mail at his or her address of record with the CLSB. Requires, if the licensee, registrant, or applicant is served by certified mail, service to be effective upon deposit in the United States mail.
6. Requires the licensee, registrant, or applicant to maintain and have readily available a copy of the letter of admonishment and corrective action plan, if any, for at least one year from the date of issuance of the letter of admonishment.
7. States that nothing in any way will limit the CSLB’s authority or ability to issue a citation, as specified and institute disciplinary proceedings, as specified.
8. States that the issuance of a letter of admonishment should not be construed as a disciplinary action or discipline for purposes of licensure or the reporting of discipline for licensure.
9. Requires that a complaint resolved by issuance of a letter of admonishment to not be deemed resolved in favor of the contractor. Requires a letter of admonishment issued to a licensee to be disclosed for a period of one year.
10. Makes Legislative findings and declarations that this measure imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the measure underscores that the Legislature makes following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:

“In order to allow the Contractors’ State License Board to fully accomplish its regulatory and disciplinary goals for minor violations, it is necessary to limit access to the letters of admonishment.”

FISCAL EFFECT: Unknown. This bill is keyed “fiscal” by Legislative Counsel.

COMMENTS:

1. Purpose. The Contractors State License Board (CSLB) is the sponsor of this bill. According to the Author, “In the last few years, CSLB’s costs to administer citations have grown significantly. CSLB issues over 2,000 citations a year; approximately 40% of citations are appealed, and the average cost per appealed citation is $10,000. The letter of admonishment will be less severe than a citation but still provide a means to correct a violation. It will also benefit licensees by providing a quicker, more streamlined process to resolve complaints.”

This bill allows CSLB to issue a letter of admonishment to an applicant who has committed a violation that CSLB deems worthy of caution, but does not merit a license denial or probationary status, as specified. By further using the letters of admonishment to include applicants for licensure, this bill will reduce the costs associated with the formal investigatory and hearing process necessary for a probationary license, while still preserving public safety and granting the applicant full licensure.

1. Background on the CSLB. The CSLB within the DCA 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 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.
2. Letters of Admonishment. A letter of admonishment that is issued to an applicant, registrant, or licensee notes violations of the BPC, Contractors State License Law, or regulations that are not egregious enough to warrant formal discipline, but where the individual does need to take action to safely carry out the requirements of licensure. A letter of admonishment allows an individual to receive the privilege of a license yet serves as a tool for further public protection, as well as allows employers to know if a licensee has violated the law. By administering these letters of admonishment, CSLB advises that it will be able to focus its enforcement efforts and resources on more egregious cases.

The Board of Pharmacy, Medical Board of California, and Physical Therapy Board have all had the ability to issue a letter of admonishment or letter of reprimand according to the following:

• SB 361 (Figueroa, Chapter 539, Statutes of 2003) authorized the Board of Pharmacy to issue letters of admonishment, directing a licensee to comply with the Pharmacy Law or related regulations. This bill is modeled after the language in the Pharmacy Law.
• SB 916 (Presley, Chapter 1267, Statutes of 1993) authorized the Medical Board of California to issue a public letter of reprimand by stipulation or settlement with the affected physician and surgeon after conducting an investigation or inspection, in lieu of filing or prosecuting a formal accusation, subject to certain procedures.
• AB 2111 (Smyth, Chapter 301, Statutes of 2008) authorized the Physical Therapy Board to issue a public letter of reprimand.

All three boards have noted that these types of letters are an additional tool to address non-compliance and help reduce time and costs associated with minor violations.

CSLB estimates that out of the 2,000 citations, approximately 500 could have been letters of admonishments.

1. Arguments in Support. The Contractors State License Board (Sponsor) writes that “CLSB believes that this letter of admonishment will increase opportunity to settle offenses before they are appealed, while still providing correction of the offending behavior. It will also provide for public disclosure, by posting the issuance of a letter of admonishment online for a year.”

The California Professional Association of Specialty Contractors (CALPASC) writes that this measure “provides a reasonable opportunity for contractors who are accused of misconduct, to appear before the Registrar, and state their case. It provides CSLB enforcement staff an intermediate level of enforcement, with a minimizing of resources.” CALPASC also notes that it has “seen that having a new, easier to process enforcement step can create an unintended incentive to just issue the lesser penalty/violation” and will continue to monitor CSLB’s letter of admonishment program if put in practice.

1. Prior Related Legislation. SB 960 (Morrell, Chapter 247, Statutes of 2014) authorizes the executive officer of the California State Board of Pharmacy to issue a letter of admonishment to an applicant for licensure who has committed any violation of law that the board deems does not merit the denial of a license or require probationary license status. The bill also authorizes a letter of admonishment that is issued to an applicant for licensure to be issued concurrently with a license.
   
   
2. Author’s Amendments.
   
   1. To better qualify when these letters of admonishment may be used, the Author has proposed adding intent language and making technical changes intended to correct grammatical errors.
      
      On page 2, line 1, after “SECTION 1.” insert “(a) It is the intent of the Legislature that the Contractors State License Board only issue letters of admonishment to applicants, licensees, or registrants for minor violations that do not involve financial harm to the consumer and do not result in serious illness or injury.
      
      SECTION 2.”
      
   2. The CSLB shall further define within regulations the conditions under which a letter of admonishment could be issued.

NOTE:

Double-referral to the Senate Committee on Judiciary, second.

SUPPORT AND OPPOSITION:

Support:

Contractors State License Board (Sponsor)

California Professional Association of Specialty Contractors (CALPASC)

Opposition:

None on file as of March 21, 2017.

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