April 17-18, 2012

THE CONTRACTORS STATE LICENSE BOARD

BOARD MEETING

MONTEREY, CALIFORNIA

APRIL 17-18, 2012

 

The Contractors' State License Board held a full Board meeting at the Portola Hotel and Spa in Monterey on April 17 & 18, 2012.

 

Board Members Present:

Chair, Robert Lamb II; Vice Chair, Paul Schifino; Secretary, Joan Hancock; David Dias; Pastor Herrera Jr.; Matthew Kelly; Ed Lang; James Miller; John O'Rourke; Frank Schetter; and Mark A. Thurman

 

Board Members Excused Absent:

Robert Brown; Louise Kirkbride; Lisa Miller-Strunk; and Bruce Rust

 

The Board and senior staff broke into smaller groups to discuss issues on enforcement prioritization, unlicensed practice investigation, and public works. The following is an overview of what was covered:

Enforcement Prioritization

The CSLBs highest priority is to protect the public and is laid out in Business and Professions Code section 7000.6. A large part of protecting the public deals with the investigation of filed complaints.

 

There are approximately 17,000 consumer complaints filed each year. There are 30 Consumer Services Representatives and 70 Enforcement Representatives to handle these complaints. The staff is effectively managing the complaint workload and provides a high level of consumer protection and service since the Board implemented process changes and performance goals in 2006.

 

There are 30 Enforcement Representatives to handle the investigations for industry complaints. Because of the underground economy there are many demands for the CSLB to have more resources to make it a level playing field for the law-abiding contractors. Board assistance is needed to prioritize the complaint investigations and approving process changes to manage the workload.

 

The Board needs to consider if the list of Top Ten enforcement activities is a comprehensive list, in the proper prioritization and if the proposed controls are appropriate to manage the workload.

The Top Ten list is as follows:

1. Unlicensed practice at active jobsites - The controls to manage the workload are to respond to leads with a CSLB Enforcement Representative conducting a site visit.
2. Workers' Compensation violations as active jobsites - The controls to manage the workload are to respond to leads with a CSLB Enforcement Representative conducting a site visit.
3. Labor/Health and Safety Code (DOSH/DSLE MOUs) - The controls to manage the workload are for a CSLB Enforcement Representative and partnering agency investigator to conduct a site visit.
4. Out-of-classification licensees - The controls to manage the workload are to determine if there is a health and safety issue or if unsure if the contractor is licensed, then a site visit may be warranted. Otherwise, this will be addressed by Intake/Mediation Center or Investigative Center staff.
5. Building permit enforcement - The controls to manage workload are to investigate only when jurisdiction is cooperative. The building department must be willing to waive fees associated with conducting the investigations and the jurisdiction must provide the CSLB with their work product. Evidence of no permit must be attained. If work is in progress it is possible that a site visit will be conducted.
6. Public Works investigations - The controls to manage the workload are that SWIFT will respond to leads and perform sweeps with other state agencies as applicable. Otherwise, leads will be referred to the CSLB Public Works Unit.
7. Electrician Certification - The controls to manage the workload are that they will only conduct a site visit to verify certification if we are responding with partnering agencies and/or observe workers' compensation violations. Otherwise, work product from a labor compliance agency is required.
8. Illegal print advertisements - The controls to manage the workload is to process through the Intake/Mediation Center where a Warning Letter, Stop Order of Telephone Disconnect can be issued. The action taken is then referred to SWIFT for use in future stings.
9. Referral fees/kickbacks - The controls to manage the workload are that enforcement will be primarily handled by the Intake/Mediation Center. Contractors will be contacted and educated on Business and Professions Code section 7157 - Referral Fee Restrictions. Warning letters will then be issued and used for more stringent action. Investigative Center staff will conduct two stings per calendar year to target egregious offenders.
10. Outreach - The controls to manage the workload is that the Public Affairs Office will take the lead. The Enforcement Division will develop a list of Enforcement Representatives available to assist the Public Affairs Office when necessary. To minimize the impact on enforcement workload, staff will work with the EDD to develop an outreach packet to educate Legislators, contractors and consumers on the dangers of the underground economy.

Twenty-seven percent of complaints in any given year involve unlicensed contractors. Many of those complaints are made by consumers who repeatedly hire unlicensed contractors and then file complaints so that they can avoid paying for the service received. This is taking up valuable resources. The Board has approved a letter for consumers which warn of the serious financial loss and potential liability they expose themselves to when they repeatedly hire unlicensed operators. However, there are still some questions to be answered:

1. Educational/Warning Letters

 

• Send education/warning letters to all consumers filing complaints against unlicensed operators (currently letters are sent only to select consumers)? If so, should the complaint be revised and automated (this will require IT resources).
• Develop criteria regarding the referral of a complaint to a local prosecutor (that may provide a restitution hearing) in lieu of an administrative action?

2. Referral to Other State Agencies

Labor Code section 2750.5 established that a person performing services who requires a license is an employee, rather than an independent contractor, when the person is not licensed.

• Should referral be made to the EDD (tax withholding), DLSE (workers' compensation insurance), and the local building department (permit requirements) when a consumer repeatedly hires unlicensed operators?
• Should staff develop criteria to work cases resulting from consumers who are complicit in aiding their contractor in avoiding business requirements? Example: consumer pays contractor in cash to receive a lower contractor price, obtains an owner building permit, or agrees to perform the work without a building permit.

3. Minor Work Exemption

• Should the CSLB take administrative action for the unlawful advertisement but not for the contracting activity valued at less than $500 (Attorney General Recommendation)?
• Should the Board pursue legislation to clarify the minor work exemption?

August 2010 started the Public Works Investigative Unit with two Enforcement Representatives to focus on public works investigations. It has been very successful with 118 complaints in 2011.

 

It was originally thought that the focus would be on contractors that:

1. Have been disbarred by the Labor Commissioner or awarding agency/local jurisdiction;
2. Are working without a license or working out of their classification, and
3. Are illegally subcontracting pursuant to the Public Contract Code,

This has not been the types of complaints investigated by the Public Works Unit. There is also other information regarding underground economy activities on public works projects that are not being addressed by other state agencies.

The Board is now being asked to consider making policy decisions that would allow for enforcement to address these violations independent of other state agencies.

1. Prevailing Wage Violation Referrals

The DLSE or an Awarding Agency's Labor Compliance Program (LCP) has primary jurisdiction to investigate and take action against construction employees violating prevailing wage requirements.

Pursuant to Business and Professions Code (B&P) §7110.5 - Initiation of action against contractor after receipt of Labor Commissioner's finding of a willful violation of Labor Code -- CSLB can impose discipline on a license based on the final order taken by DLSE/LCP.

Unfortunately, the DLSE/ LCP appeal process typically takes more than one year and no license disclosure is present to assist awarding agencies in prequalifying bidders for public works projects.

QUESTION:

Should staff develop criteria to take disciplinary action separate from DSLE's action on the more egregious offenders to provide complaint disclosure on the license?

2. Outreach to Awarding Agencies and Public Works Contractors

Complaints received by CSLB from government agencies, LCPs, and public works contractors confirm that many awarding agencies and public works prime contractors do not understand:

a. License Law Requirements (classifications, license structure, etc.)

b. Prequalification's Strategies

c. How to Effectively Use the CSLB website

d. Public Contract Code Requirements

e. Evidence Requirements to File a Complaint

QUESTION:

Should staff develop a public works brochure and/or a training module for awarding agencies and public works contractors? If so, what are the top educational/training topics?

3. Legislative Considerations

Should legislative proposals be considered to address the following deficiencies in the law?

• Currently, CSLB is unable to disclose a legal action taken by a partner state agency on a license history. Should B&P §7124.6 -- Public Access to Complaints against Licensees; Disclaimer; Limitations of disclosure -- be revised to provide disclosure of a partner state agency's finding of a violation of law without CSLB having to file a formal disciplinary action?

• PCC §4017.2 prohibits a subcontractor listed by a prime contractor as furnishing and installing carpeting, from subcontracting any portion of the labor unless the listed subcontractor specified the subcontractor to perform the labor in his/her bid to the prime. With the exception of a listed subcontractor that installs carpet, the PCC does not prohibit the listed subcontractors from bid shopping any portion of their subcontracted work or subcontracting to others who fail to pay prevailing wages. Should the PCC be revised to preclude listed subcontractors from bid shopping or subcontracting to others without approval from the awarding authority?

• B&P §7125.4 requires that a licensee have a certificate of WC on file with CSLB prior to employing anyone subject to WC coverage. The law does not require that listed subcontractors verify WC coverage prior of unlisted subcontractors that have employees. Should B&P §7125.4 be revised to require that contractors verify WC coverage for their subcontractors who have employees?

• The law does not provide for CSLB to discipline contractors who are employers (easily confirmed by certified payroll) and have not registered as employers with the Employment Development Department (EDD). Should contractors' license law be revised to provide for discipline for contractors who are employers and are not registered as employers with EDD?