Equipment Type

Kalb's Q & A For California Contractors

Q: I have been employed in upper management with a company for close to five years. Is it still possible to be grandfathered in, so to speak, so I can obtain my own license without taking any exams? Please advise. A: The CSLB no longer grants waivers for a new license based on having been listed on an existing contractor's license for five years.

December 15, 2008

Q: I have been employed in upper management with a company for close to five years. Is it still possible to be grandfathered in, so to speak, so I can obtain my own license without taking any exams? Please advise.

A: The CSLB no longer grants waivers for a new license based on having been listed on an existing contractor's license for five years. In 2003, the Registrar of Contractors discontinued waivers under B&P Code Section 7065.1(a). The Board will, however, still grant a waiver for replacing the qualifying individual under sub-sections (b) — the so-called 'family' replacement — and (c), replacement by an employee (or officer) of a corporation.

Q: I was recently surprised by an unexpected notice that my license was just suspended due to an associated judgment on another license. I have not been involved with this other company for nearly five years, yet I'm being held responsible for judgments that are several years old. I am no longer listed on the license, but the CSLB says I am still liable. Any ideas how I can fix this?

A: There are four ways to fix this problem — unfortunately none of them are good. 1) Have the company declare bankruptcy (which I understand is not feasible in this case); 2) pay the large debt even though you have no direct responsibility; 3) work out a payment arrangement with the company that has the judgment; or 4) somehow get a stay from the court stating the judgment was not valid (this is extremely difficult even under the best of circumstances).

You may think that removing (disassociating) yourself from the license would allow for your current license to have the suspension lifted. This only works if the date of disassociation is prior to the judgment date. As we discussed, the critical date is when the judgment was obtained from the court, not the date it's reported to the Board.

As I have warned many times, as soon as you leave a contractor's license, whether you're listed as the officer or partner, immediately notify the CSLB in writing. This is the best way of protecting yourself from future licensing "surprises."

Q: I know that all contractors are required to be bonded. Can you tell me why the bond is required? From what I've read, this bond appears to be only needed for small contractors. I handle large industrial and public works.

A: The CSLB requires some form of security deposit in order to maintain an active contractor's license. Most contractors post a Surety bond (currently $12,500); however, my understanding is that well over 1,000 license holders have a cash deposit on file in lieu of a contractor's bond. Based on this relatively low amount, I can understand why you believe this bond is only necessary for small contractors; however, there is no delineation between a small sole owner grossing $100,000 per year and a huge billion-dollar industrial contractor.

Claims on a bond (or cash deposit) are available to homeowners who may have suffered property damage to their residence or persons damaged as a result of willful violations of contractor license laws. Claims may also come from employees who are not paid or trust funds not paid as a result of a licensee's failure to meet fringe benefit obligations.

Q: I'm an employee for a licensed general building contractor in California. The sole proprietor has decided he no longer wants employees. Simultaneously, I'm now looking to start a new business and have been doing footwork to incorporate myself. My question is whether it would be better for me to become licensed as an individual and then get incorporated, or to incorporate and then become licensed as the qualifying individual. I'm trying to take better advantage of the tax loopholes.

A: My best suggestion is talking with a CPA or tax attorney regarding the subject of "tax loopholes." As for the type of contractor's license to apply for, this depends on how you want to conduct business. If you want to contract as a sole owner, this is how you should apply. If your goal is to do business as a corporation, then apply as such with you as the responsible managing officer (RMO). There is no need to apply for two licenses.

Q: We are looking into bidding a job in Oregon ... What would needed to be done to do that legally?

A: Oregon has contractor licensing requirements; however, I am not familiar with licensing in that state. I suggest that you contact the Construction Contractors Board in Salem, OR. Their phone number is 503-378-4621, or visit them on the Web (you can find a link on my website, www.cutredtape.com).

Q: Thanks for the enjoyable reading. I enjoy your column in California Builder & Engineer. In my years of working as a contractor, I have seen the need to familiarize myself with the Board's rules and 'regs'.

I have a brief question. I have held both an "A" & "B" license for over 30 years. I am thinking of applying to add a "C-8" and I know I would be given a waiver for both tests. Would I now have to do fingerprints, and do minor traffic tickets constitute a "yes" answer? I've had nothing more than two moving violations in 40 years.

A: Thank you for reading the column and your kind words.

The Board does not just hand out waivers as you implied. With both general licenses, applying for an additional "C-8" (concrete) class will likely result in a waiver of the trade test; however, the CSLB requires a good deal of paperwork as part of the application process. This includes documenting up to 25 projects, or more — involving concrete work — over the prior five- to seven-year period. Concrete would need to be shown to be a significant part of your construction experience.

Applying for this license would trigger fingerprinting. If all you have are minor traffic violations like those described above, then you could answer "NO" to question No. 11 on the license application. Note: If someone filing an application for licensure has a more significant traffic infraction, like a DUI, then a "YES" response is in order (even if the incident happened 30 years ago or was expunged).

Q: Is it possible for a responsible managing officer (RMO) to acquire a new license with a new company if they are 100-percent owner of the original company? Would the license need to be active or inactive?

A: It is certainly feasible for someone to become the qualifier on two licenses at the same time. For the RMO to keep his or her existing license active, they'll need to own 20 percent or more of the new company. If not, the existing license will need to be inactivated (or the RMO could disassociate).

Q: I have a question about joint venture licenses. My company will be forming a joint venture to bid on an upcoming public works project. We were told that the CSLB has restrictions on the business name we can use. If true, what are they? Also, do we need to list all classifications held by my company and my venture partner (between us we hold five)?

A: The CSLB will accept the following type of names for joint venture (JV) licenses: a) combination of both joint venture contractor names exactly as they are licensed with the Board; b) partial names of each JV entity; or c) a completely fictitious name. They will reject any application that contains the full name of one entity but only a partial name of the second company. You may list one, several or all classifications held by the companies.

Knowledge is power. Knowing where to go for the answers is half the battle.

Get expert assistance immediately when you call 916-443-0657, e-mail info@cutredtape.com, fax 916-443-1908, or write me at Capitol Services, Inc., 1225 8th St. Ste. 580, Sacramento, CA 95814.

More like this

Comments on: "Kalb's Q & A For California Contractors"

Overlay Init