BILL ANALYSIS
SB 354
Page 1
Date of Hearing: June 12, 2007
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mike Eng, Chair
SB 354 (Margett) - As Amended: March 26, 2007
SENATE VOTE : 38-1
SUBJECT : Contractors: aiding unlicensed persons.
SUMMARY : Authorizes the Contractors State License Board (CSLB)
to issue to a licensee, who has aided and abetted an unlicensed
person, a citation, which includes an order for payment for the
financial injury caused by the acts of the unlicensed person.
Specifically, this bill :
1)Authorizes the Registrar of CSLB to issue a citation to a
licensee that contains an order to pay a specified sum to an
injured party if the Registrar finds that the licensee has
aided an unlicensed person in evading the Contractors State
License Law (Contractors Law) or allowed an unlicensed person
to use his or her license.
2)States that the sum paid to the injured party may include, but
is not limited to, payment for the injury caused by the
unlicensed person.
EXISTING LAW :
1)Provides for the licensing and regulation of contractors by
CSLB under the Contractors Law, and provides for CSLB to issue
contractor licenses to individuals, co-partnerships and
corporations.
2)Authorizes the Registrar to take disciplinary action against a
licensee, including license suspension or revocation.
3)Authorizes the Registrar to issue a citation, instead of
initiating disciplinary proceedings, to a licensee who acts in
violation of the Contractors Law. The citation may include:
a) An order of correction fixing a reasonable time for
correction of the violation;
b) An order for payment by a licensee of a specified sum to
SB 354
Page 2
an injured party; and,
c) An assessment of a civil penalty.
4)Specifies that aiding or abetting an unlicensed person in
evading the Contractors Law, or allowing an unlicensed person
to use his or her license, is grounds for disciplinary action
against a licensed contractor.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . CSLB states that some contractors allow
their license to be used by a non-licensee. Often,
non-licensees who participate in this scheme cause financial
injury to consumers. In such cases, the non-licensee may refuse
to correct work that is substandard and contrary to the building
codes or, on occasion, may take a down payment and never do any
work at all. When CSLB establishes that a licensee has
permitted his or her license to be used, the consumer has no
recourse through CSLB relative to the financial injury.
Background . CSLB is unique among the regulatory boards and
bureaus under the Department of Consumer Affairs in that it has
the authority to issue a citation that includes an order for
payment by a licensee of a specified sum to an injured party.
While typically boards and bureaus may issue a citation
containing an order of abatement, instructing the licensee to
correct the violation, and an assessment of a fine, they usually
do not have the authority to order the licensee to make
restitution by paying a specified amount to an injured consumer.
For most boards and bureaus, when a citation and fine is
assessed, the fine is paid to the board or bureau and is
deposited into the board or bureau's special fund and is subject
to appropriation by the Legislature for the operations of the
regulatory agency. In these cases, in order for a financially
injured consumer to obtain restitution for damages caused by the
violation, the consumer must file a lawsuit through the civil
courts. However, the Contractors Law allows CSLB to order the
SB 354
Page 3
licensee to pay the injured party for the financial damages
caused by the violation.
In order to determine the financial damage to the consumer
caused by the licensee, as authorized under the Contractors Law,
CSLB contracts with licensed professionals (industry experts)
for the site investigation of consumer complaints. These
industry experts undergo an extensive training program through
CSLB, and are able to independently make an estimate of the
costs to correct a violation by the licensee. Typically, a
consumer is injured financially because of poor workmanship or
because the contractor abandons the project. In these cases,
the industry expert determines how much it would cost over and
above the contracted price to complete the contract or to
correct the problem with the work.
While the law authorizes the Registrar to issue a citation
ordering the contractor to pay the consumer for the damage
caused by the licensed contractor's violation of the law, it is
not clear that this authority extends to damages by an
unlicensed person who is aided by a licensee. It may be argued
that financial harm to a consumer by an unlicensed person, who
is aided by a licensee, is in fact financial harm caused by the
violation of the licensee and is therefore subject to this
provision. However, CSLB believes that the law should be
amended to clarify that licensees may be held financially
accountable for financial damages when they aid and abet
unlicensed practice.
Support . The Engineering Contractors' Association, the
California Fence Contractors' Association, the Marin Builders'
Exchange, the Flasher/Barricade Association, and the California
Chapter of the American Fence Contractors' Association, state
that the financial injuries to a consumer are the result of
activities that are otherwise subject to discipline under the
license law, such as poor workmanship, project abandonment, and
similar violations, and therefore they support CSLB requiring a
contractor who aids and abets an unlicensed contractor to make
restitution for the financial injuries caused by their illegal
activities.
REGISTERED SUPPORT / OPPOSITION :
Support
Contractors State License Board (sponsor)
SB 354
Page 4
California Spa and Pool Industry Education Council
Engineering Contractors Association
California Fence Contractors' Association
Marin Builders' Exchange
Flasher/Barricade Association
Marin Fence Contractors' Association, California Chapter
Opposition
None on file.
Analysis Prepared by : Tracy Rhine / B. & P. / (916) 319-3301