HomeMy WebLinkAboutMINUTES - 06191990 - IO.2 I .O.-2
TO: BOARD OF SUPERVISORS Contra
FROM:
Costa
INTERNAL OPERATIONS COMMITTEE
DATE: June 11 , 1990 'o•� � County
SUBJECT: REPORT ON THE EXTENT TO WHICH THE CONTRACTORS STATE LICENSE
BOARD IS ENFORCING THE LICENSING OF CONTRACTORS DOING BUSINESS
IN CONTRA COSTA COUNTY
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMU NDATIONS
1. Request the County Administrator, as a part of the design of
the centralized permit bureau, to include the capability to
access the Contractors State License Board' s computer
records of licensed contractors so that at some time in the
future the County will be able to verify before an
individual is issued a building permit that the contractor
the individual intends to use is actually licensed in
California.
2. Request the County Counsel to verify that the County can
assume the responsibility to assist in enforcing the State' s
contractor licensing laws and if he determines that the
County is able to assume some of the responsibility to
enforce such laws, request that he prepare an ordinance
which would allow for increased County enforcement of the
State' s contractor' s licensing laws by checking at the point
that an individual or developer obtains a building permit to
see whether the contractor an individual or developer is
planning to use is licensed in California and has Workers '
Compensation insurance in California and if not to report
this fact to the individual or developer and report the case
to the Contractors State License Board.
3 . Request the County Administrator to write to each city in
the County, noting the fact that incidents have been
reported where contractors are using unlicensed
CONTINUED ON ATTACHMENT.Ye s YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOACO EE
APPROVE OTHER
SIGNATURE(S): Si1NNF. WRT(;Hm McpEAK TO POWERS
ACTION OF BOARD ON_ ju ne . 1-9., 1990 APPROVED AS RECOMMENDED-X OTHER
VOTE OF SUPERVISORS
_ 1 HEREBY CERTIFY THAT THIS IS A TRUE
�X-UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
CC: ATTESTED 19 990
PHIL OATCHELOR,CLERK OF THE BOARD OF
Please see Page' 3.j SUPERVISORS AND COUNTY ADMINISTRATOR
M382 (10/88)
BY DEPUTY
a
subcontractors and that many homeowners are unaware of the
requirements of state law and urging the city to do
everything in their power to discourage the use of
unlicensed contractors and to report any instances of the
use of unlicensed contractors to the . Contractors State
License Board.
4. Request the County Administrator to indicate to the
Legislature the Board of Supervisors ' support for
legislation which would require a contractor or
subcontractor to include their contractors license number
and workers compensation number when they bid on any job.
5. Request the County Administrator to indicate to the
Legislature the Board of Supervisors ' support for
legislation which would increase sanctions for bidding on a
construction job in California if the firm is not licensed
in California and does not have workers compensation
available for its workers at the time it bids on a job.
6 . Authorize members of the Internal Operations Committee or
appropriate County staff to present testimony at the
hearings which will be held in Richmond on July 17, 1990 by
Assemblywoman Delaine Eastin on the extent to which the
Contractors State License Board is vigorously enforcing the
State contractors licensing laws.
7. Authorize such testimony to specifically encourage the
Legislature to use restricted funds which are already
available for support of the Contractors State License Board
to be used to hire additional staff to enforce existing
laws.
8. Remove this item as a referral to our Committee.
BACKGROUND:
On March 27, 1990, the Board of Supervisors referred to the
Internal Operations Committee the issue of whether the
Contractors State License Board is properly enforcing the
licensing of contractors doing business in Contra Costa County.
On June 11, 1990 our Committee met with staff from the
Contractors State License Board, representatives from the
Building Industry Association and several labor unions in this
County.
We reviewed the attached correspondence from United Association
Local Union 159, consisting of the Plumbers, Steamfitters &
Refrigeration Journeymen and Apprentices. We also received
similar testimony from Local 378, the Building Trades Council,
and IBEW Local 302.
The representatives from the Contractors State License Board
confirmed that they have a significant problem with unlicensed
contractors bidding on and being awarded jobs in this county and
elsewhere in the Bay Area. They noted that they receive
relatively few complaints regarding large general contractors who
are contracting with unlicensed subcontractors. Most of their
complaints - and .their primary concern - is with the residential
customer who is contracting, perhaps for the first and only time
in his or her life, with a contractor to do some work on their
home. Most individuals are unaware of state law and do not
generally ask a contractor whether he or she is licensed. As a
result, the Contractors State License Board tends to concentrate
their work in contractors doing work for residential customers.
There was agreement that a contractor must be licensed in
California before bidding on construction work in California.
However, the Contractors State License Board' s emphasis is to get
a contractor licensed, rather than attempting to punish the
contractor for awarding a bid to an unlicensed contractor.
Aram Hodess from Local 159 indicated that the County Building
Inspection Department could respond to licensing complaints at
the time a building permit is obtained. It is possible to
install a computer hook-up whereby the Building Inspection
Department could have on-line access to contractor licensing
information and could determine on the spot whether a contractor
is licensed or not. This type of computer hook-up is being
tested on a pilot basis currently. It is possible that Contra
Costa County could ask to be added to the pilot project.
The staff from the Contractors State License Board indicated that
the County could assist them by voluntarily enforcing the state
laws in this area. They noted that their major problem is with
inadequate staffing in the East Bay area. This is the case even
though the Board statewide has some $40 million in trust which
can only be used for enforcing contracting laws. The State
Administration apparently will not release the funds or authorize
additional personnel to do enforcement.
The staff from the Contractors State License Board noted the
passage last year of AB 2279 (Eastin) which established a
separate enforcement unit to enforce provisions prohibiting all
forms of unlicensed activity and authorizes deputy registrars to
cite violators into court. This unit, however, only operates in
Southern California. A similar program should be undertaken in
Northern California, in our view.
Assemblyman Campbell has asked Assemblywoman Eastin, who chairs
the Assembly Governmental Efficiency and Consumer Protection
Committee to hold hearings in Richmond to receive testimony on
the extent of the problem with unlicensed contractors. We
understand that these hearings will be held in Richmond on July
17, 1990 at a yet to be determined site. We believe that our
Board of Supervisors should take the lead in providing testimony
at this hearing on the extent of the problem in this County. We
have, therefore, proposed the above recommendations for
consideration by the Board of Supervisors.
cc: County Administrator
County Counsel
Director of Building Inspection
John Lawton, CSLB, Oakland
Steve Roberti, Central Labor Council
Kelly Anschutz and Aram Hodess, Local 159
Ray Trujillo, Local 378
Greg Feere, Building Trades Council
Richard McPeak, IBEW, Local 302
Guy Bjerke, BIA
J
--"f'ouhty administrator Contra Board of Supervisors
Tom Powers
%ountyAdrniniss
tration Building Costa
1st District
61 Pine Street, 11th Floor J
Martinez, California 94553 {� ' Nancy C.Fanden
415)372-4080 County 2nd District
J Robert I.Schroder
'hil Batchelor G e i 3rd District
E.--
%ounty Administrator
• Sunne Wright McPeak
4th District
Tom Torlakson
s•:J. "'�' 5th District
Cous
May 24, 1990
John Lawton
Supervising Deputy Registrar
Oakland District Office
Contractors State Licensing Board
1700 Broadway
Oakland, CA
Dear Mr. Lawton:
We recently received the enclosed correspondence from your
Sacramento office indicating that you might be available to meet
with a Committee of the Contra Costa County Board of Supervisors
to discuss the extent to which your agency is enforcing the law
against unlicensed contractors operating in the County.
We have scheduled this matter for consideration by the Internal
Operations Committee as follows:
Monday, June 11, 1990
10:30 A.M.
Room 105, County Administration Building
651 Pine Street, Martinez
We would greatly appreciate your joining the Committee in
considering this matter. As additional background information I
am enclosing a letter we have received from United Association
Local Union 159 on this subject. You can probably anticipate
that a number of union representatives will be present at the
meeting.
Please confirm with my office that you- will be able to join us by
telephoning me at 646-2602. We appreciate your willingness to
assist us in this regard.
Very truly yours,/
Claude L. Van Marter
Assistant County Administrator
cc: Supervisor Sunne Wright McPeak
Supervisor Tom Powers
UNIT IA ION
Comprised,of ;
Plumberse2�mfit-tens & efngeration
jf
Jou e &/Appren Ices
EDWARD K.ANSCHUTZ _-,-s ARAM HODESS
Business Manager , ' Fin.Sec.Treas.
0.H.GRIFFIN
President
April 25, 1990
Claude L. Van Marter Contra Costa County
Assistant County Administrator RECEIVED
651 Pine St. , 11th Floor
Martinez, CA 94553 APR ;jU �Q��
Office of
Re: Unlicensed Contractors County Administrator
Dear Mr. Van Marter:
In your letter of 4/5/90, you requested Kelly Anschutz to provide
information regarding whether the State Contractors Licensing
Board (CSLB) is enforcing the licensing of contractors in Contra
Costa County. As I have been compiling information on this
matter, Mr. Anschutz asked me to respond to your request. The
following examples will illustrate the situation occurring in two
local jurisdictions within the County.
. 1. In October, 1989, bids were accepted for a Marriott
Residence Inn, in Pleasant Hill. The project is now under
construction. The plumbing bid was awarded to West Michigan
Plumbing, a Michigan State contractor. At the time of their bid,
they were unlicensed in California. The electrical contract was
awarded to Kletscha Electric, a Wisconsin contractor, also
unlicensed in California. It is illegal under the Business and
Professional (B&P) Code to contract without a license. Bidding
is clearly prohibited of unlicensed contractors. Apparently, in
February of this year, West Michigan Plumbing applied for an
"expedited" licensing procedure, and obtained an immediate test
date and license. They have obtained a plumbing permit.
Kletscha Electric was removed from the job by the general
contractor because their performance record and financial
situation was apparently very shaky.
1308 Roman Way, Martinez,CA 94553 • Phone: (415)229-0400
(2)
We have filed a complaint with the CSLB regarding the illegal
bidding practices of West Michigan Plumbing and questioned the
method by which they obtained an expedited licensing procedure.
We do not know what action, if any, the CSLB will take.
2. In Martinez, there was a request for bids for a Carrows
Restaurant in early 1990. Among the bidders was Callahan
Plumbing, a contractor whose license expired on 12/31/88, and who
had a bond pay-out on 1/13/88. Also bidding was Jones Mechanical,
a local plumbing contractor who is licensed, bonded and insured.
Callahan Plumbing was the low bidder ($50,000) and Jones
Mechanical was second ($52,500) . After being informed of the bid
award by the general contractor, (Willingham Corporation) we
checked with the CSLB re: Callahan Plumbing and learned of their
expired license and bond pay-out. We informed the general
contractor, who claimed the contract would be awarded to Jones if
Callahan did not clear things up within 3 days. This was on
3/1/90. Callahan is as yet unlicensed, apparently has no workers
compensation insurance and has done the groundwork on the
project. This is in violation of the B&P Code and the State
Contractors License Law. The Martinez building department has not
taken any action against the parties, and has expressed an
unwillingness to, do so. We have made complaints to the CSLB and
the State Department of Industrial Relations. As yet, we do not
know what action, if any, the enforcing agencies will take.
Both these incidents occurred in local jurisdictions within the
County. There is agreement within the industry and with the CSLB
that there is a serious problem with unlicensed contractors.
Unfortunately, the CSLB is apparently more concerned with
licensing than it is with enforcement of the B&P Code and the
other laws and regulations relating to contracting.
The obvious problems we see with the activities of unlicensed
contractors include:
Poor workmanship
Fair Labor Standards Wage and Hour Violations
No Workers Compensation Insurance coverage
Unfair competition to legitimate local contractors and their
employees
Distortion of construction costs
(3)
On the above-mentioned project in Martinez, we have documented a
non-code complying plumbing installation. The local enforcement
agency has not required abatement, and has allowed work to
continue.
Many unlicensed contractors do not pay payroll taxes (cash
payments) , S.S.I, SDI or overtime.
Probably of greatest concern is the failure of unlicensed
contractors to have Workers Compensation insurance. Apparently,
some local jurisdictions believe that a general contractor who
hires an unlicensed subcontractor will provide workers comp.
insurance for the unlicensed sub-contractor's employees. Our
conversations with the State Workers Compensation Appeals Board
(464-1358) indicates it is not clear-cut. Additionally, the
Compensation Insurance carrier is covering a risk that it does
not know about, and for which it receives no premiums. We know
that the costs of Workers Compensation Insurance are a cost
factor for a subcontractor. For example, the premium for a
plumbing contractor (C-36) is $10.36 per $100.00 of payroll. For
a general contractor hiring carpenters it is $21.96 per $100.00
of payroll. An unlicensed subcontractor who does not (in fact
cannot) have workers compensation insurance has an unfair
competitive edge over a licensed, insured subcontractor. Add to
his advantage cost savings related to no liability insurance, no
bond and no business license or taxes and the advantage can be
overwhelming.
We know homeowners regularly hire unlicensed contractors and
subsequently expose themselves to great risk. We also know
there are developers and general contractors who knowingly hire
unlicensed contractors. They are willing to take certain risks
(non-performance, poor quality work, workers compensation claims)
in order to cut initial construction costs. It is apparent that
the CSLB and the DIR are not effectively enforcing existing laws
to prevent this. The local jurisdictions, through the permit
process are the logical agencies to turn to for relief.
Some possible suggestions for Contra Costa County Administration
to deal with the problem are as follows:
Adopt Section 20.4 (c) of the Uniform Plumbing Code which states:
"No person shall allow any other person to do or cause to be
done any work under a permit secured by a Permittee except
persons in his employ. " This would require a subcontractor who
clearly is not an employee to obtain his/her own plumbing permit.
Broader application of this section to all codes/trades would be
a logical step and could be enacted by ordinance.
(4)
Another possible step would be a requirement that all
construction permits require a list of subcontractors including
their State License number and their Workers Compensation
Carrier. If certain subcontracts have not been let at the time
of permit application, the above information could be provided
later and added to a particular permit. The requirement for a
subcontractor list should be aggressively put forward during the
permit application process. If such a requirement were enacted
by County ordinance, violations could be dealt with
administratively.
We understand this is a difficult problem to deal with but it is
clear that the State is not doing its job. In order to protect
the community from shoddy workmanship, to stop -providing health
care subsidies for tradesmen working for uninsured, unlicensed
contractors and to provide a marketplace with a level playing
field, the County needs to develop methods of enforcement to stop
unlicensed contractors' activities.
Thank you for your consideration of this matter.
Sincerely,
Aram Hodess
cc: Robert Geise
Larry Gunn
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a V (E �•� � Fi O U ?. � Vy � r� V y �, Y yy t°! Y !0 4+ 1r yp�1 N� • "' `w. �V
•.7 U y K N C tt r" p C.7 E l+•v •V G� V jr. �• ,�• ° V.A p N ^'1 •y
r �.!�• '' ` 0, �� 14 F' buy V (0�
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a
G Y �. A .roL in a.t� Q O
�, Some courts have allowed recovery .
4_4 = E E ' ° ° under circumstances outside or subliandal
c c 8 rIV a a compliance to avoid Injustice. Thet'etore,
Y .. c .�, § in Vitek Inc:va.Alvarado Yee P41ace lnc.,
'� 21 n S e c 3 V payment was awarded although the license
• e « - C x w ie - had expired*heft tht Contract was signed,
B a ... .5 tv A because tiro license wai:teneered the next
�f o _ r. • business day. A liceoscd tontractot s suit
L v N Y y ° 4. for fraud or breach of Wat dgt'y Inly reap
0 y g N ~ ° e- compensation damage!'evett if'st suit on
~"� u a o•� z the contract would U ttnenforeeable
13 c u T. a M c o (Grant vs, Wcathotholf,'1954), Purther;e
•�-s x ° . V F v•u 9 contractor who has already been paid can
r� xo > oto
G:= �, g ;f: ;, a c .a w keep his or her Compensation. The pay-
41 ment cannot be recovered later; it Is con-
b o Adered voluntary arid Irreversible(Comet
r-, Thcater Enterprises Inc. vs. Cartwright,
3 •�+ a: `d '� u '� '" '^ °c 13 O 1952 Likewise. unlicensed contractors
v .. '. ° Y ^yoq '- cam )'•
v ,g ^.� $c may use the value of their work to orrset
U- 7Ra a'� �` any claims against them asserted by
a x o „ s 4A a
c another party (Marshall vs. vonZumwalt,
0 a 1953).
H.5 There are statutory exceptions to the
e a 4 �y v c H•��, unlicensed contractors recovering the
o o v• g o o y g vahte of their work.For Cit3mple,an unli-
' c tensed partnotship may recover the value
a Y• g •� co ?' 4 or its work when both partners are
0. 0 .
;, �° licensed. Furthermore, the partnership
G A E'So '0 `101 ,;? .. -v °�' c u may file suit in its own name. b
"" v a °' r r-0 . Finally, when a contractor's license
t1`?'� b '- a °' v•o d +. : lapses, it is possible to retroactively
state it. The registrar may permit a tori-
tractor to renew his or her license to the
Ao y v $ a ° ' c c . original renewal date--but not for a
g >• E d u 04 Pa ° period greater than 90 days--when the
0 g o ' o ° contractor can show that the non-renewal
�; �,C a ;� was due to circumstances beyond the con-
:s ° it ;tractor's control.
•�.� ti
=T �, � U e �, „ V b � CL CL The best way to avoid pu:iing yourself
(,) t ' o c'� ri U o o g `' v 3 ° at (1142 mercy of the courts fi to make cc,
V.o O.� v y o ,° tnin you have a valid current license for
L
a the particular kind of construction wor�C
a. �- you perform.
4-J ? C o o s k William bast Jr, is a principal witlr Ric-
_ V- P = g ° ° o o w �'° ciricllo, Gast, Zalaiel & Gruber of SAn
O D r .`� aj •' C 60 ".0 H
"l EO O .-9 U O Francisco.
a;� ffi o V 4 o G o a ThA article is reprinted tvith permission
Construction News' apu11
blication of
C O o Associated Builders & Contractors,nbr
1990.
STATE OF CALIFORNIA—STATE AND CONSUMER SERVICES AGENCY GEORGE DEUKMEJIAN, Govemor
DEPARTMENT of CONTRACTORS STATE LICENSE BOARD
ro�sumff 3132 BRADSHAW ROAD, SACRAMENTO, CALIFORNIA d
MAILING ADDRESS: P.O. BOX 26000
SACRAMENTO, CALIFORNIA 95826
April 27, 1990
Contra Gita Count,,,
Claude Van Marter
AEC�?VED
Assistant County Administrator JA.A
Contra Costa County
651 Pine Street, 11th Floor offico o;
Martinez, California 94553Aen�jr�kstrat0'
County : . ,.
Dear Mr. Van Marter:
Thank you for your recent letter to the Registrar concerning. the
enforcement of contractors' licensing in Contra Costa County.
As mentioned in your letter, most of our complaints against
unlicensed contractors come from consumers and regard a specific
project. However, we do receive complaints regarding the
advertisements of unlicensed contractors; these are usually sent
to us by members of the construction industry.
In most cases, we are able to proceed with complaints from
homeowners as the documentation "is available to prove the
allegation of unlicensed contracting. The complaints from the
industry in which we do not have . a specific job site are more
difficult to prove as we often do not have enough information to
identify the individual who is doing the advertising or
contracting. This is the case, for example, with a flyer thrown
in someone's driveway advertising "Joe's Concrete" with nothing
but a phone number.
We have done a number of "stings" in northern California in which
our investigators have contacted unlicensed contractors who
blatantly advertise or contract without a license and invite them
to submit a bid for home improvement work. The individuals who
clearly violate the law are then given misdemeanor citations and
ordered to appear in the appropriate court. However, at this
time our northern regional office only has one peace officer
available for this type of operation .
I have enclosed a copy of recent legislation (AB 2279 , Eastin)
which should be of interest to you in this matter. It
establishes an enforcement unit specifically for the unlicensed
contracting problem and gives the members of the unit the ability
to issue this same type of citation . Although the unit was-
initially
asinitially limited to southern California , our agency is now
seeking legislation to expand it to the entire state . One of the
advantages of the unit is that its sole function is to enforce
the laws against unlicensed activity so there is a much quicker
response time to complaints from both industry and consumers .
Page 2
Our enforcement staff would be happy to meet with your Internal
Operations Committee to discuss this issue further at your
convenience. You may contact either our northern regional
deputy, Sondra Vaughan, at (916) 366-5290 or the Oakland district
supervising deputy, John Lawton, at (415) 464-0964 to arrange for
this meeting. Any additional questions regarding complaint
investigation or licensing enforcement in your county can also be
directed to these members of our staff.
Thank you for this opportunity to work with you on issues of
mutual concern.
Sincerely,
ickey Matsumoto
Chief Deputy
cc:No. Region
Lawton/Oakland
Assembly Bill No. 2279
CHAPTER 1363
An act to add Section 7011.4 to the Business and Professions Code,
relating to contractors.
[Approved by Governor October 2, 1989.Filed with
Secretary of State October 2, 1989.]
LEGISLATIVE COUNSEL'S DIGEST
AB 2279, Fastin. Contractors.
Fidsting law provides for the licensing and regulation of persons
engaged in the business of contracting and those provisions are
administered and enforced by the Contractors' State Licensing
Board.
This bill would create in that board, a separate enforcement unit
as a demonstration project only in southern California, to enforce
provisions prohibiting all forms of unlicensed activity,would provide
that persons employed as deputy registrars in the unit are not peace
officers and have no power of arrest,but may issue notices to appear
in court, as specified.
The people of the State of California do enact as follows:
SECTION 1. Section 7011.4 is added to the Business and
Professions Code, to read:
7011.4. (a) Notwithstanding Section 7011, there is in the
Contractors'State License Board,a separate enforcement unit which
shall rigorously enforce this chapter prohibiting all forms of
unlicensed activity.This unit shall operate as a demonstration project
only in southern California.
(b) Persons employed as deputy registrars in this unit and
designated by the Director of Consumer Affairs are not peace
officers and are not entitled to safety member retirement benefits.
They do not have the power of arrest. However, they may issue a
written notice to appear in court pursuant to Chapter 5c
(commencing with Section 853.5) of Title 3 of Part 2 of the Penal
Code.
SEC. 2. It is the intent of the Legislature that the enforcement
unit created by this act function as a demonstration project in
southern California only and that it be limited to the personnel and
money authorized in the Budget Act of 1989.
0
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