2013 California Construction Law Update

2013Over 4,000 bills were introduced in the California State Legislature during the 2011-2012 legislative session. Of these bills, 996 made it to Governor Brown’s desk, of which 876 were signed into law, and 120 were vetoed. Among the new laws impacting the construction industry are new licensing requirements for construction managers, extension of the authority of school districts and community college districts to enter into design-build contracts, and extension of the prohibition by CalTrans to withhold retention.

Indemnity

SB 474 – One of the most talked about new laws is not technically “new” at all, but rather, a bill that was signed into law in 2011 but with an effective date of January 1, 2013.

Beginning January 1, 2013, construction contracts which require a subcontractor to insure, indemnify, or defend a general contractor, construction manager, or other subcontractor from their: (1) active negligence or willful misconduct; (2) design defects; or (3) claims that do not arise out of the scope of work of the subcontractor, are void and unenforceable.

The new law effectively eliminates “Type I” indemnity clauses in construction contracts. Type I indemnity clauses were, prior to the enactment of the new legislation, already prohibited in residential construction contracts (except for homeowners performing home improvement projects on a single family dwelling).

Under the new law, Type I indemnity clauses are now prohibited in private commercial construction contracts, as well as public works projects, although as it applies to owners and public agencies, it only restricts owners and public entities from requiring indemnity for their “active negligence” but applies broadly to contractors, subcontractors, and material suppliers.

The new law does have a number exceptions, however. It does not apply to design professionals, has no affect on additional insured obligations, and does not apply to owner controlled insurance programs. The new law also does not affect “Type II” indemnity clauses in which a party is indemnified for their “passive,” as opposed to “active,” negligence.

Licensing

AB 397 – Requires proof of worker’s compensation coverage, or proof of exemption, at the time of license renewal with the California Contractors State License Board (“CSLB”).

AB 1794 – Authorizes the California Employment Development Department to share information with the Joint Enforcement Strike Force on the Underground Economy, the CSLB, and California State Compensation Insurance Fund through January 1, 2019.

AB 2219 – Existing law, which requires roofing contractors to have workers’ compensation insurance whether or not they have any employees, and which was set to expire on January 1, 2013, has been made permanent.

AB 2237 – Requires construction managers to be licensed by the CSLB in order to provide services in connection with a home improvement contract.

School Projects

AB 1565 – Requires school districts, except for districts with an average daily attendance under 2500, to use a bidder pre-qualification process for projects receiving School Facility Program funding on all projects through January 1, 2018.

AB 1598 – Includes within the definition of “public works,” modular office systems such as portable classrooms, for purposes of prevailing wage and listing laws.

SB 1509 – Existing law, which authorizes school districts and community college districts to enter into design-build contracts, and which was set to expire on January 1, 2014, has been extended to January 1, 2020.

CalTrans

AB 1671 – Existing law, which prohibits the California Department of Transportation (“CalTrans”) from withholding retention, and which was set to expire on December 31, 2013, has been extended to January 1, 2020.

AB 2498 – Establishes a pilot program authorizing CalTrans to designate six projects for a construction manager/general contractor project delivery method.

Disability Access

SB 1186 – Reduction in minimum statutory damages in disability access litigation from $4,000 to $1,000 if property was certified by Certified Access Specialist (“CASp”). Owners must disclose to tenants whether property has been certified by CASp.

Green Building

AB 930 – Requires at least one member of the California Building Standards Commission be a person experienced and knowledgeable in sustainable building, design, construction, and operation.

Construction Vehicles

SB 341 – Requires vehicles, which operate at or transport materials to a construction site, and with a gross vehicle weight rating in excess of 14,000, to have an automatic audible backup alarm.

10 Responses to “2013 California Construction Law Update”

  1. Mark Cobb Law Group

    Kudos to you! It is vital that construction professionals stay current with every change in the law as it can affect their business, financing, and their ability to collect. This seems to be a great summary, and you have inspired me to try to come up with the Georgia counterpart after our legislature finishes up the current session. Thank you!

    Reply
  2. Dave Ross

    Hi Garret,

    Any updates on AB 2237, regarding implementation, required license classification, etc.? I wrote to the CSLB with these questions several months ago and still no reply.

    Reply
    • Garret Murai

      Hi Dave:

      As you know, AB 2237 which took effect January 1, 2013, amended Business and Professions Code section 7026.1, to further define the term “consultant” as including a person, other than a public agency or owner of privately owned real property, who meets either fo the following criteria as it relates to work performed pusuant to a home improvement contract:

      (1) Provides or oversees a bid for a construction project; or
      (2) Arranges for and sets up work schedules for contractors and subcontractors and maintains oversight of a construction project.

      There have been discussions among lawyers representing homeowners associations about whether community association managers, who don’t perform any actual work but who oversee construction bids and maintain oversight over a construction project, are now required to be licensed under AB 2237. The answer has uniformly been no. The rationale being that, while AB 2237 further defined the term “consultant,” it did not change other qualifying language in Section 7026.1 which defines “contractor” as including a consultant “who or which undertakes, offers to undertake, purports to undertake, purports to have the capacity to undertake, or submits a bid to construct any building or home improvement project, or part thereof.” According to these lawyers, while a community association manager may oversee construction bids and maintain oversight over a construction project, so long as they don’t actually do any construction, they are not required to be licensed.

      I generally agree with this rationale, but as you know, its a judge or jury that renders decisions, not us lawyers. And, there’s just enough gray area here where I think construction managers, or other folks who hold themselves out to be consultants on residential projects, need to proceed with caution. I am involved in a number of industry trade organizations and I have not heard anything about the Contractor’s State License Board creating a new classification for “consultants” nor have I seen any proposed regulations on AB 2237.

      Having said all this, I would note that it’s not a coincidence that AB 2237 has garnered the most discussion from homeowners associations since AB 2237 is limited to consultants who perform work “pursuant to a home improvement contract” If you work as a construction manager on other types of private work projects, such as commercial projects, AB 2237 does not effect you.

      Reply
      • Dave Ross

        Thanks for your very thorough reply, Garret. I would imagine that another group that should be interested in this legislation is Realtors, who sometimes oversee pre-sale and post-sale work on homes.

        In my own consulting practice I don’t often work on ongoing projects, and when I do my work is as an “owner’s representative,” usually when the relationship between the GC and Owner is strained. Now and then in those projects I have arranged for additional prime vendors to the Owner to supplement the GC’s work or to take care of an Owner responsibility. Once in a while this takes place on a residential project. Activating my B license (and setting up the various bond and insurance requirements) would be overkill for the small amount of this type of work I do.

        Probably the Legislature was not trying to cast their net over me. But I wouldn’t want to have my collections ability challenged as an “unlicensed consultant” if a client wanted to avoid payment.

      • Garret Murai

        I hate not knowing the answer to something, so I called an enforcement representative at the CSLB that I know and posed your question to her. She confirmed that there will be no new classification for “consultants,” and that there are no regulations in the pipeline implementing AB 2237, but she had a different take on the implementation of AB 2237.

        According to her, AB 2237 does require construction managers on residential projects to be licensed even if they don’t do any actual work. Essentially, she was reading an “or” into the statute, as in, if you are a consultant you need a license if you build “or” if you oversee bids or construction. The lawyers representing homeowners associations are essentially reading an “and” into the statute, as in, if you are a consultant you only need a license if you build “and” oversee bids or construction. Of course, the statute doesn’t use “and” or “or” since the provisions are in different subsections.

        So, it seems, reasonable minds can disagree, and it may come down to the individual enforcement representative until it’s clarified by the legislature by amending the statute, the CSLB if it issues a regulation, by an AG opinion, or the courts. Bottom line . . . caution is probably the best course of action here.

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