What You Need to Know About Enforcement Actions by the Contractors State License Board

Easy Rider

I questioned whether to even write this post.

Because, of course, YOU would never find yourself hightailing it out of town with the California Contractor’s State License Board (“CSLB”) sniffing down your tail pipes.

Then again, mistaken identities occur all the time. So, here’s what you need to know if the CSLB mistakes you for one of “those” contractors.

What violations are subject to CSLB enforcement actions?

The CSLB can take enforcement actions based on any one of numerous violations set forth under the California Business and Professions Code (“B&P Code”), including:

  1. B&P Code §7107: Abandonment of a construction project or operation without legal excuse.
  2. B&P Code §7108: Diversion or misapplication of funds or property received for prosecution or completion of a construction project or operation.
  3. B&P Code §7108.5: Failure to pay a subcontractor not later than 7 days after receipt of each progress payment, unless otherwise agreed to in writing or in the absence of a good faith dispute over the amount due.
  4. B&P Code §7108.6: Failure to pay transportation charged submitted by a dump truck carrier, unless otherwise agreed to in writing or in the absence of a good faith dispute over the charges claimed.
  5. B&P Code §7109: Willful departure from or disregard of accepted trade standards or plans and specifications.
  6. B&P Code §7109.5: Violation of a safety provision under the California Labor Code (Labor Code section 6300 et seq.) resulting in death or serious injury to an employee.
  7.  B&P Code §7110: Willful or deliberate disregard of building, safety, labor, workers compensation, unemployment, the Subletting and Subcontracting Fair Practices Act, or violation of the California Health and Safety Code or California Water Code relating to digging, boring, or drilling of water wells.
  8. B&P Code §7110.1: Requiring a release from an unpaid laborer in violation of the California Labor Code (Labor Code section 206.5).
  9. B&P Code §7110.5: Being found by the California Labor Commissioner to have willful or deliberately violated the Labor Code.
  10. B&P Code §7111: Failure to make and keep records showing all contracts, documents, records, receipts and disbursements for a period of 5 years after completion of a construction project or operation.
  11. B&P Code §7111.1: Failure or refusal to respond to a written request by the CSLB to cooperate in the investigation of a complaint against the licensee.
  12. B&P Code §§7112 and 7112.1: Omitting or misrepresenting a material fact when obtaining or renewing a license or adding a classification to an existing license.
  13. B&P Code §7113: Failing to complete a construction project or operation for the price stated in the contract or in any modification to the contract.
  14. B&P Code §7113.5: Avoiding or settling of an obligation for less than the full amount through: (a) composition, arrangement, or reorganization with creditors under state law; (b) composition, arrangement, or reorganization with creditors under any agreement or understanding; (c) receivership; (d) assignment for the benefit of creditors; (e) trusteeship; or (f) dissolution, unless discharged or settled in bankruptcy under federal law.
  15. B&P Code §7114: Aiding or abetting an unlicensed person with an intent to evade the License Law.
  16. B&P Code §7114.1: Signing a falsified certificate of experience or certifying false or misleading experience.
  17. B&P Code §7114.2: Displaying a canceled, revoked, suspended, or fraudulently altered license, using a fictitious license or document simulating a license, lending a license to another person, or knowingly permitting the unlawful use of a license.
  18. B&P Code §7115: Failure to comply with the License Law or engaging in collusion under California Public Contracts Code section 7106.
  19. B&P Code §7116: Willfully or fraudulently injuring another.
  20. B&P Code §7116.5: Engaging in conduct that subverts or attempts to subvert an investigation by the CSLB.
  21. B&P Code §7117: Acting in the capacity of a contractor under a license that is not his or hers or with personnel not identified under the license.
  22. B&P Code §7117.5: Acting in the capacity of a contractor under an inactive, suspended, or expired license.
  23. B&P Code §7117.6: Acting in the capacity of a contractor in a classification other than a classification currently held.
  24. B&P Code §7118: Entering into a contract with an unlicensed contractor.
  25. B&P Code §7118.4: Failure, by a contractor who has made an inspection to determine the presence of asbestos, to disclose orally and in writing that there is an ownership or financial relationship with a contractor performing corrective work.
  26. B&P Code §7118.5: Knowingly or negligently entering into a contract with a person who is not certified to engage in asbestos-related work.
  27. B&P Code §7118.6: Knowingly or negligently entering into a contract with a person who is not certified to engage in hazardous waste remediation.
  28. B&P Code §7119: Willful failure or refusal to to diligently prosecute a construction project or operation without legal excuse.
  29. B&P Code §7120: Willful or deliberate failure to pay money when due for materials or services rendered or false denial of any amount due or the validity of a claim with intent to secure a discount or delay.
  30. B&P Code §7121: Employing or associating as an officer, director, partner, manager, qualifier or one of the personnel of record of a licensee, a person whose license was previously denied, suspended, or revoked, or who had knowledge of or participate in acts of an organization which had its license previously denied, suspended, or revoked.
  31. B&P Code §7121.5: Employing or associating as an officer, director, partner, manager, or qualifier, a qualifier of an organization which has had its license revoked or suspended, regardless of whether he or she had knowledge of or participated in any acts of the  organization which led to its license being revoked or suspended.
  32. B&P Code §7123: Being convicted of a crime substantially related to the qualifications, functions and duties of a contractor.
  33. B&P Code §7123.5: Overpricing work following an emergency or major disaster.

What happens when a complaint is filed or enforcement action initiated against my license?

The CSLB may initiate enforcement action on its own. However, more typically, a complaint is filed against a contractor’s license. The Contractors State License Law (“License Law”) states that “any person” may file a complaint against a license. Usually, however, a complaint is filed by an owner or another contractor, subcontractor, material supplier or employee.

Complaints against licensed contractors based on patent defects must be filed within 4 years after the act or omission. Complaints against licensed contractors based on latent defects must be filed within 10 years after the act or omission. And complaints against licensed contractors based on misrepresentations of material facts, or based on criminal conduct, must be filed within 2 years of discovery. Complaint against unlicensed contractors must be filed within 4 years of the illegal act.

When a complaint is filed it is processed at the CSLB Intake and Mediation Center nearest the location where the alleged violation occurred. If the complaint is found to fall within the CSLB’s jurisdiction the CSLB will send confirmation of receipt of the complaint to the complainant and a notice to the contractor.

  1. Notice of Possible Violation: The notice to the contractor will usually request information as to whether a settlement has been reached, whether a settlement was offered but not accepted, whether the contractor contends that no violation exists, or if there is further information the contractor would like to share with the CSLB.
  2. Investigation: If a complaint is not resolved, a CSLB consumer services representative (CSR) will contact the complainant and the contractor to request additional information and documentation and attempt to mediate the dispute. If the CSR determines that further investigation is necessary, he or she can assign the case to an enforcement representative (ER) who will conduct an investigation by requesting further information and documents, and conducting interviews, to determine whether there is clear and convincing evidence of a violation of the License Law.
  3. CSLB-Sponsored Arbitration: In certain cases, the CSLB can refer the parties to the CSLB-sponsored arbitration program. The CSLB-sponsored arbitration program is only available if: (a) the dispute involves damages greater than $12,500 but less than $50,000; (b) the contractor has a license in good standing; (c) the contractor does not have a history of repeated or similar violations; (d)  the contractor does not currently have a disciplinary action pending against him or her; and (e) the parties have not previously agreed to arbitrate or are willing to waive a contractual agreement to arbitrate. The CSLB-sponsored arbitration program is voluntary, unless the alleged damages are equal to or below $12,500, in which case arbitration can be mandated. If the  parties participate in the CSLB-sponsored arbitration the arbitrator’s decision is binding.
  4. CSLB Enforcement Action: Once an investigation is concluded the CSLB may take one or more of the following actions: (a) issue a warning letter; (b) issue a citation; (c) file an accusation; or (d) close the complaint because the parties settled, for lack of evidence, or because no violation was found. In rare instances, the CSLB may seek injunctive relief with the superior courts or refer the matter to a local prosecutor for the filing of criminal charges.

What is a warning letter?

If a violation is found but the contractor’s actions are not egregious and the contractor’s history does not reflect a pattern of violations the CSLB may just send a warning letter to the contractor. A warning letter remains a matter of record and could support more serious action against a contractor if further violations occur.

What is a citation?

If a contractor is found to have violated the License Law, the CSLB may issue a citation imposing a civil penalty payable to the CSLB as well as an order of restitution requiring the contractor to either correct deficiencies and/or pay for the damages of the complainant. Civil penalties on a single construction project, no matter the number of violations, cannot exceed $5,000. However, if a contractor is found to have contracted with an unlicensed contractor or have aided and abetted an unlicensed contractor a civil penalty of up to $15,000 may be assessed.

A contractor may appeal a citation by giving notice to the CSLB within 15 days of service of the citation by the CSLB. If a contractor appeals the citation, a hearing is held before the Registrar of Contractors who may revoke, modify, or affirm a citation. A mandatory settlement conference before the hearing may also be conducted.

If a contractor does not appeal or fails to appeal a citation within 15 days of service of the citation by the CSLB, the citation becomes final. If a contractor fails to comply with a citation it will result in the automatic suspension of his or her license 30 days after noncompliance with the terms of the citation. A contractor may contest the determination of noncompliance by giving notice to the CSLB within 15 days of service of a notice of noncompliance by the CSLB. If a contractor continues to fail to comply with a citation it will result in the automatic revocation of his or her license 90 days after the date of automatic suspension.

What is an accusation?

The most serious violations are subject to the filing of an accusation. In an accusation, the CSLB seeks to suspend or revoke a contractor’s license, and begins with the CSLB filing an accusation which is similar to a complaint filed in superior court and includes an allegation of claims. A contractor has 15 days from service of an accusation by the CSLB to file a notice of defense.

The Administrative Procedures Act (Government Code sections 11500 et seq.) govern accusations, including limited discovery of names and addresses of witnesses, statements taken, investigative reports, and documents sought to be admitted as evidence. A mandatory settlement conference before the hearing may be conducted.

At the hearing before the Administrative Law Judge (“ALJ”) the burden is on the CSLB to prove by clear and convincing evidence that a contractor’s license should be suspended or revoked. The rules of evidence, however, are typically more relaxed. Following the hearing, the ALJ will issue a proposed decision.

The CSLB may adopt the proposed decision in whole or in part or may enter its own ruling. The CSLB can also request that additional evidence be heard. The decision of the ALJ becomes a final decision 30 days after service of proposed decision unless reconsideration is requested.

A contractor who is unhappy with a decision can seek judicial relief by filing a petition for peremptory writ of administrative mandamus in the superior court. The peremptory writ provisions of California Code of Civil Procedure section 1094.5 govern writs and require the superior court to conduct an independent review of the record. The parties may also appeal the decision of the superior court to the court of appeal.

Contractors who lose an accusation may be required to pay the CSLB’s investigative and enforcement costs and they can be substantial, running in the the tens of thousands of dollars. Like an adverse decision, a contractor can challenge the reasonableness of investigative and enforcement costs.

A contractor whose license is suspended may be reinstated upon proof of the contractor’s compliance with the conditions of suspension or, in the absence of such conditions, the discretion of the CSLB. A contractor whose license is revoked may not reinstate their license for a minimum of one year or up to a maximum of five years. A contractor will also be required to file a disciplinary bond.

How does the CSLB address complaints against unlicensed contractors?

Unlicensed contractors, as opposed to licensed contractors, don’t have a license which can be suspended or revoked. When the CSLB receives a complaint against an unlicensed contractor the CSLB may issue a citation including an order of abatement to cease and desist and a civil penalty up to $15,000, file a criminal action with the local district attorney’s office, or initiate injunction proceedings in the superior court.

Unlicensed contractors have 15 days from service of an administrative citation by the CSLB to appeal a citation. If an unlicensed contractor appeals a citation, a hearing is held before the Registrar of Contractors who may revoke, modify, or affirm a citation. A mandatory settlement conference before the hearing may also be conducted.

 

13 Responses to “What You Need to Know About Enforcement Actions by the Contractors State License Board”

  1. Pamela O'Hara

    What can I do to the CSLB when they are only seeing a few violations and trust me there is more. Can I file a appeal I’m the complaint. They are only saying no permit, no reg # for the salesperson and they accepted more than 10% deposit.But there is fraud,misrepresentation, lies, no right to cancel form, no preliminary notice and there is more. At this point what I can I do. They only gave them a slap on the hand a Waring notice

    Reply
    • Garret Murai

      There’s nothing you can do. The CSLB is an administrative enforcement agency and it is up to them to investigate and determine whether there has been a violation of the Contractors State License Law. Furthermore, the CSLB is limited to enforcement of the Contractors State License Law only, so they do not have jurisdiction to investigate cases of civil or criminal fraud. You would need to file a lawsuit in the Superior Court in the case of civil fraud, or file a complaint with the district attorney in the case of criminal fraud. And, finally, there is no requirement that a contractor serve a preliminary notice, and it appears that the CSLB has already found that the contractor violated the Home Improvement Law (including failure to provide a right to cancel notice) if they found that they impermissible accepted a deposit of more than 10%.

      Reply
  2. Shayne

    I have a quick question. I filed a complaint with the CSLB a couple years ago and they are just wrapping up now. When the contractor abandoned the project, he blatantly committed fraud, by filing a restraining order against me (which was denied in court) in the hope to have a reason to get out of the binding contract. The lie was heinous, he stated in the request for restraining order, to the superior court, that I was abusive to him and had a shotgun behind the door, and he didn’t know what I was going to do with it. He told different versions of the story in writing to the surety bond company and the in the mediation briefing he provided. One version stated that many times I inspected work with the gun making threatening gestures to him and his crew, and another versionstated I came to the job site drunk and violent all the time and the last time was brandishing a shotgun. All of these stories are totally made up as none of this ever happened, in any way, shape, or form. To my knowledge the CSLB will be applying many violations such as Abandonment, not constructing per plan, and having people work for him while not having workers comp. I have asked them to look as criminal offences, due to the severity of the nature of his lie. They say that they are not looking at this situation as criminal. There will be a large amount of money (damages) awarded to me, however the contractor said in mediation that he would never pay me and would claim bankruptcy before I see a dime. He even gave me his bankruptcy attorneys phone number for me to verify this. I feel there is serious fraud in this case, what should I do?

    Reply
    • Garret Murai

      Shayne, I can’t give you legal advice. However, in general, fraud requires a false statement that you relied on to your detriment. I assume, since you know what you did (or, in this case, didn’t do), that you didn’t rely on the false statements you said were made by the contractor to the court.

      Reply
  3. Todd

    Will the CSLB discipline a contractor retroactively? After our contractor abandoned our job in mid 2016 (the job started at the beginning of 2015), we’ve since found out that he had 2 license suspensions and 1 license lapse during the time he worked on our project and he continued to work during the 3 lapses. I’ve come to learn that working during a lapse is not allowed. One of the suspensions was for not having Workers Comp insurance for 60 days and there’s evidence that even after becoming aware of the suspension, that he continued to have his employees and subs work on the project. Prior to starting the project he showed us a document saying he had Workers Comp but I don’t believe it showed a date of when the policy ended. In light of our discovery, would that be considered fraud in any capacity?

    Reply
    • Garret Murai

      Hi Todd. No case I am aware of has specifically addressed this question. However the Code of Civil Procedure provides for a “default” statute of limitations applicable to actions “for relief not hereinbefore provided for,” of four years.

      Reply
  4. Jess loya

    Should I as a contractor, just pay the citation when I pulled permits and the owner and subcontractor conspired against me? I never got paid for any work done by sub or by owner.

    Reply
    • Garret Murai

      Hi Jess. I’m not sure what occurred based on your description, but even if I did, I couldn’t provide you with legal advice. You may need to retain an attorney, sorry.

      Reply
  5. Beverly

    What if a contractor has code violations on his personal residence, my friend’s ex-husband added additional plumbing fixtures to a garage and hid them from the inspector, then added two full bathrooms and a kitchen to make the detached garage a rental space. He never called for a final inspection and this is causing a property valuation problem in the divorce settlement.

    Reply
    • Garret Murai

      Hi Beverly. I’m not a family law attorney but my guess is that the code violations are too remote to make a difference if what your friend is trying to do is argue that the house would have been worth more for purposes of valuation in a separation if there were no code violations. Your friend should consult a family law attorney.

      Reply
  6. Steven

    Excellent article.

    We have a situation where our contractor fraudulently reported many purchases that we paid him for. Some of the items add up to more than 40K. We learned that these items were never purchased over a year after his initial claims. Furthermore, we had to obtain this information by calling all the suppliers and vendors involved to verify that orders were never placed. The contractor later admitted that he was lying about some, but not all, of these purchases.

    Do you know what code(s) these actions may violate?

    Reply
    • Garret Murai

      Hi Steven. It may be a violation of Business and Professions Code section 7116. However, it appears to more closely track the elements of fraud. One issue, either way though, is how you have been damaged by those fraudulent charges if you didn’t pay those fraudulent charges.

      Reply

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