2017 California Construction Law Update

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To say it’s been an exciting year in politics would be an understatement.

While most of the nation’s attention was focused on the presidential election, state legislatures, including California’s, were busy at work. The California State Legislature introduced 3099 bills during the second session of the 2015-2016 session of which 808 bills were signed into law. 2016 saw the enactment of several bills of interest to the construction industry including bills related to alternative project delivery methods, prevailing wages, and licensing. Each of the bills discussed below takes effect on January 1, 2017.

Project Delivery

AB 2126 – Amends Public Contract Code section 6701 to increase the number of projects the Department of Transportation may use the construction manager/general contractor method of project delivery from no more than 6 projects, to 12 projects, of which 8 of the 12 projects would be required to use Department employees or consultants under contract with the Department to perform all project design and engineering services.

AB 2316 – A bill clearly introduced in response to this past year’s somewhat controversial Davis v. Fresno United School District decision, AB 2316 amends Education Code section 17400 to remove the exception from existing law which permitted school districts to enter into lease-leaseback arrangements with developers without advertising for bids. Require school districts to adopt and publish procedures and guidelines for evaluating the qualification of proposers through a competitive solicitation process based on best value. AB 2316 also provides a safe harbor for lease-leaseback developers who entered into lease-leaseback agreements before July 1, 2015, and provides that if such arrangements are later found not to be in compliance with former law, that such developers may be paid their costs, but not profits. With the exception of advertising for bids, the amendments will become inoperative on July 1, 2022.

AB 2374 – Amends Public Contract Code sections 6971 and 6972 to authorize the use of the construction manager/general contractor method of project delivery for the Yerba Buena Island West Side Bridges Seismic Retrofit Project and the Yankee Jims Road Bridge Project in Placer County.

AB 2551 – Amends the Public Contract Code to add new sections 20928 through 20928.4 which permits the CALFED Bay-Delta Program to use the construction manager at-risk, design-build, or design-build-operate methods of project delivery, with such contracts to be awarded on a best value basis or to the lowest bidder. Provides criteria for the procurement process including a requirement that pre-qualified and short-listed contractor commit to use a skilled and trained workforce to perform all work on the project that falls within an apprenticeable occupation in the building and construction trades.

SB 957 – Amends Health and Safety Code section 32132.5 to expand the use of the design-build project delivery method from the Sonoma Health Care District and the Marin Healthcare District to all health care districts for the construction of a building or improvements directly related to construction of a hospital or health facility building through January 1, 2025.

SB 1214 – Amends Public Contract Code sections 10506.4, 10506.5, 10506.8, and 10506.9 by extending the pilot program which permits the Regents of the University of California to contract for projects over $1 million based on best value, which was set to expire on January 1, 2017, to January 1, 2018. Extends the pilot program to all University of California locations and repeals the requirement that the Regents report to the State Legislature regarding the pilot program.

Prevailing Wages

AB 326 – Under existing law Labor Commissioner civil wage and penalty assessments become liquidated damages in an amount equal to the amount of unpaid wages. However, contractors, subcontractors, and sureties can avoid liquidated damages if they deposit the full amount of civil wage and penalty assessments with Department of Industrial Relations, pending administrative or judicial review. AB 326 amends Labor Code section 1742.1. to require the Department of Industrial Relations to release those funds, including interest, within 30 days following conclusion of administrative or judicial review or receipt of written notice of a settlement or other final disposition.

AB 1926 – Amends Labor Code section 1777.5 to require that apprentices on public works projects be paid prevailing wages, unless otherwise provided by a collective bargaining agreement, for time spent on pre-employment activities, including filling our applications, undergoing testing, training or examination, or other pre-employment process required as a condition of employment, including travel time to and from the required pre-employment activity.

SB 954 – Amends Labor Code section 1773.1 to require per diem wages to include industry advancement and collective bargaining agreements administrative fees if the payments are made pursuant to a collective bargaining agreement to which the employer is obligated.

Licensing

AB 1793 – We’ve talked before about dreaded Business and Professions Code section 7031 which provides that a contractor performing work requiring a license: (1) may be precluded from recovering any compensation for work performed; and (2) must disgorge all compensation paid for work performed. There is, however, a limited safe harbor for contractors who “substantially complied” with licensure requirements if certain conditions are met, including, that the contractor did not know or reasonably should not have known that he, she, or it was not duly licensed at the time of performance under the contract. The difficulty lies in the “reasonably should not have known” requirement, since courts have found that contractors, being subject to strict regulation, generally always “reasonably should” know if they are not licensed. AB 1793 amends Business and Professions Code section 7031 to remove this requirement.

SB 1209 – Amends Business and Professions Code section 7124.6 to provide that accusations and investigations against contractors, which are already made public, shall also appear on the license record of qualifiers of such contractors.

Public Works Projects

AB 626 – Amends the Public Contract Code to add new section 9204 which requires state agencies, excluding the Department of Water Resources, Department of Transportation, Department of Parks and Recreation, Department of Corrections and Rehabilitation, the Military Department, the Department of General Services and the High-Speed Rail Authority, and local agencies, including charter cities, charter counties and charter cities and counties, to include alternative dispute resolution procedures in public works contract entered into on or after January 1, 2017. The alternative dispute resolution procedures apply to claims for relief from liquidated damages, payment of money or damages, or payment of amounts disputed by a public entity, and provides for a 45-day review of such claims by public entities, a meet and confer process, and mediation. AB 626 also provides a procedure for subcontractors to make claims through a direct contractor and provides that unpaid claim amounts shall accrue interest at 7% per annum.

AB 2289 – Existing law requires the Department of Transportation to prepare a state highway operation and protection program including capital projects related to the “maintenance, safety, and rehabilitation” of the state’s highways and bridges that do not add a new traffic lane to the system. AB 2289 amends Government Code section 14526.5 to require the Department of Transportation to include in its state highway operation and protection program capital projects related to the “operation” of the state’s highways and bridges.

Davis-Stirling

AB 1963 – Under the Davis-Stirling Common Interest Development Act, which was enacted over 30 years ago in part to curb rampant construction defect litigation,  homeowners associations are required to serve a pre-litigation “Notice of Commencement of Legal Proceedings” before filing a suit for construction or design defects against a builder, developer or general contractor of a common interest development. The pre-litigation procedures were set to expire on July 1, 2017. AB 1983 amends Civil Code section 6000 to extend the inoperative date to July 1, 2024.

Safe Digging

SB 661 – Enacts the Dig Safe Act of 2016 which amends sections of the Government Code and Public Utilities Code. Requires excavators to delineate an area to be excavated prior to notifying an appropriate regional notification center of the planned excavation, to preserve plans of records for any subsurface installation, and establishes a process for an excavator to request and obtain a continual excavation ticket for an area of continual excavation that is valid for one year and eligible for renewal. Creates the California Underground Facilities Safe Excavation Board to develop standards and to enforce these requirements.

7 Responses to “2017 California Construction Law Update”

  1. Dave Ross

    Thanks once again for the annual wrap-up, Garret. If I understand your report about AB 1793, starting Jan 1 2017 an unlicensed contractor merely needs to assert that they “did not know” their license was not in force. The “reasonably should have known” requirement no longer applies? So this is effectively an expansion of the “substantial compliance” exception to 7031.

    Best wishes to you and the firm for the holiday season and a great 2017!
    Dave

    Reply
    • Garret Murai

      Hey Dave. Happy holidays. The effect of the amendment should be to make it easier for contractors to meet the Substantial Compliance Doctrine under B&P 7031 by removing the knew or reasonably should not have know requirement. As such, the four-part test has now become a three-part test whereby a contractor must now show that: (1) It had been duly licensed as a contractor in California prior to performance of the act or contract giving rise to a claim under Section 7031; (2) It had acted reasonably and in good faith to maintain proper licensure; (3) [NOW REMOVED – it did not know or reasonably should not have known that it was not duly licensed when performance of the act or contract commenced; and (4)
      It acted promptly and in good faith to reinstate his or her license upon learning it was invalid.

      Reply
  2. Fred Saj

    The law changes but the lawyer is very important as the lawyer know the updated law and helps you out in every legal things

    Reply
  3. James

    Garret,

    I really appreciate these blogs. As a small business owner in the Southern California area, I read them religiously. Thanks for putting in the great effort.

    James

    Reply

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