2019 California Construction Law Update

Photo by Alan Light

The California State Legislature introduced 2,637 bills during the second year fo the 2017-2018 Legislative Session. Of these, 1,016 were signed into law.

It was last official bill signing for Governor Jerry Brown who ends not only his second term as Governor but a colorful political career spanning nearly 50 years during which he has dated pop stars, practiced Zen meditation, kicked it with radical ex-nuns and an Apollo astronaut and, at 80,  has sparred regularly with President Trump on issues ranging from climate change to immigration to net neutrality.

For those in the construction industry it wasn’t quite as exciting, unless of course you count SCR 120, which officially makes April “California Safe Digging Month.” Hooray!

Each of the bills discussed below took effect on January 1, 2018, except as otherwise stated.

Building Codes

SB 721 – Requires the inspection of exterior elevated elements, including balconies, decks, porches, stairways, walkways, and elevated entry structures, of multifamily buildings with three or more dwelling units by an architect, engineer or contractor with a Class A, B or C-5 license by January 1, 2025 and by January 1st every six years thereafter. Elements posing an immediate threat to the safety of occupants, or which prevent occupant access or emergency repairs, are required to be repaired immediately. Elements not posing an immediate threat to the safety of occupants, or which do not prevent occupant access or emergency repairs, are required to be repaired within 180 days.

Licensing

AB 2138 – Effective July 1, 2020, the bill prohibits an applicant from being denied a license solely because the applicant has been convicted of a felony if the applicant has obtained a certificate of rehabilitation or if the applicant has been convicted of a misdemeanor if the applicant has met all applicable requirements of the criteria of rehabilitation. The bill also permits a license to be denied if an applicant has been convicted of a crime within the preceding seven years from the date of application that is substantially related to the qualifications, functions, or duties of the business or profession for which the application is made.

AB 2371 – Requires the Contractors State License Board (CSLB) to confer with the Department of Water Resources and California Landscape Contractor’s Association before updating or revising the landscape contractor examination.

AB 2705 – Increases the statute of limitation for prosecuting a contractor that has failed to obtain workers’ compensation insurance to two years (formerly one year).

AB 3126 – Eliminates the option of posting a cash deposit with the CSLB in lieu of a contractor’s license bond, bond of qualifying individual, or disciplinary bond.

SB 1042 – Permits unlicensed contractors and salespersons to contest a citation issued by the CSLB by either: (1) requesting an administrative hearing within 15 days after service of the citation; and/or (2) requesting an informal citation conference within 15 days after service of the citation.

SB 1465 – Requires contractors and insurers to report to the CSLB final civil judgments, settlements, and arbitration awards involving damage claims more than $1 million for construction defects in multifamily residential structures.

Home Improvement Contracts

SB 981 – Permits water treatment devices sold through a home solicitation contract to be installed within the three-day right to cancel period. However, if a consumer cancels the sale within the three-day period, the seller is responsible for removing the device at the seller’s cost and returning the property to its original condition.

SB 1087 – Prohibits work performed pursuant to a home improvement contract under the Property Assessed Clean Energy (PACE) program if the homeowner is not approved for PACE financing.

Hospitals

AB 2190 – Existing law requires hospitals to comply with the Alfred E. Alquist Hospital Seismic Safety Act of 1983 by January 1, 2020. The bill would authorize the Office of Statewide Health Planning and Development to grant an extension through July 1, 2022 if a hospital’s compliance plan is based upon replacement or retrofit or up to 5 years if a hospital’s compliance plan is for a rebuild.

Alternative Project Delivery

AB 2654 – Authorizes the County of Orange to utilize the design-build project delivery method for infrastructure projects limited to no more than one project per year in excess of $5 million and the Orange County Flood Control District to utilize the design-build project delivery method for flood protection improvements with a limit of no more than 12 projects in excess of $5 million through January 1, 2025.

SB 914 – Existing law authorizes counties to use the construction manager at-risk (CM at-risk) project delivery method for public works projects involving the erection, construction, alteration, repair, or improvement for any building owned or leased by the county with construction costs in excess of $1 million through January 1, 2023. The bill expands the authority to public entities on which members of the county board of supervisors make up the governing body of the public entity. The bill also expands the types of projects in which the CM at-risk project delivery method may be utilized to include buildings, utility improvements associated with buildings, flood control and underground utility improvements and bridges, but excludes roads.

SB 1262 – Removes the cap on the number of public works projects in which the Department of Transportation Is authorized to use the Construction Manager/General Contractor (CM/GC) project delivery method. However, it maintains the requirement that the CM/GC project delivery method be limited to projects with construction costs greater than $10 million. The bill requires CalTrans to use department employees or consultants to perform project design and engineering services on at least two-thirds of CM/GC projects and requires CalTrans to submit an interim report on the CM/GC project delivery method by July 1, 2021 and a final report by July 1, 2025.

Public School Projects

AB 618 – Existing law authorizes school districts that have entered into project labor agreements (PLA) to use job order contracting for public works in excess of $25,000 through January 1, 2022. The bill would revise the restriction to permit both school districts and community college districts that have entered into PLAs to use job order contracting for all public works irrespective of value through January 1, 2022.

AB 2031 – Repeals the January 1, 2019 sunset date and continues indefinitely the requirement that bidders submit a prequalification questionnaire and financial statement under oath when bidding on public school construction projects receiving funds under the Leroy F. Greene School Facilities Act of 1998 or receiving funds from any future state school bond for a public project that involves a projected expenditure of $1 million or more.

AB 2488 – Establishes a pilot project in which the Los Angeles Unified School District is authorized to award multiple annual task order procurement contracts not exceeding $3 million for services, repairs, maintenance and construction through January 1, 2024.

Public Works Projects

AB 2249 – Increases the monetary limits under the Uniform Public Construction Accounting Act by: (1) permitting public employees to construct public projects valued at $60,000 or less (formerly $45,000 or less); (2) permitting public agencies to award public projects through informal procedures if the project is valued at $200,000 or  less (formerly $175,000 or less); and (3) if a public project is bid through informal procedures but all bids are in excess of $200,000, permits the public agency to award a contract at $212,500 or less (formerly $187,500 or less) to the lowest responsible bidder, if the agency determines that the cost estimate of the agency was reasonable.

AB 2762 – Increases the authority of local agencies to provide a small business preference of 7% (formerly 5%) in construction, the procurement of goods, or the delivery of services with a maximum financial value of $150,000. The bill also provides for special small business preferences for local entities located in the Counties of Alameda, Contra Costa, Lake, Los Angeles, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma, through January 1, 2014, by permitting local agencies in those counties to provide a maximum small business preference of 7% for an individual preference and up to 15% for a single bid having two or more preferences. The bill also permits a prime contractor, with the approval of the local agency, to substitute a subcontractor with another small business, provided that subcontractors be afforded all the protections of the Subletting and Subcontracting Fair Practices Act.

SB 96 – Makes numerous changes including the following:

• Existing law requires that contractors be registered through the Department of Industrial Relation’s (DIR) Public Works Program  for state and local public works contracts entered into on or after April 1, 2015, involving construction, alteration, demolition, installation or repair work valued at more than $25,000 or maintenance work valued at more than $15,000. The bill removes the April 1, 2015 requirement, effectively requiring that direct contractors and subcontractors be registered through the DIR’s Public Works Program irrespective of when a public works contract was entered. The bill also increases the Public Works Program registration fee from $300 to $400 and permits contractors to register or renew their registrations up to three years at a time.The bill also imposes per-day civil penalties for a contractor’s failure to register through the Public Works Program and requires the Labor Commissioner to issue a stop work order on projects where a contractor has failed to register through the Public Works Program.
• The bill eliminates the discretion of the DIR to waive the payment of liquidated damages for violations of the Prevailing Wage Law.
• The bill eliminates the requirement that contractors submit payroll information for public works projects not requiring registration under the Public Works Program but, rather, requires that contractors maintain such records specified in Labor Code section 1776 for at least three years after completion of work.
• The bill extends the deadline for awarding agencies to give notice to the DIR of the award of a public works contract from 5 days to 30 days, but in no event, later than the first day in which a contractor has workers employed upon a public works project. The bill also requires that the notice include the contractor’s name and registration number, authorizes the Labor Commissioner to impose civil penalties against an awarding agency that fails to provide the required notice, and makes an awarding agency ineligible to receive state funding or financial assistance for one year if the Labor Commissioner determines that the awarding agency has willfully violated these requirements with respect to two or more public works projects in any 12-month period.
• The bill increases the civil penalties for OSHA violations determined “not to be of a serious nature” to a maximum of $12,741 (formerly $7,000) for each violation. The bill also increases the civil penalties for willful or repeated OSHA violations to a maximum of $124,709 (formerly $70,000) for each violation but in no event less than $8,908 (formerly $5,000) for each willful violation. The bill also adjusts the maximum civil penalties by the Consumer Price Index each January beginning January 1, 2018.
• The bill increases the penalties applicable to asbestos removal work as follows: (1) For knowing or negligent violations to a maximum of  $5,000 and/or imprisonment in the county jail for up to six months (formerly civil penalties only, of up to $2,000); (2) For willful violations resulting in death, serious injury or illness, or serious exposure to a maximum of $10,000 or imprisonment in the county jail for up to one year (formerly civil penalties only, of up to $2,000); and (3) For second or subsequent convictions to a maximum of $20,000 and/or imprisonment in the county jail for up to one year (formerly civil penalties only, of up to $20,000).
• The bill increases the penalties for crane safety violations to an amount equal to double the maximum penalty allowable for each violation contributing to an injury or death or, if the violation a serious violation, a civil penalty of no less than $1,000 (formerly capped at a maximum of $2,000) for each serious violation.

Employment

AB 1654 – Provides that the Private Attorneys General Act (PAGA) will not apply to employees of the construction industry covered by a collectively bargaining agreement provided that the agreement (1) provides for a regular hourly pay rate of not less than 30% more than the minimum wage and a premium wage for overtime hours; (2) expressly waives PAGA requirements; (3) prohibits all violations that would be redressable under PAGA; (4) includes a grievance and binding arbitration procedure; and (5) authorizes the arbitrator to award remedies available under the Labor Code.

AB 1565 – Effective September 19, 2018, the bill revises last year’s Labor Code section 218.7 (we wrote about this in a previous post) which made direct contractors liable for unpaid wages, fringe, or other benefit payments or contributions, including interest owed, but excluding penalties or liquidated damages, owed by a subcontractor of any tier to their workers for contracts entered into beginning January 1, 2018. The bill: (1) clarifies that direct contractors are only liable for unpaid wages, fringe, or other benefit payments or contributions, including interest owed, but strikes the original language that stated such liability “is in addition to any other existing rights and remedies”; and (2) provides that for contracts entered into on or after January 1, 2019, in order to withhold payments under Labor Code section 218.7, the direct contractor must specify in its subcontract the specific documents and information that a direct contractor will require the subcontractor to provide.

Design Professionals

SB 920 – Extends the law permitting design professionals to form registered limited liability partnerships and foreign limited liability partnerships so long as they maintain security of no less than $2 million arising out of the partnership’s professional practice from January 1, 2019 to January 1, 2026.