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A Recent Appellate Court Decision Significantly Impacts A Subcontractor's Means for Recovering California Prompt Payment Penalties
Posted by: William Last
December 28, 2009
Topic: Mechanics Liens, Stop Notices and Payment Bonds

A Recent Appellate Court Decision Significantly Impacts A Subcontractor's Means for Recovering California Prompt Payment Penalties

By

William C Last, Jr

And

Jonathan Bowne

Attorneys at Law

On December 4, 2009 the California Third District Court of Appeals published its decision in Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc. This decision will impact California's prompt payment penalty statutes becuase it allows a prime contractor to avoid prompt payment penalties by including language in its subcontract that conditions payment on the receipt of lien release and other requirements. This decision also appears to expand the ability of prime contractors to withhold retention funds without being subject to prompt payment penalties.

As most contractors are aware, California has enacted prompt payment statutes. The statutes are intended to penalize parties that fail to pay contractors within a determined period. The statutes, however, contain certain exceptions. Generally, the non-paying party can withhold up to 150% of any disputed payment.

While the prompt payment statutes may ultimately require you to institute legal action to recover the penalties, they are significant threats to non-paying parties. It is a good practice to recite the appropriate statute in any collections demand letter. The threat of a 2% penalty and attorney's fees may be sufficient to convince a non-paying party to pay the amount owed.

In this case Martin Brothers Construction ("Martin") was a subcontractor to Thompson Pacific Construction ("TPC") on a public works project. During the project Martin submitted to TPC several change requests seeking payment for disputed items. These change orders had not yet been resolved by the time Martin completed its work in March 2004. At that time Martin submitted a pay application for the change orders it was seeking and its retention. TPC and Martin agreed in their subcontracts "that payment is not due until Subcontractor has furnished all applicable administrative documentation required by the contract documents and the applicable releases pursuant to Civil Code section 3262." Martin apparently did not submit conditional lien releases for these funds along with the pay application. TPC did not pay either the change orders or retention at that time. In August 2004 the owner released retention to TPC, who continued to hold Martin's retention.

Thereafter the parties continued to negotiate the changes orders and a final payment amount. In December 2004 Martin filed a lawsuit against TPC and its bond surety. In March 2005 the parties reached an agreement whereby Martin was to submit lien and bond claim releases in exchange for an agreed amount which would constitute a final payment. Thereupon Martin submitted the conditional lien releases and received the agreed funds.

However, their dispute was not concluded at that juncture. Martin continued forward in the litigation and went to trial to seek prompt payment penalties on the basis that while payment of the progress payments and retention were eventually made (by way of the March 2005 payment), they were not timely made and the funds wrongfully withheld in violation of the prompt payment statutes.

The trial court ruled that Martin was not entitled to prompt payment penalties for the reasons discussed below, and Martin appealed. The appeals court agreed with the trial court and denied Martin prompt payment penalties. In doing so the court discussed the penalty claims relative to progress payments and retention separately. Each discussion yielded a noteworthy holding.

•1) Progress Payments: Subcontractor's may be "opting out" of the protections of prompt payment penalty statutes when they agree in subcontracts that progress payments are not due until conditional lien releases are submitted.

Martin sought penalties for the withholding of progress payments relative to its pay applications for the disputed change orders. Prompt payment penalties relative to progress payments are governed by Business and Professions Code §7108.5, which provides that a prime contractor shall pay subcontractors progress payments not later than 10 days after receipt of funds from the owner, "unless otherwise agreed in writing".

Importantly, the Court held that the language in the contract that stated "Subcontractor agrees that payment is not due until Subcontractor has furnished all applicable administrative documentation required by the contract documents and the applicable releases pursuant to Civil Code section 3262" was essentially an agreement that changed the timing for payment and thus the right to recover prompt payment penalties.

Unfortunately for Martin, it never bothered submitting conditional lien releases for the disputed amount until the March 2005 agreement for payment was reached many months after the change order disputes arose. TPC argued that no penalties should be imposed because no actual "withholding" of progress payments occurred. TPC asserted that the funds in question never actually became due until the conditional lien releases were tendered, which did not occur until the payment was made in March 2005.

In essence TPC was arguing by agreeing in the subcontract that payment was not due until conditional lien releases had been submitted Martin had "waived" its right to be paid within 10 days of TPC receiving progress payment funds as provide by Section 7108.5. TPC pointed out that Section 7108.5 appeared to allow such waiver by stating that the 10 day timeline was applicably "unless otherwise agreed in writing." TPC argued that it and Martin had effectively done so.

The Appellate Court in its decision stated: "Contrary to the argument of Martin Brothers, this language plainly reflects an intent of the parties to do more than simply follow the statutory guidelines for lien releases in Civil Code section 3262. The subcontractor language is a clear agreement to alter the timing of payments from Thompson Pacific to Martin Brothers. The language of the subcontracts that provides for monthly progress payments of "95% of labor and materials which have been placed in final position and for which the right to payment has been properly documented pursuant to the terms of this agreement" is consistent with this expressed intent to alter the timing of progress payments. The trial court correctly interpreted the language as a waiver of the payment requirements of section 7108.5."

•2) Retention: A prime contractor may withhold retention from a subcontractor in the event of any bona fide dispute, even if the dispute is unrelated to retention funds.

In addition to seeking prompt payment penalties for the withholding of progress payments, Martin sought penalties for the withholding of retention funds. Public Contract Code §7107 governs prompt payment penalties relative to retention funds on public projects. It provides that a prime contractor must pay a subcontractor retention funds within seven (7) days of receiving the same from the public entity. But, subsection (e) allows a prime contractor to withhold from retention funds up to 150% of a disputed amount in the event of a bona fide dispute. In this case TPC withheld from Martin progress payment and retention funds after the change order disputes arose.

Martin argued that it should be entitled to prompt payment penalties pursuant to Section 7107 because TPC withheld retention funds because of disputes over change orders, which it argued was unrelated to retention. Martin's argument was consistent with the customary usage of retention, which is to ensure the satisfactory completion of work. Martin was arguing that so long as its work was completed satisfactorily (as apparently it was here) that retention should be released, regardless of whether or not there were still disputes about the compensability of change orders. To wit, Martin asserted that the withholding provision in subsection (e) should only apply to disputes regarding retention funds, such as disputes over punch lists, completion of work issues, or workmanship problems. In turn, Martin asserted that a prime contractor should not be able to withhold retention when the dispute arises from only non-retention related issues, such as change orders (as was the case here).

The appeals court disagreed. It noted that while the Section 7107 itself concerned retention funds, it expressed no limit regarding the nature of a dispute which could be used justify a retention funds withholding pursuant to subsection (e). The court noted that a contrary rule would be too difficult to apply because construction disputes are often difficult to characterize. As such, the court held that a prime contractor could withhold from a subcontractor 150% of disputed amount from retention funds in the event of a dispute of any nature, regardless of whether or not the dispute was related to the retention itself.

Conclusion

The Martin decision is a significant development in the law of prompt payment penalties, although its impact is not yet certain. One thing does seem clear though: Martin decision weakens subcontractor's hands relative to prompt payment. Prime contractors (or owners) may now seek to include expanded prompt payment "opt out" provisions in their subcontracts and use these provisions to justify payment withholdings from contractors who are not diligent in submitting lien releases and/or other conditions to payment. Likewise, prime contractors may expand the practice of withholding retention funds as a matter of course whenever any disputes remain after the project has completed.

Copyright 2009, William C. Last, Jr. wrote this article. Mr. Last is an attorney who has been specializing in Construction Law for over 30 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California AA@ and AB@ license. He can be contacted at 415-764-1990 or 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.

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California Appellate Court Holds That Contractor Must Return All Payments When Qualifier is Not Acting as a Manager
Posted by: William Last
August 11, 2009
Topic: California Contractor License Law

Both California statutes and appellate courts have clearly set forth that if your contractor license is not in effect at the time you perform work you are not going to recover amounts that are due from the owner. In recent decisions, the California appellate courts have been expanding the definition of when a contractor's license is not in effect.

In a case which should be a caution to many contractors, the Fifth District Court of Appeal recently held that where the Responsible Managing Officer was no longer actively managing the business, the contractor's license was automatically suspended and the contractor was required to repay all money collected on a contract without deduction for the value of labor or materials.

The Case

The facts of the case, White v. Cridlebaugh 2009 WL 2245823, 09 Cal. Daily Op. Serv. 9586 (5th Dist. 2009) http://www.courtinfo.ca.gov/opinions/documents/F053843.PDF involved a time and materials contract between the plaintiffs and JC Master Builders, Inc. to build a new house in Kern County. The contract was entered into in March of 2006. Within a few months, the relationship soured both over White's concerns about the quality of the work and the contractor's failure to document its costs. White terminated the contract and JC Master Builders recorded a mechanic's lien against the property. The Whites reacted by suing JC Master Builders, its officers, and its license bond surety for breach of contract, breach of warranty, negligence, strict liability, fraud, and license violations. JC Master Builders filed suit for breach of contract, for the reasonable value of goods and services, and to foreclose its lien. The two suits were consolidated and went to trial before a jury.

Contractors State License Board records showed the responsible managing officer ("RMO") for the contractor as Robert Paul Diani. At trial, however, Mr. Diani testified that in 2004 he had turned over all dealings and daily work of the business to Terry E. Harper Cridlebaugh. Since that time Mr. Diani had been living in Peru. Diani also testified that he had given all the stock to Cridlebaugh. Cridlebaugh had never held a contractor's license.

The trial court granted the Whites' motion for a directed verdict under Business and Professions Code section 7031. Section 7031 provides that an unlicensed contractor is barred from recovering any payment for contracting work and further requires the unlicensed contractor can be sued for a refund all payments it does receive for such work.

The court's ruling terminated all the contractor's claims and ordered the contractor to repay all money collected from the Whites. The jury returned verdicts for the contractor on all the remaining claims against it. After trial, however, the court partially granted the contractor's motion for judgment notwithstanding the verdict. This order vacated the award of money to the Whites. The Whites appealed.

The court of appeals reversed and reinstated the award to the Whites. The court noted that under Business & Professions Code section 7068, a corporation must qualify for a contractor's license through a "responsible managing officer" (RMO) or "responsible managing employee" (RME) who is him/herself eligible for the same class of license. The court went on to note that under section 7068.2, if the qualifier leaves the corporation, the corporation has 90 days to replace the qualifier; otherwise, the license is automatically suspended. The court found that Diani had not been actively engaged in the business since August of 2004 and that no replacement had been qualified in his place.

Because JC Master Builders' license was automatically suspended, the court ruled that it was not only barred from suing to recover for its work, but that under section 7031, it must repay "all compensation paid to the unlicensed contractor..."

Discussion

Before 2001, section 7031(a) prevented contractors from suing to recover for their services without proving that they had been duly licensed at all times of performing the contract, but the courts would still allow them to raise the reasonable value of services as an offset against suits against them. In 2001, however, the Legislature added subdivision (b) to section 7031. Subdivision (b) provides that anyone who uses an unlicensed contract can recover all compensation already paid to the unlicensed contractor. An Assembly committee report on the bill explained that under the existing statute, unlicensed contractors could avoid the effect of the law by collecting money before performing their work. The report noted that the new provision would prevent this by allowing consumers to recover payments.

The stated reason for the amendment was to place the owner who had paid in the same legal position as the owner who had not.

In 2005 the California Supreme Court held that the statute would be enforced according to its terms and that a subcontractor who began performance before receiving its license was barred from recovery even for work performed after it was licensed. (MW Erectors, Inc. v. Niederhauser Ornamental and Metal Works Co., Inc. (2005) 30 Cal.Rptr.3d 755, 36 Cal.4th 412, 115 P.3d 41).

In Goldstein v. Barak Construction (2008) 164 Cal.App.4th 845, 79 Cal.Rptr.3d 603, the Court of Appeal extended this rule to subdivision (b) by holding that owners suing a contractor who had obtained a license after beginning work, could recover not only payments made before the contractor was licensed, but those paid after the contractor had been licensed despite the fact that the "at all times" provision is only contained in the provision relating to the contractor's ability to recover.

Business and Professions Code section 7068.2 provides that a licensee must replace an RMO or RME within 90 days after the RMO or RME "disassociates" from the licensee. Replacement requires filing a form designating a new qualifier. If the form is not filed, the license is automatically suspended 90 days after disassociation whether or not the CSLB has received notice. Failure to give notice, however, can result in disciplinary action against both the licensee and the qualifier. Moreover, the qualifier remains responsible for violations of the licensee.

A qualifying individual is responsible for exercising "direct supervision and control" of the licensee's construction operations as needed to assure compliance with the license law. (Bus. & Prof. Code § 7068.1). In White it was obvious that Mr. Diani's prolonged absence from the country resulted in disassociation and triggered the need for a new RMO or RME.

Conclusion

All too often contractors believe the licensing regulations are "technical" matters with little effect on their day-to-day business. This is apparent in the White case in which Mr. Diani basically abandoned the business to Mr. Cridlebaugh without informing the CSLB in order that Mr. Cridlebaugh could make a living from it.

It is fairly common for a licensed person to "loan" the license by using it to qualify a partnership or corporation as an RMO or RME without actually intending to supervise its activities. The courts, however, view the licensing laws to be consumer protection statutes and will allow owners to look beyond the bare fact that a license was issued to examine whether it was properly issued and maintained. It is a violation of the license laws to "loan" a license and such a license has no effect. (Buzgheia v. Leasco Sierra Grove (1997) 60 Cal. App. 4th 374, 386, 70 Cal. Rptr. 2d 427, reh'g denied; Rushing v. Powell (1976) 61 Cal. App. 3d 597, 605-606, 130 Cal. Rptr. 110 (5th Dist. 1976).

This issue may also arise in partnerships and "family" businesses where the qualifying individual becomes sick, incapacitated, or enters into a semi-retirement. Even if not fully "disassociated" from the business, once the qualifier is no longer supervising the work, a court is likely to conclude that the license has been suspended.

The White case demonstrates that the courts will interpret the technical requirements of the licensing laws strictly and will readily impose harsh results on contractors who fail to adhere to them regardless of the equities between the parties. On that point it is notable that the jury found that JC Master Builders, though negligent, had caused no damage to the Whites and that, in fact, the Whites had breached their contract with the company. Nevertheless, the Court of Appeal determined that section 7031 applied and that the company would have to refund them everything they paid. Contractors should be prepared to show that their qualifying personnel are properly licensed and actively engaged in supervising operations in case their bona fide status is questioned in litigation.

©2009 Frederick Northrop and William C. Last, Jr. wrote this article. Mr. Last is an attorney who has been specializing in Construction Law for over 30 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California "A" and "B" license. He can be contacted at 415-764-1990 or 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). Mr. Northrop is an attorney at Last & Faoro who specializes in construction law. This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.

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An Overview of the Additional Legal Exposure For Green Building Projects
Posted by: William Last
July 21, 2009
Topic: Green Building

An Overview of the Additional Legal Exposure

That a Contractor May Encounter in Constructing a Green Building

By

William C. Last, Jr.

Attorney at Law

 

In recent years there has been an increasing governmental and public focus on the use of "green building" in the construction industry.

Green buildings can be designed to include any of the following goals: (1) achieving a LEED certification; (2) setting energy performance consumption levels; (3) use of recycled materials; (4) self-generation of energy; (5) water use reduction; (6) indoor environmental quality including air quality; and (7) operation and manufacturing green standards. Some green buildings may be designed to simply incorporate sustainable goods and recycled building materials into the project. While other buildings are designed to obtain both sustainable goals as well as cost saving goals such as a reductionin usage of energy and other natural resources. These high performance buildings are intended to obtain measureable improved energy savings.

Disputes concerning the outcome of a green building project can result when the project owner has an expectation of how the building will perform which is different than that of the design team or the contractor. They can also result when the materials and products incorporated into the project do not perform as expected.

The remainder of this article will provide an overview of the green building concept and unique legal issues that impact a green building project.

What are benefits of green building?

Aside from the environmental benefits there are financial benefits to the owner of a green building. Typically, the costs of designing, engineering, commissioning and certifying a green building are greater than a traditional building. However, those up front costs are expected to be more than offset by an energy cost savings over the life of the building. Furthermore, there are a number of financial incentives in the form of tax credits, exemptions and grants which are available to green buildings. These include municipal grants, project permit fast tracking, solar tax credits, utility incentives and rebates. Furthermore, green buildings can provide further benefits to the owner and developers in terms of utility rate savings and public relations benefits. Due to the aforementioned incentives it is important that the "as-built" green building performs in the manner that was intended by the designer.

How is a green building certified?

Before discussing the certification process it must be noted that a building does not have to be certified in order to be a green building. Any building that is sustainable and has a beneficial or mitigated affect on the environment can be determined to be a green building.

Since there are very few if any governmentally adopted building codes for green buildings the standards and certifications are being set by non-profit organizations. The primary organizations are U.S. Green Building Council (USGBC) which created the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System. The LEED program established a certification program for green buildings.

The LEED rating system allots a certain number of points in the design process and is primary concerned with environmental and human health. LEED projects are certified on four levels. The level is based on the total points that are accumulated. The levels are: (1) Basic; (2) Sliver; (3) Gold; and (4) Platinum. In order to apply for certification a LEED project must have at least one designated LEED accredited professional involved in the project. For a professional to obtain LEED accreditation that person must apply for accreditation and pass an examination administered by USGBC.

There are other rating programs that are being used in the United States. The Building Research Establishment Environmental Assessment Method (BREEAM) Has created another rating system that is referred to as the Green Globes Rating System. Their system is web-based and is primarily used in Canada and the United Kingdom. The Green Building Initiative (GBI) is a nonprofit organization to help home builders promote the National Association of Home Builders established the Model Green Home l Guidelines GBI as licensed the use of Green Globe system for use in the United States. Other organizations that have green building programs include, but are not limited to, International Organization for Standardization (ISO 14000), Energy Star and California Green Builder.

.

Are there specific regulations that apply to green builders?

Yes. There are regulations on the federal, state and local levels. On the federal level there is Executive Order No. 13423, as well as performance standards that have been established by the Department of Energy. Executive Order No. 13423 requires: (1) new construction and major renovation to comply with Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings; and (2) by 2015, 15% of the existing federal buildings must incorporate sustainable practices. The DOE's standards can be found a 10 CFR §§ 433.1-435.306.

California's energy regulations are found in the following locations: (1) Assembly Bill 4420 (1988); (2) Executive Order No. S-20-04 "The Green Building Initiative" which concerns energy reduction in State buildings and sets certain LEED standards for design and construction of new buildings; (3) California Energy code (Title 24 at 24 Cal Regs Part 6) which has standards for the building envelope and mechanical systems; (4) the California Green Building Standards Code (24 Cal Code Regs Part 11) which seeks to reduce greenhouse gas emissions; (5) Global Warming Solutions Act of 2006 which requires the California Air Resources Board (CARB) to regulating air quality and set greenhouse emission standards to 1990 levels by the year 2020 has resulted in CARB starting to set energy efficient standards for green buildings; and (6) new supplements, addendums and practices that are designed to work with USGBC LEED Standards for certification. In addition to California statewide statutes and regulations that apply to green buildings a number of lesser public entities have adopted regulations and ordinances that apply to green buildings, as well as promote green building projects. The California Department of Justice has a directory of Local Government Green Building Ordinances in California that can be found at http://www.ag.ca.gov/globalwarming/pdf/green_building.pdf.

What additional liability exists in constructing a green building?

•a. Exposure associated with the project delivery method.

The primary exposure that a contractor can have in building a green building flows from the project delivery method. There are three primary methods: (1) the owner retains a designer who prepares a complete set of plans and descriptive/method specifications upon which the contractors bids and builds the project (design-bid-build); (2) the owners design team prepares a general set of plans and project performance specifications and/or end result specifications from which the contractor bids and then takes on the responsibility for designing a building that meets the performance criteria or alternatively the contractor takes on all the design and construction obligations (design-build) and; (3) a construction manager is retained (either at risk or not at risk) to build the project. When the contractor takes on some or all the design responsibility for a green building its risk substantially increases.

When a contractor is provided with a complete set of plans and descriptive/method specifications that set forth the full scope of the work the primary source of dispute will concern whether or not the plans and specifications were complete and accurate. Generally, if the contractor builds in accordance with the plans and specifications and the system doesn't work as designed the contractor has little if any liability. However, many contacts contain clauses intended to make the contractor responsible for a poorly designed project (e.g. requiring review of plans and specifications, requiring compliance with all applicable building codes and advances). A contractor whose intention it is to simply follow the descriptive/method specifications should review the contract to ensure that it does not include clauses that shift some of the design, outcome (e.g. certification) and/or performance risk to the contractor.

When a project is "design-build" the contractor takes on the liability for ensuring that the completed project performs in accordance with the performance specifications. If the performance specifications include a requirement that the completed building is to achieve LEED certification, than the contractor's liability is increased.

•b. Exposure associated with the certification process.

In addition to liability that may flow from project delivery system, a contractor can also be liable if it fails to comply with green building practices. For example LEED certification awards points for green construction practices. Those practices that may be added to a contractors responsibilities includes: (1) managing construction waste; (2) meeting storm water prevention requirements; (3) selection and use of green building materials (e.g. recycled materials); (4) use of materials with low level volatile organic compounds; and (5) providing the owner with documentation necessary to get LEED certification.

Since documentation of the project is critical to obtaining certification, delays in obtaining those documents or not being able to obtain them can result in LEED certification being lower than planned.

•c. Exposure associated with using new products and materials.

Since many green buildings include the use of new and innovative products and materials, there is typically additional uncertainty about whether the products will fail to perform as advertised or be incompatible with other materials used in the project. This uncertainty results in an increased risk of liability for product or material failures. Over the years there have been numerous construction defect cases that are attributable to new materials that failed to perform as marketed by the manufacturer. Plaintiffs in such cases typically assert that any person in the chain of distribution from the manufacturer to the contractor.

•d. Exposure associated with misrepresentation of the outcome.

Designers and contractors must be careful not to oversell the benefits of the green aspects of the project. If there are affirmative misrepresentations as to the outcome of the project a party whose expectations are not satisfied may proceed with a fraud and/or negligent misrepresentation claim or a claim under various consumer protection statutes. A party's expectation could concern such issues as the energy savings that may result from building a green building, the health benefits of such a building, or other sustainability claims. It is also conceivable that prior to the completion of the building the owner has entered into a lease with a tenant that is based on energy savings. If the building doesn't meet the representations the tenant could possibly sue the owner. The liability from the lessor of a green building all the way down to claims made by a subcontractor to the general contractor.

•e. The damages that can be awarded can be greater for a green building.

The damages an owner may recover from a contractor for a failed green building project may be greater than those awarded in a traditional project. Primarily the potential consequential damages (e.g. cost of reconstruction process, loss of tax credits, loss of goodwill, added energy costs, and diminution in value since non-compliant) will be greater.

For the foregoing reasons the contractor must review its prime contract and subcontracts to determine if the risks associated with a green building project are limited and, if not, a least clearly set forth.

What additional legal exposure does an architect/engineer have in a green building project?

An architect's exposure flows from whether or not the architect/engineer has committed to a specific performance standard. If the architect/engineer commits to designing a project to obtain a specific LEED certification he/she will likely have exposure if the project fails to meet that outcome. As such, architects and engineers should be wary of contractual or implied guarantees that the project will achieve a specific certification. If the architect/engineer fails to meet its contractual obligations it can be sued by both the owner and the contractor (the contractor will assert it is the third party beneficiary of the architect/engineers contract with the owner). Additionally, a design professional holding himself out as qualified to perform this work may be held to a higher standard of knowledge and skill.

What are some Do's and Do Nots for a green building project?

•(1) Do not increase the owner's expectations relative to the outcome of the project.

•(2) Do modify your standard prime contract so that it anticipates the legal and economic risks associated with a green building project, and do include flow down clauses in your subcontracts.

•(3) Do anticipate and include all the additional administrative expenses and other expenses associated with obtaining certification in your bid and contract.

•(4) Do choose and review selected products and materials to determine if they will perform as marketed by the manufacturer.

•(5) Do not make excessive representations about your experience and/or the outcome of the project.

•(6) Do ensure that you understand all the applicable building codes and regulations that impact a green building project.

•(7) Do ensure that you have on staff or access to personnel who understand green building practices and the pitfalls associated with such projects.

•(8) Do not rely on assumptions based on experience with standard products. Read and follow all manufacturer-supplied instructions for installation and obtain written approval of any deviations from them.

•(9) Do seek to limit your warranty liability, especially on new products to the same level afforded by the manufacturer.

•(10)Do review the risks associated with green buildings with your insurance broker to determine if you should add any endorsements or coverage to your liability insurance coverage.

Conclusion

 

Green building practices will become widespread in coming years. The law is evolving relative to green building requirements and the exposure for failing to build a compliant building. Before entering into a contract to provide design services and/or construction services for a green building it is important to contractually set forth what risks are being accepted. The use of standard or unmodified contracts should be avoided when a green building as the end result.

 

©2009 William C. Last, Jr. wrote this article. Mr. Last is an attorney who has been specializing in Construction Law for over 29 years. In addition to belonging to a number of construction trade associations, Mr. Last holds a California "A" and "B" license. He can be contacted at 415-764-1990 or 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.

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California Appellate Court Holds That A General Contractor is Responsible for Paying Its Unlicensed Subcontractors Employees Wages
Posted by: William Last
July 08, 2009
Topic: Subcontract Liablity

In a case entitled Sanders Construction Co. Inc. v. Cerda (June 2009), a California Appellate Court held that the employees of an unlicensed subcontractor are "statutory employees" of the general contractor. As a result, the general contractor wasliable for the unpaid wages that were due to the unlicensed subcontractors employees.

In this case Sanders Construction Co., Inc. (Sanders) entered into a subcontract with Humberto Figueroa Drywall Company (Humberto). During the course of construction Sanders learned that Drywall was not a licensed contractor. After learning that Drywall was not licensed Sanders allowed Drywall to complete its subcontract scope of work. Martin Cerda was an employee of Drywall who was not paid his wages. Cerda and five other employees of Humberto filed claims against Sanders with the state Labor Commissioner, seeking wages, interest, and waiting-time penalties.

The hearing officer found that Humberto had told the claimants they would be paid by Sanders while Sanders considered Humberto, who was being paid for labor and materials, responsible for paying the claimants. The hearing officer ruled that under section 2750.5 of the Labor Code, Humberto and the six employees were deemed to be employees of Sanders. The Labor Commissioner awarded the employees their wages and interest but denied waiting time penalties. The Labor Commission denied Humberto's claim on the grounds that he was acting as an independent contractor and was barred from recovery by Business and Professions Code section 7031.

Sanders filed appeals in the superior court, challenging the six awards by the Labor Commissioner for wages and interest. The superior court found in favor of the employees adopting the reasoning of the Labor Commissioner. The superior court awarded respondents their wages, interest, and waiting-time penalties. Sanders then appealed to the appellate division of the Superior Court which modified the judgment to eliminate the waiting time penalties. The case was then reviewed by the Court of Appeals.

The Court of Appeals Sanders primarily reviewed one appellate court decision and three statutes. The primary statute is Labor Code section 2750.5 which provides in applicable part:

"There is a rebuttable presumption affecting the burden of proof that a worker performing services for which a [contractors'] license is required ... or who is performing such services for a person who is required to obtain such a license is an employee rather than an independent contractor...

"... any person performing any function or activity for which a [contractors'] license is required ... shall hold a valid contractors' license as a condition of having independent contractor status.

"For purposes of workers' compensation law, this presumption is a supplement to the existing statutory definitions of employee and independent contractor, and is not intended to lessen the coverage of employees under Division 4 and Division 5 [concerning workers' compensation (§ 3200 et seq.) and safety in employment (§ 6300 et seq.) ]."

The other applicable statutes concern the contractor licensure. The first statute is Business and Professions Code section 7031, subdivision (a), prohibits legal action by an unlicensed contractor:

"(a) ... no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract, regardless of the merits of the cause of action brought by the person, ..."

The second statute is Business and Professions Code section 7053 which limits the application of section 7031: "... this chapter does not apply to any person who engages in the activities herein regulated as an employee who receives wages as his or her sole compensation, does not customarily engage in an independently established business, and does not have the right to control or discretion as to the manner of performance so as to determine the final results of the work performed."

Sanders asserted that Labor Code section 2750.5 only applied to workers' compensation and unemployment benefit cases. The Sanders court held, however, that it also applied to unpaid wages. The court noted that one of the aims of the statute was to discourage off-the-books arrangements. The Sanders court relied on an earlier appellate court decision (Hunt Building Corp. v. Bernick (2000) 79 Cal.App.4th 213, 220, 93 Cal.Rptr.2d 883) which held that "pursuant to the plain language of Labor Code section 2750.5, an unlicensed subcontractor may not be an independent contractor but is instead deemed a statutory employee of the general contractor. (State Compensation Ins. Fund v. Workers' Comp. Appeals Bd. (1985) 40 Cal.3d 5, 15, 219 Cal.Rptr. 13, 706 P.2d 1146.)"

Conclusion

This case makes a general contractor responsible for the wages of his unlicensed subcontractors. Earlier cases imposed liability for workers' compensation coverage and unemployment insurance for such employees on the general contractor.

Clearly, a general contractor must review the license status of every prospective subcontractor and of their subcontractors. Subcontracts should include the subcontractor's license number. If a subcontractor's license is terminated or suspended, the subcontractor and its employees must be immediately barred from the job.

Doing so is particularly important if the general or upper-tier contractor does not carry workers compensation insurance. Recent California appellate and Supreme Court cases have rendered decisions that make it clear that the current public policy is that unlicensed contractors will not be compensated for their work. Under Business and Professions Code section 7125.2 a contractor's license is automatically suspended if he is required to but does not have workers' compensation insurance. Wright v. Isaak (2007) 149 Cal.App.4th 1116, 58 Cal.Rptr.3d 1. Arguably at least, this statute can be triggered by having an unlicensed subcontractor.

While the Labor Commission rejected Humberto's claim for wages as a statutory employee, that rejection was based on a finding that he had held himself out as a licensed contractor. If he had never made that representation, he might well have recovered wages. In State Compensation Insurance Fund v. Workers Compensation Appeals Board (1985) 40 Cal.3d, 219 Cal.Rptr 13, the California Supreme Court held that an unlicensed subcontractor was deemed an employee and entitled to workers' compensation coverage from the person who engaged him at least so long as the subcontractor had not represented that he was licensed.

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A 2009 Update On New California Laws That May Impact the Construction Industry
Posted by: William Last
July 07, 2009
Topic: New California Construction Related Laws That Become Effective During 2009

A 2009 UPDATE

ON NEW CALIFORNIA LAWS

THAT MAY IMPACT THE CONSTRUCTION INDUSTRY

By

William C Last Jr

Attorney at Law

 

Last year the California legislature passed and the governor approved new legislation that will impact the construction industry. Last year, the appellate courts also rendered a number of decisions that impact the construction industry. The remainder of this article sets forth construction industry related new laws and cases.

Chaptered Bills

Chaptered bills are bills that have passed through the Legislature and the Governor and are now laws. The text in this section comes straight from the California Legislative Counsel's Digest analysis of the new laws.

SB 28 (Simitian) Motor vehicles: electronic wireless communications device

This law prohibits a person from driving a motor vehicle while using an electronic wireless communications device to write, send, or read a text-based communication, except as specified. The law will also provide that a violation point is not given for a violation of these provisions and would impose a base fine of $20 for a first offense and $50 for each subsequent offense. By creating a new infraction, the law will impose a state-mandated local program.

SB 509 (Simitian) Hazardous materials: toxic substances.

Existing law establishes the Department of Toxic Substances Control, in the California Environmental Protection Agency, with powers and duties regarding, among other things, hazardous waste disposal, underground storage of hazardous substances and waste, and the handling and release of hazardous materials.

This new law requires the department to establish a Toxics Information Clearinghouse for the collection, maintenance, and distribution of specific chemical hazard traits and environmental and toxicological end-point data.

The Office of Environmental Health Hazard Assessment will be required, by January 1, 2011, to evaluate and specify the hazard traits and environmental and toxicological end-points and any other relevant data that are to be included in the clearinghouse.

SB 593 (Margett) Department of Transportation: retention proceeds

This law prohibits the Department of Transportation from withholding retention proceeds when making progress payments for work performed by a contractor.

SB 797 (Ridley-Thomas) Professions and Vocations

This law authorizes a Board to suspend or revoke a license as a result of various things, including the licensees conviction of a crime that is substantially related to the qualifications, functions, or duties of the Business and Professions Code for which the license was issued. One of the things done by this new law is to specify that the new authorization to suspend or revoke a license is in addition to any other action that a Board is permitted to take. With respect to the Contractors' License Law, it applies specified penalty provisions to any person named on a revoked license and held responsible for the act or omission resulting in the revocation.

SB 963 (Ridley-Thomas) Department of Consumer Affairs: regulatory boards

The present law would have sunseted various Boards and Bureaus including the Contractors' State License Board, which would have become inoperative on July 1, 2009, and repealed on January 1, 2010.

The new law changes that to becoming inoperative and repealed on January 1, 2011.

SB 1145 (Machado) State Compensation Insurance Fund

This law subjects the State Compensation Insurance Fund (SCIF) to transparency and open meeting laws. It took effect immediately upon signing by the Governor.

SB 1185 (Lowenthal) Land use: subdivision maps

This law extends the expiring of the subdivision maps giving homebuilders more time to complete existing projects.

SB 1334 (Calderon) Drinking water: pipes and fittings: lead content

The present law, with certain exceptions, prohibits the use of any pipe, or plumbing fitting or fixture, etc., that is not lead free. As of January 1, 2010, the law is revised that with certain exceptions, apply to any pipe or plumbing fitting or fixture intended to convey or dispense water for human consumption. This new law also requires that the plumbing material be certified for compliance with these provisions by an independent third party.

SB 1352 (Wyland) Public works: prevailing wage rates: wage and penalty assessments

This law deals with the hearing officers as specified in public works projects. It allows an Administrative Law Judge to hold the hearings but does not require that the Administrative Law Judge hold a hearing after January 1, 2009. This is a law that would require the Superintendent of Public Instruction to examine and evaluate the ability of school districts to build complete schools as approved by the state Department of Education with the funds provided by the state allocation board and equal amount contributed by the school district. SB 1362 (Margett) Electrician Certification

This law authorizes the Contractors' State License Board to charge a fee not to exceed $20.00 to be used by the Board to enforce provisions of the Labor Code related to electrician certification. This is in addition to any other fees to the C-10 and C-7 contractors.

SB 1432 (Margett) Contractors

This law requires that the contractor's bond and the qualifying individual's bond be for the benefit of a property owner contracting for the construction of a single-family dwelling who is damaged as a result of a violation of the Contractors' License Law; if the dwelling is not intended or offered for sale at the time the damages were incurred. The law also will include some information dealing with filing suit.

The law would also increase the jurisdiction of the small claims court for any action brought by a natural person against a defending guarantor that charges a fee for its guarantee or surety services from $4,000.00 to $6,500.00.

SB 1473 (Calderon) Building Standards

This law requires the California Building Standards Commission to adopt, approve, codify, update, and publish Green Building Standards for any occupancy for which no state agency has the authority or expertise to propose those standards.

The law also authorizes the Commission and the Department of Housing and Community Development to use, as the basis for the California Building Standards Code, certain model codes adopted by the Commission as the basis for the 2007 Tri-Annual Edition of the California Building Standards Code.

SB 1556 (Ducheny) School construction

The law authorizes the state Allocation Board to permit an elementary school district that meets specific qualifications to calculate its eligibility for new construction funding based on a provision that was otherwise only applicable to high school attendance areas.

SB 1608 (Corbett) Disabled persons: equal access rights: civil actions.

It is stated that this comprehensive reform increases public access for individuals with disabilities while reducing unwarranted litigation, including by encouraging the use of state-certified disability access specialists, and establishing court procedures for early judicial review of lawsuit claims.

SB 1613 (Margett) Department of Transportation: contracts

This law provides that exempt contracts up to and including $25,000 for the leasing or renting of operated heavy highway equipment for state highway maintenance purposes are not subject to certain alternative bidding procedures.

AB 387 (Duvall) Design-build: transit contracts.

This law provides that there would be no cost threshold for the acquisition and the installation of technology or surveillance equipment, which would enhance safety, disaster preparedness, and homeland security efforts.

AB 550 (Ma) Property taxation: business property: audit

This law requires the county assessor to annually conduct a significant number of audits as specified in the law, to encourage accurate and proper reporting. The law also requires 50% of the required audits to be performed on those taxpayers that have the largest assessments of locally assessable trade fixtures and business tangible personal property in the county.

AB 642 (Wolk) Design-build: counties, cities, and special districts

This law authorizes any city approved by the appropriate city counsel, to enter into design-build contracts in accordance with specified provisions. It also extends the provisions until January 1, 2016.

AB 840 (Emmerson) Real estate: licenses

This law authorizes the real estate commissioner to suspend, revoke, or deny the issuance of a license to a person who is convicted of a felony, or crime substantially related to the qualifications, functions, or duties of a real estate licensee.

AB 1062 (Ma) School facilities: uniform standards: solar design plans

This law requires the division of the state architect before January 1, 2010, to develop uniform criteria for pre-check approval process for solar design plans for school facilities that comply with the rules and regulations adopted by the department and the applicable requirements of the California Building Standards Code.

AB 2326 (Lieu) State Highway Routes 1 and 107: City of Torrance.

This law relinquishes certain portions of State Highway Routes 1 and 107, to the city of Torrance. There are specified conditions.

AB 2335 (Nakanishi) Building Permits

This new law merely repeals certain separate provisions and creates a single provision that combines and modifies existing forms, declarations, etc., dealing with permits.

AB 2376 (Price) Small and Emerging Contractors Technical Assistance Program

As you can tell by the heading, this law is for the benefit of the small and emerging contractors. The law authorizes the Department of Transportation, along with the Office of Small Business Advocate, to establish by June 1, 2009, a small and emerging contractor technical assistance program, which would provide for training and technical assistance, to small contractors.

AB 2648 (Bass) Career Technical Education

This law requires the Superintendent of Public Instruction to develop, in conjunction with the Office of the Secretary for Education, several types of colleges, the legislature, teachers, and many others, too numerous to mention, a report that explores the feasibility of expanding and establishing career multiple pathway programs in California.

AB 2738 (Jones) Indemnification: construction contracts

This law now gives subcontractors who enter into contracts after January 1, 2009 two options. Upon the tender of a claim, a subcontractor may now choose to defend the claim with their own counsel and direction or, alternatively, decide to allow the builder to hire a lawyer and agree to pay no more than a reasonable allocated share of the builder's or general contractor's defense fees and costs. The law requires the disclosure of the costs and coverage of wrap up insurance policies on residential and non-residential projects. Disclosing the costs of coverage details of a "wrap up" insurance policy in the bid documents allows responsible decisions to be made by project participants making these projects more predictable, competitive and, most importantly, cost effective.

AB 2922 (DeSaulnier) Air pollution; penalties; fuel containers

This law deals with air pollution and emissions of air pollutants from motor vehicles. The State Air Resources Board governs it. This law sets the maximum civil penalty for a violation of the law to be an amount not to exceed $500 per vehicle, portable fuel container, spout, engine, or other units subject to regulation under these provisions.

AB 3018 (Nunez) California Green Collar Jobs Act of 2008

This law enacts the California Green Collar Jobs Act of 2008, requiring the California Work Force Investment Board to establish the Green Collar Jobs Counsel that shall, with representatives from other agencies, develop a comprehensive array of programs to address the workforce needs that accompany California's growing green economy.

AB 3024 (Duvall) Payment bonds: public works

This law states that any original contractor who was awarded a public works contract by a state entity involving expenditure in excess of $25,000.00 to file a payment bond. Prior to this year, the lid was $5,000.00.

AB 3025 (Lieber) Solid waste: polystyrene loose fill packaging

This law prohibits a wholesaler or manufacturer, from selling or offering for sale, expanded polystyrene loose fill packaging in this state, unless it is comprised of a specified amount of post consumer recycled material. This law goes into effect January 1, 2012.

AB 3060 (Labor & Employment Committee) Contractors: license enforcement

This law restricts the use of the moneys in the Industrial Relations Construction Industry Enforcement Fund to the enforcement of the laws relating to prohibited employment by unlicensed contractors.

Some Bills That Were Vetoed

The following are some bills of interest that the Governor did not sign. These have not become law, but we thought it was of interest to know what is going on in the Legislature.

SB 191 (Padilla) Public works: State Public Works Enforcement Fund

This bill would have required specified state agencies or school districts that choose to use the Kindergarten-University Public Education Facilities Bond Act of 2006 or any subsequent education facilities bond act as a source of funds for a public works project to pay a fee levied by the Director of Industrial Relations to cover administrative expenses for the enforcement of prevailing wage and apprenticeship requirements on projects using those funds.

SB 840 (Kuehl) Single-payer health care coverage

This bill dealt with single-payer health care coverage. The bill would have established the California Health Care System to be administered by the newly created health care agency. There were many more things involved in the bill as well.

SB 1113 (Migden) Attorney's fees and costs

This bill would have authorized a court to award attorney's fees and costs, including expert witness fees, in accordance with this law to the prevailing party. However, the person who defends themselves would not be able to recover costs even if the case was found to be baseless.

SB 1583 (Corbett) Employment: independent contractors

This bill stated that anyone, who for money or other valuable consideration, advised an employer to treat an individual as an independent contractor to avoid employee status for the individual would be jointly and severely liable with the employer if the individual were not found to be an independent contractor.

SB 1661 (Kuehl) Unemployment compensation: family leave: good cause

This bill provided that an individual would be deemed to have left his or her most recent work with good cause if the individual's employment was terminated as a result of the individual's taking a leave to bond with a minor child and taking a qualifying leave under the family temporary disability insurance program.

SB 1691 (Lowenthal) Mechanic's Liens

This bill was about Mechanic's Liens. It would have replaced the terms "original contractor" and "materialman" with the terms "direct contractor" and "material supplier." It would have authorized submission of notices by means of electronic communication. It would have governed the form of security for bonds and enacted separate provisions governing private works of improvement and public works of improvement. It would have governed design professionals liens, Mechanic's Liens, notices of cessation, Payment Bonds, and retention payments.

The bill also set forth additional requirements to govern the form of security for bonds for large projects with a contract price greater than $1,000,000.00 up to $5,000.000.00, and also had separate provisions for private works of improvement and public works of improvement.

SB 1698 (Romero) Contractors: public works.

This bill stated that after January 1, 2011, a contractor would be prohibited from performing work as a contractor or subcontractor on a public work contracted for or by the state or state agency unless he or she had obtained a "public works certification" from the Contractors' State License Board. The qualifier would also have had to pass a public works certification examination in order to obtain the certification.

SB 1717 (Perata) Workers' compensation: permanent partial disability benefits.

This law eliminates provisions requiring an employer to pay an injured employee a decreased amount of permanent disability benefits if within 60 days of a disability becoming permanent and stationary, the employer offers the injured employee regular work, modified work, or alternative work within those specified periods of time regardless of whether the injured employee accepts or rejects the offer.

AB 507 (De La Torre) Rating organizations: Internet Websites.

This bill dealt with workers' compensation Insurance. The insurance commissioner would provide regulations after notice and hearing, to establish and maintain an Internet website for the purposes of assisting any person to determine whether an employer was insured for workers' compensation. The bill also required that the website be accessible for inquiries without charge.

AB 844 (Berryhill and Maze) Junk dealers and Recyclers

This bill required a junk dealer or recycler to report the information included in written records, to the Chief of Police or Sheriff. The bill would have authorized the Chief of Police or Sheriff to request weekly reports for no more than a two-month period except as specified, if there were any ongoing investigation of a junk dealer or recycler.

AB 865 (Davis) State agencies: live customer service agents

This bill was called the State Agency Live Customer Service Act. It would have required each state agency to answer an incoming call on its main public line with a live Customer Service Agent or automated telephone answering equipment with an automated prompt that allows a caller to select the option to speak with a live Customer Service Agent. There were some exceptions. What an idea!

AB 876 (Davis) Career Technical Education

This bill requested that the California State University, and the University of California take certain actions with respect to the recognition of career technical education coursework in connection with the admissions criteria of the respective universities.

AB 983 (Ma) Public contracts: plans and specifications

This bill would have required a local public entity, charter city, or charter county, before entering into a contract for a project, to provide full, complete, and accurate plans and specifications, and estimates of costs, giving direction as will enable any competent mechanic or other builder to carry them out. This would exempt any clearly identified design build projects or design build portions of those projects. The bill also stated that the local public entity, charter city, or charter county would not be required to provide bidders with plans and specifications for projects that are completed through an annual contract for repair, remodeling, or other repetitive work according to unit prices.

This bill also would have provided that these provisions not be construed to require a contractor to prove an affirmative or intentional misrepresentation or act of concealment on the part of the public entity, charter city, or charter county that provides the plans and specifications. However, the charter city or public entity could raise affirmative defenses.

AB 2002 (De Leon) Public works: payments

Existing law requires a contractor or subcontractor to submit, to the state or political subdivision on whose behalf a public work is being performed, a penalty of not more than $50 per day, as provided and determined by the Labor Commissioner, for violations of these prevailing wage provisions.

This bill would have increased the penalty to $100 for each calendar day, plus interest from the date of violation accruing at 10% per annum, as provided and determined by the Labor Commissioner. Existing law requires each contractor and subcontractor performing work on a public work to keep accurate payroll records regarding his or her employees that may be accessed by the public through the awarding body or state agencies and requires the contractor or subcontractor to produce certified copies of those records, as requested by the public, as provided, within 10 days subsequent to receipt of a written notice for those records. Existing law imposes, on the contractor or subcontractor, a penalty of $25 for each calendar day of noncompliance but provides that a contractor is not subject to a penalty assessment due to the failure of its subcontractor to comply with specified requirements.

The bill would have also increased the penalty to $50 for each calendar day, plus interest from the date of violation.

The bill would have also subjected a contractor to a penalty assessment, as specified, only when a contractor had knowledge, or should have had knowledge, of its subcontractor's noncompliance.

AB 2081 (Coto) Workers' Compensation

This would have prohibited an officer or director who is a sole shareholder holding less than 10% of the shares of the corporation from excluding himself or herself from workers' compensation coverage required to be provided to other employees of the corporation, and from being subject to the specified election requirement. It would have prohibited a workers' compensation claims adjuster from offering, delivering, receiving, accepting any rebate, refund, or commission for any referral of a claim for medical utilization services.

AB 2179 (Furutani) Air quality: diesel fuel

This bill would have required all vehicles owned or leased by an entity of the state on or after January 1, 2010, that require diesel fuel to operate to use renewable biomass-based diesel fuel if certain requirements are met.

AB 2279 (Leno) Medical marijuana: qualified patients and primary caregivers: employment discrimination

This bill would have declared it unlawful for an employer to discriminate against a person in hiring, termination, or any term or condition of employment or otherwise penalize a person, if the discrimination is based upon the person's status as a qualified patient or a positive drug test for marijuana other than as specified. It would have allowed a person who has suffered discrimination in violation of the bill to institute and prosecute a civil action for damages, etc.

AB 2369 (Fuentes) Apprenticeship Programs: prevailing wage enforcement

This bill would have stated that the awarding body of a city with a population of over 3,000,000, which used an approved compliance program, may upon mutual agreement with the chief of the division of apprenticeship standards and the awarding body, assist the Director in Enforcement of prevailing rate wage laws and other requirements.

The bill would have also allowed a contractor to appeal the result of a labor Compliance Program Enforcement Action related to apprenticeship in public works projects through a specified procedure.

AB 2412 (Eng) Unlicensed contractors

This bill would have made a first conviction of working without a contractor's license punishable by a fine not exceeding $5,000 or by imprisonment in a county jail for no more than six months, as specified, or both. The bill would have required that the fine for second convictions be the greater of 20% of the price of the contract, 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor, or $5,000. In addition, the bill would have required that a third or subsequent conviction be punishable by both a fine and imprisonment in a county jail, as specified, and requires that the fine be no less than $5,000 and no more than the greater of $10,000, 20% of the price of the contract, or 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor.

The bill would have also required the unlicensed contractor to make restitution to all persons who utilized the services of the unlicensed contractor and that this restitution include all payments made to, or at the direction of, the unlicensed contractor and not be offset or reduced by any act or performance. The bill would have also contained certain other requirements.

AB 2854 (Mendoza) California Small Business Advocate: Internet Web site

This bill would have required the California Small Business Advocate to establish a one-stop location on its Internet Web site for posting announcements of business-related programs and services offered by state entities and other specified information. It would have required the advocate to determine the programs, information, announcements, and services for posting and requires state agencies to cooperate with the advocate in administering the one-stop location on its Web site.

AB 2874 (Lieber) Civil Rights: damages

The California Fair Employment and Housing Act limits the total amount of actual damages that the California Fair Employment and Housing Commission may assess against a respondent for a violation of the California Civil Rights Act of 2005. The amount was limited to $150,000 per aggrieved person. This would have deleted the $150,000 limitation on actual damages that may be assessed by California Fair Employment and Housing Commission against respondents who violate the act.

AB 2918 (Lieber) Employment: usage of consumer credit reports

This bill would have prohibited the user of a consumer credit report, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job related, (2) required by law to be disclosed or obtained by the user of the report.

AB 3062 (Committee on Labor and Employment) Employment: termination: garnishment of wages.

This bill would have prohibited an employer from terminating an employee because garnishment of the employee's wages has been threatened or the employee's wages have been subjected to garnishment.

AB 3063 (Committee on Labor and Employment) Employment: criminal history

This bill would have prohibited an employer from asking an applicant for employment to disclose, or utilizing in an employment-related decision, information concerning a criminal conviction the record of which has been judicially ordered sealed, expunged, or statutorily eradicated, or information concerning a misdemeanor conviction for which probation has been successfully completed or otherwise discharged and the case has been judicially dismissed.

AB 1473 - Green Building Standards.

This new legislation, which amends the Health and Safety Code, confirms that the Building Standards Commission is responsible to develop and adopt green building standards for construction projects in California and collect fees to finance education and training activities of certain state agencies. On July 17, 2008, before AB 1473 was signed by the Governor and chaptered, the Building Standards Commission adopted the Green Building Standards Code which you can access http://www.documents.dgs.ca.gov/bsc/prpsd_stds/2007/2007_cgbsc_9-23-08.pdf. The green building standards are for the most part voluntary at this time. The CBSC anticipates adopting a comprehensive set of mandatory provisions by 2010.

Action: Review and implement those in effect; consult with local jurisdiction to determine any locally adopted standards in effect.

Conclusion

The foregoing list is not intended to be an all inclusive list of new construction laws, but rather sets forth the primary construction related new laws and cases. If you are interested in other new laws or want to review the full text of bills, resolutions, constitutional amendments they can be found on the internet at http: //www.assembly.ca.gov/acs/ acsframeset2text.htm. That website also has each bills status, history, votes, analyses, and/or veto messages.

With the exception of the Legislative Counsel Digest material, this article, ©2009, was written by William C. Last, Jr. Mr. Last is an attorney who has been specializing in Construction Law for over 30 years.. In addition to belonging to a number of construction trade associations, Mr. Last holds a California "A" and "B" license. He can be contacted at 415-764-1990 or 650-696-8350. A number of his past articles can be found on his website (lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.

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