Why are Disciplinary Bonds Needed?

A disciplinary bond is a permit surety bond. This is required when a disciplinary action has been taken against the contractor by the company or against the license itself.

California requires this bond if a contractor wants to work with a governmental agency. Some call this bond a punitive bond, but it just serves as extra protection for any and all entities who enter into a contract with you.

Contractors need to file for this type of bond if their license is revoked, which can only happen if you are accused of some violation of the Contractor’s License Law or the CSLB.

There are many types of violations that would qualify, such as the following:

• B&P Code 7170, which is the abandonment of a construction site without any legal reason
• B&P Code 7108, which is a diversion or the ill-intended application of funds or property acquired for prosecution or completion of a particular project or operation
• Not paying subcontractors within seven days about the receipt, unless there was another agreement reached beforehand
• B&P Code 7109.5 violates California’s Labor Code, section 6300 et sec. that results in death or injury
• Abetting an unlicensed person, in any way, with the intention of attempting to maneuver pass the License Law
• B&P Code 7114.1, which is falsifying a certificate of experience or creating the illusion experience when there is none

It should be noted that these are just a few of the possible violations that could be filed and may be valid against a contractor’s license.

The contractor is usually warned of a possible violation beforehand and will be informed of an official investigation being conducted by the CSLB.

It is best to talk to an expert at this point, but there is no reason to fight this, especially if there are merits to the violation. In fact, it is encouraged to press on, and just file for the disciplinary bond with the Registrar of Contractors.

Doing this as soon as possible should help make sure that minimal time is lost because most contractors do not have time to lose. It should be noted that filing for the disciplinary bond promptly also ensures that a contractor’s license is reinstated as quickly as possible.

The firm could have the licensed reissued as well, or he or she may be able to get a new license if it is necessary, but this first step is necessary. It is important to remember that there are times when other bonds are required in conjunction with the disciplinary bond, such as a payment and performance bond, but this does depend on the contractor’s situation.

Now, contractors who do have a case against these allegations or even the investigation may be able to appeal the citation. The contractor has 15 days after receiving the CSLB citation to file this appeal. This must be filed with the Registrar of Contractors. The citation may be revoked or modified during the hearing. Of course, there is a chance that the citation is deemed to be fair, and you will just have to accept this.

There is also a chance that you will miss the appeal window. This means that the citation becomes final. It also means that the contractor will only have 30 days to comply with the citation. Noncompliance results in an automatic suspension of the license. It is much better to have taken care of this before the 30 days are over if you are seeking a disciplinary bond.

Once a disciplinary bond is required by a contractors it becomes more difficult to qualify for a bid bond and performance bond as well.

It is important to point out that these types of bonds do come with some requirements.

The first requirement (mentioned earlier) is that the disciplinary bond must be filed in addition to other required bonds–if there are any. This does not mean that the required bonds can take the place of the disciplinary bond to keep the contractor’s license active. There are times when it is explicitly clear that combining this bond with others is prohibited, which must also be observed. This is on a case by case basis.

The reason it is wise to take note of the violation that was filed and take care of any citations as early as possible is that it can give you an idea of what to expect from the Registrar. This is important because the Registrar determined the cost of the bond based on the seriousness of the violation. The registrar may take how cooperative you were during this entire ordeal into consideration. Of course, the amount will never be less than $15,000, and it cannot be more than ten times the amount of the bond itself.

It is important that the bond remains current at all times. The bond must be on file with the Registrar of Contractors for some time, which is usually two years, though it could be more. Again, this does depend on your particular case or circumstance. It is up to you to make sure that this is always current by checking the date of the bond issued or by calling the Registrar to make sure everything is as it should be.

These regulations are separate from a roofing or swimming pool contractor bond.

Remember that your firm’s license will be looked at with scrutiny during the duration of the bond. The license has to be active and current so that the bond remains valid. There is no wiggle room when you are under a disciplinary bond, and you do not want to risk being revoked for any reason.

The disciplinary bond may sound like a punishment, but it is an opportunity. It gives you a chance to continue working even after you violated a particular regulation. Yes, it may sound like a lengthy and strenuous process to go through, but it is one that ends up helping you more than anything else.

Now, all you have to do is make sure that you get the bond at a reasonable price. Looking for contractor liability insurance as well? Contact us today for a free no-obligation Quote!