Every year, new laws are enacted that affect the California building industry, the contractors and companies working within this industry, and the consumers who hire them. These laws are meant to protect consumers, promote increased safety and ensure the ongoing maintenance of the natural environment, among many other things. Contractors working within the state of California must remain cognizant of these annual changes given that failure to comply may result in significant fines and penalties, damaged commercial images, and diminished goodwill, among many other things. Moreover, staying abreast of these developments gives both individual contractors and large, established businesses the best opportunity to mitigate the associated risks.
Following is everything you need to know about the California construction industry update for 2017.
Assembly Bill 1793 – Remedying Lapses In Licensure
The criteria that the California court systems use to determine whether or not contractors are complying with license laws has been modified by Assembly Bill 1793. As per this modification, consumers can effectively withhold payments from contractors and can even request reimbursement for prior payments made if the contractor fails to maintain proper licensing at all points of the project. This development is important for all those who have let licensing expire, have failed to secure the legally necessary insurance for maintaining valid licensing or have failed to secure professional licensing altogether. In addition to paying the legal fines for offering professionals services without following the due course, contractors now face the risk of losing any monies generated from all projects performed while no licensing existed. These penalties also apply to contractors who start their work with licenses but lose these before their work is finished. Contractors can mitigate potential damages in these events by taking timely and concerted steps to remedy the problem. This legislative update offers modified criteria for responding to individuals who have made compliance efforts by correcting lapses in licensing in good faith.
Senate Bill 1209 – Enhanced Disclosure For Complaints
Certain companies have been able to manage negative attacks against their reputations by simply obtaining new licensing. With Senate Bill 1209, however, this will no longer be the case. This bill is designed to provide enhanced disclosure of complaints specifically to those involving legal actions that have been taken against license holders. For instance, if a business has been sued for errors and omissions, shoddy workmanship, or other professional errors, records of these same complaints will become attached to any new licenses that this same business obtains. This change is designed to provide a far greater level of transparency to consumers by forcing businesses to be forthright about any litigation that they have faced before, irrespective of name changes or other efforts to revamp or renew their commercial reputations. For business owners within the construction industry, the best way to mitigate the risks associated with this update is by striving to provide superior levels of service while constantly maintaining a risk-specific, insurance profile that includes both general liability insurance, and professional liability insurance, in sufficient amounts.
AB 2486 – Consumers Can Search For Licensed Contractors
Rather than turning to Google, Yahoo, Bing or online classified sites for local contractors, consumers will soon be able to use the CLSB (Contractors State License Board) to find licensed professionals who are capable of meeting their needs. As per AB 2486, the CLSB will need to have a suitable platform in place for these purposes by the start of 2019. Consumers will be able to use this system to search according to contractor specialties, area codes, zip codes, and other relevant factors. This particular change is meant to make it easier for the average individual to find, screen and hire reputable professionals with proper licensing. Consumers are also able to look contractors to ensure they have a current bond in place.
Learn more about contractor bonding here
SB 661 – The Modification Of Excavation Procedures
Another major concern in both Northern and Southern California pertains to the location and cognizance of underground utility lines during the implementation of construction projects. Failure to follow proper protocol when digging can result in serious property and community damages, and death. SB 661 acknowledges the need for increased safety in this area by altering the current requirements for excavation projects. For instance, contractors are now required to delineate all areas that they intend to excavate ahead of notifying the related centers for regional notification. Changes enacted under SB 661 also include safety measures such as establishing the California Underground Facilities Safe Evacuation Advisory Board (CUFSEAB). CUFSEAB will operate as a division of the Office of the State Fire Marshall.
AB 2286 – New Fee Increase For The CSLB
The CSLB has not implemented any fee increases since 2011. According to updates made as part of AB 2286, however, the CSLB has received authorization to increase a number of the fees that it charges. This 10 percent increase will only be the second fee increase for the CSLB since 1993. As of July 1st of 2017, several of these price increases will go into effect. These include the fees for a single classification, original license. With this license once cost just $300, applicants will need to pay $330. Renewal fees for active licenses have risen to $400 from $360, and renewal and registration fees for home improvement salespeople have been increased to $83. The former cost of this last was just $75. Contractors can companies can look forward to receiving additional information on these increases throughout the spring of 2017. These updates will be posted on the CSLB website.
Given that this is the first fee increase in six years and only the second fee increase in 24 years, the changes should not be astronomical for established businesses within the construction industry. Planning and budgeting for these additional costs will help companies within this field stay on top of their licensing requirements. It is important to note that failure to comply with licensing requirements can be far more costly than simply working with the system.
Another one of the most costly fees many contractors don’t realize when changing their business entity to an LLC is the CSLB’s requirement for a $100,000 LLC employee worker bond. The LLC bond can range in price from $1,500 to $7,500 + depending upon the individual credit of the contractor.
What These Changes Mean Cumulatively For The Construction Industry
Each year, these new laws have a significant impact on how companies within the construction industry structure, manage and operate their businesses. This year, however, the impact of updated industry laws is most likely to be felt among independent contractors, micro-sized companies, and small-sized companies due to the CSLB fee hikes. While these costs are not significant, their increases will be most noticeable to those businesses that have yet to establish a comfortable and consistent profit margin.
Regarding business marketing, many California companies will find that the addition of the CSLB database for conducting searches for licensed contractors is incredibly beneficial. This is free marketing that places licensed and legitimate businesses at the forefront of public attention. Given that the CSLB is not only a regulatory authority but a reputable and respected one, licensed businesses will be able to garner more public attention and more public trust via their placement in this database.
Finally, additional measures have been made to protect consumers by unlicensed parties and parties that formerly had to license but have not taken concerted steps to resolve lapses in licensing. These steps include significantly increased penalties that not only punish the offending business but further protect the consumer. This update is the great incentive for California construction companies to remain on par with their licensing requirements and to promptly pay all renewal fees.