Recently, a prime contractor asked us to assist with a complaint made by an industry watchdog group to the Contractor's State License Board about alleged subcontractor misbehavior. Though the CSLB ended up dismissing the claim, it became apparent that the CSLB has decided to begin enforcing subcontractor license-compliance problems against the prime contractor. We surmise the CSLB hopes to ease the problem of increasing enforcement burden and decreasing budget by requiring prime contractors to assist with the overall enforcement effort.
Aside from contract provisions requiring subcontractors to be properly licensed, prime contractors have historically taken a hands off approach to the licensing requirements of their subcontractors. The CSLB's new enforcement strategy is likely to result in an uptick in warning letters and--where multiple warnings are sent--civil penalties. CSLB personnel are currently maintaining the stance that prime contractors should be responsible for making sure project subcontractors have proper licenses.
Regardless of how the new strategy plays out, there are several sensible practice guidelines any prime contractor should keep in mind:
- Prime contractors should remain vigilant about their subcontractors' license status. The days of confirming licensure at bid time and then forgetting about it may be coming to an end.
- Since license bonds and worker's compensation insurance can affect a subcontractor's license status, prime contractors need to keep an eye on these issues as well.
- If a prime contractor receives a complaint from the CSLB relating to the license status of a subcontractor, take it seriously. CSLB's crosshairs may be on the prime contractor in addition to the subcontractor.
- CSLB personnel maintain they will expect prime contractors to perform license checks via the CSLB website. CSLB even notes that it is technically a criminal offense to copy a contractor's license card; so that age-old method of "proving" licensure is likely over.
- CSLB also has jurisdiction over some issues not directly tied to licensure, such as subcontractor listing law violations. CSLB appears to be enforcing these requirements more strenuously as well, and therefore additional attention should be paid there as well.
Significantly complicating matters is the fact that some industry watchdog groups are scrutinizing competitors on license-compliance issues. A recent article in the Sacramento Business Journal touched on this issue in a piece recounting efforts by electrician-industry groups to use private investigators to find and prosecute uncertified electricians.
Taken together, these factors lead to the conclusion that the regulatory environment for contractor's licensees may become more complex in the coming months. Any entity with a contractor's license that employs subcontractors should consider instituting procedures to protect themselves from potential unlicensed subcontractors.
© 2011 All rights reserved. Please note that the information contained herein is not intended to provide specific legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.