DIG ALERT -- 811

USA/Dig Alert was formed in 1976. This is a free service. All you have to do is simply dial 811. Unfortunately, it took a major disaster in order for USA/Dig Alert to get formed. There was a construction crew in Culver City that hit a petroleum pipeline causing a huge explosion, killing nine people and creating major damage. In 1985, there was another major tragedy where a utility company did not respond properly to an alert. Therefore, there has been new legislation, etc., where everyone has to follow the law regarding responsibilities when it comes to digging.

All that is required is that you Call Before You Dig. The number is simple, you call 811 and they will walk you through the process. Excavators need to give at least two working days notice before digging. The members will mark the lines within those two working days. If you do not call, there can be fines and a possible loss of your contractor's license. If you do make the call, the operators of the underground lines are required to mark the areas. Remember this is a free service and can help save lives, including your own. The number to call for more information is 800-227-2600. For service dial 811. For more information you can also visit their website at www.digalert.org .

THE PROS AND CONS OF INCORPORATING

Under California Law, a corporation is a separate entity. Each entity will stand on its own. A corporation, if adequately set up and maintained, can save you a great deal of time and money. If your corporation is sufficiently capitalized and done correctly, you can shield your personal liability from the corporate liability. However, all of this has to be done correctly.

Corporations can have special tax ramifications. If you are thinking of incorporating, you should talk over the tax ramifications with an accountant. In addition to shielding your personal liability from your corporate liability, a corporate business can still exist after the death of the founders of the corporation. In theory, a corporation can go on indefinitely.

In addition to tax liability, there are costs associated with incorporating. It can become very time-consuming. Once a corporation has been set-up, there are steps that need to be taken to continue to run the corporation such as holding regular meetings and keeping corporate records.

MECHANIC'S LIENS

A Mechanic's Lien is a document that is recorded at the County Recorder's Office. It provides a lien for the person who recorded that lien. In other words, it puts a "hold" on property until the person is paid. That person then has the right to foreclose on the property that has been liened.

Sometimes it is unfortunate that the homeowners are the ones who are responsible to pay the lien. The reason it can be unfortunate is because there are instances where the homeowner can pay the prime contractor in full for a job and the prime contractor does not pay the subcontractor in full. If the subcontractor places a lien on the property, the homeowner can ultimately be responsible.

However, Mechanic's Liens, Stop Notices and Bonds are documents that should not be taken lightly. For instance, material suppliers are not usually entitled to a lien since the materials have to be incorporated into the structure (installed) by them in order to have the lien rights. Mechanic's Liens have been discussed and litigated many times through California law. California law is very different than other state's laws and one should seek the aid and advice of a competent California construction attorney.

SUBSTANTIAL COMPLETION

What is completion? In this case, substantial evidence supported the trial court’s findings regarding project completion date. That is the time when everything is completed.

Completion in a construction case is very important. Actual completion means the project is complete. This does not mean that all monies have been paid. Only that the job is complete.

The trial court made a finding regarding the project completion date even though the homeowner took occupancy prior to that date because the owner did not yet have full use of the facilities at the time. That is to say that the owner was not able to use the entire project at that time and therefore the project was not complete.

CONTRACTORS' STATE LICENSE BOARD

The Contractors' State License Board is the agency that controls the Board and its operations.

The Contractors' State License Board is governed by a body of nine contractors, and others, as part of their agenda. The Registrar of contractors, Steve Sands, is the Chief Executive Officer.

The Contractors' State License Board has three or four separate entities. The ones that run it are its senior staff. The Board is made up of nine senior staff. The senior staff is Cindi Christenson, Chief Deputy Registrar; Mike Brown, Chief of Legislation; Jonathan Buttle, Budget Analyst; Amy Cox O'Farrell, Chief of Information Technology; Dave Fogt, Chief of Enforcement; Rick Lopes, Chief of Public Affairs; Karen Ollinger, Chief of Licensing; Larry Parrott, Chief of Administration; and Bob Porter, Chief of Testing.

The job of the Contractors' State License Board is to protect consumers.

The Board Members at the Contractors' State License Board right now are:

Edward "Eddie" Barnes, Chair
Robert Lamb
Robert Brown
Joan Hancock
Matthew Kelly
Louise Kirkbride
Ed Lang
Lisa Miller-Strunk
Bruce Rust

The Contractors' State License Board website is a great source of information www.cslb.ca.gov. Their address is 9821 Business Park Drive, Sacramento, CA 95827. 1-800-321-CSLB (2752).

INSPECTIONS BY CAL/OSHA

All contractors should be prepared for an inspection. This happens quite often. You should train your staff on how to respond.

Make sure that your prevention program is organized and up to date. Do not fumble in front of the the inspector.

Inspections can target high-hazard businesses with loss rates at or above what is normally expected. A complaint might also trigger an inspection.

Make sure your security people know what to do if an inspection comes around. Have someone with some real understanding available to help you. The inspectors will not help you.

Don't be rude. Be friendly. However, do not give away the store. After the inspectors do what they need to do, you should make sure that you get an indication of what the inspector is asking for. Most of all make sure of what you will say and have said.

FRAUDULENT FILING FEE REQUESTS (Cont.)

Other warning signs of fraudulent letters sent to business owners by the bad guys regarding the California Corporations Code filing are:

• References or quotes to Corporation Code sections inapplicable to the type of entity being solicited, such as Code sections applicable to corporations when soliciting a limited liability company;
• References an "annual fee" or "annual payment" rather than a filing fee and that is far in excess of the filing fee for a Statement of Information;
• Indicates the submitted information will be treated as private and confidential.

We are all working hard to keep customers happy. Customers are our life blood.

Here is some official information for any business receiving one of these letters: Statement of Information forms and instructions are available through the Secretary of State's website here http://www.sos.ca.gov/business, and the fee required to file the Statement is $25 for California stock and foreign corporation, and $20 for California nonprofit corporations and all limited liability companies.

Fraudulent Filing Fee Requests

A new pattern of criminal activity raised its ugly head in California. The Attorney General won a $1.2 million award against rip-off artists. Everybody should keep an eye out for that.

The rip-off revolves around a deceptive letter sent by the bad guys, encouraging businesses to comply with their California Corporations Code filing obligations. The bad guys sent a deceptive letter which suggested that the businesses comply with their California Corporations Code obligations by submitting substantial fees to the third party.

This was reversed by the court. The court held that the defendants omission caused the plaintiff to file an untimely claim by the delay.

The letter is often characterized by the following:

• Appears similar to a Secretary of State form (generally the Statement of Information form), containing an official-looking seal;
• Implies that failing to return the form and pay the requested fee may place the business in legal jeopardy, or might cause the business' filings with the California Secretary of State to be in default or noncompliant status;
• Contains a reference to a "file number," "Corp Number," "Corporation Number," or "Control Number" that does not match the number assigned to the entity by the California Secretary of State;

MORE EXAMPLES AND HITS WILL BE GIVEN IN OUR NEXT BLOG

Advice For Contractors

If you are not a licensed contractor, and you are working as if you are licensed, you stand a strong chance of being caught and severely disciplined. Indeed, if you are an unlicensed contractor, and you do work for an owner, the owner can wait until you finish the project, and require you to pay back everything that you received from the owner, even though you did the work correctly. That is because what you did was illegal.

Make sure that everything that you do is in writing so that there is no dispute as to what you are supposed to do or not do.

Visit trade shows. Typically, they are free and have a great deal of information.

California Home Improvement Contractors Cover Your Rear

Conflicts happen on the jobsite. Many times the work done is not the problem on the job. As a home improvement contractor or subcontractor, protect yourself by being a good businessperson. Follow these simple hints to cover your rear:

1. Make sure that your contract is up to date. Make sure that your contract complies with the California License Law.
2. If your contract refers to the plans, make sure that your contract is very specific as to exactly what you will and will not be doing on the job with respect to the plans. Otherwise, you may end up responsible for more than you intended to do on the job if there ends up being a conflict between you and the customer.
3. Keep a copy of the signed contract. Keep it at the office in a file so that there is no risk of losing it.
4. Have the customer sign or initial each page of the contract.
5. Make sure you get everything on the job in writing, from start to finish.
6. Make sure that you receive copies of the 20-Day Preliminary Notice from each subcontractor that you hire. If you are the subcontractor, make sure you send the Notice to all of the proper parties so that you can protect your rights.
7. Keep a daily job log documenting what is being done on the job and any conversations that are had with the owner, suppliers, or other contractors. Be specific as to what work was done, if the owner requested something, such as materials delivered. Basically keep a log of anything and everything.
8. Make sure that all of your change orders are in writing and signed by your customer.
9. If you have subcontractors on the job, make sure that any of their change orders are in writing. Get written approval from the homeowner on your own change order before signing off on the subcontractors change order.
10. Make sure that progress payments are timely paid and that you get sign offs.
11. Typically, in California you have 90-days after the day you last did work on the job to file a mechanic’s lien in order to preserve your rights. After filing the lien, you then have another 90 days within which you will have to file the lawsuit. Make sure that you don’t blow your chances of collecting by not meeting statutory deadlines.

These are just general hints and you may need to make additional changes not included here.

Employment Law

In June of 2003, El Pollo Loco sent out documents that set out their dispute resolution policies. The documents contained large texts, in both English and Spanish, along with a drawing that required “the employee and the company use a mediator…” for unresolved conflicts. There was no mention of arbitration.

A later section in smaller print, in English only, and without a drawing, stated, “all employment-related disputes must be resolved through binding arbitration.” This created a conflict in that this was the only form of resolving the dispute permitted and a class action would not be allowed.

A class action suit was filed alleging employment law violations. El Pollo Loco wanted to compel arbitration. However, this was denied based on the fact that the judge deemed that the arbitration clause was unconscionable. El Pollo Loco argued that the provision was not unconscionable.

There are two kinds of unconscionability that were dismissed by the court. Procedural unconscionability looks to “oppression or unfair surprise” and substantive unconscionability looks to “harsh or one-sided terms.” The courts looked at both sides and then chose the one that they believed to be more reasonable.

The court in this case determined that the degree of procedural unconscionability was high, showing the obvious unequal bargaining power between El Pollo Loco and its low-paid employees created some “pressure to sign…and agree.” Making it worse, the court determined that this was without a clear understanding of the terms.

With that said, there appeared to be a lack of informed decision and workers were mislead in the manner in which information was relayed to its people. Therefore the employees won. The court found the arbitration agreement was unenforceable.

Contractors' State License Board Information ~~~Part Three

All applicants must be fingerprinted for licensure. You may apply for only one license classification at a time. You must submit a contractor’s bond. You must submit proof of worker’s compensation insurance, or an exemption if you have no employees. If a license is qualified by an RME, the qualifier is an employee. That means that worker’s compensation must be paid but worker’s compensation insurance is not required for an inactive license. If there is a problem with the status for your application, return your application to the Contractors' State License Board within 90 days from the date it was rejected. Otherwise, it is void.

A joint venture license is something like sole owners, partnerships, corporations, or other joint ventures. A member of immediate family, if licensee whose individual license was active and in good standing for five of the seven years immediate proceeding application.

A business examination consists of multiple choice questions related to business management and construction law. A study guide is available on the Contractors' State License Board website. You will receive a wall certificate showing the name of the person or company, license number and date of issuance, along with a permanent plastic pocket card. Make it a habit to carry your pocket card.

Licenses are issued to individuals, partnerships, corporations, or joint ventures. A qualifier is the person who is listed on the Contractors' State License Board records and meets the experience and examination requirements for the license. The same person can qualify for more than one license if there is common ownership of at least 20% of the equity, the additional firm is a subsidiary or joint venture, or the majority of the partners or officers are the same. The qualifier must be regularly employed by the firm and actively involved in the operations of the business at least 32 hours per week, or 80% of the total business operating hours per week, which ever is less.

Contractors' State License Board Information ~~~ Part Two

An owner-builder is a person who has the knowledge and skill of a journeyman, who performs work on his or her own property, and has the skills necessary. A qualified, responsible person must verify them. You may receive credit for technical training, apprentice training, or education instead of the required four years of practical experience. At least one year must be practical experience. Two years after submitting a transcript from a four year degree accredited college, a professional degree in law, or a substantial college or university course, in accounting, architecture, business, construction, technology, etc. Three years upon a certificate of completion of an apprentice program from an accredited apprentice program, a submission of transcripts for four year degree from an accredited college, submission of transcripts for four year degree from an accredited college or university in the field of horticulture or landscape horticulture for the landscaping license.

A Class “A” is a general engineering contractor. The principal business is in connection with fixed work of improvement, specialized engineering knowledge, and skills.

A Class “B” general contractor works in connection with any structure built, to be built, or requiring in its construction the use of at least two unrelated building trades or crafts. However, framing or carpentry projects may be performed without that limitation.

A Class “C” general contractor has 41 separate “C” classifications. This construction work requires specialized skill and its principal contracting business involved the use of specialized building trades or crafts. Manufacturers are considered to be contractors if they are engaged with onsite construction.

There is a “C-61” limited specialty license, which is Section 832.61.

We will continue this in the next blog.

Contractors' State License Board Information ~ ~ ~ Part One

The Contractors' State License Board was established in 1929. Presently, there are two vacated positions with two vacancies. Steve Sands is the Registrar of Contractors.

There are approximately 43 license classifications. The Contractors' State License Board protects consumers by regulating the construction industry through policies, going from granting licenses to revoking licenses.

There are two regions: Northern and Southern. The executive office is in the Northern region.

Generally you have to have four full years of experience at a journeymen level or as a foreman. There can be exceptions. Public personnel working on public projects, officers of the court, are examples. The experience requirement is at least four years of experience to take the exam. However, there are exceptions. The credit for experience has to be at a journeyman level or as a foremen supervising employees, contractor or owner-builder.

A journeyman who has completed an apprentice program, or is an experienced worker not a trainee, and is fully qualified to perform the trade without supervision, can take the exam. The foremen, supervisor, or person taking the exam, must have the knowledge and skill, etc. A contractor is a person who manages the daily activities of a construction business, including field supervision. However, there have been cases that say that you do not have to be out there to do that.

We will continue this in the next blog.

How Nevada and California Handle Their Licensure

Both California and Nevada have rather strict license laws. If you are working in one state, make sure you comply with the laws of that state. Our last blog, “What Do Contractors Do Wrong?” was California specific. We are now going to give you some similarities of California and Nevada in the event that you wish to cross-over and work for the other side.

First and most importantly, you must be licensed in the state in order to do work in that state.

Disciplinary Matters

Nevada is a much smaller state than California and therefore there are many more contractors in California than there are in Nevada. Both states have significant laws. In both states, the gist of the laws are protection of the public. However, as stated previously, you must be properly licensed in the state where you are doing the work. In that the amount of contractors in California and the size of the state itself is so large, disciplinary actions in California take much longer to resolve than disciplinary actions in Nevada, where they can accomplish tasks more quickly. It is not unusual for a California disciplinary case to take one year for resolution.

Although both states have very strong laws, the laws are very similar in that they each have agencies that are intended to protect the public.

The Nevada State Contractors Board specifically states,

“The Contractors State License Board protects consumers by regulating the construction industry through policies that promote the health, safety and general welfare of the public in matters relating to construction.”

You can visit the California Contractors State License Board at http://www.cslb.ca.gov/ for further information about contracting requirements in California.

What Do Contractors Do Wrong?

Many contractors fail to notify the Contractors’ State License Board of a change of address or telephone number. This leaves you in a bad position if someone from the CSLB or otherwise, tries to contact you.

Some of the things that contractors do wrong is that they don’t get a written contract. This leaves them at the mercy of the owners.

Sometimes, the contract is not well written, again, leaving the contractors at the mercy of the owners.

Contractors should try to know the person that they are doing work for. If there is a problem and it goes to the Contractors Board, chances are you will lose at the Contractors Board.

Contractors should also make sure that all their changes are in writing.

There are three different types of contracts that are required by the Contractors Board. They are Home Improvement (this is the toughest for contractors), New Residential (usually between contractors and home builders), and Service & Repair (which is for contracts up to $750.00).

Don’t become an unlicensed contractor.

Contractors State License Board Sting Operations

The Contractors' State License Board continually sends out people to handle sting operations. Quite often, an unlicensed contractor, or one who has violated the law, may actually be put in hand cuffs and taken to a local jail. In 2008, the CSLB had a record year for conducting over 150 sting operations.

One such example of the CSLB’s sting operations occurred in the early part of this year in Santa Barbara where the Tea Fire area was and all those homes had burned. Members of the CSLB Statewide Investigative Fraud Team (SWIFT) posed as fire victims. They arrested seven suspects on felony charges that they singled out for leaving business cards, flyers and newspaper ads in the fire zone. The CSLB also tries to reduce the fire victims from getting victimized by posting hundreds of warning signs and continually working with police and district attorneys.