California Construction Law

CSLB ANNOUNCES ZERO-TOLERANCE FOR C-10 REQUIREMENT VIOLATIONS

2010-12-02T11:09:00.000-08:00

ONLY CERTIFIED ELECTRICIANS TO PERFORM WORK AS ELECTRICIANS

Effective immediately, the CSLB establishes a zero-tolerance enforcement policy and will issue legal action against any C-10 Electrical contractor who willfully employs even one uncertified electrician to perform work as an electrician. CLSB is legally required to open an investigation and initiate disciplinary action against the contractor, which may include license suspension or revocation, within 60 days of receipt of a referral or complaint from the Division of Apprenticeship Standards (DAS).

Subsections within Labor Code Section 3099 clearly state that certification by DAS is required for anyone who performs work as an electrician for C-10 Electrical contractors. DAS is required by Labor Code section 3099.2 to report violations to CSLB.

Electricians are defined as all persons who engage in the connection of electrical devices for C-10 contractors. It is CSLB's position that electrical work must be performed by a certified electrician or an approved apprentice. Trenching, concrete, framing, and other work that does not involve connecting electrical devices may be performed by noncertified workers.

Questions regarding this CSLB enforcement policy should be directed to Brian Gedney at (916) 255-4435.

Visit the CSLB's website at www.cslb.ca.gov for this and other important information for the construction industry.

MECHANIC'S LIENS

2010-11-18T12:09:00.000-08:00

A Mechanic’s Lien is a document that contractors, engineers, material suppliers, designers, etc., (the “mechanic”) has recorded at the County Recorder’s office. The purpose of a Mechanic’s Lien is to provide the “mechanic” a lien on the property that work was done on for which they have not been compensated for. In other words, it puts a “hold” on the property until the “mechanic” is paid. The lien then gives the “mechanic” the right to foreclose on that property that has the lien on it by filing a lawsuit.

Unfortunately, there are instances wherein the property owner could be the one responsible for paying the lien even though they already paid once for all of the work that was done on their property. This can occur when an owner pays the prime contractor in full for the job, but the prime contractor does not pay the subcontractor in full. If that subcontractor then places a lien on the property, the owner could then be responsible for the outstanding monies due to that subcontractor.

Mechanic’s Liens, as well as Stop Notices and Bonds, are documents that should not be taken lightly. There are many requirements in place as well as timing as to when certain things should be done and/or filed. Mechanic’s Liens have been discussed and litigated many time throughout California Law. Because California law is very different than other state’s laws, it is very important to seek the aid and advice of a competent California construction attorney for help with the Mechanic’s Lien process, even before you realize you need to record one. You do not want to miss out on important deadlines that could preclude you from getting paid.

LIS PENDENS

2010-11-02T10:35:00.001-07:00

A Lis Pendens, also known as a Notice of Pendency of Action, basically means that there is a lawsuit pending with respect to the particular real property listed in the Lis Pendens. A Lis Pendens is usually prepared once the lawsuit is commenced and is both recorded at the County Recorder’s Office and filed with the court. The purpose of having the document recorded is to tie the property up from transfer of title. Anyone that might have an interest in the property (for example, someone wanting to buy or finance) would then be aware that there is a potential claim on the property.

In the construction industry, a Lis Pendens goes hand in hand with a Mechanic’s Lien lawsuit. As you know, when a contractor provides work on a home and does not get paid, that contractor may record a Mechanic’s Lien. Once a lawsuit is brought to foreclose on that Mechanic’s Lien, a Lis Pendens is then filed and recorded to further enforce that Mechanic’s Lien. This process essentially ties up the property until the legal proceeding is resolved.

NEW LEGISLATION

2010-10-07T15:05:00.000-07:00

Following are some new laws of interest:

AB 635 (De La Torre) Public Contracts: Roofing Projects

This law now makes a project for the repair or replacement of a roof of a public school or community college, a material, product, thing, or service considered equal if it meets specified requirements. It requires an architect, engineer, roof consultant, and other specified persons or entities to complete and sign a certification related to financial relationships in connection with such a project and to provide the certification to the school district or community college district. This law went into effect immediately after signing.

AB 1659 (Huber) State Government: Agency Repeals

Prior law had a Joint Committee on Boards, Commissions, and Consumer Protection and this new law will create a Joint Sunset Review Committee in its place. The purpose is to identify and eliminate waste, duplication, and inefficiency in government agencies and to include a comprehensive analysis of eligible agencies to determine if the agencies are still necessary and cost effective. This affects the CSLB just as the current sunsetting process currently does.

AB 2036 (Berryhill) Public Contracts: Contract Document Distribution

This law amends existing laws that have set forth procedures relating to state and local agencies solicitation and evaluation of bids or proposals for, and award, of contracts for the construction of public works.
The state department and any local agencies are now to provide an electronic copy of the project’s contract documents to the contractor plan room at no charge upon request from a contractor plan service.

AB 2058 (Block) Unemployment Insurance: Retraining Benefits

This law establishes the California Training Benefits Program, which specifies that unemployed individuals who qualify for unemployment compensation benefits, extended duration benefits, or an application for federal or state extended benefits or any federally funded unemployment compensation benefits, and applies for the program shall be deemed to be eligible for the program during a period of training or retraining and requires disclosure of related information.

AB 2130 (Huber) Professions and Vocations: Sunset Review

This goes hand in hand with AB 1659 wherein prior law had a Joint Committee on Boards, Commissions, and Consumer Protection and this new law creates a Joint Sunset Review Committee in its place. The purpose is to identify and eliminate waste, duplication, and inefficiency in government agencies and to include a comprehensive analysis of eligible agencies to determine if the agencies are still necessary and cost effective. As with AB 1659, this affects the CSLB just as the current sunsetting process currently does.

AB 2181 (Hagman) State Contract Act: Contracting by State Agencies

This law amends the State Contract Act by requiring projects that are not under the jurisdiction of specified departments to be under the charge and control of the Department of General Services.

AB 2195 (Silva) Taxation: Board of Equalization: Penalty: Proof

This new law deals with taxes and fees administered by the State Board of Equalization. The Board of Equalization now has the burden of proof, by clear and convincing evidence, in sustaining its assertion of penalties for intent to evade or fraud a civil proceeding. In addition, a taxpayer shall not be subject to unreasonable search or access to records in violation of the law.

AB 2211 (Fuentes) Instruction

This law authorizes school districts maintaining high schools to establish work-based learning programs and purchase related liability insurance. It also authorizes specified school programs to deliver such opportunities for pupils that may include work experience education, community classrooms, cooperative career technical education programs and job shadowing experience. In addition, specified entities are authorized to develop related principles and guidelines. This law went into effect immediately after signing.

AB 2305 (Knight) Contractors: Workers’ Compensation Insurance

This law amends existing law that requires a contractor with a C 39 roofing classification to obtain and maintain workers' compensation insurance even if the contractor has no employees. It also extends the operation of those provisions and requires license suspension for lack of workers' compensation for employees. Lastly, it extends the operation of existing law that requires an insurer who issues a workers' compensation policy to a roofing contractor holding such license to perform an annual payroll audit and requires statistical data.

SB 156 (Wright) Insurance: Fraud Prevention and Detection

This law authorizes the Department of Insurance to convene meetings with insurance companies to discuss information concerning suspected, anticipated, or completed acts of fraud. It also protects a person sharing information pursuant to the authorization from civil liability for libel, slander or other causes of action.

SB 189 (Lowenthal) Mechanic’s Liens

This law revises and recasts provisions of existing law relating to Mechanic’s Liens. It enacts separate provisions governing private works of improvement and public works of improvement. It also revises and recasts provisions governing design professionals liens, Mechanic’s Liens, notices of cessations, bonds and retention payments.

SB 294 (Negrette McLeod) Professions and Vocations: Regulation

This law provides for the extension of various provisions governing professions or boards, the Contractors' State License Board being one of them.

SB 392 (Florez) Contractors: Limited Liability Companies

This law amends the Beverly-Killea Limited Liability Company Act and the Contractors’ License Law. It authorizes the issuance of a contractor’s license to a limited liability company and authorizes specified officers to qualify for the license. The limited liability company will be required to maintain liability insurance and post a surety bonds as a condition of licensure. The law also provides personal liability of persons within the company in a certain instance and adds persons prohibited from engaging in business without a license.

SB 694 (Correa) Public Contracts: Public Works: Competitive Bidding: Procedures

This law extends the time to request a review and the time the State Uniform Construction Cost Accounting Commission has to review a public agency project that is to be performed after the rejection of all bids as well as for a Commission review of work for which evidence was provided that the work has exceeded the force account limits or has been improperly classified as maintenance.

SB 972 (Wolk) Indemnity: Design Professionals

This law provides, with respect to contracts and amendments to contracts entered into on or after January 1, 2011, with a public agency for design professional services, that all provisions, clauses, covenants, and agreements contained in, collateral to, or affecting these contracts or amendments to contracts that purport to require the design professional to defend the public agency under an indemnity agreement, including the duty and the cost to defend, are unenforceable, except for claims that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the design professional. It also provides that all contracts and all solicitation documents between a public agency and a design professional are deemed to incorporate these provisions by reference.

SB 1254 (Leno) Contractors: Workers’ Compensation Insurance Coverage

This law authorizes the Registrar of Contractors to issue a Stop Work Order to any licensee or unlicensed contractor who, as an employer, has failed to secure workers’ compensation insurance coverage for his or her employees and makes a failure to comply with the order a misdemeanor. It also sets forth procedures for the payment of employees pursuant to issuance of a Stop Work Order, and allows an employer to request a hearing to protest a Stop Work Order. Lastly, it would authorize an increase in the number of CSLB peace officer positions from three to 12.

SB 1491 (Business and Professions and Economic Development Committee) Professions and Vocations

This law has Contractors’ License Law cleanup provisions that modify the method for administering the open book asbestos examination and extends the statute of limitations for filing an action to discipline unlicensed contractors so that it conforms to the statute of limitations for licensees, and states that an action must be brought within four years from the date of the violation or 18 months after the filing of the complaint, whichever is later.

CSLB URGES HVAC CONTRACTORS TO AVOID CUSTOMER DISPUTES BY FOLLOWING ENERGY EFFICIENCY REQUIREMENTS

2010-09-22T16:26:00.000-07:00

The Contractors State License Board (CSLB) and California Energy Commission (CEC) are encouraging C-20 Warm-Air Heating, Ventilating and Air-Conditioning (HVAC) contractors to follow California’s energy efficiency standards that took effect at the beginning of 2010. CEC has been informed of several disputes between contractors and consumers because of the costs associated with required testing and other work that ensures installations comply with the Building Energy Efficiency Standards.

Licensed contractors are required to know the applicable laws, regulations, and codes pertaining to all work performed within their licensing classification. To avoid conflict, licensed contractors must inform their clients of the costs associated with the required testing to ensure their systems are functioning properly, including testing by Home Energy Rating System (HERS) raters, when required. Contracts should fully detail all labor, services, materials, and equipment to be installed, and provide a total cost associated with the installation.

Under the California Code of Regulations, Title 24, Part 6, contractors installing new, or replacing existing, heating and air-conditioning equipment in certain climate zones must ensure that heating and air-conditioning ducts have been properly sealed and that the refrigerant charge level installed in split systems is properly measured.

For more information about license requirements, license laws, and contract requirements, visit CSLB’s website. For questions about the Building Energy Efficiency Standards (Title 24, Part 6), HERS regulations (Title 20), duct testing or additional testing requirements, contact CEC’s hotline at (916) 654-5106 or (800) 772-3300, via e-mail at Title24@energy.state.ca.us, or on the CEC website, which also provides the updated forms for energy efficiency standards requirements in some climate zones.

CORPORATIONS, LLC'S & FILING INFORMATION

2010-09-08T11:49:00.000-07:00

If your business is a corporation or a limited liability company (LLC), you might be receiving official looking third party solicitations to file a Statement of Information form or to terminate your business. They usually request exorbitant fees for them to file these documents with the Secretary of State on your behalf. These documents look very official.

No business has to go through a third party (attorney or otherwise) to file these forms. The forms can be found on the Secretary of States website along with all of the filing fee information and how to file. Please note, you can use a third party to file these forms for you if you want to or are unsure how to do it yourself, but it is not mandatory.

If you receive on of these deceptive letters and would like to complain, you can send the letter along with a written complaint to the California Attorney General's office. Please include all documents received including the envelope the letter was received in and any return envelopes, if applicable. You can print a complaint form from their website at www.ag.ca.gov/consumers/general.php. The address is:

California Attorney General
Public Inquiry Unit
P.O. Box 944255
Sacramento, CA 94244-2550

For more information about these letters and more, you can visit www.sos.ca.gov/business/be/alert-misleading-solicitations.htm

CALIFORNIA LICENSED CONTRACTOR NEWSLETTER AVAILABLE

2010-08-25T15:59:00.000-07:00

The Contractors State License Board (CSLB) is pleased to announce that its first online edition of the quarterly California Licensed Contractor (CLC) newsletter is now available.

The CSLB e-publication provides you with valuable information on a broad range of important subjects. The most recent round of state budget cuts forced CSLB management to make the difficult decision to discontinue mailing the publication. The decision will save the CSLB approximately $450,000.00 per year.

You can get the newsletter here.

BEWARE OF LICENSE RENEWAL FRAUD (CSLB INDUSTRY BULLETIN)

2010-08-11T16:21:00.000-07:00

SACRAMENTO – The California Contractors State License Board (CSLB) has learned that some states are experiencing incidents of license renewal fraud. Licensees receive notices in the mail that instruct the contractor to send their renewal fee to a name and address that is different from the regulating government agency. Do not be fooled if you receive this type of notice.

In California, all renewal forms and fees should only be sent to:

Registrar of Contractors
Contractors State License Board
Department of Consumer Affairs
P.O. Box 26999
Sacramento, CA 95826-0999

Licensees can easily determine if they are approaching their renewal date by licking on the CSLB website’s “Instant License Check” link to see if their license is nearing its expiration date. Every two years, CSLB mails a courtesy reminder notice to active licensees approximately 60 days before their expiration date. The notice includes the renewal application that must be completed, signed, and returned to CSLB with the appropriate fees. Please use the pre-addressed CSLB envelope provided in the notice or write the above address on your envelope when submitting your renewal application and fees. Inactive licenses are renewed every four years.

If you believe you have been a victim of license renewal fraud, please contact CSLB at 1-800-321-2752.

MOTION IN LIMINE

2010-07-28T08:55:00.000-07:00

A Motion in Limine is a type of pleading that is filed before the case actually goes to trial. The point of a Motion in Limine is to have the judge rule as to whether or not certain evidence will be allowed in court. A Motion in Limine is usually filed by one party to a lawsuit that is asking to exclude certain evidence that they feel would be prejudicial in trial.

CONTRACTORS STATE LICENSE BOARD ANNOUNCES NEW E-MAIL ALERT FEATURE

2010-07-15T12:17:00.000-07:00

The Contractors State License Board (CSLB) has launched a new E-Mail Alert subscription service to provide licensees and consumers with instant notification of newly published industry bulletins, California Licensed Contractor newsletters, news releases and consumer alerts, and public meeting notices.

It only takes a few moments to sign up for one or all of these instant notification
categories.

“These e-mail alerts are another way for us to meet our goal of providing the most up-to-date information possible to licensees about the many issues affecting the construction industry and the operations of this Board,” said CSLB Registrar Steve Sands.

Simply go to the CSLB website www.cslb.ca.gov or www.CheckTheLicenseFirst.com and click on the “E-mail Alerts” button. Then, enter your contact information and hit “subscribe.”

That’s it.

Once you confirm your subscription, messages will automatically be sent to your e-mail address, alerting you of newly released CSLB publications and notices. You can opt-out just as easily if you later decide to discontinue receiving any of the alerts.

AFFIRMATIVE DEFENSE DEFINED

2010-07-01T09:06:00.000-07:00

To explain what an affirmative defense is, we first need to understand how a lawsuit works. Typically, a lawsuit starts with the plaintiff filing a document with the court called a complaint. In the complaint the plaintiff alleges its causes of action and asks for damages. The defendant has to then defend himself. The most common way a defendant goes about defending himself is by filing a document called an answer with the court. In the answer, the defendant can deny claims set forth by the plaintiff (simply stating that the plaintiff's claims are not true) or the defendant can state that there are additional facts or arguments that will defeat the plaintiff's claims. These additional facts or arguments are what is known as affirmative defenses. Some of the more common affirmative defenses in a breach of contract or negligence case are listed below.

Statute of Limitations -- The plaintiff filed the lawsuit after the deadline imposed by law. For instance, if there is a dispute about a written contract, you have four years from the date that the contract was breached to file a lawsuit.

Accord and Satisfaction -- Simply, the plaintiff and defendant already settled the dispute.

Failure to Mitigate Damages -- If the plaintiff could have used ordinary care to lessen the damage, then the plaintiff should have done so.

Comparative/Contributory Negligence -- If the damages suffered is partly the plaintiff's fault, then the defendant can ask for a reduction (comparative negligence) or the complete bar of (contributory negligence) damages.

There are more affirmative defenses. The above is just a few of them.

WHAT IS DISCOVERY?

2010-06-16T09:22:00.001-07:00

Many times while representing a client in a lawsuit when the discovery process begins, the clients have never heard the term "discovery" before. Basically, discovery is a gathering of information. It is conducted between parties before a case goes to trial so that all sides can gather information from the other parties and begin to prepare for trial. Sometimes the discovery process is beneficial in negotiating settlements before the case goes to trial. If not, the parties have sufficient information to proceed to trial. There are many different types of discovery that can be used. Some of the more common discovery tools are listed below:

Interrogatories -- Interrogatories are simply written questions from one party to another that must be answered (in writing) under oath.

Requests for Admission -- Request for admission are where one party asks another party to admit or deny various facts of the case.

Requests for Production of Documents -- Requests for production of documents are where one party asks another party to produce specific written documents or physical evidence that might be important in the case. These can include such things as letters, building plans, contracts, photographs, notes, etc.

Deposition -- Depositions are oral testimony that is taken under oath where one party can ask questions to obtain information and facts relevant to the case. Depositions can be conducted upon other parties to the case as well as witnesses.

LITIGATION COSTS

2010-06-02T11:30:00.000-07:00

The Vons Companies, Inc. (Vons) owned property and entered into a contract with Lyle Parks Jr., Inc. (Parks) to improve Vons' real property. The contract contained an attorney's fees provision. After the work was completed, Parks gave Vons a separate warranty that work was completed, etc. This warranty (as well as the original contract) stated that Parks would fix any defects in his work for one year. The warranty did not contain an attorney's fees provision like the contract did. Before the year was over on the warranty, Vons sold its property to Mock Rank, Inc. (Mock). In the sale agreement, Vons sold "all of its rights, title and interest" in the warranty, but not the contract.

Two years after the sale, Mock sued both Vons (for failing to disclose water leaks among other things) and Parks (for breach of warranty and negligence, etc.). Before trial, Mock and Vons settled with Mock assigning its claims against Park to Vons. Vons prevailed in court over Parks on most of the issues. After the verdict, Vons filed a memorandum asking for costs and attorney's fees, which Parks objected to. The trial court denied Vons both its costs and attorney's fees. Vons appealed.

The Court of Appeal reversed the judgment of Vons so that they could obtain their costs since they were the prevailing party. But the Court of Appeal did not reverse the judgment of no attorney's fees since the claims were based on the warranty and not the contract. Since the warranty did not contain any attorney's fees provision, no attorney's fees should be awarded.

SMALL BUSINESS BILL PASSES ASSEMBLY COMMITTEE

2010-05-24T09:49:00.000-07:00

A California Chamber of Commerce-supported job creator bill that expands small business opportunities passed an Assembly committee on April 20, 2010.

AB 1771 (Mendoza) helps promote new opportunities and business for small businesses and saves the state money by allowing state departments to award contracts of less than $25,000 for goods or services by certified micro businesses, small businesses or Disabled Veteran Business Enterprises (DVBEs) without seeking an exemption of the Prison Industry Authority (PIA) mandate if they are able to make the product for less than the PIA.

Current law in effect gives the PIA precedence over other vendors during the contract bid evaluation process, regardless of the price of the product. The PIA mandate unnecessarily reduces business opportunities for private companies and drives up state costs.

By reducing the impact of the PIA mandate and setting the bidding preference for micro-businesses and small businesses at the same level as the PIA, the state would expand the number of businesses that can compete for small state projects, with likely savings for most bids.

AB 1771 passed the Assembly Jobs, Economic Development and the Economy Committee on a vote of 6-0. It will be considered next by the Assembly Public Safety Committee.

This article is written by the California Chamber of Commerce Alert. Staff Contact is Marti Fisher.

INDEPENDENT CONTRACTOR WITHHOLDING PROPOSAL

2010-05-05T09:01:00.000-07:00

The California Chamber of Commerce follows legislation and tries to protect California businesses. There is currently a proposal looming that will force small businesses to make interest free loans to the state. It would require businesses and public agencies to withhold 3% of payments to independent contractors. This money would be sent to the Franchise Tax Board instead of being in the independent contractors pocket, thereby making them able to keep their business going. This will severely hurt small businesses because of the tax compliance requirements that will need to be implemented and further hurt those that are independent contractors because they will be missing out on 3% of their income until they file their California taxes (if they file) and get a refund.

If you are interested in finding out more information, visit http://www.calchamber.com/alert/alert_2-5-10-4.htm

PHCC -- THE FLOW EXPO -- MAY 1, 2010

2010-04-21T11:59:00.000-07:00

Saturday, May 1, 2010, at the Long Beach Convention Center is the 35th Annual Southern California Plumbing Heating Cooling Industry Trade Show. Come by from 9:00 a.m. to 4:00 p.m. to be a part of the largest industry trade show for Plumbing and HVAC professionals in the west.

Abdulaziz, Grossbart & Rudman will be there in addition to many exhibitors showing the latest innovations, technologies and services that will help you grow your business.

For more information visit http://www.phccglaa.org/tradeshow/

REFERRAL FEES / INDUCEMENTS

2010-04-07T12:55:00.000-07:00

I believe after all of the push and shove, I have a final document that all contractors should refer to if they deal in the area of referral fees. The following is from a consensus of several people pretty high up.

There has been a lot of talk about referral fees and whether they are acceptable, not acceptable, or hurting the economy. There have been a number of people complaining about contractors and unlicensed contractors with respect to the referral fee issue.

For quite some time now, there has been some question as to whether one contractor can provide another contractor with a referral fee. We have been receiving many phone calls and emails about this very issue. Although the consensus believes (I use the word "believes" because I do not know if it would be accurate to say exactly what the law says) that the answer should be No, we thought it best to actually spell it out.

The portion of the law that was discussed among several people was Business & Professions Code section 7157. After various discussions back and forth, it was unanimously agreed among us that the answer to this question is that no referral fees should be allowed between contractors - ever. Of course, contractors can be compensated for work that they do. However, they should not benefit from this work in the form of an inducement or referral fee.

Please note that this analysis does not include anything having to do with non-contractors.

RISE IN CONTRACTOR BOND PREMIUMS - CONTRACTORS CAN CONSIDER "BOND ALTERNATIVES' -- CSLB INDUSTRY BULLETIN #10-08

2010-03-26T12:48:00.000-07:00

The Contractors' State License Board (CSLB) has received an influx of telephone calls and letters from contractors who have been unable to secure a contractor's bond or who are faced with a significant rate increase. Licensed contractors are required to maintain a surety bond (contractor bond) for the benefit of consumers who may be damaged as a result of defective construction or other license law violations, and for the benefit of employees who have not been paid wages that are due to them (Business and Professions Code section 7071.5).

Surety companies base the premiums they charge on insurance company rates file with and approved by the Department of Insurance (DOI). All surety companies must strictly adhere to DOI's approved rating plan.

CSLB's role is to ensure the proper bond(s) or approved alternative(s) is filed for each active contractor license, including and related documents provided to CSLB for the continued maintenance of the bond(s).

Before an active contractor license can be issued or renewed, the licensee must have a current contractor bond or approved alternative to a bond on file with CSLB in the amount of $12,500.00. CSLB has no authority over the bond premium amount or the cancellation criterion offered by a surety company; DOI regulates the surety companies independent of CSLB.

Currently, there are more than 50 surety companies that have active bonds filed with the CSLB. If contractors are unable or prefer not to obtain a surety bond through these surety companies, they may use one of the approved alternatives for filing a security deposit. Information concerning approved alternatives to a contractor's bond is available on the CSLB website at www.cslb.ca.gov or by calling CSLB at 800-321-2752.

SB 313 -- WORKERS' COMPENSATION

2010-03-18T14:41:00.000-07:00

California Governor, Arnold Schwarzenegger, signed SB 313 in November, 2009, which went into effect on January 1, 2010. It is intended to help legitimate business, including contractors, to compete against business owners that do not pay workers' compensation insurance. It increases the employer's penalty from $1,000.00 per employee to $1,500.00 per employee for a business that does not carry workers' compensation insurance.

Another portion of this bill now makes employers pay the amount they should have paid into the state treasury for each week they were uninsured for the three years prior to the citation. If the employer obtains the insurance while a penalty determination is going on, the employer's penalty will be prorated.

CSLB URGES LICENSEES TO COMPLETE RENEWAL FORMS PROMPTLY

2010-03-03T12:45:00.000-08:00

CSLB INDUSTRY BULLETIN #10-07

Cutting deadline too close could lead to license expiration

The CSLB is reminding its more than 300,000 licensees to submit their renewal application and fees as soon as possible after receiving their CSLB license renewal notice.

A CSLB license expires on the last day of the month in which it was issued. The CSLB sends a renewal application notice to each licensee 60 days before the expiration date. In that notice, the licensee is advised that it may take up to four weeks for the CSLB to process the renewal once it is received. If the licensee waits too long, it is likely that the renewal will not be processed before it expires. If the license expires, the licensee will not be able to legally perform any construction work until CSLB processes their renewal paperwork.

The odds of missing your license renewal deadline increase if you wait too long to submit your paperwork. The CSLB receives an influx of renewals during the last couple of weeks of each month, meaning it can take longer to process applications toward the end of any month.

It is important to note that the CSLB cannot accommodate requests for a "rush" on renewal processing. Renewal applications are processed according to the date they are received.

Anyhow interested in learning more can see all current processing times on the CSLB website at www.cslb.ca.gov. Just click on "online Services." The information is updated on a weekly basis.

PUT AGREEMENTS IN WRITING

2010-02-17T08:52:00.000-08:00

When you have an agreement, make sure you have the agreement in writing. It is important because then the parties will know what their rights and liabilities are. If the agreement is for many different types of construction, the Contractors' License Law may require that agreement be completely in writing. Make the agreement as detailed as possible. Anytime something changes, you should send a confirming letter or possibly a change order to the other side. All of this will give you legal protection. Even though you are allowed by law to have oral agreements as well, the legal protection you will get is not the same. When the agreement is only oral it is not clear as to what each party says and it is easier for a judge to believe either side of the story. A written agreement that clearly states your position leaves no room for a judge or jury to try and figure out what was meant by that agreement and you avoid going against the Contractors' License Law.

2010-02-03T14:25:00.000-08:00

As some of you might be aware, Abdulaziz, Grossbart & Rudman has been compiling an electronic newsletter every quarter. This newsletter is filled with insightful information for the construction industry, other interesting legal articles, some lighthearted jokes, and updates on what is going on with the firm as well as in the construction and legal industry in general.

The good news for you, we have decided that doing the newsletter quarterly is just not sufficient enough. Therefore, beginning this month, we will start preparing the newsletter every other month.

If you would like to be added to our list, please send your contact information to info@agrlaw.net and we will send you an email notification each time our newsletter is added to our website. You may also view back issues of out newsletter at http://www.agrlaw.net/Newsletter/Newsletter.htm

REDUCING ATTORNEYS FEES

2010-01-20T14:56:00.001-08:00

If you find yourself in need of an attorney, the following are some ways to keep your attorneys fees to a minimum:

1. Organize your paperwork. Keep it accurate and up to date.
2. Respond quickly to any request from your attorney. Answer all questions completely. Try to put everything in writing.
3. Ask if paralegals or associate attorneys can work on your case as much as possible. Their hourly rates are usually lower. If the paralegal or associate attorney is also familiar with the same type of law, it can save you money.
4. Make sure you are using an attorney who is familiar with your specific area of the law so that they do not have to charge you for extra research.
5. See if you can help by requesting certain documents or making extra copies of your file.
6. Come prepared to all meetings with the attorney. Make sure all your paperwork is in order for these meetings. Make sure you have all names, addresses and phone numbers of witnesses and other parties, etc.
7. Be honest, even if you think it will hurt your case. The attorney needs to be aware of everything so that there are no surprises.

UPDATE YOUR ADDRESS WITH THE CSLB

2010-01-06T12:36:00.000-08:00

In the event that you are a contractor, make sure that the Contractors' State License Board has your proper address AND phone number. You cannot believe how many people move and do not give the Contractors' Board their new information. This could be very distressing to you if the Contractors' Board does not have a means of contacting you. In accordance with the law, if your address or business name changes, you must report it to the CSLB within 90 days. There is a form on the CSLB's website (www.cslb.ca.gov) that can be completed. Please note that if the address is a P.O. Box, a street address is still required.

DIG ALERT -- 811

2009-12-24T10:04:00.000-08:00

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

2009-12-09T14:00:00.000-08:00

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

2009-11-25T13:36:00.001-08:00

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

2009-11-11T08:57:00.000-08:00

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

2009-10-28T09:37:00.000-07:00

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

2009-10-15T16:02:00.000-07:00

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.)

2009-09-30T12:29:00.000-07:00

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

2009-09-16T10:14:00.000-07:00

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

2009-09-02T12:13:00.001-07:00

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

2009-08-19T09:09:00.000-07:00

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:

Make sure that your contract is up to date. Make sure that your contract complies with the California License Law.
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.
Keep a copy of the signed contract. Keep it at the office in a file so that there is no risk of losing it.
Have the customer sign or initial each page of the contract.
Make sure you get everything on the job in writing, from start to finish.
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.
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.
Make sure that all of your change orders are in writing and signed by your customer.
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.
Make sure that progress payments are timely paid and that you get sign offs.
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

2009-08-05T15:07:00.000-07:00

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

2009-07-22T08:50:00.000-07:00

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

2009-07-08T09:24:00.000-07:00

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

2009-06-26T16:26:00.000-07:00

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

2009-06-11T10:48:00.000-07:00

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?

2009-05-27T13:38:00.000-07:00

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

2009-05-13T10:54:00.001-07:00

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.

Another Case On Substantial Complience

2008-12-05T11:26:00.000-08:00

We have written other articles and discussed several cases in our book California Construction Law, regarding California License Law, and more specifically Business and Professions Code section 7031. In the MW Erectors case, which we discussed in our book, we filed an Amicus Brief in opposition citing other options. Unfortunately we did not prevail. We believe the laws in this area are extremely harsh. The case discussed below continues that harshness.

A new case, Great West Contractors, Inc. v. WSS Industrial Construction, Inc., has upheld the decisions in the above referenced cases. In this case, a subcontractor, (WSS Industrial Construction (“WSS”), was barred from bringing a suit against Great West Contractors because WSS was not licensed at all times. WSS is a corporation that had applied for, but not yet obtained, their corporate contractor’s license at the time it submitted its bid. WSS had entered into the contract, ordered parts, and submitted plans before the corporation was actually licensed. However, it had not started actual construction of the site. The RMO of WSS was licensed as an individual and a partnership, but not on behalf of the corporation. The MW Erectors case we have discussed showed that MW Erectors was unlicensed for only a few days, but not “at all times during construction,” and since that case, the law states that “…except as expressly otherwise provided, a contractor may not sue to collect compensation for performance of ‘any act or contract’ requiring a license without alleging that he or she was duly licensed ‘at all times during the performance of that act or contract.’ ”

Business and Professions Code section 7031(e) gives the only exception to the contractor’s licensure requirements. It states that the courts can find there is substantial compliance with the license requirements, “if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, (3) and did not know or reasonably should not have known that he or she was not duly licensed.” This was not the case with WSS, just at it was not with the MW Erectors case, because the corporation was not licensed.

Therefore, the Appellate Court denied WSS’s case, even though the Appellate Court itself agreed that they “are cognizant of the harshness of this result. But the law is clear.”

More On Arbitration

2008-11-26T14:28:00.001-08:00

As you all should know, arbitration has become a favorite method of resolving disputes in construction cases. Mediation is another favored method of doing the same. The reason for this favoritism is that you are more likely to get an arbitrator or mediator with construction experience. This is not always true in court where you will have a judge who has no understanding of construction, nor the fact that construction is not a science. I once had a judge who asked me why I subpoenaed the plans since they are so big and dirty!

In this case, Mr. and Mrs. Bruni (“Bruni”) purchased their single family home in a development from James Didion. The contract contained a limited warranty and arbitration provision. Bruni later discovered that their home was defective. Bruni and other homeowners filed suit against the developer alleging construction defects. The homeowners opposed the Motions of the developer stating that the arbitration provisions were unconscionable. The trial court denied the Motions to Compel Arbitration agreeing that the arbitration provisions were unconscionable. The developer appealed. Essentially, the developer was stating that unconscionability must be decided by an arbitrator not the trial court.

The Appellate Court sided with the trial court. The Appellate Court stated that if a party is claiming forgery or fraud, asserting that it never agreed to the arbitration clause, then the court must decide the claim. But if the party is not denying that it agreed to the arbitration clause and instead claims some other defense to the enforcement of the clause, then the court must enforce the arbitration clause and allow an arbitrator to decide the issues.

Here, the Plaintiffs were claiming unconscionability that they never “knowingly agreed” to the arbitration provisions.

Therefore, the trial court and not the arbitrator is required to resolve the unconscionability claim. The reason the court held that the provision was unconscionable was because the provisions were contained in a contract of adhesion (a “take it or leave it” contract), and violated the reasonable expectations of the Plaintiffs (homeowners).

We believe that this is a relatively bad decision. Not because it is unfair, but anyone can say that they did not know what they were signing and therefore the court must decide. Since arbitration is much less expensive than litigation and since many courts are not typically able to resolve complicated construction disputes, this makes it very easy for someone to get out of an arbitration agreement and go to court.

Cash Flow For Contractors

2008-06-27T09:01:00.001-07:00

Contractors, subcontractors, and material suppliers should start thinking very hard as to what their cash flow might be after July 1, of this year. If a budget is not approved by the legislature by that time and some emergency measures employed, many of you may not be paid even though you may have completed your work.

There are many legal issues involved in such a matter. However, if emergency measures are not put in place by our government, there could very well be many people or companies who will not get paid timely, only because of our inept Legislature.

Site Inspections

2008-06-26T09:29:00.000-07:00

Site inspections are used extensively in construction cases. This is both during construction and sometime thereafter if there is a dispute.

If you have a dispute with your customer, and you have not taken pictures or some other means of verifying that the work you had done was done correctly, then a site inspection is appropriate. We suggest that you photograph your work during construction so that you can verify what you did.

That is to say that the parties and the trier of fact, the one making the decision as to whether the work was done appropriately, visit the site and argue over whether the work was done correctly or not. Unfortunately, quite often, either in arbitration or litigation, you may not have the opportunity to conduct a site inspection and therefore, would have very little proof that the work you did was done correctly.

Therefore, we suggest that any time you get involved in a dispute and are going to someone to determine whether the work that you did was done correctly, you should demand that a site inspection be part of the determination of the dispute. You should do this early on so that you can demand a site inspection early.

Federal Arbitration Act and California Law

2008-06-24T09:14:00.000-07:00

What happens when the parties agree to conduct their arbitration in accordance with California law, yet there are triable issues that are not subject to arbitration? This becomes a problem in that you could end up with conflicting decisions. In this case, there was a denial of the request for arbitration and the appellate court said that this was not an abuse of discretion.

In addition, in this case, the general contractor failed to pay the full sum due and building inspectors hindered the subcontractor in its work. The general contractor, subcontractor, and owner, were parties to arbitration agreements, but the building inspectors were not. That created a risk of inconsistent decisions based on conflicting conclusions.