In 2021, multiple laws affecting how construction contractors operate were enacted into law. These include:
A.B. 938 changed the three-day right of a consumer to cancel a home improvement contract. Senior citizens will now get five days to cancel the contract.
A.B. 1561 eliminates the “A, B, C” test with respect to relationships between contractors and subcontractors for work performed before January 1, 2025 and provides instead that a subcontractor is deemed to be an independent contractor rather than employee under the following seven-part test if: (a) the subcontract is in writing; (b) the subcontractor is licensed by the CSLB and the work is within the scope of that license; (c) the subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a business license or business tax registration and the subcontractor has a business license or business tax registration; (d) the subcontractor maintains a business location that is separate from the business or work location of the contractor; (e) the subcontractor has the authority to hire and fire other persons to provide or to assist in providing the services; (f) the subcontractor assumes financial responsibility for errors or omission sin labor or services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services provided; and (g) the subcontractor is customarily engaged in an independently established business of the same nature as that involved in the work performed.
S.B. 727 extends the liability of a direct contractor for unpaid wages, fringe or other benefit payments or contributions, including interest owed by a subcontractor, to also include penalties and liquidated damages. The new law will apply to contracts entered into on or after January 1, 2022.
A.B. 569 increases the civil penalty limit that can be issued by the Contractor’s State License Board (CSLB) from $5,000 to $8,000. It also enhanced the civil penalty limit that can be issued by the CSLB for unlicensed persons from $15,000 to $30,000 and expanded the enhanced civil penalty limit to contractors failing to secure workers’ compensation insurance when required.
A.B. 607 increased the license bond amount of construction contractors from $15,000 to $25,000 and qualifier bonds from $12,500 to $25,000 beginning January 1, 2023.
A.B. 830 defines a “responsible managing employee” of a construction contractor as an employee permanently employed by a contractor and working 32 hours per week or 80% of the total hours per week of the contractor’s regular business hours, whichever is less. The new law requires the CSLB to develop an employment duty statement whereby a contractor, as a condition of licensure, provides detailed information on a qualifier’s duties and responsibilities for supervision of the contractor’s construction operations.
These are just a few of the new laws applicable to California contractors. With these multiple changes, it is imperative for every California contractor to contact their legal counsel in order to assure compliance, change contact language where needed, and review their organization and operations to assure compliance with the strictures of the CSLB.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
