April 17-18, 2012

CSLB Highlights 4/17-18/12
We hope that you enjoy the CSLB Meeting Highlights of the April 17-18, 2012, Board Meeting in Monterey. For a downloadable copy in Adobe PDF please click here and save to your hard drive.

Abdulaziz, Grossbart & Rudman


APRIL 17-18, 2012
By Kenneth S. Grossbart
Abdulaziz, Grossbart & Rudman


The Contractors' State License Board held a full Board meeting at the Portola Hotel and Spa in Monterey on April 17 & 18, 2012.


Board Members Present:

Chair, Robert Lamb II; Vice Chair, Paul Schifino; Secretary, Joan Hancock; David Dias; Pastor Herrera Jr.; Matthew Kelly; Ed Lang; James Miller; John O'Rourke; Frank Schetter; and Mark A. Thurman


Board Members Excused Absent:

Robert Brown; Louise Kirkbride; Lisa Miller-Strunk; and Bruce Rust


There are currently no vacant positions on the Board.


During the public comment session there was a homeowner who talked about filing a complaint with the CSLB. He expressed his frustration at what he and his family believes was no support of CSLB staff. The Board was very sympathetic and responsive to his concerns.


Intake/Mediation Centers

The consumer restitution in the Intake/Mediation Centers for the 2011-2012 fiscal year was $5,727,516.


Investigative Centers

The consumer restitution in the Investigative Centers for the 2011-2012 fiscal year was $2,918,651.


Statewide Investigative Fraud Team (SWIFT)

The purpose of SWIFT is to combat the underground economy. There was 261 sting and sweep days in 2011 with over 1,100 legal actions. They partner with other agencies like law enforcement, District Attorneys, building departments, code enforcement officials, industry leaders and other state agencies including the Economic and Employment Enforcement Coalition.


Case Management

From July 2011 through February 2012, over 1,000 citations were issued to licensees and non-licensees. Civil penalties in the amount of $506,159 were collected because of the mandatory settlement conferences with a total savings to the public of $898,210.


The arbitration program saw 351 decisions received in that same time period with a savings to the public of $1,221,797 which was collected as restitution.


In the 205 Accusations or Statement of Issues filed the restitution received was $73,627.35 with a cost recovery of $141,551.06.

General Complaint Handling Statistics

The manageable level of pending complaints for the current CSLB staff is 4,291. As of February, the pending caseload was 3,683. It is anticipated that the caseloads will rise with time and possible exceed management levels before of the inability to fill vacancies in the Enforcement division, thereby having a longer investigation process for consumers.


The Enforcement objectives that the Enforcement staff follows are:

  • Maintain Enforcement Representative I production of closing 10 complaints per month;
  • Increase the percentage of licensee complaints settled to 30%;
  • Accomplish Intake/Mediation Center complaint disclosure of 70%; and
  • Reduce 270-day-old complaints to 100 or less.


License Application Workload

The number of applications received per month continues to decline due to the economic recession and housing downturn and is down 30% from the average over the past 10 years.


Limited Liability Companies (LLCs)

The new LLC program has been implemented. Since there is not yet case law regarding "piercing the corporate veil" with respect to LLCs, the Legislature required an additional $100,000 bond for the benefit of workers and their payment of wages and benefits in SB 392 (which allowed LLCs to be licensed with the CSLB). LLCs also have to have $1,000,000 in liability insurance when there are five or less people listed as personnel and an additional $100,000 required for each additional personnel, not to exceed $5 million.


In January and February 2012, there were 134 applications for Limited Liability Companies. Of those applications, 66 have been rejected. The most common reasons for rejection are:


  • Personnel listed on the application needs to match the personnel listed on the Secretary of State records.
  • The personnel information needs clarification or is missing information.
  • The LLC Secretary of State registration number is missing or incorrect.
  • The business name on the application does not match the LLC Secretary of State registration information.
  • Questions are missing or incomplete on the application.


Fee Increases and Application Revisions

Effective July 1, 2011, application and licensure fees were increased to their statutory limit. Eight applications were revised to reflect those new fees.


License Transaction Processing Times

Even though there is minimal overtime in the Licensing Division and a 15 percent reduction in staff hours, they have maintained acceptable application processing times.


Fingerprinting/Criminal Background Unit

The Criminal Background Unit oversees the fingerprinting that is done by the Department of Criminal Justice. The Criminal Offender Record Information (CORI) is processed the same day it is received and minor offenders are cleared. Applications that did not disclose minor violations that would normally be cleared may be given an opportunity to withdraw the incorrect application and submit another one, with additional fees.


Since 2005 when the fingerprinting began, there have been ¼ of a million transmittals from the Department of Criminal Justice. Of that, there were 43,000 applicants that had criminal convictions on their record. Through February 2012, the Criminal Background Unit denied 1,069 applications and issued 1,193 probationary licenses. Half of those denied appealed the denial.


Licensing Information Center (LIC)


Ongoing Vacancies

The Licensing Information Center still has a high number of staff vacancies because of the hiring freeze with seven vacant positions. Two of those positions are on hold because of the mandatory 5% budget reduction. There were also two long-time staff members that retired in August. Because of limited staff, the average call wait time was 14 minutes and 38 seconds in February. The highest in the past year. New staff hiring is a top priority but with upcoming retirements, difficulty in getting the wait time down is imminent.


Automated Call Distribution (ACD)

The Automated Call Distribution system that was implemented in November 2011 has been very effective in managing call volume. Incoming callers no longer get busy signals because the capacity has increased to 50 to accommodate all incoming traffic.


Silent Monitoring Program

There is a Silent Monitoring Program within the ACD that allows managers and supervisors the ability to listen in on calls for training purposes. This is expected to increase the knowledge and skills of existing call center agents and gauge the quality of customer service.


Increased Training

The Licensing Information Center has established a position to serve as a trainer and expert resource for staff. This position is responsible for updating internal call center policies, developing call center scripts for consistency, training new agents, and cross-training existing staff.


Judgment Unit

The judgment Unit processes all outstanding liabilities, judgments, and payment of claims reported to the CSLB by licensees, consumers, attorneys, credit recovery firms, bonding companies, CSLB's Enforcement Division, and other governmental agencies as well as processing all documentation and correspondence related to resolving these issues.


Budget Update


Budget and Expenditures

Through February 2012, the CSLB spent 63% of its $58.4 million budget.



Through February 2012, the CSLB received $37.2 million in revenue, a growth of 8.2% from last year.


Fund Condition

The Contractors' License Fund has a reserve of $14.9 million, to cover approximately three months.


Construction Management Education Account

The Construction Management Education Account spent roughly $9,900 in pro rata charges though February 2012.


The Board and senior staff broke into smaller groups to discuss issues on enforcement prioritization, unlicensed practice investigation, and public works. The following is an overview of what was covered:


2011-2012 Strategic Plan Objectives Update

  1. Reorganize Enforcement Division Objective had an original deadline for the 3rd quarter of 2011 with a scheduled completion date now being May 1, 2012, is currently contracted with Cooperative Personnel Services to:
    a. Establish a Deputy Chief Positions
    b. Reclassify CSRs to SSAs
    c. Reclassify ER to Special Investigator
  2. Establish Expanded Media Outreach Plan Objective had the proposal approved by the Public Affairs Committee on March 28, 2012.
  3. The objective to develop a plan to explore licensure for solar/alternative energy contractors had an original deadline for the 3rd quarter of 2011 with a new target date being the 3rd quarter of 2012. The staff continues its research on this issue and has met with groups involved in the solar/alternative energy industry.
  4. The objective to create new flagship consumer education publication was originally to be completed by the 4th quarter of 2011 but was delayed by the hiring freeze. Final drafts are expected in the 3rd quarter of 2012 and printing is expected to begin in the 4th quarter of 2012.
  5. The objective to create a training curriculum for new hires that includes basic enforcement procedures, a mentoring program, and specialized training was to be done by the 4th quarter of 2011. The CSLB and Attorney General Staff created training modules for new hires and existing employees. Training modules 1 and 2 were provided to staff in 2011.
  6. The objective to coordinate with state and local agencies to establish baseline measurements of the underground economy and the effectiveness of enforcement strategies was to be completed in the 4th quarter of 2011. Staff partnered with the EDD to perform a study of select contractors to determine underreporting of tax and workers compensation liability that was completed in December of 2011. Date is now being used to identify contractors for enforcement operations and cost effectiveness of enforcement strategies.
  7. The objective to implement online licensure tools for credit card payment was to be completed in the 1st quarter of 2012. This is tied to the Department of Consumer Affairs BreEZe project with a new target date of the 4th quarter of 2013.
  8. The objective to develop a legislator relationship plan was to be done by the 1st quarter of 2012.
  9. The objective to implement a workers' compensation insurance recertification process for contractors exempt from workers' compensation was scheduled to be completed by the 1st quarter of 2012. Legislation was passed that went into effect on January 1, 2012, which requires the recertification for workers' compensation exemption. The Licensing staff is working with IT on implementation with a target date of the 3rd quarter of 2012.
  10. The objective to create a new flagship application/licensee education publication had an original deadline of the 1st quarter in 2012. It has been delayed by the hiring freeze. The final draft is expected in the 4th quarter of 2012 and printing is expected to begin in the 1st quarter of 2013.
  11. The objective to produce a new education video to assist license applicants was to be completed in the 1st quarter of 2012. It is currently in production and is expected to be completed in May 2012.
  12. The objective to review and revise all Memorandums of Understanding (MOU) for relevancy, information sharing and effectiveness to be completed the 1st quarter of 2012 is currently underway. The MOU with the EDD was revised in December 2011 to allow for enhanced sharing of information and is currently pending approval by the agencies' executive officers.
  13. The objection to recruit and hire nine peace officer Enforcement Representatives in designated Investigative Centers is to be done the 2nd quarter of 2012. Because of the Department of Consumer Affairs delays in getting approval, many candidates have withdrawn their applications and accepted positions elsewhere. The CSLB did hire a background investigator in February 2012 to perform background checks for peace officer candidates. Two of the nine police officers have been hired and background checks are underway for six potential candidates. Recruiting for the remaining position is active.
  14. The objective to staff a subsequent arrest unit through the Budget Change Proposal process is scheduled to be done by the 3rd quarter of 2012. However, five Budget Change Proposals were submitted and all were rejected. Request has been sent to the Department of Consumer Affairs to reallocate and Enforcement Representative position to assist the Subsequent Arrest Unit.
  15. The objective to update the Enforcement staff classification system is scheduled to be completed by the 3rd quarter of 2012, estimated completion date is May 1, 2012. A contract was executed with Cooperative Personnel Services to:
    a. Establish a Deputy Chief Position
    b. Reclassify the CSRs to SSAs
    c. Reclassify ER Series to Investigator Series
  16. The objective to implement an online license exam scheduling tool was scheduled to be completed by the 4th quarter of 2012. This is tied to the BreEZe system requirement and the CSLB is part of the third and final phase of implementation which is scheduled for the 4th quarter of 2012.

Enforcement Prioritization

The CSLBs highest priority is to protect the public and is laid out in Business and Professions Code section 7000.6. A large part of protecting the public deals with the investigation of filed complaints.


Consumer Complaints

There are approximately 17,000 consumer complaints filed each year. There are 30 Consumer Services Representatives and 70 Enforcement Representatives to handle these complaints. The staff is effectively managing the complaint workload and provides a high level of consumer protection and service since the Board implemented process changes and performance goals in 2006.


Industry Complaints

There are 30 Enforcement Representatives to handle the investigations for industry complaints. Because of the underground economy there are many demands for the CSLB to have more resources to make it a level playing field for the law-abiding contractors. Board assistance is needed to prioritize the complaint investigations and approving process changes to manage the workload.


The Board needs to consider if the list of Top Ten enforcement activities is a comprehensive list, in the proper prioritization and if the proposed controls are appropriate to manage the workload.

The Top Ten list is as follows:

  1. Unlicensed practice at active jobsites - The controls to manage the workload are to respond to leads with a CSLB Enforcement Representative conducting a site visit.
  2. Workers' Compensation violations as active jobsites - The controls to manage the workload are to respond to leads with a CSLB Enforcement Representative conducting a site visit.
  3. Labor/Health and Safety Code (DOSH/DSLE MOUs) - The controls to manage the workload are for a CSLB Enforcement Representative and partnering agency investigator to conduct a site visit.
  4. Out-of-classification licensees - The controls to manage the workload are to determine if there is a health and safety issue or if unsure if the contractor is licensed, then a site visit may be warranted. Otherwise, this will be addressed by Intake/Mediation Center or Investigative Center staff.
  5. Building permit enforcement - The controls to manage workload are to investigate only when jurisdiction is cooperative. The building department must be willing to waive fees associated with conducting the investigations and the jurisdiction must provide the CSLB with their work product. Evidence of no permit must be attained. If work is in progress it is possible that a site visit will be conducted.
  6. Public Works investigations - The controls to manage the workload are that SWIFT will respond to leads and perform sweeps with other state agencies as applicable. Otherwise, leads will be referred to the CSLB Public Works Unit.
  7. Electrician Certification - The controls to manage the workload are that they will only conduct a site visit to verify certification if we are responding with partnering agencies and/or observe workers' compensation violations. Otherwise, work product from a labor compliance agency is required.
  8. Illegal print advertisements - The controls to manage the workload is to process through the Intake/Mediation Center where a Warning Letter, Stop Order of Telephone Disconnect can be issued. The action taken is then referred to SWIFT for use in future stings.
  9. Referral fees/kickbacks - The controls to manage the workload are that enforcement will be primarily handled by the Intake/Mediation Center. Contractors will be contacted and educated on Business and Professions Code section 7157 - Referral Fee Restrictions. Warning letters will then be issued and used for more stringent action. Investigative Center staff will conduct two stings per calendar year to target egregious offenders.
  10. Outreach - The controls to manage the workload is that the Public Affairs Office will take the lead. The Enforcement Division will develop a list of Enforcement Representatives available to assist the Public Affairs Office when necessary. To minimize the impact on enforcement workload, staff will work with the EDD to develop an outreach packet to educate Legislators, contractors and consumers on the dangers of the underground economy.

Unlicensed Practice Investigators

Twenty-seven percent of complaints in any given year involve unlicensed contractors. Many of those complaints are made by consumers who repeatedly hire unlicensed contractors and then file complaints so that they can avoid paying for the service received. This is taking up valuable resources. The Board has approved a letter for consumers which warn of the serious financial loss and potential liability they expose themselves to when they repeatedly hire unlicensed operators. However, there are still some questions to be answered:

1. Educational/Warning Letters


To discourage consumers from repeatedly hiring unlicensed operators, should staff:
    • Send education/warning letters to all consumers filing complaints against unlicensed operators (currently letters are sent only to select consumers)? If so, should the complaint be revised and automated (this will require IT resources).
    • Develop criteria regarding the referral of a complaint to a local prosecutor (that may provide a restitution hearing) in lieu of an administrative action?

2. Referral to Other State Agencies

Labor Code section 2750.5 established that a person performing services who requires a license is an employee, rather than an independent contractor, when the person is not licensed.

    • Should referral be made to the EDD (tax withholding), DLSE (workers' compensation insurance), and the local building department (permit requirements) when a consumer repeatedly hires unlicensed operators?
    • Should staff develop criteria to work cases resulting from consumers who are complicit in aiding their contractor in avoiding business requirements? Example: consumer pays contractor in cash to receive a lower contractor price, obtains an owner building permit, or agrees to perform the work without a building permit.

3. Minor Work Exemption

Business and Professions Code section 7048 exempts minor (handyman type) work from licensure requirements if the aggregate value of the work is less than $500. However, pursuant to Business and Professions Code section 7027.2, the $500 exemption does not apply if the unlicensed contractor solicits for work without stating in a solicitation that he/she is "not a licensed contractor."
    • Should the CSLB take administrative action for the unlawful advertisement but not for the contracting activity valued at less than $500 (Attorney General Recommendation)?
    • Should the Board pursue legislation to clarify the minor work exemption?

Public Works

August 2010 started the Public Works Investigative Unit with two Enforcement Representatives to focus on public works investigations. It has been very successful with 118 complaints in 2011.


Unforeseen Workload

It was originally thought that the focus would be on contractors that:

  1. Have been disbarred by the Labor Commissioner or awarding agency/local jurisdiction;
  2. Are working without a license or working out of their classification, and
  3. Are illegally subcontracting pursuant to the Public Contract Code,

This has not been the types of complaints investigated by the Public Works Unit. There is also other information regarding underground economy activities on public works projects that are not being addressed by other state agencies.

The Board is now being asked to consider making policy decisions that would allow for enforcement to address these violations independent of other state agencies.

1. Prevailing Wage Violation Referrals

The DLSE or an Awarding Agency's Labor Compliance Program (LCP) has primary jurisdiction to investigate and take action against construction employees violating prevailing wage requirements.

Pursuant to Business and Professions Code (B&P) §7110.5 - Initiation of action against contractor after receipt of Labor Commissioner's finding of a willful violation of Labor Code -- CSLB can impose discipline on a license based on the final order taken by DLSE/LCP.

Unfortunately, the DLSE/ LCP appeal process typically takes more than one year and no license disclosure is present to assist awarding agencies in prequalifying bidders for public works projects.


Should staff develop criteria to take disciplinary action separate from DSLE's action on the more egregious offenders to provide complaint disclosure on the license?

2. Outreach to Awarding Agencies and Public Works Contractors

Complaints received by CSLB from government agencies, LCPs, and public works contractors confirm that many awarding agencies and public works prime contractors do not understand:

a. License Law Requirements (classifications, license structure, etc.)

b. Prequalification's Strategies

c. How to Effectively Use the CSLB website

d. Public Contract Code Requirements

e. Evidence Requirements to File a Complaint


Should staff develop a public works brochure and/or a training module for awarding agencies and public works contractors? If so, what are the top educational/training topics?

3. Legislative Considerations

Should legislative proposals be considered to address the following deficiencies in the law?

  • Currently, CSLB is unable to disclose a legal action taken by a partner state agency on a license history. Should B&P §7124.6 -- Public Access to Complaints against Licensees; Disclaimer; Limitations of disclosure -- be revised to provide disclosure of a partner state agency's finding of a violation of law without CSLB having to file a formal disciplinary action?
  • PCC §4017.2 prohibits a subcontractor listed by a prime contractor as furnishing and installing carpeting, from subcontracting any portion of the labor unless the listed subcontractor specified the subcontractor to perform the labor in his/her bid to the prime. With the exception of a listed subcontractor that installs carpet, the PCC does not prohibit the listed subcontractors from bid shopping any portion of their subcontracted work or subcontracting to others who fail to pay prevailing wages. Should the PCC be revised to preclude listed subcontractors from bid shopping or subcontracting to others without approval from the awarding authority?
  • B&P §7125.4 requires that a licensee have a certificate of WC on file with CSLB prior to employing anyone subject to WC coverage. The law does not require that listed subcontractors verify WC coverage prior of unlisted subcontractors that have employees. Should B&P §7125.4 be revised to require that contractors verify WC coverage for their subcontractors who have employees?
  • The law does not provide for CSLB to discipline contractors who are employers (easily confirmed by certified payroll) and have not registered as employers with the Employment Development Department (EDD). Should contractors' license law be revised to provide for discipline for contractors who are employers and are not registered as employers with EDD?




June 5, 2012, Orange County, Joint Board Meeting with Nevada State Contractors' Board.

Abdulaziz, Grossbart & Rudman

provide this information as a service to its friends & clients and it does not establish an attorney-client relationship with the reader. This document is of a general nature and is not a substitute for legal advice. Since laws change frequently, contact an attorney before using this information.

Abdulaziz, Grossbart & Rudman

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