Happy New Year! Meet the New Requirements for Contractors Under AB 830
January 3, 2022
Practice team: Construction
Assembly Bill 830 is a new law effective January 1, 2022 which affects all California contractors that hold their license through a “Responsible Managing Employee” or “Responsible Managing Officer.” In short, AB 830 imposes additional requirements on contractors by amending Bus. & Prof. Code §§ 7068 and 7068.1 by: (1) defining the “supervision and control” of construction projects by the RMO/RME, (2) requiring RMEs to be “bona fide employees” and “actively engaged” in construction operations, and (3) specifying certain criteria of what the RMO/RME must fulfill and submit to the CSLB to qualify for the license.
What are Bus. & Prof. Code §§ 7068 and 7068.1?
Under Bus. & Prof. Code § 7068, the Contractors State License Board (“CSLB”) requires an applicant for a contractor’s license to show the degree of knowledge and experience in the classification applied for (e.g. “B-licenses” for general contractors, “C-licenses” for specialty subcontractors), as well as the general knowledge of the building, safety, health, and lien laws of the state and of the administrative principles of the contracting business necessary for the safety and protection of the public. § 7068 authorizes a contractor’s knowledge and experience to be established through a "responsible managing employee" or "responsible managing officer" who is qualified for the same license classification as the one being applied for.
Before AB 830, Bus. & Prof. Code § 7068 defined “responsible managing employee” to mean an individual who is a “bona fide employee” of the contractor and is “actively engaged in the classification of work for which that responsible managing employee is the qualifying person on behalf of the [contractor]” (the statute stopped short of further defining the terms “bona fide employee” or “actively engaged”).
Under Bus. & Prof. Code § 7068.1, the qualifying RMO/RME is responsible for exercising supervision and control of their employer’s or principal’s construction operations as necessary to secure full compliance with the Contractors’ State License Law and the rules and regulations of the CSLB (the statute stopped short of further defining the term “direct supervision and control”).
Before AB 830, § 7068.1 required every licensee qualifying by the appearance of a qualifying individual to submit detailed information on the qualifying individual’s duties and responsibilities for supervision and control of the applicant’s construction operations. A violation of any portion of § 7068.1 (either version) constitutes a cause for disciplinary action and was punishable as a misdemeanor, as specified.
What are the new requirements imposed by AB 830?
As to Bus. & Prof. Code § 7068, AB 830 defines “bona fide employee of the applicant” to mean an employee who is “permanently employed by the applicant,” and “actively engaged” to mean working “32 hours per week, or 80% of the total hours per week that the applicant’s business is in operation, whichever is less.”
As to Bus. & Prof. Code § 7068.1, AB 830 defines “supervision or control” to mean “direct supervision or control or monitoring and being available to assist others to whom direct supervision and control has been delegated,” and “direct supervision or control” to mean “supervising construction, managing construction activities by making technical and administrative decisions, checking jobs for proper workmanship, or supervision on construction job sites.”
AB 830 also requires an “employment duty statement” prepared by the qualifier’s employer or principal, which must provide detailed information on the RMO/RME’s “supervision and control” of construction operations, as well as the qualifying individual’s duties and responsibilities.
By adopting the existing penalty subsection for any violation of § 7068.1, AB 830 also makes the failure to comply with any of the new requirements a cause for disciplinary action and punishable as a misdemeanor.
What are the potential consequences of failing to comply with the revised Bus. & Prof. Code §§ 7068 and 7068.1?
Bus. & Prof. Code § 7068.1 already made a violation of its requirements cause for disciplinary action by the CSLB and punishable as a misdemeanor, including a potential fine ranging from $3,000-$5,000, as specified. Now that the statute has been revised to add the above requirements, failure to comply with any of the new requirements would constitute cause to impose these penalties.
Moreover, failure to comply with these new requirements could invite attacks on the contractor’s legitimacy, with uncertainty as to the proper RMO/RME potentially risking a challenge to the validity of the contractor’s license and encouraging claims for disgorgement and/or withholding payment to the contractor.
What are some ways that contractors can mitigate the risks associated with AB 830?
All contractors who currently use an RMO/RME should make sure that they can demonstrate that the qualifying individual works at least 32 hours per week, or 80% of the total hours per week that the contractor is in operation. If not, they should consider adjusting the RMO/RME’s work schedule to meet these requirements or if necessary, finding another qualified individual to act as RMO/RME. If the contractor does choose to substitute their RMO/RME, they must complete and submit the "Application for Replacing the Qualifying Individual" form found on the CSLB website, which has been revised to match AB 830’s revisions.
Applicants for contractors’ licenses must also ensure that the “Application for Original Contractors License,” is fully completed and accurately meets the new requirements of detailing the qualifier’s duties and responsibilities for supervision and control of construction operations. Fortunately, the application has also been revised to match AB 830 and includes the “employment duty statement.”
Contractors should make sure their “chain of command” and management structure as to the supervision and control of all construction activities is crystal clear, and ensure that the RMO/RME who delegates any of their responsibilities is genuinely available to assist on any construction projects.