Senate BillNo. 263


Introduced by Senator Monning

(Principal coauthor: Assembly Member Achadjian)

February 13, 2013


An act to amend Sections 7028, 7031, and 7114 of, to add Section 7026.4 to, and to repeal and add Section 7118 of, the Business and Professions Code, relating to contractors.

LEGISLATIVE COUNSEL’S DIGEST

SB 263, as introduced, Monning. Contractors: unlicensed activity.

The Contractors’ State License Law provides for the licensure and regulation of contractors by the Contractors’ State License Board within the Department of Consumer Affairs. The law prohibits a person engaged in the business or acting in the capacity of a contractor from bringing an action for collection of compensation for the performance of an act or contract for which a contractor’s license is required without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract.

This bill, instead, would prohibit a person engaged in the business or acting in the capacity of a contractor from bringing an action for collection of compensation for the performance of an act or contract for which a contractor’s license is required without alleging that he or she was duly licensed during the performance of that act or contract for which the person is seeking compensation. The bill would define “duly licensed” for purposes of these provisions, and would make other conforming changes.

The Contractors’ State License Law makes it a misdemeanor for a person to engage in the business or act in the capacity of a contractor without having a license, unless the person is particularly exempted.

This bill, instead, would provide that, unless exempted, it is a misdemeanor for a person to engage in the business or act in the capacity of a contractor if the person either has never been licensed pursuant to the Contractors’ State License Law, or the person was a licensee, but performed acts covered by the law under a license that was inactive, expired, revoked, or under suspension for any reason. By changing the definition of a crime, the bill would impose a state-mandated local program.

The Contractors’ State License Law provides that entering into a contract with a contractor while the contractor is not licensed constitutes a cause for disciplinary action. That law also provides that aiding or abetting an unlicensed person to evade the law, or engaging in specified acts with an unlicensed person with the intent to evade the law, constitutes a cause for disciplinary action.

This bill, instead, would provide that entering into a contract with any person that is performed during a period in which that person’s license was inactive, expired, revoked, or under suspension is a cause for discipline if the purpose of the contract is for that person to perform an act subject to licensure under the law. The bill also would define “unlicensed person” for purposes of these provisions.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 7026.4 is added to the Business and
2Professions Code
, to read:

3

7026.4.  

(a) A person shall be deemed “duly licensed” or “duly
4licensed to act in the capacity of a contractor” for purposes of this
5chapter if both of the following conditions are met:

6(1) The act was performed under a board-issued license during
7a period in which the license was not inactive, expired, revoked,
8or under suspension for any reason.

9(2) The act falls within a license classification in which the
10licensee was authorized to engage, or is incidental and
P3    1supplemental as provided under Section 7059, and defined in
2Section 831 of Division 8 of Title 16 of the California Code of
3Regulations.

4(b) Any person that does not meet the conditions specified in
5paragraphs (1) and (2) of subdivision (a) shall be deemed
6unlicensed, except as otherwise provided in this chapter.

7

SEC. 2.  

Section 7028 of the Business and Professions Code is
8amended to read:

9

7028.  

(a) begin deleteIt end deletebegin insertUnless exempted from this chapter, it end insertis a
10misdemeanor for a person to engage in the business or act in the
11capacity of a contractor within this statebegin delete without having a license
12therefor, unless the person is particularly exempted from the
13provisions of this chapter.end delete
begin insert under either of the following conditions:end insert

begin insert

14(1) The person has never been licensed in accordance with this
15chapter.

end insert
begin insert

16(2) The person was a licensee, as defined in Section 7096, but
17performed acts covered by this chapter under a license that was
18inactive, expired, revoked, or under suspension for any reason.

end insert

19(b) A first conviction for the offense described in this section
20is punishable by a fine not exceeding five thousand dollars ($5,000)
21or by imprisonment in a county jail not exceeding six months, or
22by both that fine and imprisonment.

23(c) If a person has been previously convicted of the offense
24described in this section, unless the provisions of subdivision (d)
25are applicable, the court shall impose a fine of 20 percent of the
26contract price, or 20 percent of the aggregate payments made to,
27or at the direction of, the unlicensedbegin delete contractorend deletebegin insert personend insert, or five
28thousand dollars ($5,000), whichever is greater, and, unless the
29sentence prescribed in subdivision (d) is imposed, the person shall
30be confined in a county jail for not less than 90 days, except in an
31unusual case where the interests of justice would be served by
32imposition of a lesser sentence or a fine. If the court imposes only
33a fine or a jail sentence of less than 90 days for second or
34subsequent convictions under this section, the court shall state the
35reasons for its sentencing choice on the record.

36(d) A third or subsequent conviction for the offense described
37in this section is punishable by a fine of not less than five thousand
38dollars ($5,000) nor more than the greater amount of ten thousand
39dollars ($10,000) or 20 percent of the contract price, or 20 percent
40of the aggregate payments made to, or at the direction of, the
P4    1unlicensedbegin delete contractorend deletebegin insert personend insert, and by imprisonment in a county
2jail for not more than one year or less than 90 days. The penalty
3provided by this subdivision is cumulative to the penalties available
4under all other laws of this state.

5(e) A person who violates this section is subject to the penalties
6prescribed in subdivision (d) if the person was named on a license
7that was previously revoked and, either in fact or under law, was
8held responsible for any act or omission resulting in the revocation.

9(f) If thebegin insert unlicensedend insert person engaging in the business of or acting
10in the capacity ofbegin delete an unlicensedend deletebegin insert aend insert contractor has agreed to furnish
11materials and labor on an hourly basis, “the contract price” for the
12purposes of this section means the aggregate sum of the cost of
13materials and labor furnished and the cost of completing the work
14to be performed.

15(g) Notwithstanding any otherbegin delete provision ofend delete law, an indictment
16for any violation of this section bybegin delete theend deletebegin insert anend insert unlicensedbegin delete contractorend delete
17begin insert personend insert shall be foundbegin insert,end insert or an information or complaint filedbegin insert,end insert within
18four years from the date of the contract proposal, contract,
19completion, or abandonment of the work, whichever occurs last.

20(h) For any conviction under this section, a person who utilized
21the services of the unlicensedbegin delete contractorend deletebegin insert personend insert is a victim of crime
22and is eligible, pursuant to subdivision (f) of Section 1202.4 of the
23Penal Code, for restitution for economic losses, regardless of
24whetherbegin delete that personend deletebegin insert he or sheend insert had knowledge that thebegin delete contractorend delete
25begin insert personend insert was unlicensed.

26

SEC. 3.  

Section 7031 of the Business and Professions Code is
27amended to read:

28

7031.  

(a) Except as provided in subdivision (e),begin delete noend deletebegin insert aend insert person
29engaged in the business or acting in the capacity of a contractor,
30begin delete mayend deletebegin insert shall notend insert bring or maintain any action, or recover in law or
31equity in any action, in any court of this state for the collection of
32compensation for the performance of any act or contractbegin delete whereend delete
33begin insert for whichend insert a license is required by this chapter without alleging that
34he or she wasbegin delete aend delete duly licensedbegin delete contractor at all timesend delete during the
35performance of that act or contractbegin insert for which the person is seeking
36compensationend insert
, regardless of the merits of the cause of action
37brought by the person, except that this prohibition shall not apply
38to contractors who are each individually licensed under this chapter
39but who fail to comply with Section 7029.

P5    1(b) Except as provided in subdivision (e), a person who utilizes
2the services of an unlicensedbegin delete contractorend deletebegin insert person, as described in
3subdivision (b) of Section 7026.4,end insert
may bring an action in any court
4of competent jurisdiction in this state to recoverbegin delete allend delete compensation
5paid to the unlicensedbegin delete contractorend deletebegin insert personend insert for performance of any
6act or contractbegin insert that occurred during the period or periods in which
7the person was unlicensedend insert
.

8(c) A security interest taken to secure any payment for the
9performance of any act or contract for which a license is required
10by this chapter is unenforceable if the person performing the act
11or contract was notbegin delete aend delete duly licensed contractorbegin delete at all timesend delete during
12the performance of the act or contractbegin insert for which the person is
13seeking compensationend insert
.

14(d) If licensure or proper licensure is controverted, then proof
15of licensure pursuant to this section shall be made by production
16of a verified certificate of licensure from the Contractors’ State
17License Board which establishes that the individual or entity
18bringing the action was duly licensed in the proper classification
19of contractorsbegin delete at all timesend delete during the performance of any act or
20contract covered by the action. Nothing in this subdivision shall
21require any person or entity controverting licensure or proper
22licensure to produce a verified certificate. When licensure or proper
23licensure is controverted, the burden of proof to establish licensure
24or proper licensure shall be on the licensee.

25(e) The judicial doctrine of substantial compliance shall not
26apply under this sectionbegin delete whereend deletebegin insert ifend insert the person who engaged in the
27business or acted in the capacity of a contractor has never been a
28duly licensed contractor in this state. However, notwithstanding
29subdivision (b) of Section 143begin insert and subdivision (b) of Section
307026.4end insert
, the court may determine that there has been substantial
31compliance with licensure requirements under this section if it is
32shown at an evidentiary hearing that the person who engaged in
33the business or acted in the capacity of a contractor (1) had been
34duly licensed as a contractor in this state prior to the performance
35of the act or contract, (2) acted reasonably and in good faith to
36maintain proper licensure, (3) did not know or reasonably should
37not have known that he or she was not duly licensed when
38performance of the act or contract commenced, and (4) acted
39promptly and in good faith to reinstate his or her license upon
40learning it was invalid.

P6    1(f) The exceptions to the prohibition against the application of
2the judicial doctrine of substantial compliance found in subdivision
3(e) shall apply to all contracts entered into on or after January 1,
41992, and to all actions or arbitrations arising therefrom, except
5that the amendments to subdivisions (e) and (f) enacted during the
61994 portion of the 1993-94 Regular Session of the Legislature
7shall not apply to either of the following:

8(1) Any legal action or arbitration commenced prior to January
91, 1995, regardless of the date on which the parties entered into
10the contract.

11(2) Any legal action or arbitration commenced on or after
12January 1, 1995, if the legal action or arbitration was commenced
13prior to January 1, 1995, and was subsequently dismissed.

14

SEC. 4.  

Section 7114 of the Business and Professions Code is
15amended to read:

16

7114.  

(a) begin insertAll of the following shall constitute a cause for
17disciplinary action pursuant to this chapter:end insert
begin delete Aidingend delete

18begin insert(1)end insertbegin insertend insertbegin insertAidingend insert or abetting an unlicensed person to evade the
19provisions of this chapterbegin delete or combiningend deletebegin insert.end insert

20begin insert(2)end insertbegin insertend insertbegin insertCombiningend insert or conspiring with an unlicensed person,begin delete or
21allowingend delete
begin insert with the intent to evade the provisions of this chapter.end insert

22begin insert(3)end insertbegin insertend insertbegin insertAllowingend insert one’s license to be used by an unlicensed person,
23begin delete or actingend deletebegin insert with the intent to evade the provisions of this chapter.end insert

24begin insert(4)end insertbegin insertend insertbegin insertActingend insert as agentbegin delete orend deletebegin insert,end insert partnerbegin delete orend deletebegin insert,end insert associate, or otherwise, of an
25unlicensed person with the intent to evade the provisions of this
26chapterbegin delete constitutes a cause for disciplinary actionend delete.

27(b) A licensee who is found by the registrar to have violated
28subdivision (a)begin delete shallend deletebegin insert is subjectend insert, in accordance withbegin delete the provisions
29ofend delete
this article,begin delete be subjectend delete to the registrar’s authoritybegin delete pursuant to
30Section 7099end delete
to order payment of a specified sum to an injured
31party, including, but not limited to, payment for any injury resulting
32from the acts of the unlicensed person.

begin insert

33(c) For the purposes of this section, the term “unlicensed
34person” shall apply only to a person that has never been licensed
35in accordance with this chapter, or has performed acts covered
36by this chapter under a license that was inactive, expired, revoked,
37or under suspension for any reason.

end insert
38

SEC. 5.  

Section 7118 of the Business and Professions Code is
39repealed.

begin delete
P7    1

7118.  

Entering into a contract with a contractor while such
2contractor is not licensed as provided in this chapter constitutes a
3cause for disciplinary action.

end delete
4

SEC. 6.  

Section 7118 is added to the Business and Professions
5Code
, to read:

6

7118.  

It is a cause for discipline for any licensee to enter into
7a contract with any person that is not in compliance with paragraph
8(1) of subdivision (a) of Section 7026.4, if the purpose of the
9contract is for that person to perform an act that is subject to
10licensure under this chapter.

11

SEC. 7.  

No reimbursement is required by this act pursuant to
12Section 6 of Article XIII B of the California Constitution because
13the only costs that may be incurred by a local agency or school
14district will be incurred because this act creates a new crime or
15infraction, eliminates a crime or infraction, or changes the penalty
16for a crime or infraction, within the meaning of Section 17556 of
17the Government Code, or changes the definition of a crime within
18the meaning of Section 6 of Article XIII B of the California
19Constitution.



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