BILL ANALYSIS Ó SB 561 Page 1 Date of Hearing: June 23, 2015 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Susan Bonilla, Chair SB 561(Monning) - As Amended June 17, 2015 SENATE VOTE: 38-0 SUBJECT: Contractors: home improvement salespersons. SUMMARY: Eliminates the requirement that a home improvement salesperson (HIS) register separately with the Contractors State License Board (CSLB) for each home improvement contractor he or she works for, and instead allows an HIS to utilize a single registration with one or more licensed contractors. EXISTING LAW: 1)Provides for the licensure and regulation of contractors, including home improvement contractors, under the Contractors' State License Law (Contractors Law) by the CSLB within the Department of Consumer Affairs (DCA). The CSLB is under the direction of the registrar of contractors (Registrar). (Business and Professions Code (BPC) § 7000 et seq.) 2)Defines a HIS as a person employed by a home improvement contractor licensed under the Contractors Law to solicit, sell, negotiate, or execute contracts for home improvements, SB 561 Page 2 for the sale, installation or furnishing of home improvement goods or services, or of swimming pools, spas, or hot tubs, except as specified. (BPC § 7152) 3)Provides that it is a misdemeanor for any person to engage in the occupation of a salesperson for one or more home improvement contractors within this state without having a registration issued by the Registrar for each of the home improvement contractors by whom he or she is employed as a HIS. (BPC § 7153) 4)Provides that HIS registrations expire subject to board determination. (BPC § 152.6) 5)Provides that an application for renewal of registration is delinquent if the application is not postmarked by the date on which the registration would otherwise expire. (BPC § 7153.3(a)) 6)Provides that a home improvement contractor who employs a person to sell home improvement contracts while that person is not registered by the Registrar as a HIS, is subject to disciplinary action. (BPC § 7154) 7)Requires that every application form for an original contractor license, for renewal thereof, for reinstatement or for reissuance, including both active and inactive licenses, shall be signed by both the applicant and by the person qualifying on behalf of an individual or firm, as specified. (BPC § 7067.6) THIS BILL: 8)Specifies that it is no longer a misdemeanor for a person to SB 561 Page 3 engage in the occupation of a salesperson for one or more home improvement contractors without having a registration issued by the Registrar for each of the home improvement contractors by whom he or she is employed as a HIS and instead requires a HIS to have, at the time of the sales transaction, a current and valid home improvement salesperson registration issued by the Registrar. 9)Provides that these registrations expire two years from the last day of the month in which the registration was issued, or two years from the date on which the renewed registration last expired. 10)Requires a home improvement contractor to notify the Registrar, in writing, about the employment of a registered HIS prior to his or her employment, including his or her name and HIS registration number, and when that HIS ceases to be employed by the contractor, as specified, and subjects a home improvement contractor to disciplinary action if he or she fails to report that information. 11)Authorizes the CSLB to implement a system, by regulation, which provides for the electronic transmission of an initial application or renewal application for HIS registration and electronic transmissions of specified notices. 12)Authorizes the CSLB to implement a system, by regulation, which provides for the electronic transmission of an initial application or renewal application for a contractor license and the acceptance of a digital or electronic signature as part of the filing of that application. 13)Makes other clarifying and conforming changes. FISCAL EFFECT: According to the Senate Appropriations Committee analysis dated May 18, 2015, this bill will result in: "One-time CSLB programming costs in the range of $110,000 to SB 561 Page 4 $130,000 in 2015-16 to provide for the changes to the HIS registration and contractor notification requirements. Estimated CSLB costs of up to $50,000 in 2016-17 to adopt regulations regarding electronic submission of HIS registration applications and contractor notifications. The CSLB indicates it can regulatory absorb costs within existing resources." COMMENTS: Purpose. This bill is sponsored by the CSLB . According to the author, "[This bill] streamlines the HIS registration process and provides a registration system that makes it easier for an HIS to work for multiple contractors while continuing to be in good standing with the [CSLB]." Background. A HIS is a person employed by a home improvement contractor licensed by the CSLB who is registered to solicit, sell, negotiate, or execute contracts for home improvements on behalf of the contractor. Existing law requires that a HIS apply for, and be separately registered for each distinct contractor for which he or she works. Because HISs often work for more than one contractor, the HIS is required to register multiple times with the CSLB. In the 2013-14 fiscal year (FY), the CSLB received 9,522 HIS registration applications, or approximately 800 applications per month, representing a nearly 30% increase from FY 2012-13, and a nearly 40% increase from FY 2011-12. According to the author, the number of applications received per month has continued to grow while the number of staff to process these requests has not increased, leading to longer processing times. The average processing time for a HIS registration has grown from 22 days in FY 2011-12, to 64 days in FY 2012-13, to 77 days in FY 2013-14, SB 561 Page 5 according to the 2014 CSLB Sunset Review Report. As of June, 2015, the CSLB has over 12,600 active registrants, over 5,700 registrants that are expired but eligible to be renewed, and over 85,000 invalid registrants (or registrations that are expired and no longer eligible to be renewed). The number of invalid registrations is due in large part to salespersons registering with new employers, and also represents a high turnover in the industry. Roughly 10% of the active registrants hold multiple registrations. This bill would streamline the registration process for a HIS and eliminate the requirement that an HIS separately register to work for each contractor. Instead, a HIS would only have to register with the CSLB one time, and any home improvement contractor who employs the HIS would have to notify the CSLB about a HIS's pending employment, including his or her name and registration number, and when his or her employment ceases. In addition, this bill would allow the CSLB to implement a system to provide for the electronic transmission of applications for a HIS registration, and also for contractor licenses, which should further improve processing times and increase efficiency. Prior Related Legislation. AB 2457 (Nakanishi), Chapter 106, Statutes of 2006, exempted from HIS registration a general partner of a licensee and would make the exemption, as it applies to such a general partner or a corporate officer or qualifying person, applicable only in specified circumstances. SB 364 (Figueroa), Chapter 789, Statutes of 2003, delayed until July 1, 2004, the requirement that an applicant for registration as a HIS furnish a full set of fingerprints to the CSLB. SB 1953 (Figueroa), Chapter 744, Statutes of 2002, required all SB 561 Page 6 applicants for a HIS license to submit a set of fingerprints to the CSLB with his or her application and requires the CSLB to obtain and receive criminal history information from the Department of Justice and the Federal Bureau of Investigation for a criminal history records check. AB 2544 (Bill Campbell), Chapter 372, Statutes of 2002, required the CSLB to post specified information on its website each week regarding HIS registration applications. ARGUMENTS IN SUPPORT: According to the CSLB , "This bill eliminates the requirement that a[n]?HIS separately register to work for each contractor and, instead, allows a properly registered HIS to utilize his or her individual registration with one or more licensed contractors. With this change, the licensed contractor that employs an HIS would be required to notify CSLB about the pending employment of any registered HIS, prior to him or work beginning work for the contractor?. The change proposed by this bill will improve the current registration process and provide increased flexibility of HIS registrants." According to the California Fence Contractors and the Flasher Barricade Association , "Many?members employ [HIS] in their construction companies. They are a critical component of these companies' operations and generate a significant portion of their sales. Unfortunately, current law requires that each and every salesperson who comes to work for a member company must re-register with the [CSLB] again even though most are already registered in good standing with the Board. This redundancy within the current law is costing these companies and their new salespeople literally thousands of dollars in lost revenue as they cannot legally go to work until their new registration application is processed through the CSLB. With the economy SB 561 Page 7 finally starting to pick-up significantly, hundreds of salespeople statewide are all attempting to register with new contractors at the same time?.This measure will eliminate the need to re-register every time a salesperson goes to work for another contractor." According to the California Solar Energy Industries Association , "[This bill] promises to reduce the amount of time and paperwork needed to properly comply with the state's [HIS] licensing procedure at the [CSLB]?.As the solar industry ramps up our work to help the state meet its clean energy goals, it is imperative that we reduce soft costs wherever and whenever we can. The current delays in hiring and employing salespersons is adding to the costs of going solar. Streamlining and modernizing the process, while maintaining critically important consumer protections, is a significant step in the right direction of lowering the cost of solar power for all California consumers." ARGUMENTS IN OPPOSITION: None on file. REGISTERED SUPPORT: Contractors State License Board (sponsor) California Fence Contractors California Solar Energy Industries Association Flasher Barricade Association Gallagher's Plumbing, Heating, and Air Conditioning REGISTERED OPPOSITION: SB 561 Page 8 None on file. Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301