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New Jersey’s Appellate Division recently reversed a trial court’s dismissal of a general contractor’s claim against a performance bond, holding that the bond must cover the general contractor as the intended obligee, even though the general contractor was not expressly named in the bond.

In Allied Building Products Corp. v. J. Strober & Sons, LLC, et al., A-1113-12T4 (NJ App. Div., September 5, 2014), Dobco, Inc. (“Dobco”) was the general contractor for a science hall renovation project at William Paterson University. J. Strober & Sons, LLC (“Strober”) bid for and was awarded a roofing subcontract on the project. The subcontract between Dobco and Strober required Strober to obtain payment and performance bonds, in the form annexed to the Dobco-Strober subcontract (which required that Strober be named obligee on the bonds).

Strober was awarded the subcontract with Dobco, but in accordance with the company’s procedure, Colonial did not review the actual subcontract. Nevertheless, an underwriter approved issuance of the performance bond, and Strober paid for the bond.

However, when the performance bond was issued, it named William Paterson University as the obligee, rather than Dobco. Dobco advised Strober that it rejected the bond, because it was required to name Dobco as obligee. As a result, Strober issued payment and performance bonds naming Dobco as obligee, using a power of attorney and Colonial’s seal. Colonial asserted that the bonds were a nullity, because Strober was only authorized to issue bid bonds using Colonial’s seal and power of attorney, in accordance with its “partnership account.” Nevertheless, Dobco rejected these bonds as well, and demanded that Colonial issue the bonds with various documents that ordinarily accompany payment and performance bonds. Strobco did not procure the bonds, but nevertheless began its work on the project.

During the project, Dobco became concerned with Strober’s performance, and requested the bonds that had not been delivered. Strober repeatedly contacted Colonial, but was advised several times that the bonds were “still in underwriting,” even though Colonial had already accepted the premium. Eventually, Dobco terminated Strober, and Strober filed for bankruptcy protection. Dobco filed a claim against the bond, but it was denied because Dobco had rejected both sets of bonds, and Colonial maintained, therefore, that they were not in effect.

On cross-motions for summary judgment, the trial court dismissed Dobco’s claim against the bond, citing established New Jersey law that a surety is “chargeable only according to the strict terms of its undertaking and its obligation cannot and should not be extended either by implication or by construction beyond the confines of its contract.” Since Dobco rejected both bonds, the trial court found that there was no valid contract between Colonial and Dobco.

The Appellate Division reversed, noting that, when a bond incorporates a contract by reference, the bond and the contract must be considered as one integrated document in ascertaining the meaning of the bond’s provisions. The Appellate Division held that “strict construction” should have only applied after the extent of the surety’s undertaking was determined; it should not have been used to interpret the language creating the surety’s obligations under the bond. Thus, the Court held that the bond was intended to secure Strober’s contractual obligation to Dobco, which required Strober to obtain a performance bond, naming Dobco as obligee. In so holding, the Court stated, “[W]hen Colonial agreed to bond [Strober’s] performance, it undertook the obligation to do so in the form required by the contract. That Colonial chose not to review the contract it bonded cannot relieve it of obligations voluntarily undertaken.” The Court was unmoved by Colonial’s argument that Dobco rejected both bonds, and ordered the bond reformed, consistent with the Dobco-Strober subcontract.

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To bid for, contract for and perform work on most construction projects in California, a contractor must obtain a contractor’s license, and construction contracts and subcontracts entered into must be in the licensee’s name. When two licensees endeavor to undertake a project jointly, often they do so as what is commonly referred to as a joint venture or JV. (Such a venture may be established under a detailed written JV, bidding, teaming, partnership or LLC agreement, or may simply be a general partnership that results from the joint submission of a bid or performance of work.) What licensees may not realize is that to contract for work in the name of the joint venture, the licensees must first obtain a joint venture license from the Contractors’ State License Board (CSLB). Contractors that JV should carefully review the rules governing when a joint venture license is required.

JV License Requirements

It is a misdemeanor for any person to (i) engage in the business or act in the capacity of a contractor (Bus. & Prof. Code § 7028(a)) or to (ii) submit a bid to a public agency in order to engage in the business or act in the capacity of a contractor (Bus. & Prof. Code § 7028.15(a)), within California without holding the requisite license. Prior to obtaining a joint venture license, the constituent licensees may jointly bid for such a contract or work if, at that time, each of them holds the requisite license (Bus. & Prof. Code §§ 7029.1(b), 7028.15(c)). (A failure to obtain the needed joint venture license will not prevent the imposition of any penalty for a winning bidder’s failure to enter into a contract pursuant to the bid.) It is unlawful for the constituent licensees to be awarded a contract jointly, or otherwise act as a contractor, without first having secured a joint venture license (Bus. & Prof. Code § 7029.1(a)).

For both public and private work projects, then, (i) each JV member must be duly licensed at the time of submitting a bid for such a contract or for such work and (ii) the joint venture license must be in place prior to entering into a contract or performing work for which a contractor’s license is required.

Applying for a JV License

A joint venture license, by definition, is one that is issued to any combination of two or more licensees (Bus. & Prof. Code § 7029). A joint venture licensee is subject to the Contractors’ State License Law, like any other licensee or person performing work that requires a contractor’s license. A joint venture license may be issued in any or all of the classifications in which the members of the joint venture are licensed, and the joint venture may add classifications to its license. In order to obtain a joint venture license, the constituent licensees must submit an application to: CSLB Headquarters, Contractors State License Board, P.O. Box 26000, Sacramento, CA 95826-0026.

For the joint venture license application to be approved, the following requirements must be met:

  • Each of the constituent licensees participating in the joint venture must show its exact business name and license number as it appears in the records of the CSLB — an acceptable joint venture business name may include the full business name of each listed entity, part of each listed entity’s business name, or be a completely fictitious business name
  • Each of the constituent licensee’s licenses must be current and active
  • One of the official personnel listed on the CSLB’s records for each constituent licensee (the owner, a partner or an officer of the corporation, but not a Responsible Managing Employee (RME)) must sign the application
  • Pay the required application filing fee and the initial license fee
  • Pay any additional classification fees for additional classifications being applied for
  • Submit the appropriate Contractor’s the original bond or cash deposit; the bond or cash deposit must bear the same business name as the pending joint venture
  • Submit a Workers’ Compensation Certificate of Insurance if the joint venture is hiring employees, or an exemption form if no employees are being hired

Suspension, Cancelation, Dissolution and Expiration of a JV License

A joint venture license will be canceled upon the cancellation, revocation, or disassociation of any of its constituent licensees or upon the dissolution of the joint venture; the Registrar of Contractors is to be notified in writing within 90 days of the disassociation of a joint venture entity or dissolution of the joint venture and failure to do so will cause the license to be canceled effective the date the written notification is received at the CSLB Headquarters and will be grounds for disciplinary action. If any of the constituent licenses ceases to be current and active or is suspended for any reason, the joint venture license will be suspended.

The joint venture license will expire two years from the last day of the month in which the license was issued. Each license included in the joint venture must be current and active before the joint venture license can be renewed in active status.

Additional Resources: CSLB, Joint Venture License Applicants, Steps in this Section; Blueprint for Becoming a California Licensed Contractor (2006 Ed.); CSLB Forms

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UPDATE: Nevada State Contractors Board, Horizons, Nevada contractors encouraged to seek California license to help alleviate health and safety issues during state’s driest year on record (Nov. 2014); On September 15, 2014, the CSLB confirmed that it is also expediting applications for C-61/D-21 Limited Specialty Machinery and Pumps specialty contractor during the California drought.

The California Contractors State License Board (CSLB) issued Industry Bulletin 14-11a confirming that Governor Edmund G. Brown Jr. has proclaimed a State of Emergency and directed state officials to take all necessary actions to prepare for these drought conditions. The CSLB is doing its part, expediting applications for C-57 Well Drilling Contractors. In its Industry Bulletin, the CSLB also encourages Class “A” General Engineering Contractors that are authorized to perform water supply projects (but not well drilling unless they possess a C-57 Well Drilling classification) to add the C-57 classification to their license; Class “A” contractors who would like assistance expediting this process can call (916) 255-4118 or email CSLB’s Classifications Deputy. It also reminds contractors that it has a reciprocity agreement in place for well drillers who are licensed in Nevada, which will further expedite the California licensing process.

A special teleconference with state agencies is scheduled for Thursday, September 11, 2014, at 7 a.m. to discuss how to meet well drilling regulations and expand access to ground water capacity.

Teleconference call-in information:
September 11, 2014, 7:00 a.m. PDT 1 (866) 640-4044 Passcode: 62224

Additional Resource: R-E-C-I-P-R-O-C-I-T-Y ~ Find Out What It Means To You; Agencies Expediting Well Drilling Licensing During California Drought

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Today, Pillsbury attorneys Tom Makris, Paula Weber and Erica Turcios posted their advisory New Threat to “Bring Your Own Device” Policies: Employer Required to Reimburse Personal Cell Phone Expenses. The Advisory discusses a far-reaching decision by the California Second District Court of Appeal in Cochran v. Schwan’s Home Serv., Inc., Cal. Ct. App. No. B247160, (August 12, 2014). The Cochran court held that California Labor Code § 2802 requires employers always to reimburse employees who are required to use personal cell phones for work-related calls for a reasonable percentage of their cell phone bills, even when employees have cell phone plans with unlimited minutes or the plans are paid for by third parties.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or Tom Makris, Paula Weber, or Erica Turcios , the authors of this blog.

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On August 26, 2014, the D.C. Circuit Court of Appeals decided the case of Sierra Club, et. al. v. Jewel, a case involving the National Register of Historic Places (Register), which is administered by the Department of the Interior. The Court of Appeals held, over the dissent of Senior Circuit Judge Sentelle, that the plaintiffs, a coalition of environmental groups and historic preservation organizations, have standing to challenge the decision of the Keeper of the Register that the “Blair Mountain Battlefield”, the scene of a historic and violent encounter between coal miners and coal companies in the 1920’s, and located in Logan County West Virginia, should not be included in the Register because the initial listing process was defective.

It appeared that the consent of the majority of property owners of the proposed listing — the Battlefield area is privately-owned by members of the Coal Association — was not obtained, and they objected to the listing. When the Battlefield was removed from the Register, the Sierra Club, the Ohio Valley Environmental Coalition, and other organizations (collectively, the Coalition) filed a lawsuit in the U.S. District Court of the District of Columbia, arguing that the Keeper’s decision was arbitrary and capricious. The district court granted the Department of Interior’s motion for summary judgment, agreeing that the Coalition did not have standing to bring the action.

The majority of the Court of Appeals reversed, holding that the Coalition indeed had standing because they were able to demonstrate an injury in fact in that their aesthetic interests in the Battlefield’s history was concrete and particularized, and this interest would be injured if the existing coal mining permittees exercised their permit rights and began coal mining operations. (Apparently, a listing in the Register would substantially rule out any additional coal mining in the area of the Battlefield.) The Court of Appeals agreed that the members of the Coalition had no legal rights to enter the area of the Battlefield, but this fact did not disqualify their interests. Also, there was a substantial probability of injury to their interests since coal mining operations are currently being conducted in the area today, and could be expanded (a number of coal mining permits have been issued by the State of West Virginia).

Judge Sentelle’s dissent is rather pungent. He states that the coalition is asserting an interest “in viewing the property of others. I know of no legal protection for that interest”. Indeed, none of the cases cited by the majority “would lead me to suppose that my neighbor has a legally protected right that I have invaded when I trim the grass and behead the clovers which he enjoys seeing”. According to Judge Sentelle, therefore, the plaintiffs do not have a legally protected interest.

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Yesterday, Pillsbury attorneys John McNeece, Eric Save and Michael Hindus published their advisory titled Mexico’s Energy Reform Provides Significant Opportunities in Oil and Gas Exploration and Production. The Advisory discusses Mexico’s new energy legislation, which went into effect on August 12, 2014 and which will completely restructure the Mexican energy sector, including both hydrocarbons and electricity. This legislation opens up oil and gas exploration and production (“E&P”) to the private sector, through authorization of new contract arrangements with the Mexican State or with PEMEX, while reaffirming Mexico’s ownership of hydrocarbons in the ground. Mexico’s opening to the private sector will generate numerous opportunities for E&P operators, the E&P arms of international oil and gas companies, suppliers, and investors.

If you have any questions about the content of this blog, please contact the Pillsbury attorney with whom you regularly work or John McNeece, Eric Save or Michael Hindus, the authors of this blog.

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On June 17, 2014, Ohio Governor John Kasich signed into law Senate Bill 78, a bill making changes to Ohio’s construction industry licensing law and, in particular, modifying the law regulating special construction contractors. The new law is effective September 17, 2014.

Among other things, the new law amends the definition of “contractor” to mean “any individual or contracting company that satisfies both of the following:

(1) Has responsibility for the means, method, and manner of construction, improvement, renovation, repair, or maintenance on a construction project with respect to one or more trades and who offers, identifies, advertises, or otherwise holds out or represents that the individual or contracting company is permitted or qualified to perform or have responsibility for the means, method, and manner of construction, improvement, renovation, repair, or maintenance with respect to one or more trades on a construction project;

(2) Does either of the following: (a) Performs construction, improvement, or renovation on a construction project with respect to the individual’s or contracting company’s trade; (b) Employs tradespersons who perform construction, improvement, or renovation on a construction project with respect to the individual’s or contracting company’s trades.”

The new law further requires that an individual’s specialty contractor license be assigned to a contracting company with whom the individual is employed. when the individual applies for a specialty contractor license, he/she must request that his/her license be assigned to a contracting company. Under prior law, such an assignment was optional.

The law continues to specify that any work a contracting company conducts under the license assigned or displayed is deemed to be conducted under the personal supervision of the individual named in the license, and any violation of a term of the license is deemed to have been committed by the individual named in the license. However, the new law eliminates the liability of each licensee of a business entity to which multiple licenses have been assigned for license violations occurring during any work conducted under any of the licenses.

It also modifies the procedure by which a license assignment becomes invalid. If a contractor who assigned a license to a contracting company ceases to be associated with the contracting company for any reason, the contractor or contracting company must immediately notify the appropriate specialty section of the date on which the association ceased. A license assignment becomes invalid: (1) 90 calendar days after the date of the contractor’s death; (2) 90 calendar days after the contractor completes a change of company form; or (3) at an earlier time to which the contracting company and the contractor have agreed.

The new law also expands the reasons for which discipline may be imposed against a licensee and modifies the disciplinary actions that may be imposed.

Additional Resources: Ohio Legislative Service Commission, Final Analysis of Sub. S.B. 78; Ohio Department of Commerce, Licensing

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The Nevada State Contractors Board (NSCB) recently received the National Association of State Contractors Licensing Agencies’ 2014 Innovation in Regulation Award, an award that recognizes innovation, creativity, and excellence in regulation of contracting/construction industries. NSCB was recognized for its efforts in 2012 to partner with The Home Depot and local building departments to create and launch PermitsUSA, a kiosk system placed in The Home Depot stores allowing contractors and consumers to purchase building permits from multiple jurisdictions at one time.

NSCB describes PermitsUSA as a “product of a unique public-private partnership created to encourage the purchasing of select building permits while enhancing the process and convenience for users to do so.” It “links to building jurisdictions’ systems, allowing users to interface directly with the various building departments through the in-store kiosk display.”

NSCB reported that between September 2012 and June 2013, a total of 644 building permits were pulled using PermitsUSA in Nevada-based Home Depot stores, generating a total of $42,850 among the four participating jurisdictions. It further reported that The Home Depot is expanding PermitsUSA to Oregon and Florida this year, among others, and hopes to include options for additional permit purchases, license renewal, a national licensed contractor database, a national permits database, property data, and improved compliance among its participating jurisdictions in the future.

NSCB was also recognized for its development and launch in 2014 of a mobile application designed to provide the public with immediate and direct access to contractor license information and filing complaints.

Additional Source: Nevada State Contractors Board, Horizons (Nov. 2014); State Contractors Board Receives National Innovation in Regulation Award

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On August 22, 2014, the Texas Supreme Court issued its long-awaited decision in the case of Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch. While reversing the appellate court that affirmed the jury verdict awarding the plaintiff almost $350,000 in lost market value based on the “stigma” clinging to the land after the contamination subsided, the Court based its decision on its review and rejection of the evidence offered by the plaintiff’s expert witness. Consequently, the Court postponed for another day deciding whether there is a right under Texas law to recover stigma damages.

The plaintiff is the owner of an undeveloped tract of land (155 acres) in Washington County, Texas. It was leased to a rancher who noticed that some of his calves had experienced birth defects and deaths which he attributed to the dumping of waste materials on the neighboring defendant’s land. The defendant, a metals processing facility, conceded that its employees had followed such practices for many years. A complaint was made to the Texas Commission on Environmental Quality (TCEQ), which investigated conditions on both properties and determined that the defendant had violated several TCEQ hazardous waste rules. In addition, the agency found evidence of contamination above TCEQ “action levels” on both properties, issued a compliance order and assessed a fine against Houston Unlimited. The defendant then took corrective actions to bring its facility into compliance. Its consultant concluded there were no ongoing adverse impacts after these actions were taken, but the plaintiff’s consultant disagreed, and concluded there had been a significant diminution in the market value of the plaintiff’s property. A lawsuit was filed, the experts testified on both sides, and the jury ruled in favor of the plaintiff, holding that the defendant was negligent. The Fourteenth Court of Appeals, sitting in Houston, affirmed.

The Texas Supreme Court noted in its opinion that it had never addressed the issue whether stigma damages can be recovered in Texas. In this case, the plaintiff’s expert witness testified that, in her opinion, the plaintiff’s property suffered a loss of market value due to the stigma resulting from fear, risk and negative public perceptions, and that stigma damages continue to exist even after the property has been fully repaired or remediated. However, the Court, after reviewing the evidence and the testimony of the plaintiff’s expert witness, decided that this was not the case to issue a definitive ruling on the availability of stigma damages: “even if Texas law permits recovery of stigma damages, Mel Acres’ evidence was legally insufficient to prove them”. The Court subjected her evidence to an exacting review, and determined that it was not legally competent to support the jury’s verdict, because it was based on unsupported assumptions and analytical gaps. The Court also declined to rule in this case on the evidentiary value of the presence or absence of TCEQ “action levels” which trigger TCEQ cleanup or remediation orders. The Court concluded that a “take nothing” judgment be rendered in favor of the defendant.

The Texas Association of Business, the Texas Chemical Council, the Texas Pipeline Association and the Texas Oil and Gas Association filed amicus briefs on the stigma damages issue.

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All too often the California Contractors State License Board issues a press release confirming that it has cited numerous individuals for, among other things, unlawfully advertising as contractors when they are not, in fact, licensed contractors. However, California’s Contractors’ State License Law, Cal. Bus. & Prof. Code §§ 7000, et seq. (the “Law”), governs advertising by both unlicensed contractors and licensed contractors. It regulates advertising across various marketing channels, including websites, emails, directories, and other forms of communication. “Advertising” is defined broadly to include “any card, contract proposal, sign, billboard, lettering on vehicles registered in this or any other state, brochure, pamphlet, circular, newspaper, magazine, airwave or any electronic transmission, and any form of directory under any listing denoting ‘Contractor’ or any word or words of a similar import or meaning requesting any work for which a license is required by the Contractors License Law.” 16 C.F.R. § 861; see also Bus. & Prof. Code §§ 7027.1(b), 7027.4(c). Where and how do you “advertise” your construction business and services?

Contractor’s License Number is Required on All “Advertising”

In addition to including you contractor’s license number on all construction contracts, subcontracts and calls for bid, the Law requires it to be included on all forms of advertising used. Bus. & Prof. Code § 7030.5. Licensed contractors are not allowed to advertise for construction work outside of the trade(s) for which they are licensed.

Additional Requirements for Advertising that You are Insured or Bonded

The Law also makes it a “cause for discipline” for any contractor to advertise that it is: (1) “insured” or has insurance without identifying in the advertisement the type of insurance, including, for example, “commercial general liability insurance” or “workers’ compensation insurance” that is carried by the contractor; the contractor may abbreviate the title of the type of insurance; or (2) “bonded” if the reference is to a contractor’s license bond required pursuant to Bus. & Prof. Code § 7071.6 or to a disciplinary bond required pursuant to Bus. & Prof. Code § 7071.8. Bus. & Prof. Code § 7027.4(a), (b). (Any reference by a contractor in its advertising, soliciting, or other presentments to the public to any bond required to be filed pursuant to the Law is a ground for the suspension of the license of such contractor. Bus. & Prof. Code § 7071.13). The CSLB’s publications encourage contractors not to advertise about bonding because it could lead the public to believe there is a higher level of protection provided to them by the bonding procedure than might be the case.

Additional Requirements for Advertising Asbestos Removal Services

The Law further prohibits a contractor from advertising to promote its services for the removal of asbestos unless it is certified to engage in asbestos-related work pursuant to Bus. & Prof. Code § 7058.5, and registered for that purpose pursuant to Lab. Code § 6501.5. Bus. & Prof. Code § 7099.11(a). Each advertisement must include the contractor’s certification and registration numbers and it must use the same name as on the certification and registration. Bus. & Prof. Code § 7099.11(a).

The CSLB is required to issue a notice to comply with the order of correction provisions of Bus. & Prof. Code § 7099.10(a) to any contractor who is certified and registered and who fails to include in any advertisement its certification and registration numbers. Bus. & Prof. Code § 7099.11(b). It will also issue a citation pursuant to Cal. Bus. & Prof. Code § 7099 to any such contractor who fails to comply with the notice to comply, or who advertises to promote its services for the removal of asbestos but does not possess valid certification and registration numbers, or who fails to use in the advertisement the correct name. Bus. & Prof. Code § 7099.11(c).

Additional Requirements for Motor Vehicles Used for Construction Business

Except for C-36 Plumbing contractors, C-45 Sign contractors and C-57 Well-drilling contractors, every contractor licensed under the Law is required to have displayed, in or on each motor vehicle used in its construction business, its business name and contractors’ license number in a clearly visible location in print type of at least 72-point font or 3/4″ in height and width. Bus. & Prof. Code § 7029.6.

Additional Requirements for C-36 Plumbing Contractors’, C-45 Sign Contractors’ and C-57 Well-drilling Contractors’ Motor Vehicles

C-36 Plumbing contractors, C-45 Sign contractors and C-57 Well-drilling contractors are required to display on each side of each motor vehicle used in its business, for which a commercial vehicle registration fee has been paid, its name, permanent business address, and contractor’s license number, all in letters and numerals not less than 1 1/2″ high. Bus. & Prof. Code § 7029.5. These identification requirements also apply to any drill rig used for the drilling of water wells. Failure to comply with the Law is a cause for discipline for any contractor.

Consequences for Licensed Contractors (and Their Qualifiers) Who Violate the Law

For purposes of the Law, the term “licensee” is defined broadly to include an individual, partnership, corporation, limited liability company, joint venture, or any combination or organization licensed under the Law, and also includes any named responsible managing officer (RMO), responsible managing manager/responsible managing member (RMM), or responsible managing employee (RME). Bus. & Prof. Code § 7096.

Suspension or Revocation of License

The CSLB may upon its own motion (or upon a verified complaint in writing of any person) investigate the actions of any license applicant or contractor and may cite, temporarily suspend, or permanently revoke any license or registration if the applicant or licensee is guilty of or commits any one or more of the acts or omissions constituting causes for disciplinary action under the Law. Bus. & Prof. Code § 7090.

Citation Plus Civil Penalty

If, upon investigation, the CSLB has probable cause to believe that a licensee or a license applicant has committed any acts or omissions which are grounds for denial, revocation, or suspension of license, it may issue a citation to the licensee or license applicant. Bus. & Prof. Code § 7099. Each citation is to be in writing and to describe with particularity the nature of the violation, including a reference to the Law alleged to have been violated. Each citation may contain an order of correction fixing a reasonable time for correction of the violation or an order, against the licensee only, for payment of a specified sum to an injured party in lieu of correction, and may contain an assessment of a civil penalty. See also Bus. & Prof. Code § 7099.2.

Citation Plus Civil Penalty Plus Termination of Phone Service

If, upon investigation, the CSLB has probable cause to believe that a licensee, an license applicant, or an unlicensed individual acting in the capacity of a contractor who is not otherwise exempted from the provisions of the Law, has violated Bus. & Prof. Code § 7027.1 by advertising for construction or work of improvement covered by the Law in an alphabetical or classified directory, without being properly licensed, the CSLB may issue a citation under Bus. & Prof. Code § 7099 containing an order of correction which requires the violator to cease the unlawful advertising and to notify the telephone company furnishing services to the violator to disconnect the telephone service furnished to any telephone number contained in the unlawful advertising, and that subsequent calls to that number are not to be referred by the telephone company to any new telephone number obtained by that person. Bus. & Prof. Code § 7099.10(a). If the person to whom a citation and order of correction is issued fails to comply with the order of correction after the order is final, the CSLB will inform the Public Utilities Commission (PUC) of the violation, and the PUC will require the telephone company furnishing services to the violator to disconnect the telephone service furnished to any telephone number contained in the unlawful advertising. Bus. & Prof. Code § 7099.10(c).

Misdemeanor

It is also a misdemeanor and cause for disciplinary action for any person to use false, misleading, or deceptive advertising as an inducement to enter into any contract for a work of improvement, including, but not limited to, any home improvement contract, whereby any member of the public may be misled or injured. Bus. & Prof. Code § 7161(a). It is also cause for a disciplinary action against a licensee or license applicant.

Advertising by Persons Who are Not Licensed Contractor; Penalties; Exemptions from Licensing Law

In addition to the foregoing, the Law regulates any person who advertises or puts out any sign or card or other device that would indicate to the public that he or she is a contractor, or who causes his or her name or business name to be included in a classified advertisement or directory under a classification for construction or work of improvement covered by the Law regardless of whether his or her operations as a builder are otherwise exempt under the Law. Bus. & Prof. Code § 7027. It is a misdemeanor for any person to advertise for construction or work of improvement covered by the Law unless that person holds a valid license in the classification advertised, except that a licensed building or engineering contractor may advertise as a general contractor. Bus. & Prof. Code § 7027.1(a). A violation of Section 7027.1 is punishable by a fine of not less than $700 and not more than $1,000, which is in addition to any other punishment imposed for a violation of Section 7027.1. Bus. & Prof. Code § 7027.1(c).

California’s Contractors’ State License Law does not apply to any work or operation on one undertaking or project by one or more contracts, the aggregate contract price which for labor, materials, and all other items, is less than $500. Bus. & Prof. Code § 7048. However, this exemption does not apply in any case wherein the work of construction is only a part of a larger or major operation, whether undertaken by the same or a different contractor, or in which a division of the operation is made in contracts of amounts less than $500 for the purpose of evasion of California’s Contractors’ State License Law or otherwise. Bus. & Prof. Code § 7048. Likewise, this exemption does not apply to a person who advertises or puts out any sign or card or other device which might indicate to the public that he or she is a contractor or that he or she is qualified to engage in the business of a contractor. Bus. & Prof. Code § 7048.

A person not licensed pursuant to the Law may advertise for construction work or work of improvement covered by the Law, provided that (1) the aggregate contract price which for labor, materials, and all other items, is less than $500, and (2) he or she states in the advertisement that he or she is not licensed under the Law. Bus. & Prof. Code § 7026.11.

Other exemptions from licensure contemplated by the Law are set forth in Bus. & Prof. Code §§ 7040, et seq.

Additional Sources: CSLB, Contractor Tips for Advertising; CSLB, Remember Contractor Advertising laws; R-E-C-I-P-R-O-C-I-T-Y ~ Find Out What It Means To You