The California Contractors State License Board (“CSLB”) recently warned licensees and homeowners of the “perils” of “renting” a qualifier. Renting a qualifier means that a non-licensed contracting business pays an individual who holds a California contractor’s license to act as the Responsible Managing Officer (“RMO”) or Responsible Managing Employee (“RME”) of a construction company, when that person has no actual involvement in the day-to-day operations of the company. Construction companies do this in order to obtain a license without the owner(s) meeting the experience and examination requirements necessary to obtain a contractor’s license.
The RMO or RME of a licensed construction business is held accountable for all activity and any violations committed by the company. The law requires that the RMO or RME of a construction business exercise direct supervision and control of its contracting operations. If the licensed individual is not doing so, or if any of the other business officers, general partners, or employees break the law, the RMO or RME can lose his/her qualifying license and any other license on which the individual serves as a “qualifier” pursuant to Section 7068.1 of the Business and Professions Code. In addition, under Business and Professions Code Section 7122.5, any act or omission that is a cause for disciplinary action by any individual partnership, corporation or firm is also a cause for disciplinary action against the RMO or RME, regardless of his or her knowledge and participation.
In light of a sharp rise in consumer complaints against construction companies that have “rented” qualifying members, at the request of the CLSB, the Legislature passed and the Governor signed SB 862, which became effective in January of this year. SB 862 gave the CSLB additional enforcement authority to crack down on “rented” qualifiers by allowing the CLSB to take disciplinary action against a qualifier and a licensee if the qualifier is not actively involved in the construction activities of the licensee’s business and to seek misdemeanor criminal charges, which can include imprisonment in the county jail up to six months, a fine of up to $5,000, or both.
A CSLB task force, found to ferret out rented qualifiers, will also be watching for exam waiver requests from applicants suspected of only seeking to rent their name for a fee. The CSLB will seek to revoke qualifier status previously granted to anyone whose actions demonstrate they do not have an ownership stake or are not active decision-makers listed on a license.
Consequences of unlicensed operation:
1st-time offenders likely will have to appear before a superior court judge and face misdemeanor charges. In addition, potential sentence of up to 6 months in jail and/or $5,000 fine plus an administrative fine of $200-$15,000.
2nd-time offenders have a mandatory 90-day jail sentence plus must pay a fine of 20% of the contract price, or $5000.
THIS IS HOW YOU CAN VERIFY IF YOUR CONTRACTOR HAS A REAL LICENSE OR IS RENTING SOMEONE’S LICENSE:
1- Check the structure of the company
For the purposes of this example.
John Doe is the “RMO” and must be engaged in “direct supervision and control” of the work. For purposes of §7068.1 of the Code, “direct supervision and control” includes any one or any combination of the following activities: supervising construction, managing construction activities by making technical and administrative decisions, checking jobs for proper workmanship, or direct supervision on construction job sites. Contractor State License Board, Rules & Regulations, Chapter 13, Article 2, §§823(a) and (b).
2- Check if there are more organizations associated with the RMO
It is seen that John Doe has the tendency to participate in multiple companies like RMO and in this case the other two organizations have already expired. Many times these licenses expire due to disciplinary actions that cannot be resolved in a specified time.