from Kevin Pedrotti, Legislative Advocate for the Golden State Builders Exchanges
Legislation
February 18 was the deadline for bill introductions for the 2011-12 legislative session. Approximately 1600 of the 2500 bills introduced passed over the desk on the deadline day. If there was a “theme” based upon the greatest grouping of bills introduced this session it would be regulatory/government reform. There were many bills introduced in this thematic area, many just “spot” bills to meet the introduction deadline. While legislators of both political parties are discussing regulatory reform as a way to help the dismal jobs market, it remains to be seen what will come of this effort. To some, regulatory reform is the abolishment of regulatory boards while for others it is simply a refinement of overlapping and duplicative rules and regulations. For every regulation, there is a constituency that fought to get it in place. As the year develops, it will be very interesting how the politics of this issue plays out.
GSBE’s legislative tracking grid is close to 200 bills strong. The list will be narrowed and fine tuned as the legislative session evolves. The following is a snap-shot, not a comprehensive review, of the various bills that impact the construction industry.
AB 135 (Hagman)– Requires a small business person be one of 11 appointees to CARB.
AB 249 (Berryhill)- The Contractor State Licensing Law (CSLL) requires that all contractors are properly licensed when performing work. To ensure compliance with the licensing requirement, the law requires that any contractor suing for compensation demonstrate “he or she was a duly licensed contractor at all times during the performance of that act or contract.” Furthermore, the CSLL allows one who hired, inadvertently or purposefully, a contractor who was unlicensed at any time during performance of a construction contract, to sue the contractor and recoup all monies paid. Unfortunately, due to its absolute provision, unscrupulous contractors and owners use B&P Section 7031 against other contractors with minor license problems. Consequently, this results in the wholly disproportionate penalty of either not having to pay for work performed or obtaining their money back if they have already paid for. This bill will Amend Code Section 7031(b) to a) limit the disgorgement penalty to periods the contractor was actually unlicensed and b) maintain the disgorgement penalty only for homeowners, the consumers who require the statutory protections. This proposal maintains harsh penalties for unlicensed contracting, protects the unsophisticated homeowner from unlicensed activity, and disallows underhanded recoveries of money paid to contractors on commercial and public works projects.
AB 273 (Valadao)– Would require that economic impacts be considered when adopting new regulations.
AB 397 (Monning)- Would require, at the time of renewal, an active contractor licensee with an exemption for workers’ compensation insurance on file with the board to either recertify the licensee’s exemption or to provide a current and valid Certificate of Workers’ Compensation Insurance or Certificate of Self-Insurance.
AB 465 (Bill Berryhill)– Would require the licensing and regulation by the CSLB for gardening and landscape maintance services.
AB 569 (Bill Berryhill)– Would provide for a Business Master License Center as a one stop location to obtain various business licenses.
AB 720 (Isadore Hall)– This is a reintroduction of AB 1409 of last session that was not pursued because of opposition from SEIU, AFSME and the counties. This bill removes the ability of counties to use either county road commissioner contracting authority or the authority granted under the Uniform Public Construction Cost Accounting Act when determining whether to contract out construction or to perform it with county staff. 25 years ago rural counties had fewer contractors capable of making repairs through the traditional open bidding process. However, now the construction field has changed due to new technologies, and contractors are able to complete repairs that would have been difficult or impossible to do with the technology available when the current law was passed. Some large, urban counties are taking advantage of this authorization in order to not bid out certain highway construction projects. This bill would assure more private work.
AB 780 (Chuck Calderon) – This bill is co-sponsored by GSBE and host of other construction associations. This legislation is another attempt to address tax treatment of fixed- priced contracts for construction. As introduced, this legislation would provide that during the period of the extension of the 1% sales tax increase enacted by AB 3xxx (Evans), materials and supplies purchased or obligated by a fixed price contract entered into prior to the sales tax extension that will continue after July 1, 2011, will not be obligated to pay the additional tax but will pay the sales tax rate that was incorporated into their bid and contract. The bill will likely be amended to require a mandatory change order for increases or decreases on the state sales tax. The current temporary 1% increase in the sales tax did not contain the fixed price contract provision. AB 1523 was introduced in 2009 to apply the provision to the temporary tax but it was held on Appropriations suspense file. Last year, AB 2060 took a different approach, and proposed requiring a change order to deal with the fixed price contract issue only if the sales tax is extended. The Governor vetoed AB 2060.
SB 378 (Dutton)– Provides for alternative work schedule as opposed to current 8 hour day requirement.
SB 438 (Cannella)- Provides that workers working in a yard, shop, or plant off the site of construction shall only be deemed to be employed upon public works if that yard, shop, or plant is specifically established for that public work project.
SB 474 (Evans)– This is a spot bill and will be amended. This legislation pertains to “Type 1” indemnity clauses and addresses this through “comparative fault.” The legislation as proposed to be amended would provide that a contractor should be liable for any costs or damages that are greater than what was caused by their actions. A comparative fault proposal would hold a contractor or subcontractor liable only for the work performed or arranged for by that contractor or subcontractor. According to the sponsors, small business subs have always been financially responsible for any problems they create on a job. However, they are now being required to sign construction contracts making them financially responsible for the actions and errors committed by others. Subs are being told by the GCs that these contractual provisions are non-negotiable. These contractual clauses know as “Type 1” indemnity clauses allow a GC that is 99% responsible for an accident to shift all of the responsibility to a sub that is only 1% responsible (or to a sub that is not responsible at all but whose work is only somehow connected to the underlying accident). The culpable or responsible party can also avoid financial responsibility for its own actions or inactions through special insurance endorsements. In this instance, developers and GCs are also requiring subcontractors to list them as “additional insured” on the subcontractors’ insurance policies. This unfair “liability shift” from the builders and GCs to their subcontractors has caused an unacceptable increase in their costs for insurance and level of risk for small businesses.
Budget
The two-house budget conference committee began this week with the goal of sending a budget bill to the entire legislature by late next week. The Governor has indicated he would like to have the budget process completed by March 11. On Thursday, Governor Brown actually appeared before the budget conference committee for over an hour taking questions from the conferees and defending his plan to ask the voters to decide on the five year extension of the current temporary taxes put in place two years ago. So far, it doesn’t appear republicans are willing to provide the several votes needed to move the tax question to the ballot, but intense talks continue.
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J. Kevin Pedrotti / JK Pedrotti., Inc. / 925 L Street, Suite 308 / Sacramento / CA / 95814. 916/441-3111. www.jkpedrotti.com