
Dustin Amrein
Senior Attorney
Weintraub Tobin
The California Contractors State License Board (CSLB) is
tightening enforcement and ending the use of "paper" subcontractors
with new legislation. Violations can result in license suspension, fines, or
criminal charges. Here are five key things contractors must know to avoid
violations and stay compliant.
1. Don't
"rent" a qualifier: Direct supervision defined
One of the most significant licensing violations to avoid is the
practice of "renting" a qualifier. This is when a licensed individual allows
their name and license to be used by a construction company without actually supervising the operations. California law requires
that a Responsible Managing Officer (RMO) or Responsible Managing Employee
(RME) be actively involved in the company's construction activities, not just a
name on paper.
Beginning in 2021, the legislature began defining an RMO/RME's
supervision and control obligations. Under Business and Professions Code §
7068.1, "supervision and control" requires "direct supervision," which now
includes:
Supervising construction "operations."
Managing construction by making technical and
administrative decisions.
Ensuring proper workmanship on the project or
supervision of construction on the site.
If a contractor's RMO or RME fails to have direct supervision of
its construction operations, the company - and the qualifier - can
face penalties, including license suspension, revocation, and even criminal
charges.
2. Elimination
of paper subcontractors
In 2024, California passed stricter statutes for specialty
contractors who subcontract out work within their same license classification.
Now, according to Business and Professions Code § 7035, a specialty contractor
cannot subcontract with more than one subcontractor on the same project or
undertaking within their specialty license classification unless:
The subcontractor's employees are classified as actual
employees (not independent contractors), or
The contractor is part of a bona fide collective
bargaining agreement that governs subcontracting.
Violating these rules could lead to disciplinary action by the
CSLB. Specialty contractors should review their hiring practices to ensure
they're in compliance with the new laws.
3. The criminal
statute of limitations for CSLB violations is now three years
The 2024 California Legislature extended the statute of
limitations for criminally prosecuting contractor licensing violations.
Previously, authorities had only one year to file criminal charges for
violations of the contractor licensing laws (like "renting" a qualifier). Now,
prosecutors have up to three years to initiate criminal proceedings.
This means that contractors who allow improper use of their
license or fail to comply with the contractor licensing laws now face criminal
exposure three times longer. It's essential for every RMO and RME to remain
vigilant about compliance in order to avoid delayed
but serious repercussions.
4. Confirm active
supervision of operations
If you're listed as the RMO or RME for a licensed contractor, be
directly involved in the day-to-day operations of the company. The CSLB is
actively investigating whether qualifiers are genuinely supervising
construction operations, making technical and administrative decisions,
ensuring workmanship, or monitoring the project site. Failure to meet the
supervision requirements can lead to citations, administrative hearings,
license revocation, or even criminal prosecution.
If you're a construction business owner, confirm that their RMO
or RME is meeting the supervision requirements. If your RMO or RME is not
involved in the construction operations of the business, it's time to
restructure your operations to avoid the risks of noncompliance.
5. Understand
that violations can lead to serious penalties
Contractors and subcontractors who violate the California
licensing laws can face severe penalties and repercussions. These include:
Loss of your contractor's license (aka "revocation").
Fines and financial penalties, including restitution.
Misdemeanor and possibly felony l charges for serious
violations, such as allowing illegal use of a contractor's license or
contracting without a license in a declared natural disaster area.
To avoid these consequences, it's crucial for contractors and
subcontractors to regularly review their practices. Ensure compliance with all
licensing and subcontracting regulations and take immediate action to correct
any issues before CSLB investigators or state prosecutors step in.
By staying up-to-date on new
legislation and prioritizing compliance, contractors and subcontractors can
avoid costly violations and safeguard their business. The days of casual
contracting practices are ending - act now to avoid serious legal
consequences.