When Can A Contractor’s License Be Suspended Automatically, by “Operation of Law”, Due to the Licensee’s Failure to “Supervise and Control” Work on a Construction Project

Because a corporation, partnership, Limited Liability Company or other contractor entity becomes qualified to get and hold a contractors license only because it has on its payroll a licensed “qualifying individual”, that individual must play an active role in the company’s construction operations , to ensure a competent, qualified, licensed person is in charge.

(a) The person qualifying on behalf of an individual or firm under paragraph (1), (2), (3), or (4) ofsubdivision (b) of Section 7068 shall be responsible for exercising that direct supervision and control of his or her employer's or principal's construction operations to secure compliance with this chapter and the rules and regulations of the board. . . . .” (All emphasis added)

Bus. & Prof. Code, § 7068.1(a).

" The qualifier must exercise direct supervision over the work for which the license is issued to the extent necessary to secure full compliance with the provisions of the law . (§ 7068.1.)” (Wright v. Issak (2007) 149 Cal.App.4th 1116, 1123 [58 Cal. Rptr. 3d 1]; see § 7068.1, subd. (a) [qualifier “shall be responsible for exercising that direct supervision and control of his or her employer's or principal's construction operations to secure compliance with this chapter and the rules and regulations of the board ”].)” (All emphasis added)

Jeff Tracy, Inc. v. City of Pico Rivera (2015) 240 Cal.App.4th 510, 519.98-1301. 1

“[A] corporation can qualify by a qualifying person acting as an RME or a responsible managing officer (RMO) . (Bus. & Prof. Code, §§ 7065, 7068, subd. (b).)” “The licensing law has as its purpose to protect the public from incompetent dishonest construction and building services, such that the law “ ‘provide[s] minimal assurance that all persons offering such services in California have the requisite skill and character, understand applicable local laws and codes, know the rudiments of administering a contracting business. ’ ” . . . Thus, the Contractors' State License Board requires an applicant for a license to “show such degree of knowledge and experience in the classification applied for, and such general knowledge of the building, safety, health, and lien laws of the state and of the administrative principles of the contracting business as the board deems necessary for the safety and protection of the public.” (Bus. & Prof. Code, § 7068, subd. (a).) Additionally, disciplinary action against a license may be taken for, among other things, a “willful departure in any material respect from accepted trade standards for good and workmanlike construction” (Bus. & Prof. Code, § 7109, subd. (a)), and for “[w]illful or deliberate disregard and violation of the building laws of the state, or of any political subdivision thereof” (Bus. & Prof. Code, § 7110 ).”

“Most significantly, provisions of the Business and Professions Code require that the RME or RMO who qualifies for a contractor's license on behalf of an individual or business firm is “responsible for exercising that direct supervision and control of his or her employer's or principal's construction operations as is necessary to secure full compliance with the provisions of this chapter [on contractors] and the rules and regulations of the board relating to the construction operations ." (Bus. & Prof., § 7068.1, italics added.) California Code of Regulations, title 16, section 823, subdivision (b) provides that “[f]or purposes of Section 7068.1 of the [Business and Professions] Code, ‘direct supervision and control’ includes any one or any combination of the following activities: supervising construction, construction activities by making technical and administrative decisions, checking jobs for proper workmanship, or direct supervision on construction job sites.” (Italics added.) Therefore, as a person acting on behalf of his or her contractor principals, the RME or RMO would be in a position to observe willful misconduct in the construction of house s. . . . This duty of supervision imposed by the statutory licensing scheme, like the above discussed duty of supervision imposed by case law, is reasonably viewed as a nondelegable duty and the general contractor is contractor . ( Finnegan v. Royal Realty Co., supra, 35 Cal.2d at p. 433.)” (All emphasis added)

Acosta v. Glenfed Development Corp. (2005) 128 Cal.App.4th 1278, 1299-1300.

The negligence Doctrine of “Nondelegable Duty” relied upon in Acosta v. Glenfed is a Tort doctrine which holds that, where the factual situation or a statute place duties on persons to act in a particular manner for the protection of the public or certain classes of persons, then that person cannot legally escape liability for failure to comply with those requirements by attempting to delegate such duties to a third person. The failure of a contractor to fail to be “duly licensed” for this or any other reasons means that they may not sue to recover payment for their work, and that the other party to the contract may sue to recover all money paid to the unlicensed contractor, regardless of the quality of the work performed!!!!!

“(a) Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that they were a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029. (b) Except as provided in subdivision (e), a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract. ” (Emphasis added).

Cal. Bus. & Prof. Code § 7031

And because the failure of an RMO to “supervise and control” his company’s construction operations results in it becoming unlicensed due a “sham” RMO, relief for attorneys fees and costs under Code Civil. Proc. § 1029.8 may also be proper. Nevertheless, a defendant contractor is still free to allege and try to prove at trial that he performed his statutory duties either personally or other than by his “personal presence”, and whether that complies with the statute.

ENDNOTES

1. The Court also held that the question of whether the company’s RMO complied with these “supervisory duties” requirements - and, thus, whether it was a “duly licensed contractor” was one for the jury. Jeff Tracy, Inc. v. City of Pico Rivera, supra, 240 Cal.App.4th at 519.

2. So serious is the obligation of the Qualifying Individual for “exercising that direct supervision and control of his or her employer's or principal's construction operations ” that, if the RMO fails to exercise that “supervision and control” over the corporation’s construction operations, then that corporation’s license will be deemed automatically suspended by operation of law! “[The Defendant], as a corporation, may qualify for a California contractors license only through an individual acting as its RME or "responsible managing officer" ("RMO")”.

See § 7068(b)(3); Acosta v. Glenfed Dev. Corp., 128 Cal. App. 4th 1278, 1299. (2005). If "the [RMO] is not performing his function, it is as if the contractor has no license at all ." Buzgheia v. Leasco Sierra Grove, 60 Cal. App. 4th 374, 387, 70 Cal. Rptr. 2d 427 (1997). But [only] "[i]f the individual is continuously associated with the exercising direct supervision and control, the entity is deemed to have a valid license. " Mehrabian, 2007 Cal.

App. Unpub. LEXIS 10156, 2007 WL 476059, at *5 (footnote omitted).” (All emphasis added) See also, Jeff Tracy, Inc. v. City of Pico Rivera, supra, 240 Cal.App.4th at 517- 519.

“We agree. It is possible for a party in a civil action to attack a contractor's license by going behind the face of the license and proving that a required [RMO] is a "sham ."” Buzgheia v. Leasco Sierra Grove (1997) 60 Cal.App.4th 374, 385. (Emphasis added) “Once the [RMO] is not performing his function, it is as if the contractor has no license at all .

3. “This Chapter” as referred to in Bus. & Prof. Code, § 7068.1(a), means Chapter 9 of the Bus. & Prof. Code, the Contractors State License Law, Bus. & Prof. Code § 7000 et seq.

Among the provisions of that “Chapter” or Law are Sections 7109, 7110 and 7068.1(a).

“(a) A willful departure in any material respect from accepted trade standards for good and workmanlike construction constitutes a cause for disciplinary action, unless the departure was in accordance with plans and specifications prepared by or under the direct supervision of an architect.

(b) A willful departure from or disregard of plans or specifications in any respect, which is prejudicial to another , . . ., constitutes a cause for action.”(Emphasis added)

The “wilful” element is satisfied if the Company simply intended to do what it did,, and no intent to violate the statute is required . Cartwright v. Bd. of Chiropractic Ex. (1976) 16 Cal. 3d 762, 767.