The CSLB released their Winter 2015-16 newsletter last week. One article discussed contractor RMOs for hire.
Section 7068.1 of the Business and Professions code states: …”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.” And Code 823(b) states: “For purposes of Section 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.”
823 states “any one or any combination,” so if you are using an RMO that is not directly related to your business you need to ensure that he/she is following these guidelines.
I talk to people almost daily who need to use an RMO who is not directly related to their business. I tell them that the RMO must be involved in the construction activities that will be conducted under the license and the same rules and responsibilities apply as they do to the license they currently hold.
What I think is at issue here is the broad definition of “direct supervision and control.” Does the RMO need to be on the job site to manage or make technical and admin decisions? Not according to the law. Remember, it states “any one or any combination” is allowed, that suggests “direct supervision on construction job sites” does not have to be a mandatory choice.
With this ambiguity I’m left wondering what the CSLB gestapo task force is finding during their “investigations”, what are they citing these contractors with, and what are the criminal cases truly about?
I’m sure any attorney worth his hourly fee would be able to punch holes in any CSLB case that involved 7068.1 and 823. So if you are using an RMO or you are an RMO and you do not have a direct relationship with the business, I suggest you become as active as possible with the work being done. Log all phone calls, keep all emails, review contracts and sign them if possible, review photographs, and yes… even drop by the job site if you can (even though the law cited by the CSLB does not require it).
Last comment…. if this is such a big problem that the CSLB had to create a “task force”, why don’t they just amend or remove B&P Code 7068.1? Get rid of the 20% rule altogether? Or is it easier to create an unregulated task force, pry into the business activities of licensee’s, write citations and criminal cases, and collect 100’s of thousands of dollars? Well…. they even say it themselves… “yielded big dividends”!
Full CSLB article below
RMOs-for-Hire Better Know What They’re Getting Into
CSLB has zeroed in on licensees who rent their services as Responsible Managing Officers (RMOs) for companies over which they have little or no control. Due to the work of a special CSLB task force that targets suspected RMO abuses, those who act as little more than paid license qualifier for companies are being identified and disciplined for violating state contractor law.
Contractors who serve as qualifiers for a company’s construction operations must exercise direct control and supervision, and, by law, maintain at least a 20 percent ownership stake in each firm for which the person acts as a qualifier. Business and Professions Code (BPC) section 7068.1 authorizes CSLB to discipline the licensed entity when the qualifier is not actively involved in the construction activities of the license they are representing. In addition to administrative penalties, the individual falsely serving as a qualifier on the license can be charged with a misdemeanor and be sentenced to serve up to six months in jail, and required to pay a fine of up to $5,000, or both.
CSLB’s effort to uncover straw men RMOs has yielded big dividends. There have been a total of 304 complaints filed against those suspected of misusing their qualifier status (many still under investigation), 31 accusations filed to revoke or suspend a license, 12 citations issued for violations of contractor law, 11 criminal cases filed by local district attorney’s offices, and $215,000 in restitution ordered for wronged consumers.
CSLB has strong words of caution for those who would enter these arrangements: If you act as an RMO and do not have active and financial involvement in the construction and business operations, you risk CSLB administrative penalties against your license(s) as well as criminal prosecution, regardless of whether you’re aware of substandard work being performed by unqualified individuals.
The task force also is watching for exam waiver requests from applicants suspected of only seeking to rent their name for a fee. CSLB also 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.
A review of BPC section 7065 will provide further explanation of examination waiver laws.
End of article
Very last comment…. do I think the CSLB should be taking action against the extremely small percentage of contractor RMOs for hire? Yes. Should they create an unregulated task force with no oversight to invade the businesses of California contractors? …. Not just no, but hell no!