All too often the California Contractors State License Board issues a press release confirming that it has cited numerous individuals for, among other things, unlawfully advertising as contractors when they are not, in fact, licensed contractors. However, California's Contractors' State License Law, Cal. Bus. & Prof. Code §§ 7000, et seq. (the "Law"), governs advertising by both unlicensed contractors and licensed contractors. It regulates advertising across various marketing channels, including websites, emails, directories, and other forms of communication. "Advertising" is defined broadly to include "any card, contract proposal, sign, billboard, lettering on vehicles registered in this or any other state, brochure, pamphlet, circular, newspaper, magazine, airwave or any electronic transmission, and any form of directory under any listing denoting 'Contractor' or any word or words of a similar import or meaning requesting any work for which a license is required by the Contractors License Law." 16 C.F.R. § 861; see also Bus. & Prof. Code §§ 7027.1(b), 7027.4(c). Where and how do you "advertise" your construction business and services?
Contractor's License Number is Required on All "Advertising"
In addition to including you contractor's license number on all construction contracts, subcontracts and calls for bid, the Law requires it to be included on all forms of advertising used. Bus. & Prof. Code § 7030.5. Licensed contractors are not allowed to advertise for construction work outside of the trade(s) for which they are licensed.
Additional Requirements for Advertising that You are Insured or Bonded
The Law also makes it a "cause for discipline" for any contractor to advertise that it is: (1) "insured" or has insurance without identifying in the advertisement the type of insurance, including, for example, "commercial general liability insurance" or "workers' compensation insurance" that is carried by the contractor; the contractor may abbreviate the title of the type of insurance; or (2) "bonded" if the reference is to a contractor's license bond required pursuant to Bus. & Prof. Code § 7071.6 or to a disciplinary bond required pursuant to Bus. & Prof. Code § 7071.8. Bus. & Prof. Code § 7027.4(a), (b). (Any reference by a contractor in its advertising, soliciting, or other presentments to the public to any bond required to be filed pursuant to the Law is a ground for the suspension of the license of such contractor. Bus. & Prof. Code § 7071.13). The CSLB's publications encourage contractors not to advertise about bonding because it could lead the public to believe there is a higher level of protection provided to them by the bonding procedure than might be the case.
Additional Requirements for Advertising Asbestos Removal Services
The Law further prohibits a contractor from advertising to promote its services for the removal of asbestos unless it is certified to engage in asbestos-related work pursuant to Bus. & Prof. Code § 7058.5, and registered for that purpose pursuant to Lab. Code § 6501.5. Bus. & Prof. Code § 7099.11(a). Each advertisement must include the contractor's certification and registration numbers and it must use the same name as on the certification and registration. Bus. & Prof. Code § 7099.11(a).
The CSLB is required to issue a notice to comply with the order of correction provisions of Bus. & Prof. Code § 7099.10(a) to any contractor who is certified and registered and who fails to include in any advertisement its certification and registration numbers. Bus. & Prof. Code § 7099.11(b). It will also issue a citation pursuant to Cal. Bus. & Prof. Code § 7099 to any such contractor who fails to comply with the notice to comply, or who advertises to promote its services for the removal of asbestos but does not possess valid certification and registration numbers, or who fails to use in the advertisement the correct name. Bus. & Prof. Code § 7099.11(c).
Additional Requirements for Motor Vehicles Used for Construction Business
Except for C-36 Plumbing contractors, C-45 Sign contractors and C-57 Well-drilling contractors, every contractor licensed under the Law is required to have displayed, in or on each motor vehicle used in its construction business, its business name and contractors' license number in a clearly visible location in print type of at least 72-point font or 3/4" in height and width. Bus. & Prof. Code § 7029.6.
Additional Requirements for C-36 Plumbing Contractors', C-45 Sign Contractors' and C-57 Well-drilling Contractors' Motor Vehicles
C-36 Plumbing contractors, C-45 Sign contractors and C-57 Well-drilling contractors are required to display on each side of each motor vehicle used in its business, for which a commercial vehicle registration fee has been paid, its name, permanent business address, and contractor's license number, all in letters and numerals not less than 1 1/2" high. Bus. & Prof. Code § 7029.5. These identification requirements also apply to any drill rig used for the drilling of water wells. Failure to comply with the Law is a cause for discipline for any contractor.
Consequences for Licensed Contractors (and Their Qualifiers) Who Violate the Law
For purposes of the Law, the term "licensee" is defined broadly to include an individual, partnership, corporation, limited liability company, joint venture, or any combination or organization licensed under the Law, and also includes any named responsible managing officer (RMO), responsible managing manager/responsible managing member (RMM), or responsible managing employee (RME). Bus. & Prof. Code § 7096.
Suspension or Revocation of License
The CSLB may upon its own motion (or upon a verified complaint in writing of any person) investigate the actions of any license applicant or contractor and may cite, temporarily suspend, or permanently revoke any license or registration if the applicant or licensee is guilty of or commits any one or more of the acts or omissions constituting causes for disciplinary action under the Law. Bus. & Prof. Code § 7090.
Citation Plus Civil Penalty
If, upon investigation, the CSLB has probable cause to believe that a licensee or a license applicant has committed any acts or omissions which are grounds for denial, revocation, or suspension of license, it may issue a citation to the licensee or license applicant. Bus. & Prof. Code § 7099. Each citation is to be in writing and to describe with particularity the nature of the violation, including a reference to the Law alleged to have been violated. Each citation may contain an order of correction fixing a reasonable time for correction of the violation or an order, against the licensee only, for payment of a specified sum to an injured party in lieu of correction, and may contain an assessment of a civil penalty. See also Bus. & Prof. Code § 7099.2.
Citation Plus Civil Penalty Plus Termination of Phone Service
If, upon investigation, the CSLB has probable cause to believe that a licensee, an license applicant, or an unlicensed individual acting in the capacity of a contractor who is not otherwise exempted from the provisions of the Law, has violated Bus. & Prof. Code § 7027.1 by advertising for construction or work of improvement covered by the Law in an alphabetical or classified directory, without being properly licensed, the CSLB may issue a citation under Bus. & Prof. Code § 7099 containing an order of correction which requires the violator to cease the unlawful advertising and to notify the telephone company furnishing services to the violator to disconnect the telephone service furnished to any telephone number contained in the unlawful advertising, and that subsequent calls to that number are not to be referred by the telephone company to any new telephone number obtained by that person. Bus. & Prof. Code § 7099.10(a). If the person to whom a citation and order of correction is issued fails to comply with the order of correction after the order is final, the CSLB will inform the Public Utilities Commission (PUC) of the violation, and the PUC will require the telephone company furnishing services to the violator to disconnect the telephone service furnished to any telephone number contained in the unlawful advertising. Bus. & Prof. Code § 7099.10(c).
It is also a misdemeanor and cause for disciplinary action for any person to use false, misleading, or deceptive advertising as an inducement to enter into any contract for a work of improvement, including, but not limited to, any home improvement contract, whereby any member of the public may be misled or injured. Bus. & Prof. Code § 7161(a). It is also cause for a disciplinary action against a licensee or license applicant.
Advertising by Persons Who are Not Licensed Contractor; Penalties; Exemptions from Licensing Law
In addition to the foregoing, the Law regulates any person who advertises or puts out any sign or card or other device that would indicate to the public that he or she is a contractor, or who causes his or her name or business name to be included in a classified advertisement or directory under a classification for construction or work of improvement covered by the Law regardless of whether his or her operations as a builder are otherwise exempt under the Law. Bus. & Prof. Code § 7027. It is a misdemeanor for any person to advertise for construction or work of improvement covered by the Law unless that person holds a valid license in the classification advertised, except that a licensed building or engineering contractor may advertise as a general contractor. Bus. & Prof. Code § 7027.1(a). A violation of Section 7027.1 is punishable by a fine of not less than $700 and not more than $1,000, which is in addition to any other punishment imposed for a violation of Section 7027.1. Bus. & Prof. Code § 7027.1(c).
California's Contractors' State License Law does not apply to any work or operation on one undertaking or project by one or more contracts, the aggregate contract price which for labor, materials, and all other items, is less than $500. Bus. & Prof. Code § 7048. However, this exemption does not apply in any case wherein the work of construction is only a part of a larger or major operation, whether undertaken by the same or a different contractor, or in which a division of the operation is made in contracts of amounts less than $500 for the purpose of evasion of California's Contractors' State License Law or otherwise. Bus. & Prof. Code § 7048. Likewise, this exemption does not apply to a person who advertises or puts out any sign or card or other device which might indicate to the public that he or she is a contractor or that he or she is qualified to engage in the business of a contractor. Bus. & Prof. Code § 7048.
A person not licensed pursuant to the Law may advertise for construction work or work of improvement covered by the Law, provided that (1) the aggregate contract price which for labor, materials, and all other items, is less than $500, and (2) he or she states in the advertisement that he or she is not licensed under the Law. Bus. & Prof. Code § 7026.11.
Other exemptions from licensure contemplated by the Law are set forth in Bus. & Prof. Code §§ 7040, et seq.