Articles

Licensing Law Re-Visited

Contractor's licensing issues were once again the subject of a recent California court decision. In my article of March 3, 1997 I described a case where a $600,000 change order claim survived an owner's challenge to the general's license status.

In the meantime, another case came down which did not have as happy an ending from the contractor's perspective.

An individual who held a drywall (C-9) and a painting and decorating (C-33) specialty license formed a new corporation which obtained a general contractor's license (Class B). The license was obtained through another individual who came to work for the corporation as its Foreman and Responsible Managing Employee ("RME").

The Foreman/RME later left the company; however, the owner, believing he was only on long term leave, did not notify the Licensing Board or take steps to replace him with a new RME or RMO.

The corporation later brought a lawsuit for breach of subcontract to install drywall. The court dismissed the suit holding the company was not properly licensed and not in substantial compliance. The court found that the company's failure to have a license was due to its own negligence.

The appellate court agreed holding there is no exception for "excusable neglect". An exception will be allowed only where the lack of proper license was due to circumstances truly beyond the contractor's control.

Today's licensing lesson is this: check the status of your RME's and RMO's to be sure you are properly licensed.

Mr. Kershner is with the Law Offices of Gary Kershner, a member of the Exchange since 1955. The law firm acts as general counsel in litigation and non-litigation matters for a variety of small and medium-size businesses. Mr. Kershner can be reached at (510) 832-6500.