Governor Signs Industry Sponsored Legislation to Protect Contractors

Governor Newsom has signed AB 830 to protect contractors who use a “Responsible Managing Employee” (RME) as the qualifier on their contractor license. The legislation clarifies that an RME qualifier on a contractor license is a valid qualifier and that the requirements for “supervision and control” on a construction project may be accomplished by the RME either directly, or indirectly by supervising designated employees.

AB 830 was necessary in response to recent litigation; D.A. McCosker Construction Co. v. California Department of Water Resources. In the case, a judge in the Superior Court of Sacramento found that because the contractor was working on multiple projects, the RME could not be satisfactorily involved in the California Department of Water Resources project, and as such, the contractor was operating as an unlicensed contractor.  By the judge determining independently what “supervision and control” means and declaring the contractor unlicensed, he placed the contractor in a position of being disgorged of all funds paid on the project.  As a result of the Court’s decision, it became possible for an RME’s status as a qualifier on a license to no longer be determined by regulation, but instead by individual judges.

As a practical matter, contractors and subcontractors who perform work on large public and private construction projects have multiple jobs underway at any given time.  Each project is assigned a project manager who is responsible for managing each individual project, whereas the RME is often an employee responsible for managing the operations of the licensee.  Pursuant to the Judge’s ruling, it would be unclear how a contractor whose license is held by an RME could continue perform on multiple jobs without being placed in jeopardy of being found to be unlicensed.

AB 830 address this issue long term, by placing in state law, clarity that an RME is a valid qualifier on a license and can provide “supervision and control” either directly, or indirectly by supervising designated employees.

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