Legislative Changes Affecting California Contractors

The great philosopher Arnold Palmer said: “The road to success is always under construction.” This has never been more true than in this unpredictable era of pandemic impacts, climate change and economic uncertainty. Given all this uncertainty, contractors need to keep an eye on new laws affecting private and public projects and the construction industry as a whole. To make life easier, below is a summary of key  changes taking effect in 2022 in the areas of consumer protection, climate impacts, technology, affordable housing, project delivery methods and licensing laws, all of which impact contractors in Southern California. 

Consumer Protection 

• A.B. 938: Extends senior citizens’ right to cancel a home improvement contract from three days to five days.  
•  A.B. 1023: Requirement for monthly submission of certified payroll records on public works projects revised to at least once every 30 days during ongoing work and within 30 days after the final day of work. Records must be furnished electronically to the Department of Labor. Penalty of $100 per day effective 14 days after the deadline for furnishing records, not to exceed $5,000 per project. 
•  A.B. 1561: For the construction industry, amends Section 2781 the Labor Code to provide for a new seven-part test for the determination of whether an individual is an independent contractor for work performed before January 1, 2025: 

1. 1. the subcontract is in writing;
   2. the subcontractor is licensed by the CSLB and the work is within the scope of that license;
   3. the subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a business license or business tax registration and the subcontractor has a business license or business tax registration;
   4. the subcontractor maintains a business location separate from the contractor’s business or work location;
   5. the subcontractor has the authority to hire and fire other persons to provide or to assist in providing the services;
   6. the subcontractor assumes financial responsibility for errors or omissions in labor or services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services provided; and
   7. the subcontractor is customarily engaged in an independently established business of the same nature as that involved in the work performed.

• S.B. 297: The Wade Kilpatrick Gas Safety and Workforce Adequacy Act of 2021 provides for a civil penalty up to $100,000 against operators and excavators of subsurface installations who damage gas or hazardous liquid pipeline subsurface installations resulting in the escape of flammable, toxic or corrosive gas or liquid. 
• S.B. 727: Extends the liability of a direct contractor for unpaid wages, fringe or other benefit payments or contributions including interest owed by a subcontractor to include penalties and liquidated damages for contracts entered into on or after January 1, 2022. 
• S.B. 757: Solar energy systems are now deemed to be “home improvements” for purposes of the Home Improvement Act. Home improvement salespersons may be employed by one or more home improvement contractors. Requires home improvement salespersons to identify to owners or tenants the business name and license number of the contractor they represent. Clarifies that the Act’s limitation on down payment also applies to advance payment requests from any lender or financier for the performance or sale of home improvement goods or services.

Climate 

• A.B. 137: The Solar Energy System Restitution Program administered by the CSLB will provide restitution to consumers of solar energy systems installed by contractors on single-family residences in violation of the Contractors State License Law. Also Authorizes the Energy Commission to implement the Building Initiative for Low-Emissions Development Program Phase 2 program to incentivize the construction of new market-rate multifamily and single-family residential buildings as all-electric buildings or with energy storage systems. 
• S.B. 30: State agencies are prohibited from designing or constructing state facilities connected to the natural gas grid and from providing funding or other support for certain projects involving the construction of residential and nonresidential buildings connected to the natural gas grid. 
• S.B. 68: The State Energy Resources Conservation and Development Commission is required to gather, develop, and publish guidance and best practices to assist building owners, the construction industry, and local governments with overcoming barriers to electrification of buildings and installation of EV charging equipment on its website. Authorizes the Energy Commission to award money under the Electric Program Investment Charge program for projects that will benefit electricity ratepayers and lead to technological advancements to reduce the costs of building electrification.

Technology 

• A.B. 41: The Department of Transportation must ensure that construction includes the installation of conditions capable of supporting fiber optic communication cables with respect to broadband deployment on department-led construction projects. 
•  S.B. 4: The Governor’s Office of Business and Economic Development (“GO-Biz”) will coordinate with state and local agencies and national organizations to explore methods of streamlining local land use approvals and construction permit processes for projects related to broadband infrastructure deployment and connectivity. 
•  S.B. 156: Establishes the Office of Broadband and Digital Literacy within the Department of Technology to oversee the acquisition and management of $2 billion in contracts for the development, construction, operation and maintenance of a statewide open-access middle-mile broadband network.  
•  S.B. 378: Local permitting agencies must allow micro trenching for the installation of underground fiber if the installation in the micro trench is limited to fiber. 

Licensing/ Jobsite Safety 

• A.B. 569: The CSLB civil penalty limit is increased from $5,000 to $8,000 and the enhanced civil penalty limit for unlicensed persons is increased from $15,000 to $30,000.  Also expands the enhanced civil penalty limit to contractors failing to secure workers’ compensation insurance when required. 
•  S.B. 607: The license bond amount of construction contractors is increased from $15,000 to $25,000 and qualifier bond from $12,500 to $25,000 beginning January 1, 2023. 
•  A.B. 830: “Responsible Managing Employee” of a construction contractor is defined as an employee permanently employed by a contractor working the lesser of 32 hours per week or 80% of the total hours per week of the contractor’s regular business hours. The CSLB is to develop an employment duty statement whereby a contractor, as a condition of licensure, provides detailed information on a qualifier’s duties and responsibilities for supervision of construction operations. 
•  S.B. 606: For contractors with employees at multiple jobsites, it is presumed that a health and safety violation in one location is evidence of a violation at another location, if either the contractor has a non-compliant written health and safety policy or procedure, or Cal/OSHA obtains evidence of a pattern or practice of the same violation committed by the contractor at any of its worksites. The burden is on the contractor to prove otherwise, and in addition to monetary penalties Cal/OSHA is vested with subpoena power and may seek an injunction or restraining order to enforce compliance. (See our December 9, 2021 article for more information.) 
•  S.B. 826: C-22-licensed Asbestos Abatement contractors may engage in asbestos-related work with an asbestos certification. 

Affordable Housing 

• A.B. 140: Public agencies can use funds allocated by the Coronavirus State Fiscal Recovery Fund established by the federal American Rescue Plan Act of 2021 for new construction and development. Authorizes the Department of Housing and Community Development to award a forgivable loan or grant to a qualified rental housing development to replace federal and state low-income housing credit equity. Requires the Department of Industrial Relations to establish and maintain a strategic enforcement unit focused on construction, alteration and repair projects. 
•  A.B. 172: Establishes the Community Care Expansion Program to award grants to preserve or expand capacity of qualified residential adult and senior care facilities through the acquisition, construction or rehabilitation of property in order to avoid the closure of facilities and to increase the acceptance of new qualified residents. 
•  S.B. 8: Clarifies the classification of a “housing development project” under the Housing Crisis Act of 2019 to include projects that involve no discretionary approvals, projects that involve both discretionary and non-discretionary approvals, and projects that include a proposal to construct a single dwelling unit.  Does not apply to projects for which applications were submitted before January 1, 2022.  
• S.B. 9: Requires proposed housing developments containing no more than two residential units within a single-family residential zone that meet certain requirements to be considered ministerially, without discretionary review or hearing. 
• S.B. 10: Local governments are authorized to adopt ordinances or zone any parcel for up to 10 units of residential density per parcel, at a height specified in the ordinance, if the parcel is located in a transit-rich area or urban infill site. 
• S.B. 51: Requires housing-related entities to provide an enforceable commitment to a selling agency for payment of prevailing wages for construction on surplus property being sold by a local agency. Requires housing-related entities to include prevailing wage requirements in construction contracts and to include requirements that direct contractors include prevailing wage requirements in their subcontracts. 
• S.B. 169: The Higher Education Student Housing Grant Program shall provide one-time grants for the construction of student housing or for the acquisition and renovation of commercial properties into student housing for the purpose of providing affordable, low-cost housing options for students enrolled in public post-secondary education. 
• S.B. 478: Local agencies are prohibited from imposing a floor area-ratio standard that is less than 1.0 on a housing project that consists of 3 to 7 units, or less than 1.25 on a housing development project that consists of 8 to 10 units. 
• S.B. 791: Creates the California Surplus Land Unit within the Department of Community Development for the purpose of facilitating the development and construction of residential housing on local surplus land. 

 Project Delivery/Finance 

•  A.B. 149: The Department of Transportation may use job order contracting for construction projects funded pursuant to the Clean California State Beautification Program of 2021. 
•  A.B. 486: Lease-leaseback contracts for K-12 projects based on a best-value competitive solicitation process are extended from July 1, 2022 to July 1, 2027. 
•  A.B. 846: The job order contracting method for school districts and community college districts is extended from January 1, 2022 to January 1, 2027. 
•  A.B. 1499: The Department of Transportation may utilize design-build procurement based on either best value or lowest responsible bid for up to 10 projects from January 1, 2024 to January 1, 2034. 
•  S.B. 626: Pilot program for the Department of Water Resources to utilize the Construction Manager/General Contractor (CM/GC) project delivery method and design-build procurement method for up to 7 projects each through January 1, 2033. 
• A.B. 464: The list of facilities and projects that may be funded by an enhanced infrastructure financing district from the acquisition, construction or repair of industrial structures is expanded to include commercial structures of small businesses and facilities of nonprofit community organizations which provide health, youth, homeless and social services. 
• S.B. 146: Reduces the amount of revenue bonds, notes and anticipation notes that the State Public Works Board may issue for the acquisition, design and construction of local jail facilities and adult local criminal justice facilities. 

 This information is a high-level overview of changes to California law. It does not cover  every detail of the new laws, nor consider how they may apply to a particular contractor’s projects or business practices. With the assistance of legal counsel experienced in construction law, contractors should evaluate their business plans, agreements and legal compliance in light of the legislative changes set out above in order to, in the best case, take advantage of new opportunities and, in the worst case, to avoid civil penalties as you go forward with projects in 2022.  

Allison S. Carcelli is an attorney with DDWK in the Irvine office. Her current practice focuses on design professional defense, general civil litigation, construction defect litigation, and transactional work. Allison’s experience also includes defending large scale residential developers in suits filed by single-family tract homeowners and homeowners associations. You can reach Allison at acarcelli@ddwklaw.com.

Dunn DeSantis Walt & Kendrick provides a broad spectrum of legal services to businesses of all sizes, from small, local start-ups and non-profits to large, national companies. DDWK’s real estate development and construction practice includes representing all segments of the development and construction industries on both private and public projects.