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CPSA Requests Governor Veto Contractor Liability Bill

This week, the California Pool and Spa Association submitted comments to Governor Jerry Brown registering our opposition to AB 1701. The CPSA is part of a coalition organized by the California Building Industry Association that contains 66 other groups composed of contractors and members of the business community that also oppose this dangerous bill.

AB 1701 holds general contractors and subcontractors jointly liable for unpaid wages, including fringe benefits. Specifically, for all contracts entered into on or after January 1, 2018, the bill requires a direct contractor making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other work, to assume, and be liable for, debt owed to a wage claimant that is incurred by a subcontractor, at any tier, acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the original contract. The legislation authorizes the Labor Commissioner to bring an action to enforce the liability against a general contractor through either a civil action or the administrative process for disputing unpaid wages.

This bill does not require a worker or third party to exhaust his or her options before moving on to the general contractor, nor does this measure require the worker or third party to secure a judgment against the subcontractor in order to pursue a joint liability action. In addition, the bill does not provide the general contractor with legal standing to go after the sub-contractors bond for any wages the general contractor become responsible to pay. Under current law only material persons, employees and homeowners have legal standing.

“AB 1701 would place a tremendous burden on small contractors like our members who have little ability to monitor or control the conduct of its subcontractors with regard to the payment of wages and benefits, especially when they are trying to juggle several jobs in a busy season,” wrote John Norwood, CPSA lobbyist and Executive Director. “For example, if a plaster contractor is short a couple men to do a plaster job and picks up a couple of labors he or she pays cash, how will the general contractor know?”

A significant percent of the pool and landscape business is currently going to the underground economy and the state is doing little to attack this problem. There is tremendous pressure on our members to “cheat to complete” under current conditions without the additional burdens imposed on general contractors by this legislation. AB 1701 adds an financial liability onto the small business person that there is no way to calculate or anticipate for up to a year after the project is complete, with little recourse to sub-contractors who often have little or no financial wherewithal. At minimum there should have been a size or dollar threshold for this legislation to apply.

There has to date been no case made that the current remedies for such issues are inadequate; adding a new private right of action to these remedies for subcontractor delinquencies for up to one year following the date of completion of the work exposes contractors to increased, unnecessary litigation that does not solve a purported problem. Rather than creating an ability to avoid the harm of unpaid workers, AB 1701 would make the worker go through a lengthy process of litigation – beginning one year after the work is complete, delaying payment for years.

Again, we are hopeful the Governor will reject this harmful legislation.  At minimum, this bill should be amended to incorporate a threshold for the bill to apply and amend California Business and Professions Code Section 7071.5 (f) to give the general contractor the ability to collect on the subcontractors bond for the unpaid wages that the general contractor is responsible to pay.

As it stands, AB 1701 is a dangerous and poorly conceived bill that threatens great harm to the pool and spa industry.