Legislative Update: 2012 Construction Law Changes

By Joseph M. Sweeney, Esq., Christopher J. Olson, Esq., Kristen E. Green, Esq. and Dana R. Corey, Esq.

Every year, existing laws are amended and new laws go into effect. The following legislative changes in the field of construction law may affect your business or be of general interest to you and your company.

Revised and Renumbered Mechanic’s Lien Law Statutes

The California Legislature has revised and renumbered the Mechanic’s Lien Law Statutes. On July 1, 2012, the new laws become effective. The new laws are an attempt to modernize, simplify and clarify existing law. The details of the revisions will be the subject of another Sweeney, Mason, Wilson & Bosomworth newsletter.

New Notice Provisions on Public Works Payment Bond Claims

Section 3252 of the Civil Code has been amended by adding subsections (c) – (f), inclusive. These newly added sections to Civil Code Section 3252 have a significant impact for lower tier subcontractor’s (and supplier’s) notice requirements for payment bond claims. This amendment applies to contracts entered into on or after January 1, 2012.

Prior to this amendment, a subcontractor who failed to provide a 20-day preliminary notice was given a “second chance” to provide notice of a claim on a statutory labor and material payment bond. That is, the subcontractor could file a post work bond notice either 15 or 75 days after project completion depending on whether the subcontractor was provided notice of the recordation of a Notice of Completion of the subject project.

Civil Code Section 3252 now provides that if the general contractor has made all of its undisputed progress payments to the first tier subcontractor, a lower tier subcontractor who would be a proper payment bond claimant cannot utilize a post work “second chance” provision to provide notice of a payment bond claim.

NOTE: This amendment makes it even more critical for claimants to send a 20-day preliminary notice at the inception of one’s work or when one provides materials to a project.

Workers’ Compensation Insurance: Contractors

Newly enacted Section 7125.5 has been added to the Business and Professions (“B&P”) Code. It states that at the time of license renewal an active licensee with an exemption for Workers’ Compensation Insurance on file with the Contractors State License Board (“CSLB”) shall either recertify the licensee’s exemption or shall provide a current and valid Certificate of Workers’ Compensation Insurance, whichever is applicable. If a licensee fails to submit the proper Certificate of Workers’ Compensation Insurance to the CSLB, the CSLB will reject the license renewal. B&P Code § 7125.5 also provides the licensee with a grace period for retroactive renewal should the licensee submit the proper paperwork within 30 days after notification by the Board of the renewal rejection.

The significance of this newly enacted requirement was determined by the ruling in Wright vs. Issak (2007) 149 Cal. App. 4th, 1116, 58 Cal. Rptr. 3d 1 where the Court held a contractor's license is automatically suspended as of the date the contractor was required to obtain workers' compensation insurance but did not. In the Wright case, the court ruled that because the contractor underreported its payroll, it did not have proper workers' compensation insurance in place when it performed work for the homeowners. As such the contractor’s license was automatically suspended at that time. Therefore, it was an unlicensed contractor at the time it performed work on the Project and was unable to recover any contract balance due.

Employment Leave: Interference, Restraint or Denial of Leave

It is an unlawful employment practice for an employer to interfere with, restrain, or deny the exercise of any rights under the California Family Rights Act (“CFRA”) (Government Code §§ 12945.1, 12945.2 and 19702.3) which governs an employee’s right to take unpaid protected leave from work, (1) to bond with a child who was born, adopted, or placed by foster care with the employee, (2) to care for an employee’s parent, spouse, or child who has a serious health condition, and (3) because the employee is suffering from a serious health condition rendering him or her unable to perform the functions of the job.

The CFRA covers employers with 50 or more employees. The CFRA has been amended to also make it an unlawful employment practice for an employer to refuse to allow a female employee affected by pregnancy, childbirth, or a related medical condition to take leave for a reasonable time, not to exceed four months and thereafter return to work, unless based upon a bona fide occupational qualification.


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