California’s construction industry is entering a new era of accountability. With the passage of recent legislation, the Contractors State License Board (CSLB) and state prosecutors have expanded their authority to crack down on improper licensing practices, particularly the misuse of Responsible Managing Officers (RMOs) and Responsible Managing Employees (RMEs), and non-compliant subcontracting arrangements.
If you’re a contractor, qualifier, or construction business owner, it’s time to take a hard look at your operations—because the days of “paper-only” qualifiers and overlooked labor violations are officially over.
What’s at Stake: The Qualifier’s Role Under a Microscope
For years, the CSLB has warned about the dangers of “renting” a qualifier—where a licensed individual is listed as the RMO or RME for a construction business but has little to no involvement in its actual operations. This practice is now more than just discouraged—it’s actively being prosecuted.
The law requires that RMOs and RMEs exercise direct supervision and control over the projects they’re attached to. That doesn’t mean a monthly check-in or occasional signature. It means involvement in daily construction operations, decision-making, jobsite oversight, and ensuring code compliance. A qualifier in name only is a liability, not an asset.
Business and Professions Code § 7068.1 now spells out what supervision and control really means, including:
- Overseeing day-to-day construction activities
- Making administrative and technical decisions
- Conducting site visit
- Ensuring quality control
Failure to meet these requirements can result in license suspension or revocation—and in some cases, criminal charges under Penal Code § 802 and Business and Professions Code § 7122.5.
Enforcement Ramps Up: CSLB’s Task Force Targets “Rented” Licenses
To identify abuse, the CSLB has created a dedicated task force to investigate inactive qualifiers and sham ownership structures. They’re looking closely at license applications, waiver requests, and corporate filings to determine whether qualifiers have a genuine, active role in the business—or are just a name on paper.
If a qualifier is found to be non-compliant, the CSLB may void the license and initiate disciplinary action.
New Rules on Subcontracting: Know Your Limits
As of January 1, 2024, another major change went into effect: specialty contractors may no longer subcontract work within their own license classification on a single project unless specific conditions are met.
Under Business and Professions Code § 7035, those exceptions include:
- The subcontractor uses employees—not independent contractors—to perform the work, or
- The contractor is party to a collective bargaining agreement that allows such subcontracting
This change targets worker misclassification and ensures contractors are following California’s strict labor laws. If you’re subcontracting under your same license classification, review your employment relationships carefully—what may seem like standard practice could now place your business at risk.
Extended Timeframe for Enforcement: Statute of Limitations Now 3 Years
Previously, prosecutors had one year to bring criminal charges related to improper licensing activities. Under the updated Penal Code § 802(d)(3), that statute of limitations has been extended to three years.
This means regulatory violations that occurred two or even three years ago may still be subject to investigation and prosecution. In other words, time is no longer on the violator’s side.
What Contractors Should Do Now
The legal landscape for licensed contractors is changing rapidly. Here are proactive steps you should take to protect your business and license:
- If you’re an RMO or RME: Confirm your active involvement. Documentation matters—be able to demonstrate your role in operations, site visits, and project decisions.
- If you’re a business owner: Reevaluate your licensing structure. Is your qualifier truly involved in daily activities? If not, you may be risking the entire business.
- If you subcontract specialty work: Ensure you’re hiring properly classified employees or covered by a union agreement. Avoid subcontracting arrangements that now violate the law.
- For everyone in construction: Understand that enforcement isn’t just increasing—it’s evolving. You may face investigation years after the fact.
Conclusion: Compliance Isn’t Optional—It’s Essential
At Simas & Associates, we’ve represented countless contractors navigating CSLB inquiries, license defense, and regulatory compliance issues. The recent changes to California law should not be ignored. They represent a turning point in how the state views contractor responsibility, labor practices, and consumer protection.
If you’re unsure whether your current setup complies with the new laws—or if you’ve been contacted by CSLB—get in touch. We’re here to help you protect what you’ve built.