New California Construction Laws for 2023

December 15, 2022

The California Legislature introduced more than 4476 bills in 2021-2022 sessions, with 1726 coming in the second session, down from the 2750 in the first session.

This article summarizes some of the more important bills affecting contractors in their roles as contractors, addressing issues such as payroll liability and reporting, construction delivery and contracts, licensing, design-build, best value, and dispute resolution1. These new laws are effective January 1, 2023, unless otherwise noted. Not addressed here are many other bills that will affect contractors in their roles as businesses, taxpayers, and employers. Each of the summaries is brief, focusing on what is most important to contractors. Because not all aspects of these bills are discussed, each summary’s title is a live link to the full text of the referenced bills for those wanting to explore the details of the new laws.

LICENSING ISSUES

Contractors Who Violate Requirements for Permits May Be Fined Up to $30,000 (AB 1747, Quirk)

Under existing law, willful or deliberate disregard and violation by a licensed contractor of various state building, labor, and safety laws constitutes a cause for disciplinary action by the Contractors State License Board. Violators may be fined up to $8,000 for most violations and $30,000 for certain other violations, such as willful or deliberate violation of worker’s compensation insurance requirements, building codes, health and safety laws, subcontractor listing laws, contracting with or aiding and abetting an unlicensed contractor, pest control license requirements, and requirements for contracting for service and repair work. This new law adds to that list willful or deliberate disregard and violation of any state or local law relating to the issuance of permits.

Veterans Supported by Expedited Application Processing and License Fee Discount (AB 2105, Smith)

The Department of Consumer Affairs by this measure is required to grant a 50% fee reduction for an initial license or registration fee and expedite and assist in the initial licensure process for an applicant who supplies satisfactory evidence to the board that the applicant has served as an active-duty member of the Armed Forces of the United States, including the National Guard or Reserve components, and was not dishonorably discharged.

Time of Public Disclosure of Letters of Admonishment May be Extended to Two Years (AB 2916, McCarty)

The CSLB is required to disclose complaints against a licensee, except those complaints resolved in favor of the licensee. Previously, complaints resolved by a letter of admonishment would be disclosed for a period of one year. This measure permits the CSLB to disclose a complaint resolved by a letter of admonishment for either one year or two years, depending on (i) the gravity of the violation, (ii) the good faith of the licensee or applicant for licensure being charged, and (iii) the history of previous violations. In contrast, citations against licensees are disclosed for five years.

 RETENTION

“Substantially Complex” Retention up to 10% Extended Indefinitely (AB 2173, Petrie-Norris)

This measure extends indefinitely existing law that allows public entities to withhold retention in excess of 5% from any payment by an awarding entity to the original contractor, by the original contractor from any subcontractor, and by a subcontractor from any subcontractor, when (i) the director of the applicable department has made, or the governing body of the public entity or designated official of the public entity has approved, a finding prior to the bid that the project is substantially complex and requires a higher retention and (ii) the department or public entity includes both this finding and the actual retention amount in the bid documents.

Construction Managers and Others Now Have Rights to Handling of Retentions in Escrow (SB 1192, Ochoa Bogh)

Under existing law, certain public works invitations for bid and related contract documents must include provisions permitting the substitution of securities for any moneys withheld as retention by the public agency, and, at the request and expense of the contractor, requires securities equivalent to the amount withheld to be deposited with the State Treasurer or an approved escrow agent. Alternatively, the amount withheld may be paid to the escrow agent. Subcontractors whose contracts make up 5% of the prime contract are entitled to their share of any interest paid on such retention. This amendment allows any individual, firm, partnership, corporation, association, or other legal entity permitted by law to practice the profession of architecture, landscape architecture, engineering, environmental services, land surveying, or construction project management to avail themselves of this process.

WORKER’S COMPENSATION INSURANCE

Worker’s Compensation Insurance to Become Mandatory for All Active, Licensed Contractors Whether or Not They Have Employees (SB 216, Dodd)

Starting July 1, 2023 (except for roofing contractors who have been subject to this rule since 2013), contractors with the following license classifications must have worker’s compensation insurance, whether or not they have employees:

• C-8 concrete contractors,
• C-20 warm-air heating, ventilation, and air-conditioning contractors,
• C-22 asbestos abatement contractors,
• C-39 roofing contractors, and
• D-49 tree service contractors.

After July 1, 2023, if the registrar finds the licensee has employees and lacks the proper insurance certification, the registrar will remove the licensee’s classification for which certification is required. If the licensee continues work and fails to provide the certification after the classification is removed, the offender’s license is automatically suspended. A joint venture without employees that files a certificate of exemption is not required to obtain workers’ compensation insurance. As of January 1, 2026, all licensed contractors or applicants for licensure, regardless of classification, must obtain and maintain workers’ compensation insurance—whether or not they have employees—unless they are organized as a joint venture and file a certificate of exemption.

JOB CREATION

For Contracts Solicited After January 1, 2023 Worth $10,000,000 or More for Acquisition of Zero-Emission Transit Vehicles or Electric Vehicle Supply Equipment, Contractors Must Adhere to High Road Jobs Standards and Enter Labor Peace Agreements (SB 674, Durazo)

This measure establishes the High Road Jobs in Transportation-Related Public Contracts and Grants Pilot Program to support the creation of equitable, high-quality transportation and related manufacturing and infrastructure jobs. It applies to public contracts awarded by the Department of General Services or the Department of Transportation valued at $10,000,000 or more.  It does not apply to (A) contracts for the construction or design of infrastructure, including, but not limited to, roads, bridges, or highways, (B) a local agreement approved by the Labor and Workforce Development Agency that creates high road jobs, or (C) a contract relating to architecture, landscape architecture, engineering, environmental services, land surveying, or construction project management. The measure requires contractors to incorporate High Road Job Standards, which specify that the contractor and any subcontractors shall satisfy specified requirements to be included in revisions to the State Contracting Manual. Contractors awarded contracts under this program must report annually on their compliance with the High Road Job Standards. Failure to comply could lead to a penalty of $10,000 for each violation. To limit disruptions to manufacture and roll-out of zero-emission transit vehicles, contractors must enter a Labor Peace Agreement if requested by an organization representing the contractor’s employees. The Labor Peace Agreement shall include provisions prohibiting the organization and its members from engaging in picketing, work stoppages, boycotts, or any other economic interference for the duration of the entire term of the covered public contract.

ENVIRONMENTAL PROTECTION

State Air Resources Board Must Establish by July 1, 2025 a Framework for Measuring and Reducing Greenhouse Gas Emissions of Building Materials Used in New Construction, Including Residential (AB 2446, Holden)

This new law requires the State Air Resources Board, by July 1, 2025, to develop, in consultation with specified stakeholders, a framework for measuring and reducing the average carbon intensity of the materials used in the construction of new buildings, including those for residential uses. The framework must include a comprehensive strategy for the state’s building sector to achieve a 40% net reduction in greenhouse gas emissions of building materials, as determined from a baseline to be determined. The strategy must aim to achieve this target as soon as possible, but no later than December 31, 2035, with an interim target of 20% net reduction by December 31, 2030. The State Air Resources Board must form and maintain a technical advisory committee to, among other things, (i) review information that is required to be submitted by entities that are unable to meet the targets, (ii) research and prioritize actions and provisions that leverage state and federal incentives, and (iii) evaluate measures to support market demand and financial incentives to encourage the production and use of materials used in construction-related projects with low greenhouse gas intensity.

New Building Standards May Include Installation of Electric Vehicle Charging Stations in Existing Multifamily Dwellings (AB 1738, Boener)

The Department of Housing and Community Development is required to propose to the California Building Standards Commission for consideration mandatory building standards for the installation of electric vehicle charging infrastructure for parking spaces in new multifamily dwellings and nonresidential development. Under this new law, commencing with the next triennial edition of the California Building Standards Code, the department and commission must research, develop, and may propose for adoption mandatory building standards for the installation of electric vehicle charging stations with low power level 2 or higher electric vehicle chargers in existing multifamily dwellings, hotels, motels, and nonresidential development during certain retrofits, additions, and alterations to existing parking facilities.

PROJECT PROCUREMENT

Local Agencies May Now Use Progressive Design-Build Project Delivery Method for Water Projects over $5 million (SB 991, Newman)

Current law authorizes the Director of General Services to use the progressive design-build procurement process for the construction of up to three capital outlay projects. “Progressive design-build” is defined as a project delivery process in which both the design and construction of a project are procured from a single entity that is selected through a qualifications-based selection at the earliest feasible stage of the project. After selection of a design-build entity, the Department of General Services may contract for design and preconstruction services sufficient to establish a guaranteed maximum price, after which the department may amend the contract in its sole discretion to include the design-build construction phase of the project. This measure authorizes local agencies, defined as any city, county, city and county, or special district authorized by law to provide for the production, storage, supply, treatment, or distribution of any water from any source, to use the progressive design-build process until January 1, 2029 for up to 15 public works projects in excess of $5,000,000 for each project.

County Authority to Use Construction Manager at Risk Extended to January 2029 (AB 1932, Daly)

Existing law authorizes counties to use construction manager at-risk construction contracts for erection, construction, alteration, repair, or improvement of any infrastructure projects in excess of $1 million. The current law was set to expire on January 1, 2023. This bill extends these provisions until January 1, 2029.

Metropolitan Water District of Southern California Given Broad Authority to Choose Project Delivery Methods (AB 1845, Calderon)

This new law authorizes the Metropolitan Water District of Southern California to use design-build (to January 1, 2025) and progressive design-build and construction manager/general contractor (to January 1, 2028) in addition to regular competitive bidding. The hired entity must provide an enforceable commitment to the District that it and its subcontractors at every tier will use a skilled and trained workforce to perform project work applicable to certain apprenticeable occupations in the building and construction trades. The District must report to the Legislature at specified times about its projects using alternative delivery methods.

Design-Build Authority for Certain Park and Open Space Districts Made Permanent (AB 2789, Mullin)

Existing law authorizes the Midpeninsula Regional Open Space District and the Santa Clara Valley Open-Space Authority to use the design-build process. This new law now includes the East Bay Regional Park District, and it modifies and expands the purposes for which the design-build process is authorized to include (i) construction, restoration, and improvement of buildings and facilities, (ii) construction, restoration, and improvement of public access and recreation facilities, and (iii) prescribed nature-based infrastructure projects within the entity. The existing law was set to expire on January 1, 2023. This bill removes the sunset date.

Local Agencies May Now Use Design-Build for New and Remodel Construction Needed to Satisfy Accessibility Standards (SB 1354, Jones)

Existing law authorizes local agencies (city, county, or city and county), to use the design-build procurement process for specified public works with prescribed cost thresholds. The new law authorizes such local agencies to use the design-build contracting process to award contracts for constructing projects that are necessary in order to comply with federal, state, or local construction-related accessibility standards as set forth in Government Code section 65946, without regard to total cost.

State Agencies Must Report to Legislature Proposed Terms and Conditions of Renewal of any Contract for Goods or Services of $75,000,000 or More Awarded Without Competitive Bidding (SB 1271, Wilk)

Existing law authorizes state agencies to enter contracts for the acquisition of goods or services upon approval by the Department of General Services, subject to various requirements and prohibitions for those contracts. The new law provides: “For a contract awarded without competitive bidding for the acquisition of goods or services in the amount of seventy-five million dollars ($75,000,000) or more, entered into on or after January 1, 2023, the state agency, on or before the contract end date, shall submit to the Joint Legislative Budget Committee information regarding the terms and conditions of a proposed extension or renewal of the contract.”

Pilot Program Allows DGS and State and Local Agencies To Use No-Bid Procedures for Acquisition and Installation of Carpet, Resilient Flooring, Synthetic Turf, and Lighting Fixtures (SB 1422, Hertzberg)

The Department of General Services is authorized to consolidate the needs of multiple state agencies for goods, information technology, and services and establish agreements that leverage the state’s buying power for certain acquisitions. Current law authorizes state and local agencies to contract with suppliers awarded those contracts without further competitive bidding. This pilot program authorizes the Director of the DGS to use these alternative no-bid contracting procedures for contracts for the installation or purchase and installation, of carpet, resilient flooring, synthetic turf, or lighting fixtures, as specified. State agencies and specified local agencies may contract with suppliers awarded those contracts, if (i) the installation work is not performed in connection with new construction,

(ii) the contractor complies with wage and hour requirements, and (iii) the state or local agency provides the Department of Industrial Relations with a specified notice of the contract. The Department of Industrial Relations must provide a prescribed report on the use of the procedures to specified policy and fiscal committees of the Legislature no later than January 1, 2027. The bill would repeal these provisions as of January 1, 2028.

PREQUALIFICATION

Wildfire Debris Cleanup and Removal Contractors Must Now Prequalify with CalRecycle (SB 978, McGuire)

The California EPA’s CalRecycle department, manages wildfire debris removal operations throughout the state for the Office of Emergency Services. This measure requires CalRecycle, or another state agency within the office of the Governor tasked to manage wildfire debris cleanup and removal for the Office of Emergency Services, to prequalify contractors before entering contracts for wildfire debris cleanup and removal work. To prequalify, a contractor must submit to the department, under oath, a standard form questionnaire and financial statement. These require complete statements of (i) the bidder’s financial ability and (ii) experience in performing the preparation, removal, transport, and recycling or disposal of metals, ash, debris, concrete foundations and flatwork, potentially dangerous trees, and contaminated soil on residential and public properties.

The department shall not award a contract to any bidder for the performance of any portion of a wildfire debris cleanup and removal project, unless the bidder meets the following requirements:

(1) The prime contractor has a valid general engineering contractor license.

(2) The prime contractor is registered with the Department of Industrial Relations and qualified to bid.

(3) The prime contractor provides enforceable commitments to do both of the following:

(A) Use a skilled and trained workforce to perform work under the contract, consistent with federal reimbursement requirements, for itself and its subcontractors.

(B) Pay prevailing wages and request the dispatch of apprentices for itself and its subcontractors.

(4) The prime contractor demonstrates the existence of, for itself and its subcontractors at every tier, an agreement with a qualified, registered apprenticeship program.

(5) The prime contractor will self-perform at least 30 percent of the labor hours provided under the contract, as demonstrated by its certified payroll.

(6) The prime contractor’s experience modification rate, within the state, for the most recent three-year period is an average of 1.00 or less, and its average total recordable injury or illness rate and average lost work rate for the most recent three-year period does not exceed the applicable statistical standards for its business category, or if the contractor is a party to an alternative dispute resolution system in accordance with Section 3201.5 of the Labor Code.

DIGITAL CONSTRUCTION MANAGEMENT

CalTrans Must Develop Plan to Implement Digital Construction Management Technologies for Infrastructure Projects (AB 1037, Grayson)

This measure requires the Department of Transportation to “develop an implementation plan for the use and integration of digital construction management technologies for use on a transportation infrastructure project. The implementation guide shall include a timeline of the development of guidance, policies, and procedures to use digital construction management technologies from preconstruction to asset life cycle and a description of any metrics or data necessary to quantify the benefits of using this technology.” The plan must include specified milestone goals, including that the department will begin using digital construction management technologies in construction by July 1, 2029. The department must submit a report to the Legislature by December 1, 2029, as specified. This measure sunsets on January 1, 2032.

WOMEN IN CONSTRUCTION WEEK

The legislature continues to declare Women in Construction Week, after the fact, and this year the houses do not even agree on which days are in that week. ACR 146, Garcia, Cristina proclaims the week of March 7, 2022, to March 13, 2022, inclusive, as Women in Construction Week, whereas SCR 83, Rubio proclaims the week of March 6, 2022, to March 12, 2022, inclusive, as Women in Construction Week. It is curious that the Legislature does not declare these weeks before the fact, instead.

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1 Special thanks to Skip Daum, of Capitol Communications Group, for his assistance in tracking bills.



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