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California Contractors Take Note – State Continues Cracking Down On Subcontractors Performing Work As Independent Contractors

By April 16, 2024May 31st, 2024No Comments

In the latest Chapter of California’s battle against independent contractors, Assembly Bill 1204 (Holden) was recently signed into law. A.B.1204 added Section 7035 to the Business and Professions Code, requiring specialty contractors to only subcontract with those subcontractors with the same license classification who employ persons who are classified as employees. Meaning, that subcontractors may only “subcontract” with specialty contractors that hold the same license classification.

The goal of this new law is to crack down on subcontractor’s use of independent contractors to skirt State law. Violation of this law is grounds for disciplinary action.

A.B. 1204 also places the burden on a specialty contractor to ensure that its subcontractors are properly licensed, and the specialty work is performed by that subcontractor’s employees—not independent contractors. The law defines a “specialty contractor” as a “contractor whose operations involve the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts.”

While the new law specifically applies to specialty contractors, general contractors holding either an “A” (General Engineering) License or “B” (General Building) License should pay notice to this new law if they intend to retain specialty contractors on their projects. The new law makes no distinction between public or private works.

As with many new California laws in the construction arena, the specialty contractor is exempt from these requirements if they are signatory to a collective bargaining agreement with a bona fide trade union.

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