Recent California Legislation May Have an Impact Contractors and Design Professionals

Kimberly A. Blake | Gordon Rees Scully Mansukhani | June 1, 2018

Several bills that have recently been introduced in California will likely have an impact on the construction industry and, in particular, contractors and design professionals. Below is an overview of recent and pending legislation in California that includes the Labor Code, the Business and Professions Code, and the Government Code.

Contractor Liability Under the Labor Code

AB 1701, which was introduced February 2017, and became effective on January 1, 2018, adds Section 218.7 to the Labor Code.1

The Labor Code governs the basic rights and obligations of workers and employers in the employment context. Under current law, an employee may generally sue her employer for wage claims, such as nonpayment of wages, fringe benefits, and contributions to a health and welfare or pension fund. Until January 2018, however, there had been no requirement that a direct contractor must assume liability for any successful wage claims brought against a subcontractor working for the direct contractor.

In an effort to create a new avenue for collecting remedies in wage claims, AB 1701 requires that a direct contractor making or taking a contract for the construction or repair of any structure must assume liability for “any debt owed to a wage claimant incurred by a subcontractor at any tier” acting under or by the direction of the direct contractor, where the wage claimant’s performance of labor is related to the construction project.2 Because AB 1701 covers “building(s)” and “structure(s)” as well as “other work”, it applies to all construction projects involving a direct contractor.3

Consequently, direct contractors are obligated to assume such liability at the time the contractor enters into the construction contract. However, AB 1701 provides that the direct contractor’s liability does not extend to penalties or liquidated damages unless otherwise provided.4 Therefore, a direct contractor must assume liability for wage claims against subcontractors, but should specify in the written contract that liability does not include penalties or liquidated damages.

Architect Liability

AB 1489, which was introduced February 2017, would add Section 5536.25 to the Business and Professions Code.

The Business and Professions Code provides rights and obligations to members of specific professions. Under current law, Section 5536.25 absolves a licensed architect of liability for damages that may arise when the architect’s signed and stamped plans or specifications are changed or used without the architect’s prior written approval.5 If enacted, AB 1489 would add the provision that an architect will not be liable for damages that may arise when the construction deviates from the permitted plans or specifications, regardless of written authorization.6

AB 1489 would create a broad liability shield for architects regarding construction projects that do not conform to the architect’s signed and stamped plans. Besides the direct benefit to architects, AB 1489 should reduce legal costs in the construction industry by providing greater certainty as to architect liability as well as reducing the usefulness of seeking a written authorization from the architect to deviate from the original plan.

Accessory Structures on Single-Family Lots

AB 2939, which was introduced in February 2018, would add Section 65852.2 to the Government Code.

The Government Code organizes the government of California and sets forth rights and duties of various governmental entities. Under current law, a local agency must approve an application for a building permit to create within a single-family zone one “accessory dwelling unit” per lot, if the accessory dwelling unit is part of an existing residence or accessory structure, has independent exterior access from the existing structure, and has sufficient side and rear setbacks for fire safety. An “accessory dwelling unit” is a residential dwelling unit providing complete, independent living facilities for one or more persons.

If enacted, AB 2939 would add a substantially similar mechanism enabling the construction of multiple accessory dwelling units on multifamily zoned lots which already contain at least five residential units. AB 2939 would require a local agency to approve an application for a building permit to create one or more accessory dwelling units on lots zoned for multifamily use, where each accessory dwelling unit is located within the existing an existing multifamily structure or accessory structure, access to the accessory dwelling unit is independent of access to other residential units, and where the side and rear setbacks of every structure are sufficient for fire safety.7 Therefore, AB 2939 could spur the construction of new accessory dwelling units on multifamily lots with at least five residential units.