CSLB is unable to renew active contractor licenses for corporations on suspension by the California Secretary of State. Most suspensions are for failure to pay Franchise Tax Board obligations. Also, CSLB cannot renew an active license if the licensee has an outstanding obligation to the Employee Development Department or Department of Industrial Relations. Any fee paid to CSLB for an application cannot be refunded, according to Business and Professions Code Section 7138.

Contractor renewal application forms list the suspensions that bar CSLB from renewing their license or giving a refund. If you are under any of these suspensions, make sure you clear those before sending your CSLB renewal application. CSLB is able to renew a license on inactive status, even if a suspension exists for the reasons listed above.

If you ignore consumer complaints filed against your license or already have a disciplinary action pending and think you can escape responsibility by disassociating from that license and switching to another active license, reactive an inactive license, or apply for and obtain a new license, think again.

When a license is suspended or revoked through a disciplinary action, all other licenses held by the qualifier will likewise be subject to suspension or revocation. Similarly, any separately held license of non-qualifying principals who are listed on a corporate or partnership license may be suspended or revoked if the individual(s) had knowledge of or participated in a violation that resulted in a disciplinary action.

With regard to a civil judgment against a license, all principals of the license are responsible for satisfying the judgment. Failure to satisfy a final judgment will subject the license to suspension, and any other license held by the principals will also be placed under judgment bond suspension.

Avoid Financial Complaints Against Your License

More than 15 percent of the complaints CSLB received during the 2009-2010 fiscal year were about contractors who failed to pay subcontractors or materials suppliers. Contractors must have sufficient funds to pay for the supplies and the labor required for each contract they bid.

If suppliers and subcontractors file a complaint with CSLB, the contractor who failed to pay them could be cited under Business and Professions (B&P) Code Section 7120 for failure to pay for materials or services. If you are cited for 7120, you could face civil penalty fines of $200 to $2,000.

Also, don't use funds received from a new client's job to pay your subs or suppliers from a previous project. Doing so could subject you to fines between $200 and $5,000 for violating B&P Code Section 7108 for diversion or misapplication of funds. Diversion of construction funds can also subject you to criminal prosecution, which carries fines of up to $10,000 and state prison or county jail time up to one year for violation of Penal Code Section 484(b).

In addition to citations and fines for such violations, your license could be subjected to suspension or revocation. Subcontractors and suppliers may also seek payment through your contractor license bond or through a lawsuit in the civil court system. If subs or suppliers file a lien on the homeowner to recover costs, the homeowner might also pursue a complaint against your license through CSLB, or attempt to recover financial losses through your license bond or the civil courts.

Judgment Notification is Your Responsibility

Remember to notify CSLB of any unsatisfied judgment within 90 days of it being issued. If the licensee fails to make CSLB aware of that judgment in the allotted time and CSLB learns of it through a consumer complaint or other means, that license is subject to automatic suspension under Business and Profession Code Section 7071.17.

CSLB allows licensees 90 days from receipt of notification to satisfy the judgment if it is received within 90 days of the judgment entry date. If the licensee submits proof that the judgment was paid or that a payment plan has been established, no mention of the judgment will appear when an instant license check is conducted for that contractor on CSLB's website.