Chapter 344 Oregon Laws 1999

Session Law

AN ACT

HB 2057

Relating to construction contractors; amending ORS 454.715, 701.075, 701.085, 701.100, 701.102, 701.135, 701.145 and 701.990.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 701.075 is amended to read:

701.075. (1) A person who wishes to register as a contractor shall submit an application upon a form prescribed by the Construction Contractors Board. The application shall include, but not be limited to, at least the following information regarding the applicant:

(a) Classification of registration being sought.

(b) A list of unsatisfied judgments resulting from bond claims and litigation involving the applicant or its principals within the prior five years.

(d) Workers' compensation insurance account number if help is hired or traded.

(e) Unemployment insurance account number if help is hired.

(f) State withholding tax account number if help is hired.

(g) Federal employer identification number, if help is hired or if self-employed and participating in a retirement plan.

(h) The name and address of:

(A) Each partner or venturer, if the applicant is a partnership or joint venture.

(B) The owner, if the applicant is an individual proprietorship.

(2) An applicant shall conform to the information provided by the applicant on the application and to the terms of the application.

(3)[(a)] The board shall adopt by rule an application form that requires an applicant to indicate, as set forth in ORS 670.600, the basis under which the applicant qualifies as an independent contractor.

[(b) The board shall require as part of the initial application or first renewal following implementation of this paragraph that a registrant sign a notarized acknowledgment that if the registrant qualifies as an independent contractor:]

[(A) The registrant understands that the registrant and any heirs of the registrant will not qualify for workers' compensation or unemployment compensation; and]

[(B) The registrant's election to be an independent contractor is voluntary and is not a condition of any contract entered into by the registrant.]

SECTION 2. ORS 701.085 is amended to read:

701.085. (1) A person who wishes to register as a contractor or renew a certificate of registration shall file with the Construction Contractors Board a surety bond with one or more corporate sureties authorized to do business in this state in the amount set forth in subsections (2) to (4) of this section, conditioned that the applicant, with regard to work subject to this chapter, will pay claims ordered paid by the board under ORS 701.140. Bonds filed under this subsection shall remain in effect for at least one year or until depleted by claims paid under ORS 701.140, unless the surety sooner cancels the bond. At the discretion of the surety the bond may be continued for an additional period by continuation certificate. The aggregate liability of the surety under the bond for claims against the bond shall not exceed the penal sum of the bond no matter how many years the bond is in force. No extension by continuation certificate, reinstatement, reissue or renewal of the bond shall increase the liability of the surety.

(2) A general contractor shall obtain a surety bond in the amount of $10,000.

(3) A specialty contractor shall obtain a surety bond in the amount of $5,000.

(4) The board may reduce the amount of the surety bond required by this section to $2,000 for a contractor upon a showing that the contractor does not perform work as a contractor exceeding $30,000 in gross annual volume. These contractors shall be designated as limited contractors.

(5) If the amount the registrant must pay against the bond under this section exceeds the amount of the bond, the board shall suspend the certificate of the registrant until the amount owed is paid. The board, as a condition of ending the suspension, may require the registrant to file a bond of an amount up to five times as much as the amount required ordinarily of a registrant under this section.

(6) The board by rule may establish conditions for applicants or persons registered under this chapter under which [an] the applicant or registrant must file a bond of an amount up to five times as much as the amount required ordinarily of an applicant or registrant under this section. The board may reduce the amount of bond it would otherwise require if the contractor demonstrates satisfactory completion of approved elective classes on dispute resolution and prevention, basic accounting and record keeping or such other classes as the board may prescribe.

(7) The bond required under this section is for the exclusive purpose of payment of final orders and arbitration awards of the board in accordance with this chapter.

(8) Upon determination of a claim under ORS 701.140 against a contractor who holds a bond required under this section, the board shall notify the surety on the bond of the final order in a manner determined by the board by rule. The notification shall include a list of all claims upon which a final order has been issued.

(9) No suit or action may be commenced against a surety on a bond required under this section until 30 days after the date that the surety is notified by the board under ORS 701.140 that payment is due on the claim.

(10) In any action against a surety on a bond under this section that is based on the failure of the surety to pay a claim or on the denial of a claim by the surety, the court may award:

(a) Costs;

(b) Reasonable attorney fees to the prevailing party as part of the costs; and

(c) If the surety is ordered to pay a claim on the bond that the surety arbitrarily and capriciously refused to pay upon order of the board, twice the amount of damages against the surety as ordered by the board.

SECTION 3. ORS 701.100 is amended to read:

701.100. (1) The failure of a contractor to comply with the provisions of this section and ORS 656.021, 657.665, 670.600, 701.035, 701.065 to 701.075, 701.135, 701.240 and 701.250 or to be in conformance with the provisions of ORS chapter 316, 656 or 657 is a basis for suspension of the contractor's registration, revocation of the contractor's registration, refusal to issue or reissue a contractor's registration, assessment of a civil penalty as set forth in ORS 701.992 or a combination of these sanctions.

(2) Any action against a contractor under this section shall be conducted in conformance with the provisions of ORS 183.413 to 183.497.

(3) When imposing a sanction [under this chapter] for a violation of ORS 701.055 (1), if the Construction Contractors Board does not have evidence that a contractor has worked without registering as required under this chapter and no consumer has suffered damages from the work of the contractor, the civil penalty imposed by the Construction Contractors Board shall not exceed $1,000.

SECTION 4. ORS 701.135 is amended to read:

701.135. (1) The Construction Contractors Board may revoke, suspend or refuse to issue or reissue a certificate of registration and the board may assess a civil penalty as provided in ORS 701.992 if it determines after notice and opportunity for hearing:

(a) That the registrant or applicant has violated ORS 701.055.

(b) That the registrant or applicant has failed to pay in full any final judgment on claims adjudged by the board or by a court of competent jurisdiction referred to in ORS 701.085.

(d) That the registrant has knowingly assisted an unregistered person to act in violation of this chapter.

(e) That a lien was filed on a structure under ORS 87.010 to 87.060 and 87.075 to 87.093 because the registrant or applicant wrongfully failed to perform a contractual duty to pay money to the person claiming the lien.

(f) That the registrant has knowingly provided false information to the board.

(g) That the registrant has worked without a construction permit where such permit is required and such work resulted in a claim filed with the board. For purposes of this paragraph, "construction permit" includes a building permit, electrical permit, mechanical permit or plumbing permit.

(h) That the number of registered contractors working together on the same task on the same job site, where one of the contractors is registered exempt under ORS 701.035 (2)(b), exceeded the following:

(A) Two sole proprietors;

(B) One partnership;

(D) One limited liability company.

(i) Consistent with the provisions of ORS 670.280, that the registrant or applicant has been convicted of one of the following crimes:

(A) Murder;

(B) Assault in the first degree;

(C) Kidnapping;

(D) Rape, sodomy or unlawful sexual penetration;

(E) Sexual abuse;

(F) Arson in the first degree;

(G) Robbery in the first degree;

(H) Theft in the first degree; or

(I) Theft by extortion.

(2)(a) The administrator of the board, in accordance with administrative rules adopted by the board and after setting forth specific reasons for such findings, may suspend or refuse to renew a registration without hearing in any case where the administrator finds a serious danger to the public welfare, including but not limited to:

(A) Lack of a surety bond required by ORS 701.085;

(B) Lack of liability insurance required by ORS 701.105;

(D) Conduct as a construction contractor that is dishonest or fraudulent.

(b) If the registrant or applicant demands a hearing within 90 days after the date of notice to the registrant or applicant of such suspension or refusal to renew, then a hearing must be granted to the registrant or applicant as soon as practicable after such demand, and the administrator shall issue an order pursuant to such hearing as required by ORS 183.310 to 183.550 confirming, altering or revoking the administrator's earlier order. Such a hearing need not be held where the order of suspension or refusal to renew is accompanied by or is pursuant to, a citation for violation which is subject to judicial determination in any court of this state, and the order by its terms will terminate in case of final judgment in favor of the registrant or applicant.

(3) In addition to all other remedies, when it appears to the board that a person has engaged in, or is engaging in, any act, practice or transaction which violates the provisions of this chapter, the board may direct the Attorney General or the district attorney of the county in which the act, practice or transaction occurs, to apply to the court for an injunction restraining the person from violating the provisions of this chapter. An injunction shall not issue for failure to maintain the list provided for in ORS 701.055 (11) unless the court determines that the failure is intentional.

(4) A certified copy of the record of conviction shall be conclusive evidence of a conviction under subsection (1)(i) of this section.

SECTION 5. ORS 701.145 is amended to read:

701.145. (1) Any person having a claim against a contractor of the type referred to in ORS 701.140 may file with the Construction Contractors Board a statement of the claim in such form as the board prescribes.

(2) The board may refuse to accept, or refuse at any time to continue processing, a claim if:

(a) The same facts and issues involved in the claim have been submitted to a court of competent jurisdiction for determination or have been submitted to any other entity authorized by law or the parties to effect a resolution and settlement;

(b) The claimant does not permit the contractor against whom the claim is filed to be present at any inspection made by the board;

(c) The board determines that the contractor against whom the claim is filed is capable of complying with recommendations made by the board relative to the claim, but the claimant does not permit the contractor to comply with the recommendations. However, the board may refuse to accept or further process a claim under this paragraph only if the contractor was registered at the time the work was first performed and is registered at the time the board makes its recommendations;

(d) The board determines that the nature or complexity of the claim is such that a court is the appropriate forum for the adjudication of the claim; or

(e) The amount in controversy is less than an amount adopted by the board and not more than $250.

(3) The board shall not process a claim, including a claim based upon a court judgment or arbitration award, unless the claim is filed in a timely manner as follows:

(a) If the owner of a new structure files the claim, the board must receive the claim not later than one year after the date the structure was first occupied or two years after completion, whichever comes first.

(b) If the owner of an existing structure files the claim, the board must receive the claim not later than one year after the date the work was substantially completed.

(c) Regardless of whether the claim involves a new or existing structure, if the owner files the claim because the contractor failed to begin the work, the board must receive the claim not later than one year after the date the parties entered into the contract.

(d) Regardless of whether the claim involves a new or existing structure, if the owner files the claim because the contractor failed to substantially complete the work, the board must receive the claim not later than one year after the date the contractor ceased work on the structure.

(e) If a registered contractor files the claim against a registered contractor performing work as a subcontractor on a new structure, the board must receive the claim not later than one year after the date the structure was first occupied or two years after completion, whichever comes first.

(f) If a registered contractor files the claim against a registered contractor performing work as a subcontractor on an existing structure, the board must receive the claim not later than one year after the work on the structure was substantially completed.

(g) If a registered contractor files the claim against a registered contractor performing work as a subcontractor, because the subcontractor failed to substantially complete the work, the board must receive the claim not later than one year after the date the subcontractor ceased to work on the structure.

(h) If a material or equipment supplier, an employee, or a registered subcontractor files the claim, the board must receive the claim not later than one year after the date the registrant incurred the indebtedness.

(4) Upon acceptance of the statement of claim, the board shall give notice to the contractor against whom the claim is made and shall initiate proceedings to determine the validity of the claim. If, after investigation, the board determines that a violation of this chapter or of any rule adopted thereunder has occurred, or damage has been caused by the registrant, the board may recommend to the registrant such action as the board considers appropriate to compensate the claimant. If the contractor performs accordingly, the board shall give that fact due consideration in any subsequent disciplinary proceeding brought by the board.

(5) Except for claims by owners of nonresidential property when the total contract is $25,000 or less and those claims that are settled through binding arbitration under subsection (9) of this section, any person with a claim against a contractor involving nonresidential structures shall bring an action upon the bond required by ORS 701.085, as provided in subsections (6) to (8) of this section, in a court of competent jurisdiction or through binding arbitration in compliance with ORS 36.300 to 36.365. At the option of the claimant, a person having a claim as an owner of nonresidential property when the total contract is $25,000 or less may elect to bring an action upon the bond in this same manner. In such instances, all other statutes and rules applicable to the processing of claims in accordance with subsections (5) to (8) of this section apply.

(6) Except as set forth in subsection (5) of this section, in order to have access to the bond required by ORS 701.085, the claimant in an action against a contractor involving nonresidential structures must deliver a copy of the complaint to the board and to the surety on the bond by certified mail, return receipt requested, within 90 days of the date the complaint was filed. The surety shall not be joined as a party to the action, but shall have the absolute right to intervene in the action. If notice is so given, except as provided in subsection (8) of this section, the surety that received notice shall be bound by any judgment entered in the action, unless within 30 days of receipt of such notice, the surety delivers to the claimant or the claimant's attorney of record and to the board by certified mail, return receipt requested, or by facsimile machine or form of transmission with an acknowledgement, a notice that the surety is not the surety that should have received the claimant's notice. If the claimant disputes the validity of the surety's notice, or if the surety disputes the validity or timeliness of the delivery of the complaint, the claimant may join the surety as a defendant or the surety may join as a party in the action. If the surety elects to intervene in the action or is joined as a party to the action, it shall be bound by all issues of fact and law determined by the court, which issues shall not then be subject to review by the board. The date the board receives a copy of the complaint shall be the date the board uses to establish the priority of the claim.

(7) If a court issues a judgment against a contractor in an action involving nonresidential structures, the claimant shall deliver a certified copy of the judgment to the board and to the surety within 30 days of the date of entry of the judgment in order to retain a claim against the bond. The entry of a final judgment against the contractor shall fully and finally conclude the contractor's involvement concerning participation in any and all proceedings to determine whether its bond is subject to payment of the claim. The contractor shall not be a party to the administrative process set forth in subsection (8) of this section, which shall proceed with the claimant and surety as the only parties.

(8)(a) Upon receipt of a timely filed copy of the judgment specified in subsection (7) of this section, the board shall issue a proposed order in the amount of the judgment, together with any court costs, interest and attorney fees awarded by the court. The board's determination of the claim shall be limited only to determinations of whether the claim comes within the jurisdiction of the board and is subject to payment by the surety. The proposed order shall be issued in such form as to indicate the surety's maximum liability to the claimant. If there are no exceptions filed to the proposed order within the time period provided therefor after issuance of the proposed order, the proposed order shall become final without any further action required by the board. The surety's right to except to the proposed order based upon a judgment, except where the surety has elected to intervene in the action as set forth in subsection (6) of this section, shall be limited to the following issues:

(A) Whether the claim was timely filed with the board as provided in subsection (3) of this section.

(B) Whether the surety received timely notice as provided in subsections (6) and (7) of this section.

(D) The extent of the surety's liability to the claimant.

(b) The provisions of ORS 701.150 (4) shall in all events apply and the surety shall be entitled to except to the proposed order as to the specific monetary liability of the surety in connection with all claims then pending. The surety shall not be required to pay any claim under subsection (7) of this section until such time as it receives notice from the board under ORS 701.140 that claims are ready for payment.

(9) With the prior agreement of the claimant and registrant, the board may resolve the claim through binding arbitration under rules adopted by the board generally in conformance with ORS 36.300 to 36.365. The board may also use the arbitration procedure to resolve a construction dispute between any persons [a person bringing a claim and any other contractor] who [agrees] agree to follow the rules of the board.

(10) The board may require claims of less than $1,000 to be subject to mediation or resolved through binding arbitration. Notwithstanding the provisions of subsection (4) of this section, the board is not required to investigate claims of less than $1,000.

(11) The board may apply the provisions of subsections (5) to (8) of this section to any arbitration decision as it would to a judgment of a court whether the arbitration decision is rendered by the board or by independent arbitration.

(12) The board may delegate any of its functions described in this section to a hearings officer. If the board delegates its authority to decide claims to a hearings officer, the board may provide for appeal of such orders to the board.

(13) The board by rule may require a deposit not to exceed $100 for the filing of a claim, the filing of a request for hearing or the filing of exceptions. Such deposit is recoverable by the party.

SECTION 6. ORS 454.715 is amended to read:

454.715. Subject to ORS 183.310 to 183.550, the Department of Environmental Quality at any time may suspend or revoke any license issued pursuant to ORS 454.695 if it finds:

(1) A material misrepresentation or false statement in the application for the license.

(2) Failure to comply with the applicable provisions of this chapter.

(3) Violation of any rule of the Environmental Quality Commission regarding sewage disposal services.

(4) The licensee was registered with the Construction Contractors Board at the time of licensing and such registration was revoked or suspended for a failure to comply with ORS 701.100 or 701.102 and rules adopted thereunder.

SECTION 7. ORS 701.990 is amended to read:

701.990. (1) Violation of ORS 701.055 (1) is a Class B misdemeanor.

(2) The intentional use of a contractor's registration number without the authorization of the registered contractor is a Class B misdemeanor.

(3) Use of a contractor's registration number, with or without the authorization of the registered contractor, with the intent to deceive the public is a Class B misdemeanor.

SECTION 8. ORS 701.102 is amended to read:

701.102. (1) The Construction Contractors Board may suspend the registration of or refuse to register any corporation, partnership or individual if any individual who is an owner, shareholder or officer of the business is or was the owner or officer of a business that:

[(1)] (a) Owes any amount pursuant to a final order or arbitration award of the board;

[(2)] (b) Has an outstanding final judgment of a court that a bond under ORS 701.085 would have been subject to; or

[(3)] (c) Owes any amount pursuant to a court order or civil penalty arising from construction business activities in any other state of the United States.

(2) The board may place a contractor on probation if three or more claims are filed against the contractor with the board within a 12-month period. A contractor may not be placed on probation unless the board determines after investigation that it is likely that the contractor has caused harm to the claimants. The board may require a contractor that is placed on probation to develop a corrective action plan, to attend specific classes and to resolve outstanding claims. The board may require a contractor that is placed on probation to take any education and training described under ORS 701.280 and to pass an examination on subjects relating to business practices and laws affecting construction contractors. The board shall take action to terminate the contractor's registration if the contractor is unwilling or unable to comply with the conditions of probation.

Approved by the Governor June 24, 1999

Filed in the office of Secretary of State June 24, 1999

Effective date October 23, 1999

__________