ALJDEC

00F-U0266-ROC · Registrar of Contractors · 2000-03-03

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: March 3, 2000.

APPEARANCES: The Defendant, Kenneth Michael Schwartz, appeared in his own behalf.

The Registrar of Contractors was represented by Assistant Attorney General Marc H. Harris, Esq.

ADMINISTRATIVE LAW JUDGE: Robert I. Worth _____________________________________________________________________

Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. At all times material herein, Kenneth Michael Schwartz, on occasion doing business as K. S. Construction, did not and still does not possess a valid Arizona contractor’s license.

2. It was not effectively disputed that Defendant was the author of two separate proposals to perform construction work on identified residential projects. The first was

for $5,400.00 and second was for $21,600.00. These bids were submitted to Bonafide Improvement Company (herein called “Bonafide”), an entity that was serving as the general contractor for both such projects.

3. Defendant was shown to have received payments of $2,700.00, representing an amount equal to half of the proposal price for his work on the first project plus approximately $19,300.00, representing a substantial portion of the quoted cost price for his work on the second project. No portion of the respective balances of $2,700.00 and $2,300.00 for each project (a total of $5,000.00) has been paid by the project’s general contractor.

4. In each instance, the quoted and charged amounts for the above- described work, including all labor and materials, significantly exceed the maximum statutory sum that may properly qualify under the handyman exemption provisions of the State’s contracting laws.

5. Credible testimony, not disputed on the record in this matter, tended to indicate that Defendant responded to Bonafide’s newspaper ad for workmen and was subsequently told by representatives of Bonafide that he must first fill out and deliver a separate written proposal for the contemplated work to be performed by Defendant on each respective jobsite. Following the work performances, Mr. Schwartz was also told that he must transmit separate written invoices for the amounts claimed payable before any release of funds would be authorized.

6. No employer-employee relationship is found to have been created between Bonafide and Defendant in this case. Instead, it is found and determined under all the evidence presented at the hearing that Defendant was operating on both projects as an

independent contractor and not as an employee. Any individual or entity bidding, undertaking and/or completing construction work of the nature, extent and total cost of the contemplated work on these jobsites would be required to hold a valid contractor’s license, and such a license was admittedly not possessed by Defendant. Consequently, the unlicensed activity of Mr. Schwartz is rendered impermissible and contrary to express provisions set forth in the State’s contracting laws..

7. The Registrar’s assigned Investigator, after evaluating a complaint initially filed by Defendant against the general contractor based upon a claimed non-payment violation, issued a Cease and Desist Order to Defendant and also served notice that a civil penalty Citation would be issued requiring the payment by Defendant of $1,000,00 for unlicensed contracting and another $500.00 for improper advertising. A timely request for the instant hearing was filed by Defendant seeking review of the propriety and amount of the proposed civil penalties in the combined total sum of $1,500.00.

8. Notwithstanding the foregoing determination with respect to the lack of a valid defense to the unlicensed contracting charges, it does not follow that the impermissible advertising charges are automatically established. The written proposal by Defendant was completed on a purchased blank form and, in one instance, utilized the “dba” name of K. S. Construction, in accordance with directions as to content from the general contractor to whom it was being submitted. With respect to the subsequent invoices seeking payment for work already performed, such communications were also the result of Bonafide’s specific requirement and were prepared on a personal letterhead (name, address and phone/Fax number only) without any business related wording or other occupational information. Under all the circumstance of this case, neither the proposals nor the invoices prepared and forwarded by Defendant are found to have constituted forms of advertising that would necessarily require disclosures of Defendant’s unlicensed status.

9. The monetary amount of the assessed civil penalties for impermissible contracting was somewhat above the statutory minimum and significantly below the specified statutory maximum. It is held that the proposed total civil penalty amount of $1,000.00 allocated to the unlicensed contracting violations is neither unreasonable nor unwarranted under all the circumstances. Although the $1,500.00 combined total of the two separately assessed penalty amounts could lawfully have been imposed solely for the unlicensed contracting violations, standing alone, it is deemed inappropriate to effectively increase the previously proposed aggregate penalty for unlicensed contracting so as to compensate for any or all of the deleted penalty amount that had been specifically allocated to the charged impermissible advertising violation, found herein not to have been supportable.

CONCLUSIONS OF LAW

1. A specific exemption from licensure is available for individuals or entities engaged in construction-related activities that (a) are less than $750.00 in combined charges or proposed charges for all labor plus materials, (b) are not part of a larger project, and (c) do not require a local building permit. Additionally, any and all forms of advertising by the unlicensed person must include an affirmative statement disclosing that such person is “unlicensed” or “not licensed.” See A.R.S. §32-1121(A)(14).

2. The Registrar of Contractors is empowered pursuant to A.R.S. §32- 1166(A) to impose monetary civil penalties against individuals or entities proven to be in violation of the statutory prohibitions against unlicensed contracting and/or advertising in amounts ranging from $200.00 to $2,500.00 for each violation and for each day that such violation continues.

3. The word “advertisement” is defined in A.R.S. §32-1101(A)(1) to include “any written or oral publication, dissemination, solicitation or circulation which is intended to directly or indirectly induce any person to enter into an agreement for contracting services with a contractor, including business cards and telephone directory display advertisement.” (Emphasis added). In Black’s Law Dictionary, Seventh Edition (1999), “advertising” is defined as “the action of drawing the public’s attention to something to promote its sale.” Neither the Defendant’s proposal form nor his letterhead invoice, both transmitted to Bonafide at the latter’s specific direction, were utilized by Defendant as a form of advertising under the facts and circumstances of this case.

4. The testimonial and documentary evidence of record as to the nature and size of the construction-related work on both of the projects, as bid and performed by Defendant, adequately established that Defendant had violated the provisions contained in A.R.S. §32-1151 prohibiting unlicensed contracting activities. However, no violations by Defendant of A.R.S. §32-1165 restricting advertising without a license were sufficiently proven hereunder.

5. The dollar amount imposed by the Registrar for Defendant’s unlicensed contracting violations and sought herein to be confirmed does not appear to be inappropriate, excessive or otherwise unwarranted.

6. The additional civil penalty sought to be imposed for impermissible advertising should be quashed and vacated.

7. The evidence adduced at the hearing with respect to the possible aiding or abetting of unlicensed contracting by Bonafide, the general contractor on the two

above-identified projects, in its dealings with Defendant and perhaps with others should prompt the Registrar to investigate and pursue action, if and as may be appropriate and warranted, against such general contractor.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the Registrar’s previously issued Cease and Desist Order, as well as that portion of the Citation assessing a $1,000.00 civil penalty against the Defendant, Kenneth Michael Schwartz, for the unlicensed contracting violation be affirmed in its entirety.

It is further recommended that the remaining portion of the Citation relating to and including the proposed assessment of $500.00 against Defendant for impermissible advertising be reversed and vacated.

It is further recommended that the Registrar initiate or continue an investigation into the hiring practices or for other possible violations of the State’s contracting laws on the part of Bonafide Improvement Company, and if appropriate and warranted, to commence disciplinary proceedings against such licensee.

Dated: March 14, 2000.

OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Michael Goldwater, Director Registrar of Contractors 800 West Washington Street (6th Floor) Phoenix, AZ 85007

ATTN: Griselda Ybarra -----------------------

Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826