Law & Business key numbers and rules

• Qualifier options: sole owner = owner or RME; partnership = general partner or RME; corporation = RMO or RME; LLC = RMO, responsible managing manager, responsible managing member, or RME.
• An RME must be a permanent employee working at least 32 hours per week or 80% of the business's operating hours, whichever is less.
• A person may qualify additional firms only with 20% common ownership, a subsidiary or joint venture, or the same majority of officers; never more than 3 firms in one year.
• When a qualifier leaves: notify CSLB in writing within 90 days and replace within 90 days, or the license is suspended; one 90-day extension possible (180 days maximum for dispute or death).

+8 more with the pass

• Minor work exemption: total labor and materials less than $1,000, no building permit, no employees, and no advertising as a contractor.
• Owner-builder: selling within 1 year of completion creates a presumption of building for sale; 5 or more structures in 1 year is conclusive.
• Branches: A General Engineering, B General Building (2 unrelated trades), B-2 Residential Remodeling (3 unrelated trades), C Specialty; C-61 needs no trade exam.
• Experience: 4 years within the last 10 years at journey level or higher; up to 3 years of credit for education or apprenticeship; at least 1 year practical.

+8 more with the pass

• The license number must appear in all contracts, subcontracts, calls for bid, and all advertising, including vehicle lettering and websites.
• Commercial vehicles: business name and license number in at least 72-point type (3/4 inch); C-36, C-45, and C-57 show name, address, and number on both sides in letters at least 1½ inches high.
• ‘Insured’ ads must name the insurance type; ads may not say ‘bonded’ about the license bond.
• Unlicensed advertising is a misdemeanor with a $700 to $1,000 fine; unlicensed people may advertise jobs under $1,000 only if the ad says they are not licensed.

+9 more with the pass

• Profit is revenue minus costs; cash flow is actual money in and out of the bank.
• Cash projection: beginning cash + collections − payments = ending cash.
• Working capital = current assets − current liabilities (current = within one year).
• Lines of credit cover short-term gaps; term loans fit long-term equipment.

+9 more with the pass

• A budget is a written plan; compare it with actual results monthly.
• Operating budget = yearly revenue and expenses; capital budget = major long-term purchases.
• Direct job costs: field labor, materials, subcontractors, job equipment, job permits.
• G&A (overhead): office rent, office salaries, advertising, sales and office vehicles.

+9 more with the pass

• 2026 Social Security: 6.2% employee + 6.2% employer on wages up to $184,500.
• Medicare: 1.45% each, no wage limit; extra 0.9% employee-only over $200,000.
• FUTA: 6.0% on first $7,000, up to 5.4% credit, 0.6% net; deposit when over $500.
• California 2026: UI 3.4% new employer on $7,000; ETT 0.1% on $7,000; SDI 1.3% employee, no limit.

+10 more with the pass

• Balance sheet = assets, liabilities, and equity on one date; assets = liabilities + equity.
• Income statement (P&L) = revenue and expenses over a period.
• Cash flow statement has three sections: operating, investing, financing.
• Revenue − direct job costs = gross profit; gross profit − G&A = operating income.

+10 more with the pass

• Markup = profit ÷ cost; margin = profit ÷ price; price = cost ÷ (1 − margin).
• Overhead rate = annual overhead ÷ expected direct costs.
• Break-even sales = fixed costs ÷ gross margin %.
• Percent complete = cost to date ÷ estimated total cost; earned revenue = contract × percent complete.

+8 more with the pass

• ABC test (Labor Code §2775): a paid worker is an employee unless the hiring entity proves all three parts A, B, and C.
• Labor Code §2781: construction subcontractors meeting all 7 criteria (written subcontract, CSLB license, etc.) are judged under §2750.5 and Borello instead.
• Labor Code §2750.5: a worker doing licensed work must hold a valid contractor's license to be an independent contractor.
• Willful misclassification: $5,000–$15,000 per violation; $10,000–$25,000 per violation for a pattern or practice (§226.8).

+10 more with the pass

• California minimum wage as of January 1, 2026: $16.90 per hour; exempt salary minimum $70,304 per year.
• 1.5× pay: over 8 hours/day, over 40 hours/week, first 8 hours on the 7th consecutive day.
• 2× pay: over 12 hours/day and over 8 hours on the 7th consecutive day.
• 30-minute meal period for more than 5 hours; second meal for more than 10 hours.

+9 more with the pass

• Personnel file (§1198.5): provide inspection or a copy within 30 calendar days of a written request (35 if agreed in writing).
• Keep personnel files at least 3 years after employment ends.
• Payroll records request (§226): comply within 21 calendar days; $750 penalty for failure.
• Signed employment documents: give a copy on request (§432).

+8 more with the pass

• Pay wages at least twice each calendar month; 1st–15th paid by the 26th; 16th–end paid by the 10th of next month.
• Weekly or biweekly payroll: pay within 7 calendar days after the period closes.
• Wage statements list 9 items, show only the last 4 SSN digits, and are kept at least 3 years.
• 2026 Social Security: 6.2% each for employee and employer on wages up to $184,500.

+10 more with the pass

• Every employer except the state must secure workers' comp, even with one employee (Labor Code §3700).
• Two ways to secure it: a policy from an authorized insurer (including State Fund) or a DIR certificate of consent to self-insure.
• C-8, C-20, C-22, C-39, and D-49 licensees must carry workers' comp even with no employees.
• An RME-qualified license cannot file an exemption; after hiring, proof of coverage is due to CSLB within 90 days.

+9 more with the pass

• Insurance indemnifies the insured; a surety bond answers for the contractor's default and the contractor must repay the surety.
• Contractor's license bond: $25,000 (since January 1, 2023); not required for an inactive license.
• Bond of qualifying individual: $25,000; RMO with 10% or more of voting stock is exempt.
• Disciplinary bond: $25,000 to $250,000, on file at least 2 years.

+8 more with the pass

• Lien rights: direct contractor, subcontractor, material supplier, equipment lessor, laborer, design professional (Civil Code §8400).
• Preliminary notice: within 20 days of first furnishing work; late notice covers only work from 20 days before it was served.
• Laborers need no preliminary notice; a direct contractor gives it only to the construction lender.
• Notice of completion: recorded on or within 15 days after completion; copies sent within 10 days.

+10 more with the pass

• Markup is a percentage of cost; margin is a percentage of selling price. Price = cost ÷ (1 − margin).
• A 25% markup equals a 20% margin.
• Office costs, office staff, and office vehicles are general and administrative (G&A) overhead, not direct job costs.
• Public bid security for state departments and cities: at least 10% of the bid.

+8 more with the pass

• Use the same cost codes in the estimate and in job cost accounting.
• Variance = budget − actual; negative means over budget.
• Percent complete (cost-to-cost) = cost to date ÷ total estimated cost.
• Over-billed = billings to date − earned revenue (when billings are higher).

+8 more with the pass

• The critical path is the longest path through the schedule network; its activities have zero float.
• Total float = late start − early start (or late finish − early finish).
• A bar (Gantt) chart shows timing but not clear dependencies; CPM shows dependencies.
• Submittals are approved before ordering or fabricating; RFIs ask written questions about the documents.

+9 more with the pass

• Four essentials of a contract: capable parties, consent, lawful object, sufficient consideration (Civil Code §1550).
• Statute of limitations: 4 years written contract, 2 years oral; 4 years patent defects, 10 years latent defects.
• Unlicensed contractors cannot sue to collect, and owners can recover all compensation paid (B&P §7031).
• Home improvement contracts over $500 must be in writing and signed before work starts.

+10 more with the pass

• Home improvement: no payment beyond the value of work performed or material delivered, except the down payment.
• Private owner pays a progress payment within 30 days after a written demand notice (Civil Code §8800).
• Prime pays subcontractors within 7 days after receiving a progress payment (B&P §7108.5), unless otherwise agreed in writing.
• Good faith dispute: withhold no more than 150% of the disputed amount.

+10 more with the pass

• Public work = construction, alteration, demolition, installation, or repair under contract, paid in whole or part with public funds (Labor Code §1720).
• Prevailing wage applies above $1,000; projects of $1,000 or less are exempt.
• DIR registration is not required on projects of $25,000 or less (construction) or $15,000 or less (maintenance).
• DIR registration renews on or before July 1 each year; the Director may post fees up to $800 (as of July 1, 2026).

+8 more with the pass

• “Requisitos de vinculación” on the Spanish exam means bonding requirements (fianzas).
• Public works go to the lowest responsible bidder, not simply the lowest price.
• List subs whose work is more than one-half of 1% of the bid ($10,000 minimum for streets, highways, and bridges).
• State bids need bidder's security of at least 10% of the bid.

+8 more with the pass

• Every employer except the state must be insured for workers' compensation or have DIR consent to self-insure (Labor Code §3700).
• Every public works contract must include a workers' compensation clause (Labor Code §1860).
• The contractor signs and files the §1861 workers' compensation certification with the awarding body before performing work.
• DIR registration requires proof of workers' compensation coverage.

+7 more with the pass

• Every employer must have a written, effective IIPP (T8 §1509, §3203), no matter how small.
• The IIPP names a responsible person and covers compliance, communication, hazard inspections, accident investigation, hazard correction, and training.
• IIPP inspection and training records are kept at least 1 year.
• Construction employers need a written Code of Safe Practices posted at each job site office or given to each supervisor.

+9 more with the pass

• Heat: 1 quart of water per employee per hour; shade above 80°F; high-heat procedures at 95°F; cool-down rest at least 5 minutes.
• New workers in high heat are closely observed for their first 14 days; the heat plan is written in English and the majority's language.
• Indoor heat rule starts at 82°F; full program at 87°F.
• Railings and general fall arrest: 7½ feet. Residential framing and residential roofing: 6 feet. Non-residential roofing: more than 20 feet.

+9 more with the pass

• T8 §5194 requires a written hazard communication program, GHS labels, SDSs accessible every shift, and training at first assignment and when new hazards arrive.
• Unknown material: stop, keep people away, notify, and test before disturbing it.
• PACM is thermal system insulation and surfacing material in buildings built no later than 1980.
• Asbestos PEL is 0.1 f/cc (8 hours); excursion limit is 1.0 f/cc (30 minutes); records kept 30 years.

+9 more with the pass