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Construction Law | November 2017

ROC Rule Changes Appear to Benefit Contractors

Arizona contractors stand to gain from removal of the dual-license requirement and from new opportunities to defend their license at an ROC hearing.

The Arizona Registrar of Contractors has released new rules that went into effect November 5, 2017. While some of the changes are intended to make the ROC rules clearer and more user-friendly, others are substantive, including alternatives to dual-licensing and a brand-new rule about disclosing documents and other information in advance of a disciplinary hearing.

Unbundling Contractor Licenses

The Registrar's new rules undo changes, made in 2014, that combined many residential and commercial licenses into dual-license scopes. Under the ROC's previous administration, the agency adopted rules that combined many residential and commercial licenses into a single "dual" license.

 

This article appeared in the November 2017 issue of "The Construction Advisor" published by Lang & Klain, P.C.


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For example, under the 2014 rules, a drywall contractor would need the CR-10 Drywall license, covering both commercial and residential projects, even if the contractor performed only one kind of project (commercial) and never performed the other (residential).

Many contractors were unhappy with the 2014 license combinations, because of the negative financial impact. Commercial contractors that were forced into the new dual licenses were required to pay into the Residential Contractors' Recovery Fund, even if they never performed any residential work.

On the other side, residential contractors that were forced into the dual licenses were required to increase their bond amounts to cover the commercial scope, even if they never performed any commercial work. (In one public comment, a residential-only contractor stated that his bond premium rose from $100 to $525 premium, adding, "Ouch! Just doesn't seem fair to us little guys.")

Under current Director Jeff Fleetham, the unbundling of the combined license scopes gives contractors more freedom to choose the right scope for their businesses. For example, the drywall contractor that performs only commercial work can now choose the commercial C-10 drywall license, as the new rules do not force him to get the dual-scope CR-10 and pay into the Recovery Fund. Likewise, for the residential-only drywall contractor, the residential R-10 is available. And what about the drywall contractor who performs both residential and commercial work? The dual CR-10 license is still an option.

Opting Out. For contractors that were forced into a dual classification by the 2014 rules, the ROC now offers Rule R4-9-111, "Opting Out of Dual-License Classifications." This new rule allows the holder of a dual license, at renewal time, to keep the dual license or designate it as either commercial-only or residential-only. Choosing to go commercial-only or residential-only is a one-time choice and cannot be reversed: "If a license is designated as either commercial or residential under this Rule, that designation is permanent." Rule R4-9-111(B) (emphasis added).

Fairer, More Efficient ROC Hearings?

When facing a license suspension or revocation or a Recovery Fund award or restitution order, the contractor is entitled to a hearing, to tell its side of the story and to defend its license against a complaint.

Unfortunately for contractors, the ROC has never issued a rule that requires the complaining party to disclose information or documents before the hearing. As a result, ROC hearings have often taken on a "Wild West" atmosphere, where surprises pop up and anything can happen - usually to the detriment of the contractor.

To bring more fairness and predictability to the hearings, the ROC has adopted Rule R4-9-118, "Prehearing Disclosure Requirement." The new rule requires each party (the contractor and the complainant) to disclose, in advance of the hearing, their witnesses and the facts to which those witnesses will testify. The rule also requires the parties to exchange any documents or photographs that they intend to use at the hearing.

All disclosures must be made at least a week before the hearing, to give each side a chance to prepare (and to encourage settlement). If a party fails to make a required disclosure, the rule allows the hearing officer to exclude surprise evidence at the hearing and even to dismiss the complaint entirely.

Only time will tell whether the new rule actually makes hearings fairer, but it seems like a step in the right direction. At the very least, contractors should have a better chance to understand and prepare for the case against them; further, requiring complainants to show their cards before a hearing could make it easier to settle complaints before the hearing occurs.

Conclusion

In addition to the substantive changes described above, the ROC has made some largely stylistic revisions that make the rules easier to understand and to navigate. (All of the rule changes that went into effect November 5, 2017, are described in the September 22, 2017, edition of the Arizona Administrative Register).

Overall, the Registrar's recent rule changes appear to be good for Arizona contractors, as they tend to provide for greater clarity in the regulations, more flexibility in licensing, and a fairer disciplinary process.

Jamie Hanson is a former Chief Counsel for the Arizona Registrar of Contractors.