Executive Summary

The West Virginia Contractor Licensing Board was created by the 1991 Acts of the Legislature (West Virginia Code §21-11-4). The Board is mandated to protect the public from unfair, unsafe and unscrupulous bidding and construction practices.

Issue 1: Compared to Most States, West Virginia Provides a Low Level of Consumer Protection Against Financial Loss From Contractors.

During the 2001 Legislative Session, the Legislature amended West Virginia Code §21-11-14(h). House Bill 2801, which was passed on April 13, 2001 and is in effect 90 days from passage, eliminates the language which stipulates that a court of record judgment must be obtained before the Board can discipline a licensed contractor. In essence, this means that a consumer will be able to file a complaint directly with the Board without having to obtain a circuit court judgement. This amendment will allow the Board to discipline a contractor such as suspend or revoke the license prior to a circuit court judgement. However, this amendment does not provide financial assurance.

Although the intent of the Contractor Licensing Act is to protect the public from unfair, unsafe and unscrupulous practices, citizens of the state can still lose thousands of dollars to contractors with little hope of any financial recovery. In order to enhance public protection from unscrupulous and incompetent licensed contractors, consideration should be given to providing all consumers with some type of financial assurance. According to the Division of Labor and Board representatives, there are three basic methods for providing financial assurance to consumers. These include the following: 1) Contributing to a recovery trust fund; 2) Posting a performance bond; and 3) Acquiring an insurance policy. All three methods of financial assurance are currently being utilized in other states. The Legislative Auditor obtained information on the states of Maryland, Virginia, and California, which represent examples of all three methods.

Recommendation 1:

The Legislature should consider amending the West Virginia Code to allow for some method of financial assurance, such as insurance, bonding, or a recovery fund, to the consumer in order to protect consumers from unscrupulous and/or incompetent licensed contractors. If a recovery fund is to be used, the legislature should consider allowing fines collected to be deposited into the recovery fund.

Issue 2: The Board is Required to Issue a "Grandfathered" License Ten Years after the Effective Date of the Contractor Licensing Act.

The Contractor Licensing Act contains a "grandfather clause" which was initially established to make it easier for existing contractors to obtain a license. The "grandfather clause" in West Virginia Code §21-11-7(b) does not contain a termination date. Theoretically, this permits an individual who has not been working as a contractor since September 30, 1991 to obtain a contractor's license without examination. However, most companies who request to be "grandfathered" at the present time have been working illegally for the past ten years. When a company is caught working without a valid contractor license, the individual/company will request to "grandfather" the company because they had been registered to do business during the September 30, 1990 - September 30, 1991 time period and they are currently in compliance with the Departments of Tax and Revenue, Workers Compensation, Employment Security, and the Secretary of State. The Board is currently compelled to issue a "grandfathered" license in these instances. If the "grandfather clause" was no longer in effect, then these companies who are working illegally would not be able to be "grandfathered" and would have to take an examination.

Recommendation 2:

The Legislature should consider eliminating the language in §21-11-7(b) of the West Virginia Code.