An RMO/RME’s Failures May Result in the Loss of a License for Litigation Purposes

Kring & Chung works with a number of contractors that are corporations and limited liability companies holding their licenses through a Registered Managing Employee and/or Registered Managing Officer, which are commonly referred to as RMO/RME. According to Business & Professions Code § 7068.1, the license holder:

“. . . shall be responsible for exercising that direct supervision and control of his or her employer’s or principal’s construction operations as is necessary to secure full compliance with the provisions of this chapter. . .” (emphasis added).

California Code of Regulations § 823 defines direct supervision and control as requiring at least one of the following:

  1. Supervising construction;
  2. Managing construction activities by making technical and administrative decisions;
  3. Checking jobs for proper workmanship; or
  4. Direct supervision on construction job sites.

Over the last few years, aggressive counsel have begun to argue that failing to comply with the above code sections is the same as working without a license. In litigation, failing to work with a valid license would result in the other party receiving a complete recovery of all funds paid to contractor for the construction work. [See Business & Professions Code § 7031(b).]

As such, in order to make sure your license is protected, you need to make certain that your RME/RMO(s) take an active role in construction management to avoid this potential argument in litigation. For details on how to protect your company, please call us or stop by to discuss.