Voluntary Arbitration Program Guide:    Many disputes between consumers and contractors can be resolved efficiently and satisfactorily through arbitration. Arbitration is usually defined as an informal process in which two or more persons agree to let an impartial third person or panel make a final decision in a dispute between them. Because of the many advantages arbitration can offer, the Contractors State License Board (CSLB) offers arbitration for the resolution of disputes that meet certain criteria. The CSLB will pay for the hearing, the arbitrator, and the services of one board-appointed expert witness per complaint. Only contractors with good records qualify for participation in arbitration. Complaints involving deceptive or fraudulent practices will continue to be investigated by the CSLB.

Criteria

For a case to qualify for voluntary arbitration under Business and Professions Code Section 7085 when all of the following apply:

1. The dispute must involve present or future damages greater than $12,500 and less than $50,000;
2. The contractor must possess a license that was in good standing at the time of the alleged violation;
3. The contractor must not have a record of prior violations;
4. The contractor must not currently have a disciplinary action pending against him or her; and
5. The parties must not have previously agreed to private arbitration of the dispute, either in their contract or otherwise.

Depending on the type of defect, the complaint must be filed within either four or ten years after the alleged wrongful act or omission causing the dispute occurred, or within the duration of any written warranty for which breach is alleged. The four-year time period applies to disputes involving patent defects and the ten-year time period applies to disputes involving latent structural defects (Business and Professions Code Section 7091).

Mandatory And Binding Arbitration

“Voluntary” and “binding” are key terms to understand before entering into arbitration. Participation in this program is voluntary for both parties; if either party chooses not to participate, the dispute in question will not be arbitrated but will instead be investigated by the Contractors State License Board.

If both parties agree to arbitration, however, they will be agreeing to binding arbitration. In other words, both the consumer and contractor must comply with the decision of the arbitrator. In binding arbitration, parties who refuse to comply may be taken to court and have a judgment entered against them. In addition, licensed contractors who fail to comply with an award that is issued against them may have their licenses suspended or revoked.

This brochure provides the information necessary to understand the CSLB Arbitration Program for the resolution of complaints in which the damages are between $12,500 and $50,000.

The CSLB Arbitration Program

An arbitration forum has been selected to arbitrate construction disputes for the CSLB. The arbitration forums have expert arbitrators throughout California who have been trained to resolve consumer/contractor disputes. All have undergone intensive training to ensure that both parties receive a fair hearing. The arbitration forum will contact you after the CSLB asks that your dispute be scheduled for a hearing.

How To Obtain Arbitration Services

Parties to a construction contract should consider arbitration when communications have broken down, the consumer has filed a complaint with the CSLB, and the board has determined that the dispute could be effectively handled through arbitration.

Once both parties agree to arbitration, and a representative of the board determines that a complaint qualifies for arbitration, the representative will send a Submission to Voluntary Arbitration form to the consumer and the contractor. The respective parties will fill in their names, addresses, and outline the claims and relief they are seeking.

The CSLB will send copies of the signed submission forms to the other party so that both of them will know exactly what issues are in dispute and what remedies are being sought. In most cases, a party will not be permitted to add to the issues in dispute or to increase the amount of damages sought after the submission form is sent to the opposing party.

Both parties can then prepare their cases for presentation at the arbitration hearing. A copy of the signed submission to arbitration forms will also be sent to the arbitration forum selected to handle the case.

Scheduling The Hearing

When the arbitration forum receives a signed Submission to Voluntary Arbitration form, it will prepare a candidate list of arbitrators to conduct the hearing. Each party may strike any unacceptable arbitrator from the list and rank the remaining in preferential order. If possible, the arbitration forum then appoints a mutually acceptable arbitrator from the returned lists and sets a hearing date, time, and place that is most convenient for all parties. If the parties cannot agree on an arbitrator from the submitted lists, the arbitration forum can appoint one from its pool of arbitrators. Similarly, if the parties cannot agree on a hearing date, the arbitrator has the authority to fix the date, time, and place for the hearing.

Case Preparation

Each party will be responsible for his or her own case presentation at the hearing, including relevant documents. Any documents previously sent to CSLB for the complaint file will not be forwarded to the arbitration forum. Parties may hire an attorney to represent them, at their own expense, or they may present their own cases. In either instance, case preparation is very important. Both parties should review the submission form for an understanding of all issues and as preparation for gathering relevant evidence. Any documents previously sent to the CSLB for the complaint file will not be forwarded to the arbitration forum.

Expert Witnesses

The CSLB will pay for one state-appointed expert witness per case.

An expert witness is a person who has extensive work experience and is competent to evaluate the work that is in dispute. If an expert witness is needed, the Contractors State License Board will hire one prior to referring the dispute to arbitration. This expert will become the state-appointed expert for the dispute. The CSLB has the discretion to hire an expert, depending on the circumstances of the dispute. If the the CSLB hires an Industry Expert to qualify the complaint as an arbitration referral, a second expert will not be hired.

When a state-appointed expert is used, both parties will receive a copy of the report of the expert witness shortly after the dispute is referred to the arbitration association. Either party may use the expert witness at the arbitration hearing. A party who wishes to use the testimony of the state-appointed expert at the hearing will be responsible for making arrangements with the expert witness to ensure his or her attendance at the hearing. At the time the referral is made to the arbitration forum, the name, address and telephone number of the Industry Expert is provided to the parties. If that information is not provided, the Enforcement Representative that handled the complaint and the referral should be contacted for the information. Arrangements to have a state-appointed expert testify should be made with the expert at least 15 days prior to the scheduled hearing.

The consumer or the contractor may use an expert who is not appointed by the state.

A party who uses the services of an expert witness who is not appointed by the state will be responsible for arranging and paying for the services of the expert witness. A party will not be able to collect this cost from the opposing party.

To locate an expert who is not appointed by the state, consult local sources, references, trade associations, building exchanges, or the yellow pages of the telephone book. The local office of the CSLB can also provide you with a list of expert witnesses who you can hire to assist in your dispute.

The Hearing

Arbitration hearings are conducted in an informal setting and are designed to bring out the facts involved in a case. The informality of the setting should not be considered as a casual discussion. The witnesses and information that the parties bring or do not bring, will have a tremendous bearing on the outcome of the hearing. Preparation for the hearing is essential. The award is binding.

The consumer presents his or her claims, evidence, and witnesses first, and then the contractor follows with his or her claims, evidence, and witnesses. Parties may be represented by legal counsel if they wish, but at their own expense. The rules that govern arbitration hearings under this program are found in Business and Professions Code Section 7085.5.

When a hearing is completed, the arbitrator has 30 calendar days in which to render a decision. The arbitrator has the authority to rule on the claims and to award money damages.

The Award

The arbitrator’s award is final and binding on both parties. In other words, the contractor and the consumer must abide by the terms of an award. If either party does not comply, the other may petition the superior court to have the award confirmed and made a judgment of the court. The court can then enforce the award as its civil judgment.

The procedure for enforcing awards can be found in the Code of Civil Procedure starting with section 1285. However, if court enforcement is necessary, an attorney should be consulted.

Consumers or contractors who wish to appeal an award in court must do so at their own expense. The CSLB will not represent parties in court. A consumer or contractor’s refusal to accept the terms of an award will not preclude the CSLB from taking action after an award is granted.

The CSLB has the authority to discipline contractors who do not comply with an arbitration award. Most awards will specify a final date for compliance. If the award is against the contractor and the contractor does not comply within the time specified in the award, the consumer should notify the CSLB’s Sacramento Case Management office at P. O. Box 26888, Sacramento., Ca. 95826. The board will investigate the report of noncompliance, and, if appropriate, suspend the contractor’s license. If the contractor complies with the arbitrator’s award within 90 days, his or her license may be reinstated; otherwise, it will be revoked.