If you regularly practice construction law, as I do, you are likely used to client requests for contract reviews, delay claims, defect claims, and the like. However, you may also find yourself receiving requests outside what we typically view as construction law – requests by your construction clients for assistance with licensing boards. With over 300 boards and commissions established in North Carolina, it is hardly surprising that the construction industry is subject to state licensure and regulation. This regulatory framework leads to a complex collision of construction law and administrative law.

While questions about which licensing statutes and rules apply are likely to increase as projects in the state get larger and procurement methods more innovative, this blog focuses on representation of those who may not have thought those issues through prior to performing their work – i.e., enforcement actions by licensing boards. While each board’s statutes and rules are different, their enforcement powers generally fall into two categories: (1) actions against unlicensed individuals or companies and (2) actions against licensed individuals or companies. Your approach to representing your clients will likely be strongly influenced by which category your client falls in to. Though it is necessary to consult each board’s authorizing statutes and rules, there is some commonality between the boards within each category when it comes to regulatory authority and procedures.

Representing Unlicensed Clients

As discussed above, there are a lot of licensing boards. Sometimes a client just did not know that the activity it was performing was subject to licensure. Or, maybe, a client is licensed by one licensing board but ventured into work outside the scope of its license. Somehow, the board found out, whether by consumer complaint or, believe it or not, admission to performing unlicensed work on an application to get a license (yes, this happens more often than you think). Now, the board’s primary interest is stopping the offending party from committing future violations.

A licensing board has only the power granted to it by statute. Each board is generally responsible for regulating its licensed constituents. By obtaining a license, the licensed individual or company is submitting itself to the licensing board’s regulatory authority. In contrast, authorizing statutes do not typically provide regulatory authority over unlicensed individuals. Instead, licensing boards are typically authorized only to seek an injunction against the offending party and, in some instances, collect the costs of the investigation and/or enforcement. While your client may be contacted by a licensing board investigator, frequently a former law enforcement officer, your client’s first notice of enforcement action is often a complaint filed in Superior Court seeking an injunction.

Now it is decision time. Does your client fight the injunction and go to court? Generally, the practice of the various trades is broadly defined in authorizing statutes. The licensing boards often attempt to maintain broad authority by setting forth a very broad definition in their rules and then provide only very narrow exceptions. Thus, while licensing statutes are narrowly construed under appellate jurisprudence, the licensing boards attempt to retain significant flexibility. Your client may decide it is not worth the expense and effort of fighting the licensing board, particularly given the uncertainty of the result in most cases. Plus, your client may want to continue performing those services, which likely means that your client will need to apply for a license. Review of any unlicensed practice is almost certainly going to come up on an applications and boards are more likely to look favorably on those agreeing to a consent or enjoining future unlicensed practice.

If your client took the path of least resistance and is willing to agree to a consent injunction, your work is not over. While each licensing board likely has its standard consent order, the licensing boards and/or their counsel may be willing to enter into some level of negotiation. While certain elements are likely required to be included by each board’s authorizing statute, you can often negotiate to soften the language related to the alleged violation. You may also be able to negotiate language including a reference that the consent order is a negotiated settlement. Though criminal prosecution is highly unlikely for first offenses, unauthorized practice is typically a misdemeanor. Accordingly, you should try to assist your client as much as possible in avoiding a dead-to-rights admission of unlicensed practice or at least include some language that gives your client a reasonable argument. Once any costs are paid and the consent order is signed, filed, and executed by the judge, your work is done. If your client decided to fight the board, good luck.

Representing Licensed Clients

In contrast to unlicensed individuals, licensed individuals are directly subject to the authority of the applicable licensing board. Most authorizing statutes provide specific regulatory authority and permissible enforcement actions. Those permissible enforcement actions typically include, refusal to renew a license, revocation of a license, suspension of a license, or a reprimand, along with collection of certain administrative costs. Enforcement actions against licensees will often be related to allegations of improper practice, the specifics of which will be set forth in the authorizing statute and/or applicable rules. The applicable standards vary from board to board.

Generally, each board will establish by rule a procedure for conducting its enforcement actions over licensees. The procedures vary from board to board but there are some generally some common steps. The first step is often the board making a preliminary determination after receiving a complaint or becoming aware of a possible violation. Your client likely became aware of the board’s action by receiving a copy of the complaint or communicating with an investigator. You can assist your client in multiple ways at this stage. First, you can help your client craft its communications, including the provision of requested documents, to the investigator. Second, you can assist your client in crafting a formal response. Third, an often overlooked step, you can attempt to negotiate a resolution with the board’s counsel before the board takes any formal action. Dismissals can happen if your client has a strong argument. However, if your client’s arguments are not strong, you can often assist your client by negotiating a resolution that least impacts your client’s business operations. For instance, if responsibility is acknowledged and investigative costs paid, some boards are willing to limit their enforcement action to a reprimand or tolled suspension that allows the business to continue operations, of course depending on the offending conduct. In addition to a written response, some boards allow for an informal hearing or meeting with the board or select members. The purpose of that meeting is to allow your client to present its case and, to the extent the board feels there is a violation, to see if a negotiated settlement is possible. You can assist your client by attending that meeting.

If your client was unable to reach a negotiated settlement with the board, the board likely issued some type of enforcement decision over your client’s objection. Your client is then typically entitled to contest the board’s enforcement action by requesting a hearing. The boards typically adopt specific rules governing the conduct of the hearing. You can assist your client by guiding your client through the hearing process and representing your client at the hearing. Following the hearing, the board will issue a final agency decision, which is subject to judicial review if your client intends to challenge the decision.

Conclusion

While we may not consider representation of clients before licensing boards the typical practice of construction law, you may have clients in need of such services. Such requests are only likely to increase as our state continues to grow at a fast pace.

November 9, 2021/by Construction