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CSLB CONTRACTOR'S LAW & BUSINESS EXAM
QUESTIONS WITH ACCURATE SOLUTIONS
- An employer remits State disability taxes withheld from an employee’s wages to what agency? -- Answer ✔✔ Employment Development Department
- Which act establishes the rights of workers to organize into unions and negotiate contracts? -- Answer ✔✔ National Labor Relations Act of 1935
- A contractor has had a problem with employees stealing tools and equipment from job sites. When conducting job interviews, may the contractor ask prospective employees about their arrest records? A. It is legal to ask prospective employees about arrests not leading to convictions. B. It is not legal to ask prospective employees about arrests not leading to convictions. C. It is legal for a private employer to ask about arrests not leading to convictions, but it would not be legal for city or county agencies to ask about such arrests. D. It is legal for a private employer to ask about arrests leading to convictions, but it would not be legal for a federal, state, or local public agency to do so. -- Answer ✔✔ It is not legal to ask prospective employees about arrest not leading to convictions.
- Why would a contractor have a case in Superior Court? -- Answer ✔✔ If it is a dispute of more than $25,000 it can be transferred to Superior Court.
- Which would not have to be reported to DOSH immediately or within 24 hours? A. Death from a three-story fall. B. Drunken crane operator hits a high-voltage power line C. Car accident in which an employee steps onto a public road, gets hit by a car, and suffers a concussion. D. Employee falls off forklift and suffers a sever back injury. -- Answer ✔✔ Car accident in which an employee steps onto a public road, gets hit by a car, and suffers a concussion.
- A general contractor has obtained bids from several subcontractors for a private project. He notices that one bid is substantially lower than the rest. Is it ethical and a good business practice for this contractor to inform the subcontractor that the bid is substantially lower than the bids of the other subcontractors? -- Answer ✔✔ Yes. If the contractor has reason to believe that the subcontractor has made an error in preparing his bid, the contractor should notify the subcontractor of the apparent error, but the contractor may not disclose the amounts of the other bids.
- An employer must furnish an employee with a completed IRS Form W-2 (Wage and Tax Statement) by: -- Answer ✔✔ The 31st of January.
- After a job is completed, the owner decides to have additional work done. How should the contractor proceed? -- Answer ✔✔ Write a new contract and ask the owner to sign it.
- The purpose of a 20-day preliminary notice for private work is to? -- Answer ✔✔ Notify the owner that the person or firm who sent the notice has improved the property.
would be legal for a federal, state, or local public agency to require lie detector tests of their employees.
- If a newly hired employee does not have a SSN, what should be done? -- Answer ✔✔ The employee must apply for a SSN.
- How many times may you take the contractor’s license exam before your original application is voided? -- Answer ✔✔ As many times as necessary within 18 months.
- When should a contractor renew the contractor's license bond? -- Answer ✔✔ 30 days before it expires.
- The qualifying RME for a construction firm must work at least: -- Answer ✔✔ A qualifying RME for a construction firm must work at least 32 hours per week or 80% of the work week.
- The federal Employer Identification Number (EIN) is issued by the: -- Answer ✔✔ The Internal Revenue Service
- Every employer of ______ or more full or part time employees must keep written health and safety records for _______ years. A. 1 - 3 B. 7 - 4 C. 10 - 3 D. 11 - 5 -- Answer ✔✔ Every employer of 11 or more full or part time employees must keep written health and safety records for 5 years.
- After you have read the plans and specifications, what is the next important step in writing a bid?
A. Talk to and select subs. B. Walk the job. C. Call about materials, price, and availability. D. Talk to the crew leader about labor. -- Answer ✔✔ Walk the job.
- Once a budget is finalized, the: A. Contractor should stick to the budget no matter what happens. B. Contractor should do the best possible job of staying within the budget. C. Budget should be revised each month. D. Budget should be referred to only if the business has cashflow problems. -- Answer ✔✔ The contractor should do the best possible job of staying within budget. `
- Who must sign a joint control addendum to a home improvement contract? -- Answer ✔✔ Owner, contractor, and joint control officer.
- When purchasing insurance, what is the best way to choose among different companies? -- Answer ✔✔ Cost and Coverage
- Sometimes contracts can prove to be too vague to interpret without disagreement between owner and contractor. Which of the following steps would best prevent such problems? A. Walk the job site with the owner. B. Review the plans and specifications with the owner. C. Show the owner the critical path schedule. D. Include a payment schedule in the contract and review other details of the contract with the owner. -- Answer ✔✔ Review the plans and specifications with the owner.
- When should you let your attorney see a construction contract? -- Answer ✔✔ After the contract is prepared but before it is signed.
- How often are FICA taxes reported and paid? -- Answer ✔✔ Quarterly
- Business records must be kept and made available for inspection by the Registrar of Contractors for a period of _____ after completion of a construction project or operation. A. One year B. Two years C. Three years D. Five years -- Answer ✔✔ Business records must be kept for 5 years.
- Funds withheld to guarantee completion of a project and correction of defects are called a(n): -- Answer ✔✔ Retention
- Direct costs are $37,000, overhead is 12% and profit is 5%. What is the selling price? -- Answer ✔✔ $44,578. Add the 12% overhead and 5% profit together, then subtract that from 100% (83%). Then divide the total direct cost ($37,000) by the remaining percentage (83%) = 445.7831.
- A mechanics' lien is a written document that must be signed and verified by the claimant. The first and third steps a contractor should take in filing a lien are listed below. Step 1: Obtain the exact legal description of the property. Step 2: Step 3: Find out if the person requesting the work of improvement is the owner. What is Step 2? -- Answer ✔✔ Find out the name of the legal owner of the property as well as the percent of ownership.
A mechanics' lien. Step 1: Obtain the exact legal description of the property. Step 2: Find out the name of the legal owner of the property as well as the percent of ownership. Step 3: Find out if the person requesting the work of improvement is the owner.
- What happens after an employee's taxable wages exceed $7,000? -- Answer ✔✔ After $7,000, the employer does not pay FUTA.
- A subcontractor who does not serve a preliminary notice: A. May not serve a stop notice but may file a mechanics' lien. B. May not file a mechanics' lien but may serve a stop notice C. loses both stop and mechanic’s lien rights D. Loses nothing because subcontractors are not required to serve preliminary notices. -- Answer ✔✔ A subcontractor that does not serve a preliminary notice loses both stop notice and mechanics' lien rights.
- If a sales presentation is made in Spanish, the home solicitation contract: -- Answer ✔✔ Must be in Spanish.
- Who pays FUTA? -- Answer ✔✔ The employer pays FUTA until an employee’s taxable wages exceed $7,000.
- If a contractor forgets to renew his or her license on time, the expired license may be renewed any time within _____ after its expiration without reapplying for a license and fulfilling the exam or waiver requirements again. -- Answer ✔✔ Five years.
- How often are you required to pay sales tax? -- Answer ✔✔ It depends on the expected amount of taxable sales.
A. Balance Sheet B. Income statement C. Cash flow statement D. Profit plan -- Answer ✔✔ A balance sheet.
- You are the qualifier for an active contractor's license. How do you inactivate the license? -- Answer ✔✔ Write to CSLB, requesting that the license be made inactive.
- You are bidding as a prime contractor on a public works project. The work will not involve construction, improvement, or repair of streets, highways, or bridges. You will use subcontractors for part of the work. If you do not name a subcontractor for any part of the work: A. The contract is canceled B. You will do that part of the work yourself C. You may simply submit a name later D. the awarding authority will choose a subcontractor for you. -- Answer ✔✔ You will do that part of the work yourself.
- John Meyers, a general contractor, had a contract with Mr. and Ms. Barnes to construct a gazebo and deck in their back yard. John was behind schedule and hired his 18-year-old son, Bart, to help on a part-time basis. After working on the project for a month, Bart slipped on a plank that John had laid across the deck but did not nail securely. As a result of the fall, Bart broke his leg. John is insured for workers' compensation, but Bart wants to sue his father for negligence in a civil action. Which of the following statements is CORRECT? A. John is not liable for damages in a civil action because the injured employee is his son. B. John is liable for damages in a civil action and must prove that the injury did not result from his negligence.
C. In a civil action, John may use the defense that the injury was the result of the contributory negligence of his son. D. A civil action is not a possibility when the -- Answer ✔✔ A civil action is not a possibility when the dispute involves a job-related injury, unless the employer is not insured for workers' compensation. This case would be handled by the Department of Industrial Relations.
- An applicant for a contractor's license receives a notice from the Contractors' State License Board, dated October 1, that the applicant passed the written exams. To receive an active license, the applicant must file a license bond and fee no later than: -- Answer ✔✔ December 30th. You have 60 days to file a license bond.
- If an owner lawfully cancels a contract, how long does the contractor have to pick up previously delivered materials? A. Within 24 hours after cancellation B. Within 10 days after cancellation C. Within 20 days after cancellation D. It's too late: If the materials are delivered to the property before a notice of cancellation is received, the materials become property of the owner. -- Answer ✔✔ If an owner lawfully cancels a contract, the contractor has 20 days to pick up previously delivered materials.
- Who is responsible for checking the site before the building inspector arrives? -- Answer ✔✔ The contractor is responsible for checking the site before the inspector arrives.
- When is an employee allowed to view their own personnel file? -- Answer ✔✔ Whenever they wish to.
- Is it legal for a contractor to hire professional strikebreakers to replace striking employees? -- Answer ✔✔ No. The contractor is subject to a maximum fine of $1,000 and/or a maximum jail sentence of 90 days.
- You have been awarded a job. It requires two days for site preparation and one day for clean-up. The contract involves two separate tasks--one lasting seven days and the other 10 days. If the two tasks can be done simultaneously, for how many days should you schedule the job? A. 7 Days B. 13 Days C. 15 Days D. 20 Days -- Answer ✔✔ 13 days as long as the jobs can be done simultaneously.
- A subcontractor or material supplier has 30 days to file a lien once a notice of completion has been recorded. -- Answer ✔✔ A sub or material supplier has 30 days to file a lien once a notice of completion has been recorded.
- What possible reason would an owner have for requiring an unconditional lien release from a subcontractor? -- Answer ✔✔ The owner's property covered by the release may not be liened.
- A prime contractor entered into a construction contract with a subcontractor. An employee of the subcontractor was injured, but unfortunately the subcontractor had not secured workers' compensation coverage. Which of the following statements best describes the situation, except in cases of fraud? A. The subcontractor is guilty, but the prime contractor is not responsible. B. The prime contractor is guilty, but the subcontractor is not responsible. C. Neither the prime contractor nor the subcontractor are responsible.
D. The subcontractor is guilty, but the prime contractor must take responsibility for the injuries. -- Answer ✔✔ The subcontractor is guilty, but the prime contractor must take responsibility for the injuries.
- Your accountant advises you to set up a cost management system. What does a cost management system do? -- Answer ✔✔ A cost management system gives a cost history to analyze labor and material costs.
- before beginning work, an employer or contractor must inquire whether asbestos is present in any building constructed prior to: -- Answer ✔✔ 1978
- What does it mean when a subcontractor signs a waiver and release form on a public works project? -- Answer ✔✔ The subcontractor gives up the right to lien the construction funds.
- A contractor is looking for an insurance policy to cover a high degree of exposure to risk. Of the following, which policy would be the best for this purpose? A. Property B. General Liability C. Builder's Risk D. Umbrella -- Answer ✔✔ Umbrella policy. But the umbrella policy would only cover the high degree of exposure if it was covered by one of the underlying policies.
- Which of the following is considered a direct cost? A. Telephone use by employees B. Personal Vehicle C. Insurance. D. Payroll Tax -- Answer ✔✔ Payroll tax is considered a direct cost.
Despite the changes in the laws, the CSLB still refers to "Notice to Owner" in several current publications as well as on their website. Without any evidence to the contrary, we must assume that the question may still be an active question in the database. If this question still appears as written here, then the correct answer is "Notice to Owner." A three-day notice of right to cancel is also included as part of the contract, but is not required if the contract is negotiated at the contractor's place of business. A 20-day Preliminary Notice is typically delivered by the subcontractor when he or she starts work, but can be delivered later.
- Ms. Gomez applies for a job. Of the following, the only reason an employer may lawfully deny her employment is: A. She is over 50 years of age B. She is Hispanic and everyone else is African-American or Caucasian C. Lifting is involved and she is a woman. D. She has no work experience or Social Security Number. -- Answer ✔✔ No related work experience or social security number.
- What is the most likely reason to lose a bid? A. 10% added to profit. B. Vague specifications C. Prices from subs were not exact. D. Costs of materials were not obtained. -- Answer ✔✔ Vague specifications.
- Which of the following procedures BEST ensures error-free bids? A. Working with an attorney
B. Having another person draft the bid C. Discussing details of the bid with the supplier D. Rechecking the bid before submitting it to the client -- Answer ✔✔ Rechecking the bid before submitting it to the client.
- A contractor, on his own initiative, changed the design of a building and carried out the change. The owner rejected the change and stated that the building has lost market value. If the owner takes the contractor to court and obtains a favorable judgment, the owner is: -- Answer ✔✔ Due the cost of repairs or the loss of market value.
- When a subcontractor does work on a public works contract, the public agency considers the subcontractor to be: -- Answer ✔✔ A subcontractor of the prime contractor.
- For which of the following would you not obtain a short term loan? A. Wages B. Bid Bond C. Job materials D. Office rent -- Answer ✔✔ Office rent.
- Construction or alteration of any building, highway, excavation, or other structure in the State of California requires a contractor's license if the total cost of one or more contracts on the project is: -- Answer ✔✔ $500 or more in labor and materials.
- A contractor meets Mr. Jones at his home to discuss remodeling. The contractor and Mr. Jones sign a contract that includes a three-day cancellation form. After the contractor leaves, Mr. Jones decides not to have the work done. Instead of using the cancellation form, Mr. Jones sends the contractor a letter by first-class mail stating that he is canceling the contract. Is Mr. Jones' cancellation effective? -- Answer ✔✔ Yes. Mr. Jones' letter does cancel the contract because it indicates his intention not to be bound by the contract.
B. You do not have to pay this additional tax if your home office is in another county. C. You may pay the additional tax charged in your county if the rate is lower than the county where the materials were purchased. D. You must pay the additional tax in the county where the materials were purchased. -- Answer ✔✔ You must pay the additional tax in the county where the materials were purchased.
- A notice of completion must be recorded within: -- Answer ✔✔ A notice of completion must be recorded within 10 days after work is completed.
- Insured employers must report every work-related illness or injury to their workers' compensation carrier within _____ of the incident. A. 24 hours B. 2 days C. 5 days D. 10 days -- Answer ✔✔ Any work related illness or injury must be reported to the workers compensation insurance company within 5 days.
- Which of the following may NOT be deducted from an employee's paycheck? A. SDI B. FICA C. Medicare Tax D. Workers' compensation insurance premiums -- Answer ✔✔ Workers compensation insurance premiums
- Who pays FICA? -- Answer ✔✔ For FICA, it is 50% the employer and 50% the employee.
- If, during excavation, you unearth human remains or burial artifacts at a construction site, what should you do? -- Answer ✔✔ Stop work immediately at that site and any there nearby area that may have remains.
- Who would be held responsible if a contractor completes a project according to plans and later discovers that there is a building code violation? -- Answer ✔✔ Both the contractor and the architect would be liable.
- A(n) _____ summarizes revenues, cost of sales, and operating expenses over a period of time. A. Profit plan B. Balance sheet C. Cash flow statement D. Income statement -- Answer ✔✔ Income Statement
- If required safety devices are missing from tools, what should an employee do? -- Answer ✔✔ Notify the contractor, who is responsible for safety.
- AB 2040 requires that before work begins on a project, the contractor must inquire of the owner whether asbestos is present in any building constructed prior to: -- Answer ✔✔ A contractor must inquire on any building built before 1978 about asbestos.
- The required Injury and Illness Prevention Program (IIPP) takes the form of: -- Answer ✔✔ The IIPP Injury and Illness Prevention Program takes the form of a written plan that includes procedures and that is put into practice and documented.
- Social security tax for a self-employed contractor is: -- Answer ✔✔ Based on the rate set for the self-employed for the year in which the tax is paid.
