State measures penalties for contractor paperwork

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By Darryl Enriquez

Longtime roofing contractor Leo Kaltenbrun of Sheboygan is skeptical of proposed penalties as high as $2,000 for generals and subs that fail to register with the state before going on a work site.

When Kaltenbrun, 90, founded Sheboygan-based Kaltenbrun Bros. Roofing Co. Inc. in 1946, a contractor preparing for a job simply went to City Hall, pulled a permit and depended on local building inspectors to make sure the completed work was within code.

“Is the state trying to make more money now?” Kaltenbrun asked.

The state is trying to improve regulation of safety, public health and payment of employee taxes with the registration law that took effect in March 2009. The law was intended to give the public, state and contractors a quick way to find out who is working at and responsible for a construction site.

But the law did not set penalties, and the Department of Commerce is developing them now.

Proposed penalties for unregistered contractors are $1,000 for a first offense, $1,500 for a second offense and $2,000 for third and subsequent offenses.

Proposed penalties for contractors caught employing unregistered subcontractors are $1,500 for first offense, $1,750 for second offense and $2,000 for third and subsequent offenses.

Jim Quast, a program director with Commerce, said the penalties were proposed by his agency because they are similar to those craftsmen face if they are not properly licensed.

Just because a general or a sub is not registered does not mean a penalty is automatic, he said. The agency likely would issue a warning and only enforce a penalty if it becomes clear the law was being ignored, Quast said.

Compliance does not appear to be an issue, Quast said. More than 10,000 contractors and subcontractors have registered since March 2009.

But the proposed penalties are an issue. A public hearing Wednesday in Madison on the penalties drew opposition from the Associated Builders and Contractors of Wisconsin Inc. and the Associated General Contractors of Wisconsin.

John Mielke, ABC of Wisconsin‘s vice president, said failure to register does not put the public at risk, and he questioned why the lowest penalty is 10 times greater than the $100 four-year registration fee. Jim Boullion, AGC of Wisconsin’s government affairs director, argued it is inappropriate to penalize contractors for hiring unregistered subcontractors.

Registration requirements do not apply to those who build on property they own or lease, but the rules affect more than the usual subcontractors, such as HVAC, electricians and plumbers. The law and proposed penalties also apply, for instance, to installers of gas systems, boilers, piping and refrigeration units.

Quast, who said he wants the penalty amounts in place by December, said holding a general contractor responsible for subcontractors is “not a new concept.” Master craftsmen, he said, are held responsible for the work of their hired help.

But Kaltenbrun insists the law and proposed penalties are new concepts and likely to drive fledgling contractors out of business.

“Is this still a free country?” he asked. “Now that the state has gotten involved, what’s next, the federal government?”