"Sec. 1   RCW 18.27.340 and 1997 c 314 s 17 are each amended to read as follows:
     (1) Except as otherwise provided in subsection (3) of this section, a contractor found to have committed an infraction under RCW 18.27.200 shall be assessed a monetary penalty of not less than two hundred dollars and not more than five thousand dollars.
     (2) The director may waive collection in favor of payment of restitution to a consumer complainant.
     (3) A contractor found to have committed an infraction under RCW 18.27.200 for failure to register shall be assessed a fine of not less than one thousand dollars, nor more than five thousand dollars. For a first offense, the director may reduce the penalty for failure to register, but in no case below five hundred dollars, if the person: Becomes registered within ten days of receiving a notice of infraction ((and the notice of infraction is for a first offense)); and registers for a department-approved contractor training class under section 2 of this act within ten days of receiving a notice of infraction, completes the class within one hundred twenty days of receiving the notice of infraction, and pays any required class fees upon class registration.
     (4) Until July 1, 2011, monetary penalties collected under this chapter shall be deposited in the general fund. Beginning July 1, 2011, monetary penalties and class fees collected under this chapter shall be deposited in the contractor registration account created in section 4 of this act.

NEW SECTION.  Sec. 2   A new section is added to chapter 18.27 RCW to read as follows:
     The department will approve or conduct contractor training classes and charge a fee, payable upon class registration, that covers the costs of administering the class. The department may adopt rules relating to the number of classes to be offered by the department, the locations of these classes, class fees, and curriculum. In determining the locations of these classes, the department may consider offering online classes and ensure that classes are reasonably accessible in eastern and western Washington. The department shall deposit all fees in the contractor registration account created in section 4 of this act.

Sec. 3   RCW 18.27.070 and 1997 c 314 s 7 are each amended to read as follows:
     (1) The department shall charge fees for issuance, renewal, and reinstatement of certificates of registration; and changes of name, address, or business structure. The department shall set the fees by rule.
     (2) The entire amount of the fees are to be used solely to cover the full cost of issuing certificates, filing papers and notices, and administering and enforcing this chapter. The costs shall include reproduction, travel, per diem, and administrative and legal support costs.
     (3) The department shall deposit all fees in the contractor registration account created in section 4 of this act.

NEW SECTION.  Sec. 4   A new section is added to chapter 18.27 RCW to read as follows:
     The contractor registration account is created in the state treasury. The department shall deposit in the account all moneys from registrations, renewals, or civil penalties assessed and collected under this chapter. Appropriations from the account may be made only for the purposes of administration and enforcement of this chapter, including conducting contractor training classes under section 2 of this act.

Sec. 5   RCW 60.28.040 and 2009 c 432 s 7 and 2009 c 219 s 7 are each reenacted and amended to read as follows:
     (1) Subject to subsection (5) of this section, the amount of all taxes, increases, and penalties due or to become due under Title 82 RCW, from a contractor or the contractor's successors or assignees with respect to a public improvement contract wherein the contract price is thirty-five thousand dollars or more, shall be a lien prior to all other liens upon the amount of the retained percentage withheld by the disbursing officer under such contract.
     (2) Subject to subsection (5) of this section, after payment of all taxes, increases, and penalties due or to become due under Title 82 RCW, from a contractor or the contractor's successors or assignees with respect to a public improvement contract wherein the contract price is ((twenty)) thirty-five thousand dollars or more, the amount of all other taxes, increases, and penalties under Title 82 RCW, due and owing from the contractor, shall be a lien prior to all other liens upon the amount of the retained percentage withheld by the disbursing officer under such contract.
     (3) Subject to subsection (5) of this section, after payment of all taxes, increases, and penalties due or to become due under Title 82 RCW, the amount of all taxes, increases, and penalties due or to become due under Titles 50 and 51 RCW from the contractor or the contractor's successors or assignees with respect to a public improvement contract wherein the contract price is ((twenty)) thirty-five thousand dollars or more, shall be a lien prior to all other liens upon the amount of the retained percentage withheld by the disbursing officer under such contract.
     (4) Subject to subsection (5) of this section, the amount of all other taxes, increases, and penalties due and owing from the contractor shall be a lien upon the balance of such retained percentage remaining in the possession of the disbursing officer after all other statutory lien claims have been paid.
     (5) The employees of a contractor or the contractor's successors or assignees who have not been paid the prevailing wage under such a public improvement contract shall have a first priority lien against the bond or retainage prior to all other liens.

Sec. 6   RCW 18.27.020 and 2007 c 436 s 2 are each amended to read as follows:
     (1) Every contractor shall register with the department.
     (2) It is a gross misdemeanor for any contractor to:
     (a) Advertise, offer to do work, submit a bid, or perform any work as a contractor without being registered as required by this chapter;
     (b) Advertise, offer to do work, submit a bid, or perform any work as a contractor when the contractor's registration is suspended or revoked;
     (c) Use a false or expired registration number in purchasing or offering to purchase an advertisement for which a contractor registration number is required;
     (d) Transfer a valid registration to an unregistered contractor or allow an unregistered contractor to work under a registration issued to another contractor; or
     (e) Subcontract to or use an unregistered contractor.
     (3) It is not unlawful for a registered contractor to employ an unregistered contractor who was registered at the time he or she entered into a contract with the registered contractor, unless the registered contractor or his or her representative has been notified in writing by the department of labor and industries that the contractor has become unregistered.
     (4) All gross misdemeanor actions under this chapter shall be prosecuted in the county where the infraction occurs.
     (5) A person is guilty of a separate gross misdemeanor for each day worked if, after the person receives a ((citation)) notice of infraction from the department, the person works while unregistered, or while his or her registration is suspended or revoked, or works under a registration issued to another contractor. A person is guilty of a separate gross misdemeanor for each worksite on which he or she violates subsection (2) of this section. Nothing in this subsection applies to a registered contractor.
     (6) A person is guilty of a class C felony if, after receiving a third or subsequent final infraction for working as a contractor while unregistered, while his or her registration is suspended or revoked, or under a registration issued to another contractor, he or she works as a contractor while unregistered, while his or her registration is suspended or revoked, or under a registration issued to another contractor.
     (7) The director by rule shall establish a two-year audit and monitoring program for a contractor not registered under this chapter who becomes registered after receiving an infraction or conviction under this chapter as an unregistered contractor. The director shall notify the departments of revenue and employment security of the infractions or convictions and shall cooperate with these departments to determine whether any taxes or registration, license, or other fees or penalties are owed the state.

NEW SECTION.  Sec. 7   The legislature finds that the state loses over one hundred million dollars a year in taxes due to underground economy construction activity, causing great inequity to law-abiding businesses and taxpayers. The legislature further finds that an employer in construction is required to pay industrial insurance and unemployment taxes for a worker unless a seven-part independent contractor test is met, which test includes that the worker is free from direction and control and has his or her own books and records. The legislature finds that some contractors avoid taxes by engaging multiple contractors to work together on the same task and treating the contractors as independent contractors rather than hiring and paying taxes on these persons as covered workers. The legislature finds, however, that if multiple contractors are working together on the same task on a job site, the contractors must be working under direction and control such that they are not independent contractors but are, in fact, covered workers.
     The legislature finds that the seven-part test is and should continue to be applied in investigations of underground economy activity. However, the legislature also finds that prohibiting up front certain contracting which by its nature creates a situation in which taxes due are not paid will provide clarity to contractors and provide an additional cost-effective means to reduce the underground economy. By enacting section 8 of this act, the legislature intends to define the prohibited contracting narrowly to assure no legitimate contracting is prohibited. The legislature further intends to exempt work on single-family residences. The legislature intends that nothing in section 8 of this act prohibits a contractor from engaging other contractors to assist with tasks so long as those contractors are treated as covered workers.

NEW SECTION.  Sec. 8   A new section is added to chapter 18.27 RCW to read as follows:
     (1) A contractor commits a violation under this chapter and is subject to an infraction if on a single job site, work is performed together on the same task by more than two contractors who bring no workers to that job site who are subject to the mandatory coverage of Title 51 RCW.
     (2) If contractors are working in the same trade or craft on a single job site, the contractors have the burden of proof to show that they are not working together on the same task.
     (3) The violation under subsection (1) of this section is committed by all parties to the contract.
     (4) A contractor found to have committed an infraction under this section shall be assessed a fine of not less than one thousand dollars, nor more than five thousand dollars. For a first offense, the director may reduce the penalty to no less than five hundred dollars if the contractor registers for a department-approved training class under section 2 of this act within ten days of receiving a notice of infraction, completes the class within one hundred twenty days of receiving the notice of infraction, and pays any required class fees upon class registration. For a second or subsequent offense under this section, the director may suspend the registration of the contractor.
     (5) For purposes of this section, a "job site" is a single physical address.
     (6) This section does not apply to work performed on a single-family residence.

Sec. 9   2009 c 432 s 13 (uncodified) is amended to read as follows:
     The department of labor and industries, the employment security department, and the department of revenue shall coordinate and report to the appropriate committees of the legislature by December 1st of each year on the effectiveness of efforts implemented since July 1, 2008, to address the underground economy. The agencies shall use benchmarks and measures established by the institute for public policy and other measures it determines appropriate. The department of labor and industries must include in its report measures of the effectiveness of section 8 of this act.

NEW SECTION.  Sec. 10   Section 9 of this act is codified as a new section in chapter 43.22 RCW.

NEW SECTION.  Sec. 11   Sections 3 and 4 of this act take effect July 1, 2011."