Licensed Electrical Contractor Business and Law Practices 2 — Questions and Answers
Question 1: A licensed electrical contractor's bond primarily protects against which situation?
- Equipment theft from the job site
- Financial loss caused by the contractor's failure to complete the work (Correct answer)
- Injuries sustained by the contractor's employees
- Damage to the contractor's tools and vehicles
Correct answer: Financial loss caused by the contractor's failure to complete the work
A contractor's bond protects the client (obligee) against financial loss if the contractor fails to fulfill contractual obligations.
Question 2: Under the Fair Labor Standards Act (FLSA), which employees are generally entitled to overtime pay at 1.5x their regular rate?
- Salaried managers earning over $684/week
- Non-exempt employees working more than 40 hours per week (Correct answer)
- Apprentices working under supervision
- Subcontractors on federal projects
Correct answer: Non-exempt employees working more than 40 hours per week
The FLSA requires non-exempt employees to be paid 1.5 times their regular rate for hours worked beyond 40 in a workweek.
Question 3: Which financial statement shows a company's assets, liabilities, and owner's equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Accounts receivable ledger
Correct answer: Balance sheet
A balance sheet is a snapshot of a company's financial position — assets, liabilities, and equity — at a single date.
Question 4: When bidding on a public works project in most states, an electrical contractor is required to pay employees at least the:
- Federal minimum wage
- State minimum wage
- Prevailing wage rate for the trade (Correct answer)
- Negotiated union rate regardless of union membership
Correct answer: Prevailing wage rate for the trade
Public works projects are governed by prevailing wage laws (e.g., Davis-Bacon Act federally) requiring contractors to pay the locally determined prevailing wage.
Question 5: An electrical contractor issues a notice to the property owner stating the contractor intends to file a lien if payment is not received. This is called a:
- Stop-work notice
- Preliminary notice (pre-lien notice) (Correct answer)
- Demand letter
- Lis pendens
Correct answer: Preliminary notice (pre-lien notice)
A preliminary notice (pre-lien notice) is sent before filing a mechanic's lien to preserve lien rights and notify the owner of the potential lien.
Question 6: Which type of insurance covers an electrical contractor if a client claims the contractor's negligent work caused financial harm to the client's business operations?
- Workers' compensation
- Commercial general liability (CGL)
- Errors and omissions (professional liability) (Correct answer)
- Commercial auto insurance
Correct answer: Errors and omissions (professional liability)
Errors and omissions (professional liability) insurance covers claims of negligence or mistakes in professional services that cause a client financial harm.
Question 7: A subcontractor agreement should include a clause requiring the subcontractor to:
- Obtain the general contractor's personal credit card number for purchases
- Name the general contractor as an additional insured on the sub's liability policy (Correct answer)
- File all permits in the subcontractor's business name only
- Hire employees directly from the general contractor's workforce
Correct answer: Name the general contractor as an additional insured on the sub's liability policy
Subcontractor agreements typically require the sub to add the general contractor as an additional insured, providing coverage if the sub's work causes a claim.
Licensed Electrical Contractor Business and Law Practices 2
A licensed electrical contractor's bond primarily protects against which situation?