RMO (Responsible Managing Officer) is an officer of a corporation or LLC who qualifies the business for a CSLB contractor's license. They must be a bona fide officer with at least 20% ownership OR serve as CEO, President, VP, Secretary, CFO, or Manager.

RME (Responsible Managing Employee) is a W-2 employee who qualifies the business. They must be a permanent employee involved in the business on a "substantially full-time basis" (at least 32 hours/week or 80% of their working time).

Both the RMO/RME and the contractor are jointly liable for the contractor's work. This means if the contractor does defective work or violates CSLB rules, the RMO's personal license and assets can be at risk.

California Business & Professions Code requires every contractor to have a qualifier (RMO or RME) who:

• Passed the trade exam and law exam for the license classification
• Exercises direct supervision and control over the contractor's work
• Is responsible for the contractor's construction operations
• Is listed on the CSLB license as the qualifying individual

The CSLB takes "direct supervision and control" seriously. This doesn't mean the RMO needs to be on every job site, but they must have meaningful oversight of the contractor's operations.

As an RMO, you can be held personally liable for:

• Construction defects - Even if you never visited the job site
• Worker injuries - If safety protocols weren't followed
• Consumer complaints - Homeowners can name you personally
• CSLB disciplinary actions - Your personal license can be suspended or revoked
• Contractor bond claims - You may be named on claims

Many RMO arrangements fail the CSLB's "direct supervision and control" requirement. Signs of inadequate oversight:

• RMO doesn't know what projects the contractor is working on
• No regular reporting or communication structure
• RMO has never visited the contractor's jobs
• RMO doesn't review bids, contracts, or change orders
• Multiple contractors using the same RMO simultaneously

If the CSLB investigates and finds inadequate supervision, both the contractor's license and the RMO's personal license can be revoked.

This agreement between the RMO and the contractor should address:

• Scope of oversight duties - What the RMO will actually do
• Reporting requirements - How the contractor reports to the RMO
• Compensation structure - Monthly fee, equity, or other arrangement
• Insurance requirements - Who carries what coverage
• Indemnification - How liability is allocated
• Termination rights - When the RMO can walk away
• CSLB notification duties - Who notifies CSLB of changes

If you're a company that matches RMOs with contractors (like ConstructionRMO), you need clear agreements that:

• Define your role clearly - You're a matchmaker, not a supervisor
• Disclaim agency relationships - You're not the contractor's agent
• Limit administrative scope - Document what you do and don't handle
• Require insurance from all parties - Contractor, RMO, and your company
• Include mutual indemnification - Each party responsible for their own acts
• Address CSLB compliance - Who ensures the arrangement meets CSLB rules

Contracts that say the RMO will "provide oversight" or "supervise as required" without specifics create two problems:

• The RMO doesn't know what they're actually supposed to do
• When problems arise, the RMO can't prove they met their duties

Fix: Specify exact oversight activities—monthly site visits, weekly reports, review of contracts over $X, etc.

Many RMO agreements have no indemnification clause, or only one-way indemnification favoring the contractor. This means:

• The RMO has no contractual right to recover from the contractor
• If the contractor causes a loss, the RMO bears it personally
• Defense costs aren't covered

Fix: Include mutual indemnification with each party covering claims arising from their own negligence, plus require the contractor to indemnify the RMO for construction defects.

If the RMO discovers the contractor is doing substandard work or violating CSLB rules, they need to be able to terminate immediately. Without clear termination rights:

• The RMO is stuck qualifying a bad contractor
• Continued association creates ongoing liability
• The RMO's license remains at risk

Fix: Include immediate termination rights for cause (including any CSLB violation, consumer complaint, or failure to maintain insurance), plus notice-based termination for convenience.