Did You Know CA Laws On License + Unlicensed Contractors

eagleandbaby

Did You Know That...

• California Business & Professions Code section 7031 sets forth the basic restrictions on an unlicensed contractor's right to collect compensation for work that requires a license. Unlicensed contractors cannot sue to collect compensation for the performance of any act or contract where a license is required, regardless of the merits of the lawsuit. Cal. B. & P. Code § 7031 (a). On the other hand, a person who utilizes the services of an unlicensed contractor can bring a lawsuit to recover all of the money paid to the unlicensed contractor for performance of any act or contract where a license is required. Cal. B. & P. Code § 7031(b). If security is taken to secure payment for the performance of any act or contract for which a license is required, an unlicensed contractor will be unable to foreclose on that security because the underlying security agreement will be deemed unenforceable. Cal. B. & P. Code § 7031( c ).
• California Business & Professions Code section 7028 prohibits contracting without a license. It is a misdemeanor for any person to engage in business or act in the capacity of a contractor within California without having a valid license. Cal. B. & P. Code § 7028(a). If there is a previous conviction for contracting without a license, the court will impose a fine of 20 percent of the aggregate sum of the cost of materials and labor furnished and the cost of completing the work to be performed or four thousand five hundred dollars ($4,500), whichever is greater, and the person shall be confined in a county jail for not less than 90 days, except in an unusual case where the interests of justice would be served by imposition of a lesser sentence or a fine. Cal. B. & P. Code § 7028 (b) (emphasis added).
• California Business & Professions Code section 7027.1 prohibits an unlicensed contractor from advertising the possession of a valid license. It is a misdemeanor for any person to advertise for work that requires a license if that person does not hold a valid license in the classification advertised, except that a licensed building or engineering contractor may advertise as a general contractor. Cal. B. & P. Code § 7027.1(a). A violation of section 7027.1 is punishable by a fine of not less than seven hundred dollars ($700) and not more than one thousand dollars ($1,000) in addition to any other punishment imposed. Cal. B. & P. Code § 7027.1 ( c ).
• California Business & Professions Code section 7027.3 prohibits any contractor from fraudulently using another contractor's valid license. Any person with intent to defraud, licensed or unlicensed, who willfully and intentionally uses a contractor's license number that does not correspond to the number on a currently valid contractor's license held by that person, is punishable by a maximum fine of ten thousand dollars ($10,000), or by imprisonment in state prison, or in county jail for not more than one year, or by both that fine and imprisonment. This is in addition to any other penalties that are available. Cal. B. & P. Code § 7027.3.
• California Business & Professions Code section 7028.15 prohibits unlicensed contractors from participating in public works. It is a misdemeanor for any person to submit a bid to a public agency in order to work as a contractor without being licensed, unless very specific exceptions apply. Cal. B. & P. Code 7028.15(a). If there is a previous conviction for bidding on public works without a license, the court will impose a fine of 20 percent of the aggregate sum of the cost of materials and labor furnished and the cost of completing the work to be performed or four thousand five hundred dollars ($4,500), whichever is greater, or imprisonment in the county jail for not less than 10 days nor more than six months, or both. Cal. B. & P. Code § 7028.15 (b).

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homemasters

Earl1350

Over the last year or so I have tried to use these rules to eliminate the unlicensed competition. Found that I (since I am licensed) am required to follow the rules but if you are unlicensed “there’s not much anyone can do”
So I will ask your opinion;
Given
You buy a light fixture for $1000.00
To install it do you need electrical licenses?

Given
You buy a double oven $2000.00
The company who sold you the double oven has it installed by “licensed contractor” and takes a prime contract)
The contractor/installer is not licensed
The contractor/installer hires another person who gets paid by the piece. (we will call this person the worker/installer
The worker/installer drives the first contractor/installers van, uses the contractors/installers tool follows the contractor/installers time schedule. In short does all the work for the contractor/installer.

Is the appliance store taking a prime contract?
Would the contractor/installer need to be licensed?
Is the worker/contractor a real contractor or an employee?
State of California rules…..

Ed the Roofer

Here is a good article about that topic and the legal decision to stiff a contractor who was using another company as their qualifier. (It went by another name, but I cant remember right now.) RMO. Responsible Managing Officer.

http://3oceansrealestate.com/blog/th...ntractors.html

Here is a short excerpt from the article:
Unlicensed contractors have the riskiest of occupations. That is, they risk the legal ability to collect compensation for work they perform, and more importantly, they risk the ability to keep the money they have been paid. Why is this you say? Well the California legislature has made a point to prevent unlicensed individuals from doing business in this state by not offering them any judicial help to recover compensation even if the consumers strategically were lying in wait to prey on the unlicensed individuals.

Ed

tnt specialty

Oh yeah.......

I moved from California to Colorado in 92', which has no contractor licensing.......

You can imagine my "business culture-shock" once I set about setting up shop.

This place is infested & over-run with the most unscrupulous/unethical bunch one could imagine. Colorado is a "buyer beware" market, and a breeding ground for the crooks, (jacklegs). It's darn near impossible for a truly legit outfit to prosper here.

Earl1350

Ed the Roofer

We all see the high profile news "stings" but try to get the CSLB to DO anything is impossible. If someone is smart enough to not pay the unlicensed I am all for it. The problem is only the HO can or will do anything about this problem. If you get caught by the CSLB they fine you 250.00 maybe and tell you to get licensed.
I was at a local home builders association a year ago where Karen Smiley our SWIFT enforcer told a story about a dumb (her word) guy who they caught 3 times in less than 4 months. Everyone laughs but why (given the CSLB regulations) is this guy on the street? The high profile stings dont show you what happens to these guys, in short very little and they are doing the same unlicensed attivities the next day.

As a company we are going back to the dark side. I just cant keep wasting time fighting this anymore. If the powers that be wont protect us why fight it?

I have let 4 employees go in the last 2 years because of unlicensed guys and the CSLB did an invstigation on guys who we supplied business cards for. They advertised electrical, decks, plumbing, drywall, ect. What the CSLB explained to us they did was called them and asked how much to change an outlet? how much to patch my drywall? ect. They ask only pricing on items they know would be less than 500.00 This is like asking an unlicensed roofer who has 20 employees re-roofing houses how much to fix 3 shingles on my roof? If less than 500.00 and then say they "must be following the rules". Not one of the people we turned in was arrested or fined. (which is want they told us).

The CSLB is a joke. There are always a few guys who will get caught but look on Creigs list under contractors do you think anyone is afraid of the CSLB?

Just gave up in the last week after hearing form the 3rd lawyer I spoke with. They said I am getting screwed but not much they can do about it. In short no money to be made..........

So just my last rant before I return to ananimity.........

Ed the Roofer

Then turn it around and use the law in your favor.



Advertise:

Earl1350

I really really like it

I think I'll put this in my customers hand out folders

You made me smile

Thanks

eagleandbaby

Earl,

Maybe I missed something but what are you sueing for or want a lawyer for and what are you going to give up?

Thanks for your comment it is always good to see how the laws work in real life.

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homemasters

Earl1350

Un-fair business practices

Disgorgement B&P 7031

False advertising

Class action to return monies to defrauded customers

Without going into long winded details the basic point is this.

I am a C-61 (Specialty contractor) D-34 pre-fabricated equipment contractor. (i.e. appliances)

We install appliances, built in types such as cook tops and ovens ranges big built in Sub-Zeros and many more. We cut to fit check wiring and clearances. We are NOT talking about a fridge you just plug in.

All big box stores that sell appliances also sell installation. The people they hire have what is known as a BEAR licenses. This stands for Bureau of Electronic and Appliances Repair. Repair being the operative word.

BEAR has given us a letter that says Installation is not part of a BEAR licenses and only the contractor’s board has jurisdiction over installation, a C-61, D-34 licenses.

What happens is this
You go to Sears
You buy a double oven
Sears sells you an installation of that appliance and writes a contract for the install. (Taking a prime contract)
They then hire someone (usually with a BEAR certificate) to do the actual install.
Sears collects the money and pays the sub a fee
If the regulation of all labor and material over 500.00 requires a licenses applies 99% of appliance installations would require contractor’s licenses to install.

Before you think this is small change we did 750K 3 years ago and climbing. We now do about 250K. Down about 66 %. We do not work for big box stores just the smaller appliances dealers.

Since Sears and other big box stores take 30% of what is charged for an installation you have to work cheep to make any money.

To work cheep the guy who does the physical install works on per piece rate. No need for the company Sears contracts with to pay taxes on the second guy who does the physical installation as an employee. According to the Dept. of Labor if you have “control” of how a person does a job or when or if you supply the tools, the worker is not a contractor he is an employee.
This is important because if you pay workers comp, matching taxes ect. the cost to me is about 30% (maybe a little less). So by not paying taxes on employees you can work cheep and the big box store keeps the 30%

The contractor’s board call the unlicensed guys and asked how much to install a dishwasher, answer 125.00 then they exclude the materials (like the dishwasher) and say they are following the rules. This is a simplified version of what is going on in many different trades by the big box stores.

We get calls all year about problems unlicensed guys cause and HO get mad at us because we tell them what it takes to upgrade wiring and fix their cabinets. (I also hold an electrical and general license). My workers make 20. to 30. per hour + bonus and we pay half their medical. We are high risk arena dealing with electrical requirements, gas and water. We make a mistake we pay they make a mistake the sub disappears and the big box stores pays off the HO. Then the big box store moves on to the next unlicensed guy.

That’s it in a nut shell. I have been fighting this for a year or so but this last week I have given up. I read the rules and regulations and it says what it says and no attorney has showed me where I am wrong just kind of vague “not much you can do” comments.

Consider how much money would be returned to customers of these stores if you could get a ruling that they are hiring unlicensed contractors. Tens of millions. The problem is some attorney has to understand the problem and the CSLB would need to back you up.

Ed the Roofer

Okay Earl,

You liked the script.

Now to really make it functional, you need to describe in clear understandable words what the difference is to the consumer, between the properly cerified and licensed contractor and the one who has the limited certification.

10-20-30-or even 50 testimonials about the inapproriate methods of installations done from previously scourned customers would be invaluable.

If you can not get the actual testimonials, make up a list from your phone and service call records, who had what type of problem and why it occurred.

What is it that you, being a properly certified and properly licensed installer can do that would put them at ease. You need to hone in on their "Peace Of Mind" value. Send out an informative "Help" guide to all of your previous customers and tell them to pass it on to a friend.

Get that news letter on your website and allow others to suscribe to it.

Send copies to the local newspapers and to the local representatives in the California legislature. Some may fall on deaf ears and blind eyes, but dsome will stick.

Ed

License Guru

Interesting thread. Nothing posted here in a while, but I'd thought I'd toss in my 2 cents.

Having worked Enforcement for the CSLB HQ office I have some experience with unlicensed activity. I dealt mainly with licensees, but I know several of the SWIFT people. They bust their humps going after the non licensed guys, and they do put people in cuffs!!

Often the bad guys they are taking off the streets (as eluded to above) are guys with warrants or criminal records, etc. Their cuffed and off to jail they go.

Now... if I had a choice... I would want them out there putting away those guys as their first priority.

As mentioned above "why don't they get their license"?? Because they have criminal backgrounds that will most likely prevent them from obtaining the license. So if it wasn't for SWIFT?? Those types would be walking thru Bob and Betty's house right now.

Regarding fines.... the fine amounts vary. Why do they get fined and fined again and again?? I'll tell you... the courts do not have room for accusations with the DA's office for a guy who bid on a $2000 job with no license. Is this the CSLB's fault?? No way. I can tell you FIRST HAND that it was very frustrating not to be able to file as many accusations as we wanted to.

The CSLB has to build a case, show a pattern, of the guy who keeps getting caught. With that track record, the DA is more likely to take the case.

Again... you can bad mouth the CSLB... I have as a former employee but after 5+ years I earned the right... but they are doing everything they can to go after the unlicensed guy.

Take the Lake Tahoe or San Diego fires!!! The CSLB was on the spot nailing the unlicensed unscrupulous slag that rose from the ashes to take peoples money.

Ed the Roofer

LG,

Would my article above have been correct, barring prosecution from the equation, but just on its merits.

Can a home owner legally not pay for the work done by an unlicensed contractor?

What documentation would a legitimate contractor need to gather to assist in pursuing and aprehanding the unlicensed contractors?

Other points that you could suggest would be helpful as well.

Ed

License Guru

Ed,

"Legally" is a broad term. But the reality is, even if the contractor is not licensed he is still owed monies for the work performed.

Now there are plenty of other factors that could come into play, but I have never heard of an "unlicensed" contractor having to re-pay all monies he's received per his contract. The HO did enter into a binding contract for services and assumably made the progress payments as described in the contract.

Then again, is there a contract?

The HO is not completely without fault. It is their responsibility to do a reasonable background check on who they hire prior to entering into a contract.

"What documentation would a legitimate contractor need to gather to assist in pursuing and aprehanding the unlicensed contractors?"

That's a tricky one. The CSLB would have to catch the non-licensed person on the job site to take any immediate action. If you had documents in hand, about the only thing you could do is file a complaint with the CSLB. Ok, ok, stop laughing! I know what you are thinking. What a Joke! Right? Unfortunately that is the only course of action available to you.

Ponce

Wrong all. We are currently involved in litigation whereby a homeowner that we did work for is sueing us for the full amount of the project, $230,000, because they found an attorney who is using B&P 703.1 and a previous state case (MW Erectors). The MW Erectors case involved a contractor who started a project whereby is license was not approved until three weeks into the job. Obviously there were some problems with the job and the client sued. The courts found MW Erectors guilty of contracting without a license and order them to pay back ALL money, even though they were only without a license for three weeks out of 15.

In the case we are being sued for, we currently hold three classifications (C27, C53, C8) and contracted to remodel a homeowner's front and back yards including existing pool. Homeowner wanted a non-watertight deck built onto the back of their home. This deck was stucco with footings and columns with a tile floor and was properly engineered and permited. Let me preface that in all depositions and testimony the homeowner has stated they are NOT suing for any defects. The entire projects is perfect. We subcontracted out the deck to a B-General. What they are suing for is: We were not properly licensed to CONTRACT TO BUILD this deck. Even though a B-General built it, and it was signed off and there is nothing wrong with it. The homeowner's attorney is using the above case, MW Erectors, and B &P 703.1 to take this to the max and sue for the entire amount of the job, and they truly believe they will win.

Every expert I have spoken to has stated that this can't be.....How can they do this? If they win, this will change everything that contractors do in the state. That all contractors will be scared to death to contract any little thing they do! Most of our competitors are outraged at this. Most have asked, "If there is nothing wrong with the job, why do these people want all of their money back? That's stealing."

So, my friends this is happening, and we go to trial in around a month. It's cost me over $40,000 in attorney fees to defend myself, and we haven't even started trial, and this thing has been going on for two years. Luckily we have a retired board member from the CSLB coming to testify in our behalf that 703.1 B was NOT INTENDED for this type of suit. It was intended for completely unlicensed contractors.

So beware of what you contract to build even if you sub it out. Be careful of all the GREY areas the CSLB states under these classifications. Appreciate any comments.

Chris Johnson

And because of laws like this I went a got a B license, no intention of using it, but if I end up in a grey area I figure I am covered

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Chris

J87513

the answer is progress payments.

i know a guy who said "now that I am licensed I can't find any work". He worked for about 5 years on concrete jobs. He bid a few 30k dollar projects. Got burnt a couple of times but never anything too bad. he said his first job he was looking over his should to make sure that the "License Police" didn't come by and arrest him. he was so embarassed when he told me that.

he got away without a license for 5 years in ca working full time with a couple illegal employees if he needed them.

reality and cslb.ca.gov are two different things. they have on their website a "Most Wanted List" for people contracting without a license. I don't think I need to elaborate on that

bconley

Bump I can't post links yet

Taihe

The new guy here. I agree and disagree with this whole thread. I have been working on kitchen and bath remodels general home repair and even handyman type items for 10+ years and I don't yet have a contractors license. Many of my clients for smaller jobs say that a contractor will not even give them the time of day due to lack of large profit and yet the guys doing small jobs are still required to have a license. In order to legally perform a kitchen remodel I am required to have a "B" license and pay all of the overhead associated with it. In order to fix a fence, patch some drywall and repair a couple of broken floor tiles I need a "B" contractors license and... The point is I have many years of experience and am extremely scrupulous but it is not always easy to obtain a license. I have no criminal background, no complaints or lawsuits but am afraid I have no way to prove experience in the business because I am self employed. Additionally I am shocked that many of the contractors I have met are given a license. Just my pointless rant. By the way the above is bad advice to give your clients because you are setting them up for failure. Entering into a contract, even with an unlicensed contractor, with the intention of not paying for the services constitutes fraud!

JumboJack

If you live in California and you do jobs over 500.00 total labor and materials,you need a license.If you don't have one you are breaking the law.
How come I have to pay "all the overhead associated with it" but you don't.

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in texas with framing and cornish people will do it for 3.00 a foot. What do yall think about that? Just laber

Taihe

You must have misunderstood my point. I have no problem with getting a contractors license. I will pay for it have clients whom will vouch for my professionalism and great work. However, I am in a catch 22 regarding experience and that makes it difficult. I hold a business license and have general liability as a finish carpenter for some of the contracts I receive as a sub. The point is there are unsavory characters with licenses out there when some of us are given a hard time over minor details.