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Things Just Got Tougher For Unlicensed Contractors in California
Individuals contracting in California without a contractors license as a first offense face up to six (6) months in jail or a fine of up to $5,000 due to new legislation that took affect on January 1, 2010. This is a substantial increase from the misdemeanor offense with no set jail time or penalties prior to 2010.

Getting caught as a second-time offender will require the individual to pay twenty-percent (20%) of the total contract price, or $5,000, whichever is greater. This also includes a stay of at least ninety (90) days in county jail.

Three time repeat offenders get ninety (90) days to one (1) year in a county jail and will be fined from $5,000 and $10,000, or twenty-percent (20%) of the contract price.
Anyone who utilizes the services of an unlicensed contractor is considered a victim and is entitled to disgorgement of all monies paid to the unlicensed contractor, regardless of whether they knew the contractor was unlicensed. Consumer victims of unlicensed contractors may also get reimbursed for their attorney’s fees spent going after the unlicensed contractor under current statute.

California state law mandates that all construction jobs costing $500 or more for labor and materials must be conducted by a validly licensed contractor. Receiving a contractor’s license requires contractors to pass several tests and get a background check from the California Department of Justice. Typically, individuals with offenses, infractions, or citations substantially related to contracting or contracting related businesses are not issued licenses. There are currently over 300,000 licensed contractors in California in varying specialty trades.

Because unlicensed contractors don't carry worker's compensation insurance, commercial general liability insurance, or any type of bonds, they almost always are the low bidder on a job. However, there is a high price to a low bid. If a worker (hired by the unlicensed contractor) is injured on the job, the homeowner or property owner could be liable and cause unexpected increased insurance premiums. Without commercial general liability insurance in place problems, defects, and shoddy construction which results in property damage or personal injury will not be covered, and the homeowner or property owner will be stuck with the damage and no one to pay for it.

The Bottom Line

If you are a contractor make sure your license is in good standing. Make sure you thoroughly check that your worker's compensation insurance is up to date and that your bonds have not expired. If you are a corporate entity make sure all of your current taxes and fees have been paid. If you receive any inquiries from the Contractor's State Licensing Board make sure you respond timely, accurately, and truthfully. These minimal checks will help you keep out of licensing trouble.

David S. Roberson, Esq.
San Jose, CA

[email protected]
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