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The Construction Connection - California Contractor News, Notes & Legislation

What Are The Penalties For Contracting Without A License In California?

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Contractors entertaining the idea of illegally operating without a license in California should think twice as it’s perhaps the worst occupational decision one can make for several reasons. In addition to stiff criminal & financial penalties, unlicensed contractors also have no legal right to enforce contracts they establish with customers. While illegally contracting in California is certainly a high risk activity, not all construction projects require a contractor to be licensed. When is a contractor’s license required in California? According to state law, it is illegal for an unlicensed contractor to advertise as being licensed or contract for work exceeding $500 in value for labor and materials. However, there are several exemptions to the $500 threshold rule.

 

 

Criminal & Financial Penalties

 

Many unlicensed contractors are unaware that operating without a license in California is a misdemeanor that can result in jail terms of up to 6 months and fines that can run upwards of $15,000. The penalties are much stiffer for repeat offenders or those caught contracting illegally for work that stems from a federal or state disaster. Repeat offenders will also earn the notorious distinction of finding themselves on the CSLB’s infamous most wanted list.

 

California Business and Professions Code 7028 (a)

 

Unlicensed Contractor’s Have No Legal Recourse To Enforce Work Contracts

 

Unlicensed contractors may be surprised to discover they cannot legally recover any financial damages they may have incurred as part of a contract for work that requires a license, in which a customer did not hold up their end of the deal California business and professions code 7031. In addition, any person who hires an illegal contractor to perform work that requires a license can bring a suit against the contractor for all payments made and the unlicensed contractor will have no legal recourse. In layman terms, no contract between an unlicensed contractor and a customer involving work that requires a license is legally enforceable from the perspective of the contractor, however, the customer retains the right to sue the contractor for any and all payments made EVEN if all work was performed according to contract.

 

Conclusion

 

Do not contract illegally for construction work in California. While many unlicensed contractors are undoubtedly good people just trying to provide for their families, the ratio of risk vs. reward for this activity is poor and getting caught is inevitable the longer one chooses to continue illegal operations. The CSLB actively performs stings throughout the state that lead to hundreds of arrests annually and nobody wants the added embarrassment of being apprehended in their local community, often in the presence of the media. Complying with CSLB license and bonding regulations while tedious and financially cumbersome at times, is a much better alternative than fines, lawsuits and jail time. Becoming a licensed contractor also adds an element of trust that potential customers recognize and actively seek when hiring for construction projects.

 

By Jeremy Schaedler

Disclaimer

 

 

About the Author:

Shortly after graduating from the University of California, Los Angeles with a bachelors degree in economics, Jeremy founded Surety First Insurance Services (formerly Schaedler Insurance), a Northern California based insurance agency specializing in surety bonds for California construction professionals. Jeremy is happily married and the proud father of two young boys. In his free time, he enjoys camping, fishing and shooting the breeze with friends and family.

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