Penalties for Operating Without a Proper California Contractor License
In 1929, the Contractors State License Board was established in the state of California. The CSLB was meant to increase regulation of construction standards in order to protect consumers. Individuals who do business without a state-issued California contractor license are creating an underground economy that puts consumers at risk, belittles the reputation of California state construction contractors, and creates a parallel and unregulated financial structure. The CSLB has an enforcement wing called the Statewide Investigative Fraud Team (SWIFT). SWIFT executes undercover sting and construction site sweep operations weekly throughout the state. This helps them determine if there are any violations of contracting laws and other regulations.
Individuals who are considering doing contract work without the required state license should reconsider this idea. Not only are there severe fines and jail sentences associated with this illegal activity, there is no legal recourse for these contractors to force a customer to pay them.
When is a Contractor’s License Required?
According to state law, a California contractor license is required for work exceeding $500 in value. This figure includes labor and materials. A single project may not be broken down into several smaller projects that are all valued at less than $500. There are several exemptions to this $500 rule, such as:
- Public personnel working on public projects
- Officers of court working within the scope of their office
- Oil and gas operations when done by the owner or lessee of the property
- Security alarm company operator
To Whom are Licenses Issued
Licenses can be issued to many entities, including:
- Joint ventures
The California contractor license is owned by whatever person or group to whom it is issued. Licenses are not issued to limited liability companies (LLC’s). Licenses are not typically considered a part of a business, except in the case of corporations. This means that if a partnership or small business is purchased by another entity, the license issued to that enterprise does not transfer.
In the case of corporations, as long as the corporation registration number does not change, the same contractors license may be used so long as it is active and valid. The qualified individual directly tied to the license does not need to be the same person, though there does need to be someone to fill that role through qualifying experience and examination records.
Operating Without a License
Many California contractors don’t understand the penalties of working without a state-issued license. If caught, an unlicensed contractor could face misdemeanor charges, requiring them to appear before a Superior Court. Penalties may include:
- Up to 6 months in jail
- A fine of up to $5,000
- Administrative fines of up to $15,000
If the same individual is caught continuing to operate without a license, the penalties become more severe with each offense. A second offense can result in:
- A mandatory 90 day jail sentence
- A fine of 20% the contract price or $5,000
Felony Misuse of Licensure
Anyone who is caught illegally using another individual’s California contractor license or who misleads potential customers into thinking he or she is a licensed contractor is guilty of a felony offense, possibly resulting in a state prison sentence.
Anyone who works as a contractor in a state or federal natural disaster area without an active state contractor license may face felony charges, possibly resulting in a state prison sentence.
Customers who work with a contractor who does not have a state license are not legally obligated to pay for this contract work, according to California Business and Professions Code 7031. Additionally, customers who have hired an illegal contractor to perform work that requires a state-issued license may bring a lawsuit against that contractor for all payments made. The contractor operating illegally will have no legal recourse. Essentially, no contract between a contractor who does not have a license and a customer that involves work that requires a license is legitimate in the eyes of the law. Even if the contractor does a great job, he or she may lose their pay or may be sued for any payments made.
Getting a California Contractor’s License
Getting a state-issued California contractor license is a very affordable way to ensure you are operating a legitimate operation that the law will support and defend. Having a contractor license indicates you are registered with and sanctioned by the state, ensuring your customers that you are a legitimate worker. Be sure not to get stuck doing work without one!
Get a California Contractor License the Right Way
A1 Contractor Services, LLC is the premier state contractors license assistance company in California. With over 43 different types of contractor classifications in California, it’s important you get the proper California contractor license for your business. Give us a call at (916) 394-1601 today.