Licensing

Contractor Licensing Case Limits Disgorgement Remedy in CA

Contractors performing work in California are required to be licensed by the California State License Board (“CSLB”).  Cal. Bus. & Prof. Code §7065.  Except for sole proprietors, contractors are typically licensed through “qualifiers,” i.e., officers or employees who take a licensing exam and meet other requirements to become licensed on behalf of the contractor’s company.  Contractors who perform work in California without being properly licensed are subject to a world of hurt, including civil and criminal penalties (see, e.g., Cal. Bus. & Prof. Code §§ 7028, 7028.6, 7028.7, 7117, and Cal. Labor Code §§ 1020-1022), and the inability to maintain a lawsuit to recover compensation for their work.  Cal. Bus & Prof. Code § 7031(a); Hydra Tech Systems Ltd. v. Oasis Water Park, 52 Cal.3rd 988 (1991).

But arguably the worst ramification of not being property licensed is that established in Business & Professions Code Section 7031(b), which provides that any person who uses the services of an unlicensed contractor may bring an action for the return of all compensation paid for the performance of the work, commonly known as “disgorgement.”  This remedy is particularly harsh (often described as “draconian”) because it makes no allowance for the fact that an unlicensed contractor will likely have already paid out the bulk of its compensation to its subcontractors, suppliers and vendors, but nevertheless can be ordered to disgorge all compensation.

Given the complexity of California’s contractor license law, the disgorgement penalty threatens not just contractors who willfully evade licensing, but also those who inadvertently fail to keep their license current, those who are improperly licensed for the specific work they are performing, and those who do not meet particular underlying licensing requirements, e.g., failure to maintain workers compensation insurance unless truly exempt, and (arguably) failure

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Importance Of Licensing, Bonding, And Insurance For Contractors and Homeowners

If you sign a contract with a contractor who is not licensed, you are not going to break a law, but you are going to take a big risk. At times, shoddy workmanship may cause a good deal of loss. Therefore, many states in the USA spend a significant amount of resources in order to catch and punish unlicensed contractors. Read on to find out more.

There are entities offering counsel to licensed as well as unlicensed contractors that face fines and legal charges in relation to license violations. Moreover, they point out why the DBPR and CILB consider surety bonds, licensing and insurance a very important aspect of the industry of construction on the whole.

LICENSING

The contractor's licenses are under the regulation of the DBPR and CILB in order to make sure that each individual that gets certificate meets the set requirements, such as financial responsibility, experience in the field, clean criminal record, and insurance coverage based on the type of license.

Aside from this, it's important to keep in mind that licensed pros can be held responsible if they don't complete the work or complaints have been registered against them. Therefore, the pros try their level best to complete the work in time in order to avoid permanent license revocation. So, for each professional, it's very important to meet the deadlines.

SURETY BONDS

In each construction contract, it's mentioned that the project will be completed within the given time. If the deadline is not met, problems can occur for the contractor. This is where a surety bond comes to rescue the homeowners. In unforeseen circumstances, a bonded status offers protection to business owners, but it's not required if you are based in Florida. However, it does matter if the credit score of the contractor is under 660. …

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