If you project is $500 or more (combined labor and materials) the contractor must hold a current, valid license. Specifically, from the California State Licensing Board. Using a licensed contractor means that they’ve met the requirements for that line of work as required.
Risks of Hiring Unlicensed Contractors
The fact is that working on large projects without a license is illegal in California. However, for the property owner, the financial liability risks are of much greater concern. Hiring an unlicensed contractor could cost you big. If the work does not meet local building codes. The contractor doesn’t pull the necessary permits (which an unlicensed contractor cannot do). You will be responsible for making the repairs to meet code.
But, the biggest risk involved in hiring unlicensed contractors comes down to liability.
If you don’t hire a licensed contractor, they could be deemed an employee? What does that mean?
They could be eligible for employee benefits (think sick pay, worker’s compensation) costing you big money. If they are determined to be employees, it is actually your responsibility to provide them with a safe workplace. You should know you would have to cover them should they be injured.
An unlicensed contractor can sue you if they sustain an injury while working on your property. You could be on the hook for expensive medical bills, legal fees etc. Not to mention, their lost wages for as long as their injury holds them out of work. These financial damages can amount to thousands of dollars. Typically, far more than the initial savings you thought you were getting by using an unlicensed contractor.
We assure they have workers’ compensation for any employees they hire. If your contractor is unlicensed, they and anyone else that work at your property are all considered your employees. This makes them all your responsibility to insure.
When the work is over $500, you, are responsible for assuring licensed contractors are hired. To be clear- we properly vet these contractors before we allow them on your property.
Your property insurance will not cover you in these cases, leaving you vulnerable to have to pay out of pocket. Let’s say you hire a licensed contractor. If their subcontractors is injured on the job. You will likely be protected by the worker’s compensation insurance.
The best thing to do to protect yourself against this potentially financially crippling situation. Hire a contractor who holds the appropriate license to do the work you need to be performed.