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What Are the Penalties for Unlicensed Contractors?

Contractor Tips , Posted by Nicole Zemaitis on

What Are the Penalties for Unlicensed Contractors?

It is a requirement across all the states of America for contractors to be licensed within the construction industry. 

Licensing is organized by the Contractors State License Board (CSLB), established for nearly a century to raise standards and protect consumers.

Operating without a license can give rise to a range of negative consequences for an individual contractor. The exact implications vary from state to state and include possible imprisonment and substantial fines.

A consumer can take action against an unlicensed contractor, including legal measures to recover monies already paid. A consumer may also be relieved of their contractual obligation to make any payments under a contract with an unlicensed operator.

The Legal Consequences of Contracting Without a License

The CSLB is very proactive in investigating whether those within the construction industry adequately follow licensing regulations.

Spot checks are made regularly on building sites to check for licensing status. Failure to hold the appropriate license is a misdemeanor and carries harsh consequences.

Penalties will depend on which state you are in and whether this is a first or subsequent offense.

There are a few possible defenses to the charge of operating as a contractor without a license. These usually prove that you were not working as a contractor within the definition of the code or that you were an employee for someone else.

There is also a defense of casual or minor work for jobs valued at less than $500; this amount may be higher in other states. This is the so-called ‘handyman’ exemption, but the courts are wise to contractors who try to hide behind this.

Defenses only tend to succeed with input from an experienced attorney. Attorney support should be sought at the earliest possible opportunity to help mount a clear rejection of a charge of unlicensed operating if you have genuine grounds.

Unlicensed operators at best produce shoddy workmanship, which represents poor value for money and, at worst, actually put people’s lives at risk through defective and unsafe construction.

Jail Time

There is a potential sentence of up to six months in jail for those operating without a license.

Financial penalties

In California, the California Business and Professions Code 7028 BP details that it is an offense to operate as a contractor without a license in California.

Courts can impose a fine of up to $5,000 on unlicensed contractors as an alternative to jail or in addition to a prison term. Other administrative fines can range from $200 to $15,000 – these vary from state to state. 

If the culprit continues to operate in the construction industry, the penalties will become even more punitive. In California, upon a second offense, there is a mandatory 90-day prison term and a fine of $5,000 or 20% of the contract price, whichever is greater.

An unlicensed contractor also risks personal financial loss if the customer discovers his status. Clients are not legally required to honor payments under a contract made with an unlicensed contractor, plus they can take the contractor to court to recover monies they have already paid to him.

Other remedies may be available to a consumer who has been the victim of an unlicensed contractor, depending on the state.

Criminal sanctions

Criminal sanctions vary depending upon which state you are in. The classification of the crime will dictate the legal consequences in terms of any fine or jail sentence.

In Florida, for example, unlicensed contracting is a serious criminal offense and is charged as a first-degree misdemeanor. 

However, suppose the contractor has been previously convicted of operating without a license. In that case, the offense increases in status to a third-degree felony which can carry a term of up to five years in prison and a $5,000 fine.

Felony charges may be brought against an unlicensed contractor who uses another contractor’s license or tries to pass themselves off as licensed. Felony charges can result in imprisonment.

This misrepresentation is an offense known as a ‘wobbler’, which means the prosecutor has the right to decide whether to charge the crime as a misdemeanor or a felony.

Court-Ordered restitution

Suppose the consumer alleges that an unlicensed contractor has performed sub-standard work or used sub-standard materials and has suffered loss as a result. In that case, the contractor may be ordered to compensate the victim via a restitution award.

Restitution awards can run into tens of thousands of dollars.

Conclusion

Getting properly licensed not only protects you as an individual but also speaks volumes about the integrity and legitimacy of your business. Not all contracting work requires a license, so it is essential to take professional and expert advice to avoid the pitfalls of acting as an unlicensed contractor, which may be genuinely unintentional.

Contractor Training Center can provide advice and guidance about successfully navigating the process of applying for a license and supporting the process of registration. We have resources to enhance your journey to a recognized qualification and correct licensing, all of which go hand in hand with a profitable and legitimate business enterprise. 

Book a Start-Up Consultation with our expert licensing specialists to help you get started in earning your contractor’s license!