What Does a Valid Contractor’s License Mean?

Any building contractor in California should have a valid license – but what exactly does this entail? Photo: Legacy Construction, Inc. ©2019

In California, anyone offering home improvement services must be licensed if the project will entail at least $500 worth of work from start to finish. The Contractors State License Board (CSLB) issues contractor licenses, enforces contracting laws and resolves disputes related to contractors working in California. Here are some quick facts:

• All licensed contractors are bonded.
• Contractors with employees and all roofing contractors are legally required to carry workers’ compensation insurance.
• Contractors are not legally required to carry commercial general liability (CGL) insurance, although many do. If this is important to you, you may verify in advance.
• A violation of contractor law doesn’t necessarily impact the contractor’s license status.
• The licensee is the person listed as the RMO or RME on the license. The RMO/E is responsible for the contracting firm’s daily operations.

License Classifications: Engineers, General Contractors and Specialty Contractors

Engineers (A license)

Class A licensees contract for large, fixed works projects that require specialized engineering knowledge. Most home improvement projects are not on this scale.

General contractors (B license)

Class B contractors are generalists who undertake and oversee projects with many moving parts. They build homes and remodel kitchens and bathrooms. If your project requires the use of carpentry and/or multiple specialty trades within the structure, you’ll want to hire a general contractor. A general contractor may perform all of the work or subcontract portions to specialty contractors.

It’s important to keep in mind that even if a general contractor is permitted to perform all or parts of a larger project involving multiple trades in a large contract, they are prohibited from accepting contracts for single specialty trade work unless one of the following is true: 1) the single trade is carpentry/framing, 2) their license includes the necessary specialty trade classification or 3) they will be subcontracting the work to an appropriate specialty contractor. The rationale for this may be better explained by a CSLB historian.

Specialty contractors (C/D licenses)

Some examples of specialty contractor industries are roofing, HVAC, plumbing, electrical, drywall, concrete, painting, fencing, pool installation, landscaping and tree work. These are the contractors you call when something breaks and needs to be repaired or replaced. It’s against the law for anyone to advertise and contract for single trades unless they hold the appropriate specialty license. For example, a general contractor may not advertise for specialty category work like HVAC, plumbing or electrical without also holding the appropriate specialty license.

Landscape contractors can be thought of as general contractors for the grounds surrounding a structure. A licensed landscape contractor may contract for outdoor improvements that require multiple specialty trades to complete. 

Subcontractors

Any subcontractor hired by your general contractor must be licensed and appropriately insured. If the subcontractor has employees, they must carry workers’ compensation insurance to cover medical costs should an employee sustain injuries on the job. Without workers’ compensation insurance, the homeowner may be asked to pay the bills. Many reputable general contractors have long-standing relationships with their subcontractors—they trust them to do good work on time. As the homeowner, it’s reasonable to request proof of the subcontractor’s CSLB license and, if a crew will be on your property, proof of workers’ compensation insurance, which employers are legally mandated to carry.

Payment

This rarely comes up, but one of the mysteries of contracting law is the right of a subcontractor to place a “mechanic’s lien” on your property if they aren’t paid by the general contractor, even if you paid for that portion of the job. In order to do so, the subcontractor must first provide you with a document called the California 20-Day Preliminary Notice. This notice isn’t a lien—it’s simply a formality to notify you of the presence of the subcontractor on your project, the subcontractor’s rights and what to do to protect yourself against mechanic’s liens. For more information, please visit the CSLB’s website.

Active and Valid License

When you do a license check, you’ll want to ensure the contractor’s license is active and valid. Contractors are prohibited from accepting new or even complete existing contracts if their licenses have been suspended or revoked.

Complaint Disclosure

Having an active, valid license doesn’t mean the contractor hasn’t received complaints from consumers, suppliers and subcontractors. A contractor may have an active, valid license and their license page may also include a complaint disclosure:

• Violations: These are considered minor or not egregious. The CSLB may put the contractor on notice. Violations are disclosed for a period of time on the contractor’s license page.
• Citations: These are more serious violations that are accompanied by an order to correct a project, make restitution to an injured party and pay a civil penalty up to $5,000. Contractors may contest citations before a judge.
• Accusations: These are considered “flagrant” violations of law that may result in license suspension or revocation after due process. Accusations are filed with the Attorney General. A contractor charged with an accusation is innocent until proven guilty. The contractor may settle in an informal settlement conference or defend him/herself at a hearing before an administrative law judge. Accusations may result in license suspension, probation, stay of suspension/revocation, revocation for a period of time, dismissal with no penalties, injunction or criminal charges.

Why hire a Diamond Certified contractor?

Diamond Certified contractors have valid CSLB licenses, are appropriately licensed for the work they offer in Diamond Certified media, and carry CGL insurance and workers’ compensation insurance (if they have employees). All Diamond Certified service providers are backed by the Diamond Certified Performance Guarantee for up to six months from the contract date.

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