What Is A Contractor?
A “contractor” is generally defined by the California Business and Professions code as any person who offers or undertakes to construct, alter, repair any building. The definition also includes merely offering to have the capacity to do the job. “Person” includes an organization such as a partnership or a corporation.
“A” and ”B” Contractors
A general contractor is someone licensed to do two or more trades on the same job. For example, a small remodel would requiring carpentry and electrical could be performed by someone with a general contractor’s license. This is also called a “B” license. A subcontractor is someone licensed to do one trade only. An plumbing contractor can only perform plumbing. A roofer only roofing, and so on. A subcontractor’s license is called a “C” license.
General Engineering Contractor – The “A” License
There is also an “A” contractors license for a general engineering contractor. Don’t confuse an engineering contractor with an engineer. An “A” license allows a person to build and work on streets, harbors, dams, sewage disposal plants, bridges, and other unusual projects such as chemical plants, refineries, and power plants.
Acting as a Contractor Requires a License
California law wants everyone who acts as a contractor to be licensed unless the job is $500 or less, including both labor and materials. Acting as a contractor without a license is a misdemeanor. More importantly, for civil law (which is all I handle) an unlicensed contractor is not entitled to be paid for the work- neither the labor or the materials. The unlicensed contractor is also not entitled to record a mechanics’ lien.
Unlicensed Work Carries a Penalty
Generally, the harshness of the penalty prevents people from contracting without a license. The issue usually arises when the deal was somewhat unusual. For example, a work trade, a tenant making improvements, or a deal between “friends” or family members. The unlicensed worker’s attorney will generally raise one of two arguments to try and get the worker paid. The first argument is the employee exception to license law. The second is the construction manager exception.
The Employee Exception
A bona fide employee of the owner is allowed to do work that would otherwise require a license. Owners are allowed to hire anyone they want to work on their property as their employee. Typically, the only cases that make it to lawyers are ones in which the parties never formally discussed their legal relationship. There was usually just an oral agreement and work done. It is up to the contractor’s attorney to show facts proving there was an employee relationship.
Proving an employee relationship depends on a number of factors. These include the following:
- How was the person going to be paid? Was it hourly? Was it a flat fee for the whole job?
- Was the owner’s occupation the same kind of work that the “employee” was performing?
- Who supplied the tools for the job?
- How much investment did the “employee” put into the job? Was he paying for the materials and hiring others to work also?
- Did the “employee” take a risk in the investment? Was profit or loss going to depend on the “employee’s” skills in managing the job?
- How much skill was required to get the job done?
- How much supervision by the owner occurred while the job was being done?
- Was the job one that normally is done without supervision or with supervision of someone experienced in that kind of work?
The worker’s lawyer must submit evidence to the court on each of these factors and the court will determine each case on an individual basis. The owner’s lawyer will, of course, offer evidence that supports the argument that a license was required.
Construction Manager Exception
The second argument to raise by a person without a license is the “construction manager” exception. Although it would seem that a construction manager is a “consultant to owner,” which is included in the definition of a contractor, a construction manager has been held by the courts as a limited exception to the license requirement.
In order to meet the exception a construction manager must not have performed any of the work. He cannot hire or contract with anyone else to perform the work either, not even a licensed contractor. A construction manager may only help to facilitate the relationship between the owner and the licensed contractor. It may also help if the owner hires a licensed contractor to be responsible for performance of all the work. However, this may not be necessary as the owner could have the work all performed “in house” by an employee. As long as the construction manager has no responsibility or authority to perform any construction work on the project it is permissible to do certain things without a license. These include:
- Prioritizing the work.
- Offering advice on the project strategy.
- Coordinate and direct design professionals.
- To obtain building permits- except for certain permits that must be obtained by contractors.
- Provide opinions as to the budget and construction costs.
- Provide cost performance evaluations.
- Prepare a project development schedule.
- Hold construction meetings.
- To assist the contractor in developing bidders’ interest in the project and to assist in the bidding process.
- To conduce on-site inspections and reviews during the construction.
- To provide reports and summaries of the work and to document change orders.
- To review inspection reports.
If the claimant can show that no construction work was done then he may qualify as a construction manager and be entitled to be paid.
Conclusion
A property owner generally does not bring a claim against an unlicensed contractor unless the work is defective. If you are an unlicensed contractor, be warned that you are in a bad position. If you are not going to get a license I recommend that you keep a great relationship with the owners and make sure there are no disputes as to the work. Otherwise, you may need an attorney to try and find an exception to the license law. This is a general article and there may be other exceptions which will apply in your case.