Do not pass Go. Do not collect $200.
Anyone who has ever played Monopoly is familiar with those two sentences, which mean: You’ve been caught. There is no appeal. You are not wiggling out this time. Accept your punishment.
While Monopoly is considered primarily a game of chance, with zero consequences in the real world, contracting without a license is not so benign, as “Ricky” discovers in today’s story.
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Ricky was employed by “Antonio” in his electrical and general contracting business, hired right out of high school as an apprentice. “He is a very personable young man,” Antonio said.
They worked well together for years. “My long-term plans were to move out of state,” Antonio said. “Looking forward to the time that Ricky would go out on his own, I spent a great deal of time helping prepare him to run his own business, getting him enrolled in an electrician-training school that led to obtaining his license. I stressed the importance of having liability and workers’ compensation insurance for employees, deducting taxes and Social Security, how to write a contract that complies with state law and to never take on a job that you are not licensed for.”
To reinforce what Antonio had told Ricky, we set up a Zoom meeting with him in which Antonio and I would go over the same important legal requirements and the serious consequences of violating the law. Before Ricky joined the session, though, Antonio admitted that he was worried: “While Ricky does excellent work, I have a feeling that he is in too much of a hurry to make money, and that can lead to bad things.”
General contracting by Ricky
Shortly after Antonio retired, Ricky opened his own shop. However, being licensed only as an electrician did not stop him from presenting himself as a general contractor. He ran ads in newspapers and online, falsely claiming to be fully licensed as a general contractor, bonded and insured. He claimed his employees were covered by workers’ compensation insurance and that he had five-star ratings.
Ricky became very busy, very fast, sending his people out on jobs in uninsured company vehicles. Not only did he lack the proper licenses for most of the work he took on, but his contracts failed to meet state law requirements.
It all worked beautifully until the California Contractors State License Board caught him. Ricky was arrested and charged with misdemeanors for contracting without a license in addition to false and misleading advertising. Penalties vary by state and often include six months in jail, a $5,000 fine, as well as an administrative charge of up to $15,000. False advertising could include fines into the thousands of dollars.
Later, I heard from some of his customers, many of whom had paid fully for jobs that were never completed, which could be seen as criminal fraud.
After he was released from jail, he called me: “I have three kids. I don’t want a misdemeanor on my record. I need you to represent me.”
“We talked about all of this, remember?” I said. “Both Antonio and I went over all of these things with you. Do you remember? I warned that you could lose much of what you hold dear. Remember? People who willfully refuse to follow my advice are not welcome as clients. Call someone else.”
Red flags when looking to hire a contractor
Surprisingly, not all states require contractors to be licensed — 17 do not in 2024, though there may be local or county licensing requirements. If you’re looking to hire a contractor for a substantial job, here are some things a potentially problematic contractor might say that should raise red flags:
“I’ll be over in an hour.” Most legit — and busy — contractors are booked for several days and possibly weeks. Someone who’s available that quickly should raise questions in your mind.
“I only accept cash payments, but I can give you a better price that way.” This is how they can avoid paying taxes on their earnings. Also, without a canceled check or credit card statement to support any dispute you may have about the work they do for you, it is your word against theirs.
“My truck is my office.” No office with an actual address? Forget working with this person. If things go south and they won’t answer your calls, how else are you going to find them?
“You don’t need to see my insurance certificates.” Uninsured contractors are trouble. Take a photo of the insurance certificate or card from their insurance company listing the policy number, agent and expiration date and their driver’s license before signing their contract. If they can’t produce those things or refuse, it’s bye-bye time!
Speaking of signing a contract: If there’s no written contract, just a handshake, walk away.
Questions to ask potential contractors
Here are some questions to ask, and other information to obtain from, potential contractors to ensure you don’t end up with one who’s not licensed or otherwise following the law:
- How long have you been in business? Please show me your contractor license.
- Are permits required for this project? If so, will you obtain them?
- How long will this take? What are the payment terms and schedule? (This info should also be spelled out in the contract.)
- Show me a cost breakdown of labor and materials.
- Will you be using subcontractors? If so, provide me their names, addresses, telephone numbers, insurance information and a photo of their driver’s license.
Finally, go slow. Get several bids. Check references, but beware of glowing reviews. Once all of these boxes are checked, keep your fingers crossed that the project goes well. If it doesn’t, it’s likely not going to be because the contractor is breaking the law.
Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.
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