Although it might seem like a nearly impossible, worst-case-scenario type of event, you – an innocent homeowner or business owner – are being sued by an unlicensed contractor for issues that happened on your job site. Remain calm. If an unlicensed contractor has threatened to sue you, it’s actually not the end of the world.

In a past blog post, we answered the question Can You Sue an Unlicensed Contractor? and now it is time to take a look at the other side of that same coin and let you know whether or not an unlicensed contractor can sue the client who hired them.
The Unlicensed Contractor Dilemma

You’ve been given the same advice a million times — hire a licensed contractor. If any kind of home repair or construction work exceeds $500 in labor and materials, you need a licensed contractor for the job.

Even though the message to hire licensed contractors is out there, you may have unknowingly hired a slippery, unlicensed contractor who convinced you that they’re the real deal.

It’s upsetting enough to realize that someone is working with you in bad faith, but in addition to that, you’re seeing what a challenge it is to hold unlicensed contractors accountable.

Meanwhile, the unlicensed contractor might lead you to believe that you are liable for damages if anything goes wrong while they are working on your handyman or construction project.

Can they sue you for non-payment? Can they sue you if they get injured or sick on the job? What are your rights? What is your responsibility?

Unlicensed Contractors Have Limited Legal Standing to Sue

The thing that unlicensed contractors want you to forget or fail to realize is that they typically have limited legal standing to sue you for not paying them.

A quick review of the California Business and Professions Code section 7031 shows that unlicensed contractors are prohibited from taking legal action to enforce contracts for services requiring a valid contractor license – so if they don’t have a license, they can’t sue you!

Unlicensed contractors can’t sue you for breaking a contract that they entered fraudulently. This rule exists to discourage unlicensed individuals from advertising illegal services in the first place and this rule also stands to protect consumers from unscrupulous practices.

Exceptions to the Rule

There are extraordinary circumstances that might get a judge to rule in favor of the unlicensed contractor who has sued to recover payment:

Substantial Compliance
In some rare situations, the courts might see that the contractor made a good-faith effort to comply with licensing requirements. “Substantial compliance” might be enough to keep you on the hook for paying this individual.

Minor Work Exemption
For projects valued under $500, certain minor work exemptions do apply. If it is determined that your project qualifies for such exemptions, that may be enough of a legal precedent for you to pay for the labor.

Please note that the above-mentioned scenarios are rare and the risk involved is considerably low compared to the drama and headache that typically comes with hiring an unlicensed contractor to work on structural repairs and other construction work.

How Homeowners Can Protect Themselves

The constant refrain that you’ll get from the Contractors State License Board (CSLB) is to take your time when hiring a contractor and look up their license to verify that it is active and valid.

The CSLB urges the public to report illegal contractor activity to avoid situations where consumers could get swindled and tricked into hiring an unqualified worker leaving shoddy non-compliant construction work in their wake.

One simple way that homeowners can protect themselves is by getting everything in writing from the outset. All agreements and details indicating the scope of work, the costs of the project, and timelines should be documented in a written contract and signed by both parties.

Another easy thing you can do is ask for references from past clients. Checking out a contractor’s work history and gauging the satisfaction of the people who have hired them before can only help you. The more you know the better.

Also, another great way to have your own back is to check your contractor’s proof of insurance coverage. You want to be sure that the contractor carries liability insurance and workers’ comp coverage so that there are no unpleasant surprises later down the line.

We don’t have to tell you that accidents and injuries come up in construction frequently, so before you enter a new contract, make sure you understand the liability that you are taking on.

Conclusion

The take-home advice is to do whatever you can to avoid hiring an unlicensed contractor.

The lack of a license might indicate that your contractor lacks the necessary skills and expertise required for delivering high-quality work.

Substandard, non-compliant workmanship leads to safety issues and legal troubles that you do not need in your life. If you unknowingly hire an unlicensed individual, both you and the contractor could potentially face serious penalties.

While it is not likely that an unlicensed contractor can sue you and win in a court of law, you still risk facing legal consequences eventually just by agreeing to let someone perform contractor work on your property without a license.

Additional Reading

CSLB – Before Hiring a Contractor
CSLB – Owner-Builders Beware!
Unlicensed Contractors: The Good, The Bad, and The Ugly
CSLB – Consequences of Contracting Without a License