The Dangers of an Unlicensed Contractor From Every Angle

David Muñoz | September 8, 2023 | Workers' Compensation

The dangers of an unlicensed contractor are simple and straightforward, even if they require a bit of elaboration. If you are considering hiring an unlicensed construction contractor—don’t do it. If you are considering working as an unlicensed construction contractor—don’t do it. If you are considering working as an employee for an unlicensed construction contractor-–don’t do it.

The possible consequences of ignoring this advice range from poverty to prison. You will not be able to negotiate your way out of some of them.

If You’re Considering Hiring an Unlicensed Contractor

Is it legal to hire an unlicensed contractor? Yes, but only if the price is $500 or less. If the work is extensive and the contractor is giving you that kind of price, how many corners will they be cutting? What kinds of invisible safety hazards will you unknowingly face as a result of your decision to hire them? Hire one only if the job really is worth no more than $500. Anything else is asking for shoddy (and perhaps dangerous) workmanship.

If the value of the work is over $500, hiring an unlicensed contractor is illegal in California, even if you hire one to work in your own home. It’s not hard to see why even your own home is not exempted. Imagine the contractor miswires your home’s electrical system, causing a fire a year later that kills your entire family. The stakes really can be that high.

Personal Injury Liability

California recognizes a legal principle known as respondeat superior that holds an employer financially liable for the consequences of work-related misconduct committed by their employee. If the employee accidentally drops a hammer off of a skyscraper and injures a pedestrian, for example, the pedestrian can sue the employer for personal injury.

Here’s the problem with hiring an unlicensed contractor—if they have no license, then their employees become your employees with respect to the job you hired them for. “You,” in this case, means whichever party hired the unlicensed contractor. If that party should be a corporation, so be it. You won’t be personally liable, but your company might go bankrupt paying compensation to the injured pedestrian.

If an Employee Is Injured on the Job

Unlicensed contractors cannot get workers’ compensation insurance for their employees. Maybe that’s okay with them because, as mentioned above, their employees are your employees. Do you have workers’ compensation coverage that will compensate the injured employee? If you don’t, you could end up liable for the injuries as well as the injured employee’s attorney’s fees.

If You’re Considering Working as an Unlicensed Contractor

In California, contracting without a license is a crime in most instances. If you work illegally as an unlicensed contractor (for a job worth more than $500), California can fine you up to $5,000 and put you in jail for up to six months on a first offense. Penalties get more serious if you commit second and third offenses.

Another problem you will face is that your customer (the party who hired you) will have no legal obligation to pay you. Indeed, if they have already paid you any money at all, they can potentially file a “disgorgement action” with a California court and force you to repay them every dime that they have already paid you.

If You’re Considering Working as an Employee for an Unlicensed Contractor

If you work as an employee for an unlicensed contractor, you have entered the black market economy, where it can be difficult to enforce your rights. If you are aware that your employer is unlicensed, you could share in their criminal penalties–a fine of up to $5,000 and up to six months in jail.

Workplace Injury

If you suffer an injury on the job, you can be certain that your black market employer does not carry workers’ compensation insurance that you can use to help pay for your medical expenses and lost earnings.

The Consequences of Black Market Employment

Black market employment leaves a hole in your employment record that could hurt you in many ways:

It could prevent you from obtaining credit.
You might find difficulty renting an apartment or buying a home.
Your mortgage, student loan, or insurance application might be turned down.
Your black market employment will not help you build an employment history for social security purposes.
You can’t participate in 401k programs while working illegally.

Some of the consequences of working on the black market won’t hit you immediately. Over time, however, these consequences can be devastating.

Nightmare Scenario: When Hiring an Unlicensed Contractor Can Cost You Big Money

Imagine this scenario. A leak damages the interior walls of your home. Your homeowner’s policy has a deductible of $3,000, and you don’t want to pay that much. Instead, you hire your cousin Joe, who offers you the low, low price of only $1,500.

Several years later, you decide to sell your home. The inspector discovers that shoddy repairs to your leak have caused $450,000 in structural damage to your home. Since you used an unlicensed contractor, your homeowners’ insurance refuses to cover it. Now, the value of your home has been reduced by $450,000. You have a choice:

Reduce the sale price of your home by almost half a million dollars;
Cough up $450,00 to repair the damage out of your own pocket (and don’t hire Joe this time); or
Cancel the sale and reside in a house that will probably become legally uninhabitable very soon.

This is not a fantasy story. There is nothing at all unrealistic about it, and it has happened many times.

If You Have Suffered an Injury on a Construction Site, Whom Do You File Your Claim Against?

Normally, if you are an employee and you suffer an injury at work, you file a workers’ compensation claim against your employer. But how do you enforce your claim when you work for an unlicensed contractor? Can you file a third-party workplace accident claim?

You’re going to need a lawyer to help you answer these questions-–and act effectively on the answers.

Contact the San Diego Workers’ Compensation Law Firm of Mission Personal Injury Lawyers Today To Get More Information

If you’ve been injured in San Diego or Chula Vista, please call Mission Personal Injury Lawyers for a free case evaluation with a personal injury lawyer or contact us online.

We proudly serve San Diego County and throughout California.

Mission Personal Injury Lawyers
2515 Camino del Rio S Suite 350, San Diego, CA 92108
(619) 777-5555

Mission Personal Injury Lawyers – Chula Vista Office
690 Otay Lakes Rd #130, Chula Vista, CA 91910
(619) 722-3032

We also serve the state of Texas. Contact our personal injury law office in El Paso for legal assistance today.

Mission Personal Injury Lawyers – El Paso Office
201 E Main Suite 106, El Paso, Texas 79901
(915) 591-1000