October 18, 2024 • By Dennis Beaver
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” would discover.
Worked Together
He was hired right out of high school by “Antonio” in his electrical and general contracting business, as an apprentice. “He is very likeable and he got us a lot of business,” Antonio said.
They worked well together for years. “Looking forward to the time that Ricky would go out on his own, I helped 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, 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. A zoom meeting with my office was arranged where we went over the same important legal requirements, and consequences for violating the law.
However, before Ricky joined the session, Antonio admitted that he was worried.
“He and his wife have three children. 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 as an electrician did not stop him from holding himself out as a general contractor.
He ran ads in newspapers and online, falsely claiming to be a licensed general contractor, bonded, insured, that his employees had workers compensation insurance, and that he had 5 star ratings. Ricky hired employees, and as he made a good impression, 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 Contractor’s License Board ran a sting. Ricky was arrested, 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 up to $15,000. False advertising could include fines into the thousands of dollars.
Later I would hear from his customers – many of whom fully paid for jobs that were never completed which could be seen as criminal fraud.
Our Brief Conversation
“I have three kids. I don’t want a misdemeanor on my record. I need you to represent me.” He was calling from home and had just been released from jail.
“We talked about all of this, remember? Both Antonio and I went over all of these things, Do You Remember? I warned that you can 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, but there may be local, county licensing requirements. Here are some red flags to watch out for when hiring a contractor for a substantial job:
“I’ll be over in an hour.” Most legit–and busy–contractors are booked for several days and possibly weeks. Someone quickly available should raise questions in your mind.
“I only accept cash payments but can give you a better price that way.” This is how they can avoid paying tax, but without a cancelled check or credit card statement as support, it is your word against theirs in any dispute.
“My truck is my office.” “You don’t need to see my insurance certificates.” No office with an actual address? Forget this person, for if things go south, how are you going to find them?
No written contract, just a handshake: Forget it!
Uninsured contractors are trouble. Take a photo of the insurance certificate or card from their insurance company listing the policy number, agent, expiration date, and driver’s license before signing their contract. If they can’t produce those things or refuse, its bye bye time!
Questions to Ask Potential Contractors
How long have you been in business? Please show me your contractor license. Are permits required for this project? Will you obtain them? How long will this take? What are the payment terms and schedule? (Should be spelled out in the contract.) Show me a cost breakdown of labor and materials. Will you be using sub-contractors? If so, provide their names, addresses, telephone numbers, insurance information, a photo of their driver’s license.
Finally, go slow. Get several bids. Check references but beware of glowing reviews.
Keep your fingers crossed!
Dennis Beaver Practices law in Bakersfield and welcomes comments and questions from readers,
which may be faxed to (661) 323-7993,
or e-mailed to Lagombeaver1 – at – Gmail.com.