While anyone answering this question will need more facts to assist them in an analysis, I can say that the partnership, since it is the plaintiff in the case against you, is required to have workers’ comp. insurance for the maintenance of an active contractors’ license (presuming there are employees or no other exceptions apply. See http://www.cslb.ca.gov/contractors/maintainlicense/WorkersCompensation.asp). Failure to maintain workers’ comp. insurance will result in the license being suspended. Workers’ comp. insurance is not required for expired or inactive licenses. A license must be in active and good standing (not suspended) for a license holder (contractor) to maintain a lawsuit.
Assuming all work was done under the partnership which has maintained all appropriate work comp. insurance requirements and is active and in good standing, then I do not see why the qualifying partner’s individual lack of workers’ comp. insurance will impact the partnership’s case against you. However, if you can somehow show that the qualifying partner was conducting work under his own individual license for the benefit of the partnership or are able to tie his license to the work related to the lawsuit involving you, then you may have a defense, but that will depend on the specific facts of your situation. Also, you need to ask yourself if the qualifying partner is required to have workers’ comp. insurance – does he have employees, self insured, other exception, etc.? You should contact an attorney to assist you. Bring your documents and any evidence you have of licensure (or lack of). Good luck.
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If the partnership and you entered into a contract that involved construction, then the partnership needed to be licensed. If the partnership had employees, it needed to have workers compensation insurance.
The fact that the qualifier also had an individual license but did not have workers comp may not be relevant for your purposes.
Your case will depend on a lot of information that is not included here. You need to talk with a construction attorney.
It sounds like your partner was a licensed contractor but failed to acquire workman's compensation insurance, which is required if he has any employees. If he doesn't have Workman's compensation insurance, and someone is injured, he is responsible for the full damages sustained by the individual without any limitation to workman compensation limits. The path you seem to be attempting to lead would not be in you or your partner's best interest because if he is an unlicensed contractor he has no right to receive any money whatsoever for whoever he performs services and delivers product to. It would seem to put both you and him in even a worse position than he may be in now, by virtue of not having any workman's compensation insurance.
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You are trying to determine if the partnership is barred under B&P Code section 7031 from suing you to recover for the value of contracts or construction services performed during a period that the partnership was considered unlicensed by the state. This is a highly fact intensive question. For example, one fact issue is if the qualifying partner's side business reasonably did not employ any employees, then he would not have needed worker's compensation insurance. Under this circumstance, his lack of worker's comp insurance would have no effect on his licensure status.
Your question doesn't so state, but I am presuming that the partnership itself did have employees and did have worker's compensation insurance. Obviously if the partnership had employees but no worker's comp insurance during a period the project was being performed, then the partnership itself would be considered unlicensed and the RMO's licensure status would be irrelevant.
You seem on top of the nuances of these issues enough, so I also presume you have checked the actual licensure status of the partnership as well as its bond status and have determined that both were in compliance during the period the project was performed. If not, the partnership letting a license or bond lapse provides further bases for arguing its non-licensure.
Substantial compliance is always a potential defense to licensure issues under Section 7031. But the Substantial Compliance Doctrine has been severely circumscribed by recent decisions about the strength and breadth of the public policy underlying Section 7031 that requires non-payment to unlicensed contractors. It is almost a strict liability standard, now.
Another fact that will be highly determinative of your ability to use a Section 7031 argument is whether any of this work the qualifying partner was performing through his side business included work on the project you are being sued on. Assuming the above facts are correct (the partnership had employees and worker's comp insurance), if all of the work was contracted through, performed by, and billed through the duly-licensed partnership, then the fact that one of RMOs did side work unrelated to your project, and that side work may have been unlicensed work, would have no bearing on the partnership's licensure or its ability to collect on its contracts. This is because all of its work performed on your project was performed while it was considered licensed.
You need to consult with a business attorney who has SPECIFIC experience representing contractors in order to have your facts assessed and applied to the various cases that interpret licensure compliance under Section 7031. Good question, though.
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