Intro to State Contractor's Licensing Laws: Caution in California re Hiring Independent Contrator
Research results for CaliforniaThe combination of these statutes transforms an independent contractor into a statutory employee of the hirer for purposes of third party tort liability where the employer hires an unlicensed independent contractor under circumstances in which the law requires a licensed one. Research in ten states reveals the licensing laws of the various states are set forth in diverse statutory schemes which are not easily comparable. However, some general principals which appear to be present in all ten states studied are that there is usually a general rule of non-liability on the part of the hirer or an independent contractor with five or six exceptions to the rule. The research was prompted by an unpublished case in which a customer had a home warranty policy and she had an electrical problem which required repair. She sought to have the home warranty plan cover the repair. During the repair, a sub-contractor ran over a pedestrian on his way to do the repair, liability of each at issue.
California research cont'dThe home warranty company hired an electrical contractor, to repair an air conditioning control panel which should have cost, including parts and labor, less than $500.00 -- therefore not requiring a licensed worker to perform the repair under California's Minor Work Exemption (Cal. B.P. Code ?7048). The licensed contractor sent an unlicensed sub or "independent contractor" to do the work. Because several panels blew out and a fire started, additional panels were ordered and additional service calls were made running the costs up to, and as Plaintiff argued, over $500.00. Applying Cal. Labor Code ? 2750.5 under this scenario made the home warranty company potentially liable for the negligence of the unlicensed independent contractor since, as it turned out, the job cost was, according to Plaintiff, arguably over $500.00 and thus required a licensed worker to perform the repair. California Business & Professions Code ? 7048, the Minor Work Exemption, provided in pertinent part:
California Research cont'da) This chapter [licensing requirements] does not apply to any work or operation on one undertaking a project by one or more contracts, the aggregate contract price which for labor, materials and all other items, is less than five hundred dollars ($500), that work or operations being considered of casual, minor, or
Labor Code ? 2750.5 transforms the independent contractor into a statutory employee in the situation where the job requires a licensed contractor (i.e., costs over $500) but an unlicensed contractor is provided. Labor Code ?2750.5 provides in pertinent part:
There is a rebuttable presumption affecting the burden of proof that a worker
performing services for which a license is required pursuant to Chapter 9 . . .
of Division 3 of the Business and professions Code, or who is performing such services
for a person who is required to obtain such a license is an employee rather than an
California Research cont'dProof of independent contractor status includes satisfactory
proof of these factors:
(a) That the individual has the right to control and discretion as to the
manner of performance . . .
(b) That the individual is customarily engaged in an independently established
(c) That the individual's independent contractor status is bona fide and not
a subterfuge to avoid employee status;
In addition . . . any person performing any function or activity for which
a license is required pursuant to Chapter 9 . . . Division 3 of the Business
and Professions Code shall hold a valid contractors' license as a condition of
having independent contractor status . . . ."
The case was settled under a confidentiality agreement.