The State Senate today voted 27-7 to pass SB 488, a bill by Senator Nell Soto (D – Pomona) targeting unlicensed contractors. The bill now heads to the Assembly.

Existing law requires a person to be licensed as a contractor if he or she engages in the business of contracting or acts in the capacity of a contractor and provides that it is a  misdemeanor for any person to act as a contractor without a license.

Existing law further requires that if a person has been previously convicted of  contracting without a license, the court to impose a fine of 20 percent of the price of the contract under which the person performed contracting work, or $4,500, whichever is greater, and imprisonment in the county jail for not less than 90 days.

SB 488, which is sponsored by the Contractors’ State License Board (CSLB), would increase the fines for third or subsequent offenses.

“Unlicensed contractor activity is a serious ongoing problem in California,” Soto said. “Not only is this taking badly needed tax revenues away from the state, it seriously affects legitimate contractors who cannot compete against criminals who don’t play by the rules. These criminals rip-off consumers because they are not accountable to anyone.”

According to the CSLB, there are a considerable number of unlicensed contractors who are part of the underground economy, an element that compromises the financial security of legitimate businesses and undermines the state's revenue-generating programs.  Numerous approaches have been used to address this problem, but it continues to impact legitimate licensees and consumers alike with injurious economic results.  The victims of these violations include consumers, often the elderly, who pay thousands of dollars to the unlicensed person who never finishes the job or does incompetent or negligent work. 

Participation in the underground economy is not limited to those who are unlicensed. Some licensees occasionally hire employees without obtaining the Workers' Compensation Insurance coverage required by law.  This is more common on smaller projects, such as roofing repairs.  In these cases the licensee does not want the competitive disadvantage that results from having to pay for an insurance policy. This practice puts the consumer at risk for any injuries sustained on their property, and undermines licensees who are trying to compete and operate legitimately. 

SB 488 would also provide that failure to comply with the Workers' Compensation Insurance requirements under the Contractors License Law is a misdemeanor.