Court Bars Licensed Contractor From Seeking Compensation for Work Performed by Unlicensed Sub

Construction worker

Does Section 7031 bar a licensed contractor from seeking compensation for work performed by an unlicensed subcontractor?

June 6, 2022
Garret Murai - California Construction Law Blog

It all started with a tree.

A eucalyptus tree to be exact.

What followed is one of the more important cases to be decided under Business and Professions Code section 7031 in recent years. Yes, that Section 7031. The statute variously described by the state’s courts as “harsh[ ],” draconian” and “unjust,” but, importantly, nevertheless valid.

Under Section 7031, an unlicensed contractor is barred from seeking compensation for work requiring a contractor’s license. This has been called the “shield.” However, in addition to the “shield,” project owners can also employ Section 7031’s “sword,” and seek disgorgement of all monies paid to an unlicensed contractor. Section 7031’s “shield” and “sword” applies even if the project owner knew that the contractor was unlicensed. They also apply even if the unlicensed contractor’s work was flawless. And they also apply even if a contractor was unlicensed during a portion of its work. This is because, as courts have stated, Section 7031 is a consumer protection statute intended to protect the public from unlicensed contractors and applies irrespective of the equities.

Mr. Murai may be contacted at gmurai@nomosllp.com



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