For Homeowner
AB-2705 - Workers’ Compensation Insurance and Unlicensed Contractors
Dec 24, 2019
Design Everest

You hire a contractor to work on your home. They bring in workers to do the job, then one falls off a ladder and breaks their collarbone.

Unfortunate, but hey, it’s not your problem, is it? You’ll recover from the shock, see the injured worker into an ambulance, wish them a speedy recovery, and go about your day. No biggie - we all know construction’ is a risky business.

If you’ve done your homework and hired a licensed contractor with workers’ compensation insurance, this may well be how an injury on your construction site plays out.

But what if your contractor is unlicensed and uninsured?

Perhaps, you didn’t think to ask - appearances can be deceptive. Or, maybe, you didn’t think a license or workers’ insurance are needed for your type of project. There are plenty of reasons that may justify you hiring someone without a license or insurance, and as one California homeowner found out, doing so can make you liable for workplace injuries on your property.

For over a decade, Danita Sorenson hired the same gardener to landscape her property. Sometimes, the gardener employed a helper, Mary Jones. One day, while trimming branches on Ms. Sorenson’s property, Ms. Jones fell off her ladder and injured herself. In a stunning turn of events for Ms. Sorenson, Ms. Jones sued her for negligence.

What grounds did Ms. Jones have for her lawsuit?

The contractor - the gardener in this case - didn’t have a license. For a long time, this wasn’t a problem - most gardeners can operate without one. But then, the gardener sent her helper to trim branches of a tree over 15 feet tall, which is a licensed activity in California.

At that moment, both the gardener and the helper became Ms. Sorenson’s employees in the eyes of the law. Ms. Jones fell off the ladder due in part to alleged negligence on the gardener’s part; yet, as the employer, Ms. Sorenson assumed vicarious liability for the gardener’s actions.

This ascription of liability comes from a legal doctrine known as Respondeat Superior, which challenges the notion that liability must arise out of fault. The doctrine holds that an employer should not be able to deny responsibility for injuries that stem from employment-related activities, as this responsibility comes with the risk of doing business. Workers’ compensation insurance, which covers medical costs and lost wages stemming from a workplace accident, is the most effective way for employers to protect themselves against vicarious liability.

Unfortunately for Ms. Sorenson, neither she nor the gardener had this type of insurance to cover the claim. Neither did Ms. Jones work enough hours for the home insurer to consider her Ms. Sorenson’s employee. After an initial summary judgment in Ms. Sorensen’s favor, the Court of Appeal reversed the decision and held that Ms. Sorenson was potentially liable for the injuries.

Assembly Bill 2075

At the time of Ms. Jones’ lawsuit, the law required contractors to have valid Workers’ Compensation Insurance as a precondition for obtaining and keeping their license. Also, contractors who lose their license for not obtaining or maintaining their workers’ compensation insurance coverage are still considered employers, liable for their staff’s injuries. The laws are still in effect today, and their violation is a misdemeanor offense.

The laws of the day, however, did not cover contractors operating without a license, such as the one who worked for Ms. Sorenson. This loophole allowed contractors operating illegally to evade liability for their workers’ injuries and pass it on to the homeowners.

Assembly Bill 2075 (AB-2075), addressed this legislative gap. It added a new section to the Business and Professions Code, effective January 1st, 2019, which compels unlicensed contractors to obtain and maintain workers’ compensation insurance for their employees.

Under the new bill, contractors who operate without a license and fail to insure their workers are guilty of a misdemeanor, just like their licensed counterparts. To facilitate the apprehension of contractors who operate without a license or insurance, the new bill also requires that prosecution begins within 2 years of the crime.

What you can do to protect yourself

Having a law on the books is no guarantee that all contractors will obey it. Those who are willing to disregard the licensing requirement may feel the same way about mandatory insurance coverage for their employees. While the state legislature has obligated unlicensed contractors to cover their employees, you may still find yourself in Ms. Sorenson’s shoes if the contractor working for you does not comply.

The most effective way to protect yourself against injury lawsuits is to make sure that the person working for you is licensed and insured.

When hiring a contractor, ask for their license card, and note their license number. Contractors are often caught operating under someone else’s license, so be sure to run a check on the Contractors State License Board’s (CSLB) website.

Demand to see the contractor’s Certificate of Workers’ Compensation Insurance before signing any contracts with them. Do so even if a license is not required for the type of work you are hiring them to do.

Find out whether your project requires a licensed professional. Leave nothing to chance - if your unlicensed contractor is performing work for which no license is required, be sure both you and the contractor know the extent to which they can operate without the proper license. Had Ms. Sorenson known that trimming branches on her tall trees was a licensed activity, she may have stopped her gardener and the subsequent lawsuit could have been prevented.

Disclaimer

While we hope that you find this digest useful, please note that the information above is presented for educational purposes only and does not amount to legal advice. If you have questions or concerns about your legal rights and responsibilities, please consult an attorney.

Sources:
[1] http://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=2750.5.
[2] https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB2705
[3] https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?division=3.&chapter=9.&lawCode=BPC&article=7.5.
[4] http://www.cslb.ca.gov/Contractors/Applicants/Contractors_License/No_Exam_Application/Before_Applying_For_License.aspx
[5] https://law.justia.com/cases/california/court-of-appeal/2018/c084870.html

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