The Dangers of an Unlicensed Contractor

January 31, 2021 9:00 am Published by |

To the Owner Considering Hiring an Unlicensed Contractor:

On the positive side for owners considering hiring an unlicensed contractor, the general rule is that an owner can escape the obligation to pay an unlicensed contractor for work performed and materials supplied because unlicensed contractors are prohibited from bringing legal actions against owners for payment. The law even goes so far as to allow the Owner to bring a legal action against the unlicensed Contractor for reimbursement of anything the owner paid to the unlicensed contractor. This is done through a “disgorgement” action. Despite this, there are a great many negative potential consequences to be considered by any owner who might consider hiring an unlicensed contractor. Among them are the following:

  1. Consider that unlicensed contractors, who have clearly demonstrated a disinclination to follow legal obligations in the first place, may resort to “less than socially acceptable” means of exacting retribution against those who do not pay them or who demand the return of money paid through a disgorgement action.
  2. Also important for the owner to consider is that the unlicensed contractor and its employees become the actual legal “employees” of the owner.
  3. Further to consider is that in the usual course of events, the owner who has hired an unlicensed contractor has no workers compensation coverage for injury claims of the unlicensed contractor’s employees.
  4. The owner should also consider that use of an unlicensed contractor may void insurance coverage.
  5. Finally, if an owner hires an unlicensed contractor to perform repairs, when the owner acts to sell the home the owner may be required by law to disclose this fact.

To any Person Considering Working for an Unlicensed Contractor:

If you are a prospective employee of an unlicensed contractor, you face dangers as well. Consider the following:

  1. Since your ostensible “employer” is unlicensed, they are entirely illegitimate and acting illegally. In the eyes of the law, you may be considered a co-conspirator with your employer in this criminal enterprise.
  2. It is entirely unlikely that your ostensible employer will obtain workers compensation insurance to provide treatment, hospitalization, and compensation if you are injured while working.
  3. It is also entirely unlikely that your ostensible employer will be making deductions from your paycheck for state and federal taxes, social security, and other standard deductions. Thus, you may thus be left with a tax bill and may be subject to prosecution for income tax evasion.
  4. If you are employed “off the books” or “under the table” you will not be able to substantiate your income for purposes of showing employment history necessary to obtain credit, rent an apartment, fill out a mortgage application, a student loan application or an insurance application. Instead, you will be treated as chronically unemployed, a scofflaw, or both.
  5. You will not be able to build up any employment history necessary to participate in Social Security.
  6. You will not participate in employer sponsored 401-K and other similar employer tax deferred savings programs to supplement Social Security income, if any.

Conclusion:

Whether you are considering hiring an unlicensed contractor, acting as one yourself or working for an unlicensed contractor, you can expect serious negative consequences. These consequences may not visit you immediately, but eventually and catastrophically, they will land on your doorstep. Steer clear of any association with unlicensed contractors and you will never have to worry about these consequences.

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