Business & Professions § 7031 mandates suspension of a contractor's license if there's no workers' comp. coverage. NOTICE was the issue here, whether it's required or not before the suspension is effective.
This is important because a contractor without a license (or a suspended one) cannot sue for money owed and those contracting with it can sue to get their money back.
The trial court had ruled that, since the contractor in this case hadn't been given notice of the suspension at the time of the instant lawsuits, the customers' motion to seek "disgorgement" of all monies paid to the contractor had to be denied.
The facts involved two couples who had hired the contractor to build two houses on the property. A dispute arose with the contractor after the houses had been largely, but not completely, constructed.
The owners ultimately terminated the contractor from the project, and completed construction at their own cost. The owners sued the contractor for the costs of completion, loss of use damages, and the cost of fixing items defectively constructed by the contractor. The contractor cross-complained for the amounts unpaid under the contract, and the additional cost of several changes to the work allegedly requested by the owners.
Subsequently, the owners sought to amend their complaint to allege a cause of action seeking disgorgement of all funds they had paid the contractor, on the basis that the contractor's license had been suspended by operation of law during his work on the houses (because of the contractor's lack of workers' comp insurance). The trial court denied this request.
The jury then reached a verdict in favor of the owners and against the contractor, although not in the amount the owners had sought.
The owners challenged the trial court's denial of their motion to amend their complaint to seek disgorgement and the contractor argued that the trial court failed to offset the unpaid balance on the contract against the award in favor of the owners.
In this unpublished opinion from the Second District, the appellate court affirmed the judgment in favor of the parties who had sued the contractor and denied the contractor's appeal.
It did point out that the trial court had erred when it said the contractor's license suspension wasn't effective because there had been no notice but that the error was harmless in light of the award in favor of the owners.
But the Court made clear that B&P Section 7031 distinguishes between whether a contractor EVER had workers' comp coverage or its policy simply lapsed. It ruled that if a contractor's workers' comp. policy simply lapses during a job, the contractor must be given notice before its license suspension takes effect.
However, if the contractor never had workers' comp coverage to begin with, as was the case here, the license suspension is automatic without any notice being required.
The case is Li v. Wu.
To read the full opinion,
PLEASE CLICK HERE.
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