Two conflicting payment laws —
how do you deal with it?
My sister and I are partners in a general contracting firm that does
tenant improvements mostly for
We have a dispute with a painter
that has been ongoing for over 18
months. It all started when the
painter we had used for almost 10
years retired to Arizona right when
we were slammed with more projects
than we had ever handled.
Out of desperation, we hired a painter that happened to come by
one of the jobsites. He claimed he
was currently working for another
general contractor in Vista on a highend
house remodeling project that
was coming to an end, and the work
he was doing there was similar to
what we needed for this project.
His business card had a contractor’s
license number on it and we
thought someone in our office had
confirmed it. One night soon after
the new painter first came by, one of
our superintendents went by the
house this new painter said he was
finishing up and just as we were
told, was a brand new, high-end
home, which looked to be almost
So, believing he was a legitimate
licensed painting subcontractor, we
hired him for one of our restaurant
As it turned out, he was horrible.
He could never get his act together to
completely finish his work and he
was belligerent when our superintendent
pushed him to finish in the
timeframe he promised in his subcontract.
He was also not able to pull off the
faux marble look that was required
on some of the columns and the walls
around the bar area.
Needless to say, we ended up paying
him only part of the value of his
subcontract, about $8,000 out of
$18,000, because we had to redo
much of his work, and the owner of
the restaurant held back $9,000
from what we were owed ($3,000 for
each of the three weeks we were late
due to the painter).
About a month after we completed
the project, the painter was still pressuring
us for the amount still due
under his subcontract ($10,000) and
he ended up recording a mechanic’s
lien, even though we found out later
that he was not licensed.
He never filed suit on it, though,
and our attorney was able to get it
released through the court because
the lien had expired.
During this time, we found out
that the license number the painter
had on his business card did not
belong to him, but belonged to a
friend of his.
Our attorney told us that under the
Contractors’ State License Law we
don’t have to pay him any more
under the subcontract and we could,
in fact, easily get back the $8,000
that we paid him since he wasn’t
Plus, we could sue him for damages due to his bad work and
delays. But we decided the hassle and costa are not worth
it because our attorney said our subcontract did not have
anything about the prevailing party getting back their attorney
fees. We thought the issue had died a natural death, but now,
out of the blue, we got a letter from the painter claiming
that, per Labor Code section 2750.5 he is an employee, and,
unless we pay him the $10,000 left on his contract within
30 days, he is going to file a complaint with the Labor Board.
If he does that, he claims that we
will have to pay him overtime and
penalties on top of the $10,000.
have friends who are business owners
and I know that they have had to pay
steep penalties for violating labor laws. Also, I looked up section 2750.5,
and it does say that a person who
doesn’t have a license cannot be an
independent contractor — so he’s an
This guy caused us so much grief
on the jobsite, and he is still making
life difficult, is there something we
can say to convince him to back off?
How can the Contractors’ State
License Law allow us to not pay him
because he is not licensed, while the
Labor Code seems to require us to
pay him as an employee?
You have a very good question and
this issue has come up in California
And, the answer is pretty straightforward.
As you know, when an individual
works for you, he is either an
independent contractor such as your
subcontractors, or an employee.
The Contractors’ State License
Law that prohibits your unlicensed
independent contractor painter from
collecting money for work he did is
Business & Professions Code, section
7031(a). And, section 7031 (b) allows
you to get back all the compensation
you paid to him.
On the other hand, Labor Code
section 2750.5 states that a person
cannot be considered an independent
contractor unless they are
Thus, under the Labor Code, your
painter would be considered an
employee, and you would be subjected
to paying him overtime for any
hours he worked over eight in a day,
or over 40 in a week, plus potential
penalties. But, our courts have recognized
this conflict and have ruled
that if the Labor Code prevailed in a situation such as yours, then
Business & Professions Code section
7031 would be rendered useless.
Thus, courts have decided that the
Business & Professions Code prevails
and an unlicensed person cannot
bring a claim to recover payment for
work that requires a license.
If you have a construction question,
submit it to: info@construction-
• • •
The information in this article is
based upon California law and is for
general information only. Any information
or analysis presented here is
intended solely to inform and educate
the reader on general issues.
Nothing presented or referenced to,
regarding facts, documents or applicable
laws, constitutes legal advice.
Before acting or relying on any information,
including any information
presented here, consult with a qualified
attorney for your specific situation.
Scholefield holds an active PE
license in Colorado, an undergraduate
engineering degree from the
University of Florida, and received
her JD from the University of San
Source Code: 20080523tca
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