Posted on in Industry News Marketing

Across the country, state and local governments are conducting sting operations to uncover contractors operating without a license and proper insurance. As a result, many unlicensed contractors are facing hefty fines and potential jail time.

In March of 2013, the State of California conducted a massive sting operation that netted 78 unlicensed contractors. These contractors now face a potential fine of $5,000 and up to six months in jail. In 2012, 1,188 such cases went to prosecutors in California.

In June of 2013, a Florida sting operation by the Pinellas County Office of Consumer Protection resulted in nine arrests. In addition to unlicensed contracting, a misdemeanor, they each received felony charges for failure to secure workers compensation insurance.

In 2012, the National Association of Contractor Licensing Agencies (NASCLA) cooperated in a multi-state sting operation. As a result, 16 unlicensed contractors received citations in Oregon and 23 in Nevada. California made 100 arrests. Arizona opened investigations against 15 unlicensed contractors because of the sting operation.

In most states, a contractor who accepts any job in excess of $500 needs a contractor’s license. Contractors who operate without this license may face fines and potential jail time if caught. Contractors who do not wish to face the legal consequences are smart to obtain the necessary license and insurance to run a legitimate business.

Aside from the legal protection offered by a contractor’s license, there are benefits to being a legitimate contractor.

  • Licensed contractors can operate out in the open. They can advertise their services widely, without fear of detection. This allows them to reach a greater number of potential clients and grow their business. Many of the unlicensed contractors caught in stings received citations for advertising without a license.
  • Licensed contractors are less vulnerable to the clients who do not pay for the work contracted. A legitimate contractor is able to file for a Mechanics Lien. Unlicensed contractors have no such protection under the law.
  • Contractors can receive discounts from suppliers and home improvement stores if they are licensed.
  • In order to qualify for business loans with a bank a contractor must have a license.

The media attention surrounding the recent spate of sting operations has alerted many potential clients to the importance of hiring only licensed contractors. These clients are asking for the documentation to prove that a contractor is legitimate before they will hire them. Unlicensed contractors are not able to compete for these jobs.

Legitimate contractors, faced with unfair competition, have cooperated in past investigations against unlicensed contractors.

Although it may seem expensive for a contractor to remain licensed and insured, it can be far more costly to operate illegally. Licensed contractors benefit by having access to a larger pool of potential clients. They are able to take advantage of legal protections and financial opportunities that are not open to unlicensed contractors. Most importantly, a licensed contractor will not face the costly fines and potential jail time that can result from operating without the proper license and insurance.