Pursuant to California Business & Professions Code § 7031(a), an unlicensed contractor cannot file a lawsuit to collect compensation for the performance of any act or contract requiring a license, regardless of the merits of the lawsuit. California Business and Professions Code §7031(b) further requires that an unlicensed contractor be disgorged of all monies paid by their victims (more than just economic loss) and does not require the client (victim) to prove she or he believed the individual was a licensed contractor. In other words, a person who uses the services of an unlicensed contractor, even if the individual knows the worker is unlicensed, can bring a lawsuit to recover all of the money paid to the unlicensed contractor for performance of any act, or contract, requiring a license. California Business and Professions Code §7031(c).

California Business & Professions Code § 7028 prohibits contracting without a license. Under the law, a person who uses the services of an unlicensed contractor is considered a victim of crime and eligible for restitution for economic losses, regardless of whether that person had knowledge that the contractor was unlicensed. Assembly Bill 370 amends Business and Professions Code §§ 7028 and 7028.16 by adding criminal fines and penalties for engaging in construction without a valid license. Under the new law, it is a misdemeanor for a person to engage in the business of construction, or act in the capacity of a contractor, without having a valid contractor’s license. This new law makes a first conviction punishable by a fine up to$5,000, or imprisonment in a county jail for up to 6 months, as specified, or both. A second conviction is punishable by a fine of 20% of the contract price, 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor, or $5,000, whichever is greater. A third or subsequent conviction is punishable by both a fine and imprisonment in a county jail, as specified, and requires that the fine be at least $5,000 and no more than the greater of $10,000, 20% of the contract price, or 20% of the aggregate payments made to, or at the direction of, the unlicensed contractor.

In sum, unlicensed contractors cannot sue to get paid for any work that requires a contractor's license. The individual for whom an unlicensed contractor performs work requiring a contractor's license is under no legal obligation to pay. A dissatisfied client may bring a lawsuit to recover any monies previously paid to an unlicensed contractor and if the individual files a complaint with the Contractors State License Board (CSLB), the CSLB will investigate and this may lead to criminal charges, fines, and possibly jail time.