ARTICLE
1 November 2006

In California Your Unlicensed Contractor May Really Be Your "Employee"

A case recently decided by the First District Court of Appeal on August 18, 2006, reminds all Californians of the danger of employing an unlicensed contractor.
United States Consumer Protection
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A case recently decided by the First District Court of Appeal on August 18, 2006, reminds all Californians of the danger of employing an unlicensed contractor. Mendoza v. Brodeur, 06 C.D.O.S. 7729, 2006 WL 2383287.

Glenn Brodeur needed to replace the roof on his house. His neighbor, Ernesto Mendoza, was an unlicensed roofing contractor and Brodeur hired Mendoza to do the roofing work for a set price. Mendoza arrived at Brodeur’s house with a gang of workmen, started on the project, and within a few hours fell off the roof and was seriously injured.

Mendoza sued Brodeur for negligence, saying he was Brodeur’s employee and not limited to workers’ compensation remedies that would otherwise apply when an employee is injured. In moving to dismiss Mendoza’s negligence claim, Brodeur relied on Labor Code Section 3225(h) in arguing that Mendoza was not his employee. Section 3225(h) excludes from the definition of "employee," for workers’ compensation purposes, anyone who has worked for a given employer less than 52 hours during the 90 days preceding the injury. Mendoza had only worked for Brodeur for a few hours before falling off the roof, so Brodeur claimed he was not an employee and must have been an independent contractor. Mendoza countered that he was not an independent contractor, because Labor Code Section 2750.5 establishes a rebuttable presumption that a worker performing services for which a license is required is an employee, rather than an independent contractor. Siding with Brodeur, the trial court granted the motion and dismissed Mendoza’s action.

Mendoza appealed and the Court of Appeal reversed, reinstating Mendoza’s negligence action. According to the Mendoza court:

[The 52-hour provision of section 3352(h)] means that plaintiff is not his employee only for the purposes of workers' compensation. Section 3352(h) does not ipso facto preclude any employment relationship between defendant and plaintiff. Rather, because plaintiff is concededly unlicensed, section 2750.5 kicks in and creates an employment relationship. And that relationship allows plaintiff to maintain an action in tort. (Emphasis by the court.)

The Mendoza decision is noteworthy in that it builds on, and clarifies the application of, earlier cases interpreting these same statutes. In Furtado v. Schriefer, 228 Cal.App.3d 1608 (1991), Furtado was an unlicensed painter and was injured when he fell while working on Schriefer’s house. The Court of Appeal held that an unlicensed contractor performing work for which a license was required cannot be an independent contractor. If Furtado was an employee for workers’ compensation purposes, he was to pursue that remedy; otherwise he could continue his tort action against Schriefer.

In Rosas v. Dishong, 67 Cal.App.4th 815 (1998), a case involving almost identical circumstances to Mendoza’s, the court held that Rosas, a tree-trimmer, was Dishong’s employee "as a matter of law because his lack of a license while performing work for which a license is required prevents the presumption of employee status from being rebutted." By making a license "a condition of independent contractor status, the Legislature was unequivocal that a person lacking the requisite license could not be an independent contractor."

The California Supreme Court stated the underlying policy in State Compensation Insurance Fund v. Workers’ Compensation Appeals Board, 40 Cal.3d 5 (1985). Those hiring others to perform services should bear the risk of injuries incurred in their undertakings. An owner or contractor may reasonably assume that a licensed contractor has insurance and is passing its cost on through the contract, but should also assume that an unlicensed contractor is unprotected and that the employer must therefore bear the risk through its own insurance. "While it may seem anomalous," the Court said, "to hold that the hirer is liable for compensation only if the contractor lacks the required license, and that he would not be liable if the contractor were licensed, the justification is apparent in that the Legislature has sought to assure that both licensed and unlicensed contractors and their employees will have compensation should they be injured on the job."

Implications for the Construction Industry

The Court of Appeal’s holding in the Mendoza case reinforces the doctrine that an unlicensed contractor can sue an employer in tort – that a contractor is not an employee for workers’ compensation purposes does not mean he is not one for litigation purposes. Additionally, it serves as a powerful reminder that owners, as well as contractors, should always check the license status of contractors with whom they work to avoid complications and unnecessary surprises. Although owners and contractors oftentimes have insurance policies that may cover liability for an unlicensed contractor’s injuries, there is always the possibility of inadequate coverage, especially if the injuries are serious. The status of a contractor’s license can be easily determined through the California State Licensing Board’s website at www.cslb.ca.gov.

Scott Douglass is a partner in Farella Braun + Martel’s where his practice focuses on construction and surety law.  He has a background in engineering and construction, and uses this experience in a variety of cases representing owners, general contractors, subcontractors, and a major Asian-based steel fabricator in the context of private and public construction projects.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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