California Business and Professions Code §7031 — The Most Powerful Remedy Against an Unlicensed Contractor

The Full Text of What §7031 Actually Says

California Business and Professions Code §7031(a) provides that no person shall bring or maintain any action to recover compensation for the performance of any act or contract where a license is required without alleging and proving that he or she was duly licensed at all times during the performance of the act or contract. In plain terms: an unlicensed contractor cannot sue you for payment.

§7031(b) — the disgorgement provision — goes further. It provides that a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract. This is the right to get your money back.

The California Supreme Court confirmed the absolute nature of this rule in Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988. The court held that §7031 applies regardless of equitable considerations — meaning a contractor cannot argue "but the work was good" or "you knew I was unlicensed" as a defense. The statute is designed to be harsh in order to deter unlicensed contracting.

What Qualifies as "Unlicensed" Under §7031

The statute applies in more situations than most homeowners realize. A contractor is considered unlicensed for purposes of §7031 in all of the following situations:

• No license at all — the person performed work without any CSLB license
• Expired license — the license existed but had lapsed during the period of work
• Suspended license — the license was suspended by the CSLB during the work period, whether or not you knew about the suspension
• Wrong classification — the contractor held a valid license in one trade category but performed work requiring a different classification (e.g., a general contractor performing specialty electrical work without a C-10 electrical license)
• License held by another person or entity — the license was in another person's name and the person performing your work was using someone else's license number
• Qualifying individual requirement — the company's Responsible Managing Employee (RME) or Responsible Managing Officer (RMO) left the company and the license was technically invalid during the period they worked on your project

Each of these situations is worth investigating. Many homeowners who hired a seemingly legitimate company later discover that a key qualifier had left the company, or that the license had lapsed for a few months during the exact period of their renovation.

How to Verify License Status — Step by Step

1. Go to cslb.ca.gov and click "Check a License"
2. Enter the contractor's license number, name, or business name
3. On the results page, note: the current status, the license issue date, the expiration date, the classification(s), and the name of the licensee
4. Click "License Details" to see the complete history, including any suspensions or disciplinary actions
5. Check whether the classification covers the type of work performed on your project
6. Screenshot the results with the date and time visible
7. If the license was active at the time you check but you need to know if it was active during your project, call the CSLB directly at (800) 321-2752 and ask them to confirm the license status on a specific date — they maintain historical records

How §7031 Works with Other Legal Remedies

A §7031 disgorgement claim can be brought simultaneously with other claims. You do not have to choose between §7031 and your other remedies. Common combinations include:

• §7031 disgorgement + breach of contract — recover all money paid plus any additional damages from defective work
• §7031 disgorgement + fraud — if the contractor misrepresented their license status, add a fraud claim for additional damages including potential punitive damages
• §7031 disgorgement + CSLB complaint — a CSLB complaint runs concurrently and can result in criminal referral; no bond claim is available since unlicensed contractors are not required to have bonds

Note that unlicensed contractors are not required to carry a contractor's bond — so a bond claim is generally not available when the contractor was unlicensed. The §7031 disgorgement lawsuit and any applicable fraud claims are your primary financial remedies.

The 2-Year Statute of Limitations

Claims under Business and Professions Code §7031 must be brought within two years from the date you discovered — or reasonably should have discovered — that the contractor was unlicensed. This discovery rule means the clock starts when you learn of the unlicensed status, not necessarily when the work was performed.

However, do not assume you have two years and wait. Evidence can disappear. Contractors can move, dissolve their businesses, or transfer assets. The sooner you act, the more options you have. If you believe your contractor may have been unlicensed, contact Bay Legal PC for a free initial consultation to evaluate your situation and timeline.