Posted on December 26th, 2019
Below is a complete transcript of this video.
What’s up fellow entrepreneurs. It’s John Fagerholm again and in this video I wanted to talk about a labor board hearing that I was at yesterday and I think it was a really good result.
So I just wanted to let everybody know what happened or just give you a general idea of what happened and a particular tool that I used that I think anybody could use if it’s the right circumstance.
So let me give you some background on it. Basically this was an issue of a contractor that didn’t do a good job and so my client who owns apartment buildings didn’t pay the entire contract.
What he did was pay half up front and then he was supposed to pay the other half when it was finished, but since it was a poor job he didn’t pay the second half.
So the contractor then filed a labor board claim saying that he was an employee and he wasn’t paid wages.
So I’ve had this problem before and believe it or not, the labor board will say that a contractor is an employee if the contractor isn’t licensed.
So if it’s somebody unlicensed, they’ll say that it’s an employee and then they’ll give them the same rights that an employee has. And in fact they’ll even honor workers’ comp claims.
So it could be someone that you hired out of the Home Depot parking lot and you bring them in to do construction in your home and then if they get injured, they can file a workers’ comp claim and you’ll be held liable for that. A lot of people don’t know that, but it’s true.
But anyway, let me get back to this tool. So there’s a very specific code and I’ll read it to you. It’s Business and Professions code 7031 and let me throw my glasses on and read to you what it says.
It says… I mean it’s a long code, but I’m just going to read the part that’s pertinent here.
No person engaged in the business or acting in the capacity of a contractor may bring or maintain any action or recover in law or equity in any action in any court of this state for the collection of compensation, for the performance of any act or contract where a license is required by this chapter without alleging here she was duly licensed at the time during the performance or the act of the contract.
So in layman’s terms, what that means is if you’re acting as a contractor and you do contractor type work, construction type work, if you don’t have a license you don’t have any rights basically is what it’s saying.
So you can’t enforce a contract for contractor work in any court in California if you don’t have a license.
So based on that, now I’ve used this in the past and it hasn’t worked and I’ll kind of tell you the distinction.
I was even able to argue the distinction because the hearing officer at the labor board brought that distinction up and then I was able to get around what she said and I think the result is good.
So I had a previous case where it was an apartment owner and one of his tenants, he was knocking off some of the rent if he would act as a handyman and fix things and do things.
So I tried to use this particular code and say well he’s doing contractor work and since he’s not a licensed contractor, he’s not an employee. This is just a breach of contract.
And the labor board said, “No, because he’s basically being hired to do these particular things.” So in the case yesterday, the labor board said the same thing. “Well, no, it doesn’t matter that he’s an unlicensed contractor. He’s an employee according to the law.”
So my argument and my distinction to that was, well there’s a difference between someone that my client goes to and says, “Hey, I will pay you if you come in here and do this particular work for me, even though you’re unlicensed.” That potentially could be an employee. But in this case, this particular person is going around and marketing his services as a contractor.
He’s knocking on doors, making calls, whatever he’s doing and saying, “Hey, I can do all of this work as a contractor.” That’s completely different and the other part of this is even if you say he’s an employee, even if the labor board says, “No, it doesn’t matter, this guy’s an employee,” well this code is pretty specific.
If he’s doing contractor work and holding himself out as a contractor, he can’t enforce it. It doesn’t matter whether he’s an employee or not, he can’t enforce those rights.
So anyway, that’s what happened at the labor board yesterday. So I don’t have a decision yet, but I can tell by everything that was happening.
It’s kind of like if you were boxing or something in a match, you can kind of tell if you’re winning or losing and I have a pretty good feeling that we were winning.
And even in the end the hearing officer said, “Well whatever these results are, whether I think you’re owed money or not, I don’t believe that we have jurisdiction to hear this anyway.”
So anyway. Hopefully, this particular code, which I’ll read it back to you again. It’s Business and Professions code 7031, will come in handy for someone out there. But my advice is if you’re going to hire a contractor to do anything for you, that you get a licensed contractor.
I know it costs a little more, but just the sheer number of employers that get hit with this, and when I say employer, I’m saying that in air quotes, even though I’m not doing air quotes because you could just be a homeowner and hire someone to come in and do a job for you and the law will say that he or she is an employee.
And workers’ comp, especially, I see most of the homeowner type of claims become uninsured workers’ comp claims and so to me it just doesn’t make sense to even do that.
If somebody knocks on your door and they want to fix something for you, or paint your house or whatever, ask them, do you have a license?
And if they don’t, I think you shoo them away and you find someone that has a license.
All right. So until next time, be productive.
