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How to Deal With Unlicensed Contractors on the Job

Licensure is a very important concept within the world of contracting, but many who operate in this field will run into unlicensed contractors during their dealings. And while many such contractors are in that position by mistake or because they’re new and simply didn’t understand their requirements here, there are also some rarer but notable cases where contractors will intentionally attempt to skirt the law and skim business from others in the industry.

At Contractors School, we’re happy to assist numerous reputable contractors with starting a contracting business or managing their existing business. We’ll help you learn the ins and outs of the industry, including how to deal with unlicensed contractors or any other dishonest parties you come across in your dealings. Why are licenses so important in the contracting world, why do some contractors not have them (either intentionally or unintentionally), and how should licensed contractors react when they come across unlicensed operators? Here’s a full breakdown.

Why Licensure is Vital in the Contracting World

As we all know, licenses are required to legally offer contracting services in many areas. But beyond the legal implications and potential penalties for working without one, getting licensed is a sign of professionalism and an assurance that you’re doing things correctly.

It requires research into local laws, demonstrating financial stability, passing an examination or other tests, and staying up-to-date with continuing education requirements. All of this is necessary to make sure that contractors are operating safely, responsibly and within the law.

And within the contracting world, there are several types of licenses that you may need based on the type and scope of work you plan to do.

Innocent Mistakes Do Happen

Before proceeding further, it’s important to note that many unlicensed contractors are in this position by mistake rather than on purpose. When first starting out, many contractors don’t fully understand the requirements for licensure in the general industry or their specific field; this world can be intimidating when you’re first entering it, as even many licensed contractors will remember from when they started out.

In cases where a contractor is unlicensed by mistake, or is actively working to obtain licensure, it’s important to have some discretion. Such contractors certainly should not be viewed in the same way as those who know the law and are well aware they should be licensed, but specifically choose to break the law and go unlicensed for personal profit. Similarly, if a previously unlicensed contractor who ended up in that position by mistake takes the steps to legitimize themselves and become licensed, there’s no reason not to work with them in the future if you’re in need of their services.

The Dangers of Unlicensed Contractors

There are several specific downsides of intentionally unlicensed contractors operating in contracting spaces:

  • Siphoning business from licensed contractors: Many unlicensed contractors offer services at lower rates, undercutting the prices of their competition who do things the right way. This causes licensed contractors to suffer in terms of both revenue and reputation.
  • Lack of knowledge: Without a license, unlicensed contractors are more likely to lack the necessary skills and knowledge needed for proper contracting work.
  • Risk of injury: Unlicensed contractors may lack the proper safety measures or insurance needed to protect either themselves or the customer from harm.

Are Licenses from Other States Valid?

One question that’s often raised during these conversations is whether a contractors license from a different state qualifies a given contractor to perform work somewhere else. The answer: It depends on the states in question.

In Idaho, for instance, it’s possible for a contractor with a license from another state to use that license to simplify the process of obtaining licensure here – but it should be noted that simply the license alone from another state does not qualify a contractor here. They will have to go through the steps required to obtain a license within this state before they can perform work.

This is one of several areas here that simply highlights the importance of speaking for a licensing specialist if you’re at all unsure of your situation. Rules will vary from state to state, so ensuring you’ve confirmed your status with a professional is valuable.

Always Show Your License for New Jobs

As a general rule, it’s always important to show your license when you’re bidding for a new job. This helps to demonstrate that you can legally perform the work and also shows potential customers that you’re able to do it in an effective, professional manner.

Not only will this set you apart from any unlicensed contractors who are offering services at lower rates, but it also ensures that you won’t be competing against any other licensed contractors who may have a better understanding of the industry and technology than you do.

Never Hire Unlicensed Subcontractors

If your contracting business sometimes requires the help of subcontractors, it’s important to never hire someone who is unlicensed. This can have serious legal consequences for your business and open you up to potential lawsuits from customers if any problems arise during the job.

Not only this, but you risk seriously damaging your reputation as a contractor if you hire someone without a license.

How to Avoid Unlicensed Contractors

The best way to steer clear of unlicensed contractors is to always check the credentials of anyone you plan to work with on a job. This includes looking into their licenses, insurance and any other relevant documents before making your final decision. You can also do a quick online search to make sure there have been no reports of any shady dealings or other problems associated with a particular contractor.

Reporting Unlicensed Contractors

If you ever find yourself in the unfortunate situation of being undercut by an unlicensed contractor who is clearly doing this intentionally, it’s important to know that you can take action. Every state has methods for reporting unlicensed contractors, and the general steps for doing so will go as follows:

  • Gather information: Firstly, before you make any reports, make sure to collect all of the necessary information about the contractor in question. This includes their name, address and contact information.
  • File a complaint: Depending on your state’s specific laws, you can file a complaint with either your local contracting or licensing board or with a consumer protection agency.
  • Be prepared for legal action: If you go ahead and file a complaint, be prepared for the potential of legal action. This is necessary to ensure that all contractors are held accountable and follow the rules.

For our Utah clients, for example, reporting unlicensed contractors should be done via a complaint filing through the Utah Department of Commerce Division of Occupational and Professional Licensing. This form can be found online.

By following these steps, you can help ensure a fair and honest playing field for all contractors in the industry. This is beneficial not only to you personally, but also for customers looking for reliable and professional services.

For more here, or to learn about any of our contractor license courses or other contractor resources, speak to our team at Contractors School today.


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