California contractor license: a $1,000 exemption, a $25,000 bond

In most states, working without a license gets you a fine — three states run this three different ways. In California it can cost you the entire contract — twice.

Business and Professions Code § 7031 does two things that have no real equivalent elsewhere. Subsection (a) stops you suing for your money. Subsection (b) lets the customer sue for theirs back. Together they turn a licensing lapse into a total loss on a completed job.

Everything else in this article is downstream of that.

Section 7031(a): you cannot sue, regardless of the merits

"Except as provided in subdivision (e), 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 that they were a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person …"

Three phrases carry all the weight.

"At all times during the performance." A license that lapsed for three weeks in the middle of a nine-month job is not a license held at all times. Renewal dates are not administrative trivia in California.

"Regardless of the merits." The work can be flawless, the debt undisputed, the customer plainly unjust. It makes no difference.

"Any action … in law or equity." Quantum meruit, unjust enrichment, breach of contract — the door is closed on all of them.

Subsection (c) closes the side door too: a security interest taken to secure payment "is unenforceable if the person performing the act or contract was not a duly licensed contractor at all times during the performance."

Section 7031(b): the customer can recover everything paid

"Except as provided in subdivision (e), 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."

All compensation paid. Not the overpayment, not the difference between price and value, not the cost to remedy. The whole amount, on a job that may have been completed to the customer's satisfaction.

Who has to prove what

Subsection (d) puts the burden in a specific place:

"If licensure or proper licensure is controverted, then proof of licensure pursuant to this section shall be made by production of a verified certificate of licensure from the Contractors State License Board which establishes that the individual or entity bringing the action was duly licensed in the proper classification of contractors at all times during the performance … When licensure or proper licensure is controverted, the burden of proof to establish licensure or proper licensure shall be on the licensee."

"In the proper classification." Holding a B when the work required a C-something is a licensing problem with 7031 consequences, not a paperwork detail.

Substantial compliance: a narrow door

Subsection (e) rules out the doctrine of substantial compliance entirely for anyone "who has never been a duly licensed contractor in this state". For everyone else, a court may find substantial compliance after an evidentiary hearing if it is shown that the person:

"(1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure."

Three conditions, all of them about diligence rather than luck. A license that lapsed because nobody watched the calendar does not obviously satisfy (2).

The $1,000 exemption, and how easily it evaporates

Section 7048 exempts small work:

"This chapter does not apply to a work or operation on one undertaking or project by one or more contracts if the aggregate contract price for labor, materials, and all other items is less than one thousand dollars ($1,000)."

Subject to two conditions in the same section: the work must be "of casual, minor, or inconsequential nature", and "the work or operation does not require a building permit."

And the exemption is lost where:

1. the person "employs another person to perform, or assist in performing, the work or operation";
2. the person "advertises or puts out a sign or card or other device that might indicate to the public that the person is a contractor";
3. "the work of construction is only a part of a larger or major operation";
4. there is "a division of the operation … made in contracts of amounts less than one thousand dollars ($1,000) for the purpose of evasion."

The text quoted here is the version amended effective 1 January 2026. Any guide still quoting $500 is out of date.

Condition (2) is the one that makes the exemption nearly useless in practice. A van with your business name on it is arguably a device indicating to the public that you are a contractor.

The criminal side: section 7028

Section 7028(a) makes it a misdemeanor, unless exempted, "for a person to engage in the business of, or act in the capacity of, a contractor within this state" while not licensed, or while performing covered acts under a license suspended for failure to pay a civil penalty, comply with an order of correction under § 7090.1, or resolve outstanding final liabilities under § 7145.5.

The penalties escalate sharply:

Subsection (d) adds that this penalty "is cumulative to the penalties available under all other laws of this state" — which is to say, it does not replace 7031.

Getting the license: classifications, exams, bond

Classifications. The CSLB issues general engineering contractor (A), general building contractor (B), residential remodeling contractor (B-2) and specialty contractor (C) with more than fifty specialty subcategories, plus asbestos (ASB) and hazardous substance removal (HAZ) certifications.

Exams. The board states that "an applicant must take and pass two examinations: Law and business" and "Trade", with an exception for the C-61 limited specialty classification. Holding the licence in the right classification also does other work: it is one of the conditions that keeps a construction subcontract out of California's ABC test for worker classification — see contractor or employee: three tests, one California carve-out.

Bond. Section 7071.6(a):

"The board shall require as a condition precedent to the issuance, reinstatement, reactivation, renewal, or continued maintenance of a license, that the applicant or licensee file or have on file a contractor's bond in the sum of twenty-five thousand dollars ($25,000)."

Note "continued maintenance". A bond that lapses is a licensing problem, and a licensing problem is a § 7031 problem.

Section 7071.6(b) caps the surety's aggregate liability on non-priority claims at $7,500, reserving the balance for the beneficiaries specified in § 7071.5(a). Subsection (c) excuses a bond while a license is inactive on the board's records. And subsection (d) allows the board to require double the bond as a condition precedent to licensure where the applicant has been convicted under § 7028 or cited under § 7028.7, the citation has become a final order, and the violation "constituted a substantial injury to the public."

This version of § 7071.6 became operative on 1 January 2023.

And once you are licensed: pay your subs in seven days

The same seven-day rule sits inside a wider set of penalties that differ by state: state prompt payment laws, the same 7 days, three penalties. Section 7108.5(a):

"A prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor's interest therein."

Where there is a good faith dispute, the payer "may withhold no more than 150 percent of the disputed amount."

The consequences (subsections (b) to (d)): a violation is cause for disciplinary action and subjects the licensee to "a penalty, payable to the subcontractor, of 2 percent of the amount due per month for every month that payment is not made"; in an action for wrongfully withheld funds "the prevailing party shall be entitled to his or her attorney's fees and costs"; and these sanctions are separate from and in addition to all other civil, administrative or criminal remedies.

Subsection (e) makes it apply "to all private works of improvement and to all public works of improvement", except where Public Contract Code § 10262 applies.

The three-line summary

1. Renew on time, keep the bond current, and hold the right classification — all three are what § 7031 means by "duly licensed at all times".
2. Do not rely on § 7048 unless the job is under $1,000, needs no permit, involves no helper and you do not advertise as a contractor.
3. Pay your subs within seven days of each progress payment, or pay 2 percent a month plus their attorney's fees.

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Current as of August 29, 2026. This article describes California contractor licensing provisions and is not legal advice. It does not cover the experience requirements, the qualifying individual and responsible managing employee rules, workers' compensation certification, home improvement contract requirements, the disciplinary process, citations under § 7028.7, or the exceptions in § 7031 subdivisions (e) and (f) in full. Licensing law changes: the § 7048 text quoted was amended effective January 1, 2026 and the § 7071.6 text became operative January 1, 2023. The sections quoted were checked on the date shown. Consult the CSLB or a California construction attorney before relying on any of this.

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