Law Review: Unlicensed workers can cost you money
Have you ever hired someone to help around the house or yard? Is it legal to hire a friend to trim trees, repair or add-on a deck, repair or replace a roof, do extensive landscaping, patch or pave your driveway, paint the house, upgrade the wiring in the attic, or build a shed out back?
The answer is – all of those activities require a contractor’s license. If you hire an unlicensed individual to perform those services, as owner you are responsible for withholding and should the worker get injured. (Under the handyman exception, unlicensed workers may perform construction services under $500.)
You will also be in violation of Cal Occupational Safety and Health Administration (OSHA) requirements.
Here’s an example: the Dishongs hired Rosas, their usual landscape maintenance guy, to trim a tree branch overhanging their roof for a price in addition to his regular maintenance fee. As luck would have it he fell and injured his back. Because the tree was over 15 feet in height, Rosas was required to have a contractor’s license.
Rosas filed a workers’ compensation claim under the Dishong’s homeowners policy. That is important information for owners: Homeowner’s policies have workers’ comp coverage in certain circumstances.
The workers’ comp claim was denied because Rosas had not met the minimum number of 52 hours during the preceding 90 days to qualify as a household employee. Rosas then sued the Dishongs for his injuries, which everyone agreed amounted to $100,000.
The labor code requires a license for anyone performing work for which a contractor’s license is required. Rosas did not have a contractor’s license, so under the law he was deemed to be an employee of the Dishongs. He legally could not be an independent contractor.
The Dishongs had the worst of both worlds. Their gardener was required to have a license because he cut a tree over 15 feet tall, so by law he was deemed to be an employee, subjecting them to liability, but the workers’ comp coverage on their homeowner’s policy required a minimum amount of hours before he could be deemed an employee entitled to workers’ compensation.
Fortunately the Dishongs’ homeowner’s liability policy covered Rosas’ claim.
Although it did not come up in this case, there are times when a homeowner is able to hire maintenance workers who are not employees and who do not have contractor’s licenses. You can hire someone without a contractor’s license to mow your lawn and do gardening, for example. Make sure they own their business and equipment and have their own insurance. They work on their schedule, not yours as owner. They determine the manner of performing the work. There are several tests to determine the distinction between employees and independent contractors. It can be a gray area.
If you are performing services that require a contractor’s license, you either have a license or you are presumed to be an employee. If you are providing services that do not require a contractor’s license, such as lawn mowing and yard maintenance, you can be an independent contractor (without a contractor’s license) or an employee. Owners are responsible for employees withholding and uninsured injuries.
The second big issue in this case was whether Rosas was bound by OSHA rules of safety. OSHA is generally applicable to any employment but an exception is “household domestic service.” This case defined for the first time in California that “household domestic service” includes not only the usual household chores but also private residence yard maintenance work, including tree trimming, for which there is no OSHA requirement.
Legitimate independent contractors (licensed or no license necessary) may be paid in cash, which must be reported to the IRS, of course.
If the Dishongs had paid Rosas in cash, they would have been in trouble with the government for not withholding, because under the law he was an employee because he did not have the required contractor’s license to cut 15 foot tall trees.
Remember contractors, it is improper to pay licensed contractors without withholding when they are really your employees: under your direct control, set hours and treated like your other employees – even if you don’t believe me and everyone does it.
Jim Porter is an attorney with Porter /Simon, with offices in Truckee and Reno. He is a mediator and was the Governor’s appointee to the Bipartisan McPherson Commission and the California Fair Political Practices Commission. He may be reached at firstname.lastname@example.org or at the firm’s web site http://www.portersimon.com
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