Below is a guide to Contractor License Law in California (“CCLL”) designed to help contractors quickly navigate certain statutes along with the full legal text. California Contractor License Law can be found in the California Business and Professions Code, Division 3, Chapter 9, beginning with Section 7000. California Contractors Insurance Services specializes in bonds and insurance for licensed contractors in California so we will focus on pertinent sections of Articles 3, 5 and 9 relating to Exemptions, Licensing and Renewal of Licenses. The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. Feel free to call with any questions or visit Capitol Services Inc., who assists Contractors with licensing.

Last updated October 2017.

Who is required to obtain a contractor license in California?

All contractors in California are required to be licensed unless they meet one of the exemptions. Exemptions from licensing include, but are not limited to: (1) authorized representatives of the federal, state or local government, (2) public utilities, (3) certain property owners working on their own property, and (4) individuals performing small projects that cost less than $500.   

How does the California contractor license application process work?

To become licensed, an applicant must submit a completed Application for Original Contractor License and $330.00 application fee to the California Contractor State License Board (“CSLB”). Each application must list a “Qualifying Individual”, which is an owner or Responsible Managing Employee/Officer of the applicant. 
 
A Responsible Managing Employee (RME) is a permanent employee that is not an officer, general partner or sole owner of a licensed contracting business that provides the necessary qualifications of the contractor license classification because the business’ owners cannot meet the criteria of the trade. An RME must be actively engaged in the operation for at least 32 hours per week or 80% of the total weekly hours the business is operating. A Responsible Managing Officer (RMO) is an officer holding less than 10% of the voting rights of a corporation or LLC in California who provides the necessary qualifications of the contractor license classification because the corporation’s other owners do not possess the criteria for the trade. 
 
The application must specify the license classification applied for. Only one classification may be requested on an original application when an examination is required. 
 
Below is a list of the various license classifications from the application:
 
The Qualifying Individual must also show they have the required level of experience to become licensed through submission of a Certificate of Work Experience, and Construction Project Experience form if applicable. The Qualifying Individual must document at least 4 years of journeyman-level or higher experience in the classification for which they are applying obtained within the last 10 years.
 
In addition, applicants are required to submit a full set of fingerprints for the CSLB to conduct a criminal history record check. 

Prior to becoming licensed, the Qualifying Individual must pass a written exam administered by the CSLB to demonstrate knowledge of contractor law, the business of contracting and the contractor’s trade. 
 
The CSLB will notify the applicant within 15 days after approval of the application that a license may be issued to them once the initial license fee of $200.00 is paid. Upon payment of the initial license fee, the CSLB will issue the license to the applicant. 

Are any California contractor license applicants not required to take the written license examination?

No exam is required of a Qualifying Individual for a license application if in the five-years prior to the application for licensure, the individual has passed the exam for the same classification applied for, or has served as the Qualifying Individual for a licensee whose license was in good standing at any time during the five-years prior to the application for licensure and in the same classification applied for. 

Certain Qualifying Individuals that are either (i) personnel of a licensee, (ii) immediate family members of a licensee,(iii) a formerly licensed contractor that is now a U.S. government contractor currently exempt from state licensure, or (iv) an employee of a corporation or a limited liability company seeking to replace its former Qualifying Individual, may also be eligible for a waiver from the contractor licensing written exam if certain requirements are met. The primary requirement for such waivers is that the Qualifying Individual has actively engaged in the licensee’s business for five of the seven years immediately preceding the application for licensure in the same classifications in which the licensee is or was licensed. 

Existing licensees may also be granted a waiver from the exam requirement for an additional class of license if they possess satisfactory experience in the classification applied for and certain additional conditions are met. In addition, applicants already licensed with the same classification in another state in good standing for the previous five years may be eligible for an exam waiver if certain additional conditions are met. 

Those applying for licensure based on waiver or exemption from the exam should complete the Application for Original Contractor License – Examination Waiver instead of the standard application.
  

What surety bond is required for all contractor license applicants?

Every contractor is required to file a $15,000 Contractor’s Bond with the California Contractors State License Board (“CSLB”) to activate, reinstate or renew their license and must maintain such bond during the term of their license. 

Who can make a claim against a Contractor’s Bond?

Homeowners of personal family residences and property owners of single-family dwellings not for sale at the time of damages may file a claim for damages against a licensee’s bond. In addition, the Contractor’s Bond benefits a person damaged by a licensed contractor’s violation of the California Contractor License Law or by fraud of the licensee in the execution or performance of a construction contract. Also, employees owed wages by a licensee may make a claim against the licensee’s Contractor’s Bond. 

What are the additional bonding requirements for a contractor formed as an LLC?

In addition to the $15,000 Contractor’s Bond, contractors formed as a limited liability company are required to file a $100,000 LLC Employee/Worker Bond with the CSLB.

Who can make a claim against a LLC Employee/Worker Bond?

The $100,000 license bond required of contractors organized as limited liability companies strictly benefits workers employed by or contracted to work for an LLC owed wages by the LLC licensee.

What are the additional insurance requirements for a contractor licensee that is an LLC?

LLC licensees with five or less personnel must have $1,000,000 in liability insurance coverage. For each additional personnel, the amount increases $100,000, up to a maximum of $5 million. An LLC licensee that fails to comply with these requirements is suspended until the LLC complies.

When is a Bond of Qualifying Individual required?

In addition to the $15,000 Contractor’s Bond, a Bond Of Qualifying Individual is required when the Qualifying Individual for a contractor license application is a Responsible Managing Employee, or Responsible Managing Owner/Manager/Member holding less than 10% voting stock/membership interest of the entity seeking licensure. 

Who can make a claim against a Bond of Qualifying Individual?

Homeowners of personal family residences and property owners of single-family dwellings not for sale at the time of damages may file a claim for damages against a Bond of Qualifying Individual. In addition, the Bond of Qualifying Individual benefits a person damaged by a licensed contractor’s violation of the California Contractor License Law or by fraud of the licensee in the execution or performance of a construction contract. Also, employees owed wages by a licensee may make a claim against the Bond of Qualifying Individual. 

When is a Contractor Disciplinary Bond required?

A Contractor Disciplinary Bond is required when a licensee, qualifying individual, or primary owner or manager of a licensee that has been subject to a CSLB disciplinary action resulting in suspension or revocation of the licensee’s license is seeking a new license, or continuation, renewal, or restoration of a license. The bond limit of a Contractor Disciplinary Bond is set by the CSLB based on the seriousness of the violation with a minimum of $15,000 up to ten times that amount i.e. $150,000. The bond shall remain on file with the CSLB at least two years and for any additional time that the CSLB determines. The bond period runs only while the license is current, active, and in good standing, and is extended until the license has been current, active, and in good standing for the required period.

Within what time frame after the effective date of a bond is it still acceptable to the CSLB?

90 days unless the licensee shows that failure to have a bond on file was due to circumstances beyond the licensee's control. Bonds received by CSLB within these parameters will be considered accepted as of the effective date of the bond. 

Within what timeframe can a claim be brought against a Contractor’s Bond, LLC Bond, Bond of Qualifying Individual or Disciplinary Bond?

Actions against a Contractor’s Bond, LLC Bond or Bond of Qualifying Individual, except for claims for unpaid wages, must be brought within two years after expiration of the license period in which the damages occurred. Actions against a Disciplinary Bond, except for claims for unpaid wages, must be brought within two years of the last date the Disciplinary Bond was required. Claims for unpaid wages against all of these bonds must be brought within six months of discovery but no later than two years after the wages were required to be paid.

What happens when a surety company has to make payment on a claim against a bond required of a contractor licensee?

If a surety company has to make payment on a claim against a bond, the surety company is required to notify the CSLB within 30 days of such payment. Prior to such claim settlement payment, the surety company has to provide the licensee at least 15 days for the licensee to protest the payment of such amounts. If a protest is filed, the CSLB will investigate it and file disciplinary action against the licensee if there is evidence the surety company sustained a loss because a good faith payment was made to mitigate damages incurred by the party bringing the claim. If the licensee does not protest the payment, the licensee is required to submit proof of payment, of any amounts owed to the surety company for a judgment or admitted claim, to the CSLB within 90 days from the date of notification by the CSLB to submit such proof or the license will be suspended at the end of the 90 days. A license suspension for failure to reimburse the surety remains on the contractor’s license record indefinitely and a contractor can not have his or her license renewed, reissued, or reinstated until the surety company is reimbursed. A licensee that has any unsatisfied final judgments against them may also be required to post a bond with the CSLB sufficient to guarantee payment of an amount equal to any such judgments prior to the CSLB accepting an application for licensure, renewal, reinstatement, or to change officers or other personnel of record, from such applicant.

Can contractors advertise they have a license bond?

No. Advertising that a contractor has a required license bond is grounds for suspension of the contractor’s license. 

What happens if a licensed contractor fails to maintain a required license bond?

The contractor’s license can be suspended or revoked by the CSLB. 

Is a licensed contractor required to notify the CSLB if they are convicted of a felony/crime?

Yes, a licensed contractor must notify the CSLB within 90 days of being convicted of any felony, or any other crime substantially related to the duties of being a contractor.

Do contractors have to display their licenses?

Yes, a contractor must display the license in the contractor’s main office or primary place of business.

Can a contractor’s license be transferred to another person or entity?

No, a contractor’s license may not be transferred to any other person or entity but a license number may be reissued or reassigned to a different person or entity under certain circumstances and if certain conditions are met.

What events can lead to the cancellation of a contractor's license?

The death of an individual licensee, death or dissociation of a general partner or sole limited partner of a partnership licensee, or dissolution of a partnership licensee will result in the cancellation of the license but the CSLB may continue the license upon request by remaining family members/partners within 90 days so projects can be completed. A corporation or LLC’s license is canceled upon dissolution, merger or surrender of of its right to do business in California. Partnerships, corporations and LLC’s must notify the CSLB of any of these events or risk being subject to disciplinary action. A licensee can also voluntarily surrender a license to the CSLB, which will cancel it.

What happens if a licensed entity fails to remain in remain registered or in good standing with the Secretary of State?

If a corporation or LLC fails to remain registered or in good standing with the Secretary of State, the entity’s contractor license is automatically suspended. The license can be reinstated once the entity returns to being registered and in good standing.

What is the term of a California contractor license and how is it renewed?

Contractor licenses expire two years from the last day of the month the license was issued or two years from the date a renewed license last expired. Licenses can be renewed by applying with the CSLB for a renewal using the required form and paying the renewal fee prior to the expiration of the license. An expired license may be renewed any time within five years after expiration.

Can a contractor inactivate his or her license if they are not doing any work requiring a license?

Yes, a contractor can inactivate his or her license for up to 4 years and does not have to meet the bonding requirements during that period. The CSLB issues an inactive license to the contractor. The contractor can reactivate his or her license prior to the 4 year period and the license exam is not be required.