What Happens When a Utah Contractor Works Without a License?

By Joseph G. Ballstaedt
801-365-1021
joe@snjlegal.com

Doing construction work in Utah without a proper license is a risky business. This article discusses what construction work requires a license and what work is exempt from requiring a license. This article also explains the general rule that prevents an unlicensed contractor from suing for unpaid work on a construction job. It then explains the four exceptions to that general rule. Lastly, this article explains what punishments the Utah Division of Professional Licensing (DOPL) can impose if it discovers that a person or company is working without a license when a license is required.

Most People Working in Construction Trades Need a License

Under Utah law, anyone working in the “construction
trades” or working as a “contractor” must be licensed or exempt from licensure (as
explained later in this article). The term “construction trades” includes essentially any
work that improves real property. The term “contractor” includes any person or entity that, for compensation, does any of the following:

·         Builds a structure on its own property for the purposes of selling it.

·         Represents or advertises itself as a contractor.

·         Does any activity that constitutes the definition of “construction trades” (see above).

·         Acts as a construction manager, construction consultant, construction
assistant, or other similar role.

These definitions are so broad that it is wise to obtain a license to be
safe—or at least discuss whether a license is required with an attorney and the
Utah Division of Professional Licensing (DOPL). That said, I have spoken with
representatives of DOPL who have, in my opinion, misinterpreted Utah laws
requiring licensure. If a lawsuit arises and licensure becomes an issue, a
court might not give weight to whether DOPL gave you bad advice. The court
could apply harsh Utah laws against you (see an explanation of those laws
below). But if DOPL tells somebody a license isn’t required, DOPL isn’t likely
going to punish that person (see an explanation of those punishments below). 

Also, there are other professions and work that require a license, which are not discussed in this article. Before engaging in any other work that might require a license, it is wise to review the Utah Construction Trades Licensing Act and talk with both a competent attorney and DOPL about whether a license is required.

Parties Who Are Exempt from Licensure

Utah laws and regulations provide many exceptions from licensure. The following are a few entities or individuals who don’t need a license:

·         People who install carpet, mirrors, or certain
weatherstripping, or engage in other specifically identified activities that
do not “significantly impact the public health, safety and welfare.” A few of
these activities include tree removal, sandblasting, installing satellite
dishes, locksmithing, and window washing, to name a few. 

·         Contractors who do certain projects with a value of less than $3,000 (the handyman exception). 

·         The sole owner of a property doing working on its property (with certain limits on how many structures can be built each year). A person who sells, but does not install, personal property that can easily be attached to real property, such as a dishwasher or microwave oven (sometimes known as the Sears exception). 

·         Certain plumbers or electricians engaged in minor work. 

·         Delivery persons who replace certain appliances (gas ranges and dryers and outdoor gas barbeques and patio heaters). 

·         Those working for the United States or other governmental entity. 

·         Certain public utilities.

This list is by no means exhaustive. You should talk with an attorney or DOPL for more clarification, and you can also review the laws linked above.

The General Rule of Unlicensed Work

Utah law establishes a general rule that punishes contractors who work without a license: the contractor cannot sue in Utah courts for payment or any other relief. That’s a big deal. If an unlicensed contractor does $100,000 of work for a homeowner, and the homeowner decides to stiff the contractor, even if the contractor’s work is superb, the general rule may leave the unlicensed contractor without a legal remedy. That contractor may not ever get paid. Proper licensure (or being exempt from licensure) is an essential element of any lawsuit.

Utah courts have explained two reasons for this harsh general rule: 1) it protects the public from incompetent contractors and 2) it punishes contractors who are required to obtain a license but fail to do so. But Utah courts have also established four exceptions to the general rule, which eases the severity of the rule.

Four Exceptions to the General Rule

Despite the harsh general rule that contractors can’t get paid for unlicensed work, Utah courts have identified four exceptions. Rigidly applying the general rule is not necessary if the public is otherwise protected from the harm that rule seeks to avoid. Those exceptions are as follows:

1. Beneficiary’s Expertise Exception: Unlicensed contractors can recover unpaid amounts if the party who receives the work has skill or expertise in the type of work performed. For example, if an unlicensed HVAC contractor provides HVAC work to a building owned by an HVAC company (although an unlikely scenario), the HVAC company would still likely be required to pay the unlicensed HVAC contractor for its work. The reasoning here is that the HVAC company can protect itself from any incompetence of the unlicensed HVAC contractor because the HVAC company knows all about HVAC work. Of course, this exception assumes that the HVAC company will oversee or be aware of the specific work the unlicensed HVAC contractor performs, which may not be the case, but certainly the HVAC company will be better able to spot and halt incompetent work.

2. Licensed Subcontractor Exception: If an unlicensed general contractor hires a licensed subcontractor to do work, the unlicensed general contractor may be able to sue the hiring party for payment. This is because the licensed subcontractor’s supervision or labor protects the hiring party from the unlicensed contractor’s incompetence. For example, a homeowner may hire an unlicensed general contractor to remodel its home, and the unlicensed contractor may hire a licensed framer to do the framing, a licensed plumber to do the plumbing, a licensed electrician to do the electrical work, etc. If every party who performed work is licensed, the homeowner is, in theory, protected from the unlicensed contractor’s incompetence.

3. Minor Reason Exception: If the reason a contractor does not have a proper license is due to a minor or trivial factor that does not affect the unlicensed contractor’s ability to perform its work, the unlicensed contractor can often recover unpaid amounts on a construction job, despite the general rule that unlicensed contractors are barred from such recovery. Such a situation may occur where a contractor mistakenly, but in good faith, believes he can perform work under a partner’s license, which is not the case, or where a qualified contractor mistakenly allows his license to lapse by failing to pay a simple renewal fee.

4. Reliance/Bond Considerations: In deciding whether to apply the harsh general rule of prohibiting unlicensed contractors from recovering unpaid amounts on a construction job, Utah courts have considered whether the contractor posted a performance bond and whether the contracting party relied on the contractor’s representations that he was properly licensed. This fourth exception, as explained by Utah courts, seems to be a squishy factor and suggests that parties can argue other factors that may justify payment, despite the general rule.

Punishments from the Utah Department of Professional Licensing (DOPL)

Just because a contractor qualifies for an exception to the general rule that unlicensed contractors cannot recover unpaid amounts on a construction job, that doesn’t mean the contractor is free from any punishment. The Division of Professional Licensing (DOPL) can punish anyone who engages in “unlawful conduct” by working without a license if no exemption from licensure applies. These penalties include:

·         A class A misdemeanor.

·         A citation.

·         Fines up to $1,000 for the first offense, $2,000 for a second offense, and $2,000 a day for any subsequent offense.

·         A cease-and-desist order.

If you believe somebody is working without a license, you can file a complaint with DOPL, who will investigate the matter and determine whether a license was required and whether it will seek a fine or some other punishment.

Help with Licensing Issues

The above article does not by any means discuss all the issues and nuances of construction licenses or punishments and consequences related to failure to have a license. If you are working with a party that may need a license but does not have one, or if you have legal issues or questions due to not being licensed, I am happy to help. I offer a free consultation. My direct dial is 801-365-1021, and you can e-mail me at joe@snjlegal.com. You can also contact the Division of Professional Licensing, which is generally very willing to help answer questions. It is best to get help rather than simply keep working with an unlicensed contractor or do work yourself when a license may be required.

 

 joseph-g-ballstaedt

Joseph G. Ballstaedt
801-365-1021
joe@snjlegal.com

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