According to Mr. Steve Dale, the Executive Director of the National Low Voltage Contractors Association, unlicensed electrical contracting is on the rise, and building owners and managers are vulnerable. Unlicensed contracting is a crime in most states, counties, and cities. There are statutes, laws, and rules to protect the public against unlicensed contracting. Mr. Dale: “I’ve spoken to many building owners and managers who have indicated they have unknowingly hired an unlicensed, illegal contractor, and it had become their worst nightmare. Unlicensed contractors in many cases are slick talkers, good communicators, and what we hear most from their victims is; ‘I really liked the guy and the price, until…”
Electrical contracting requires a license in most states, which includes high and low voltage wiring, raceways, and devices installed in residents and businesses. These electrical systems consist of 120 volt line voltage work, such as indoor and outdoor lighting and receptacles, and low voltage work (typically under 90 volts) encompassing solar systems, network and phone systems, security and fire alarm systems, camera, CCTV, access control systems, business and home automation systems, gate control systems, landscape lighting and more.
A common scam of the unlicensed contractor is to show the potential client a local tax or business occupational license number, which is not a regulatory license or certificate of competency as it only covers the privilege of engaging in or managing a business.
Unlicensed contractor’s agreements and contracts are not binding in most states, meaning if a person performing the work is unlicensed, they have no recourse against the client if they are not paid because they have conducted the work illegally. The customer is not legally obligated to pay an unlicensed contractor, as an unlicensed contractor or subcontractor shall have no liens in their favor. That might sound great to the client, however it can also be a double-edged sword as the unlicensed contractor is not under the jurisdiction of a licensing board, so the client has less recourse against them if the work is not being properly performed, inspected, or they walk off the job. Unlicensed contractors are often poorly trained, the work they do can be shoddy, and they may use inferior materials and violate federal, state, or local building codes. This can result in the customer having to hire a licensed contractor to complete the repairs correctly and pay more money for the job than if they originally hired a licensed contractor. If the unlicensed contractor fails to pay his or her subcontractors or suppliers, the client may be legally forced to pay them, even though they have already paid the contractor. If, on the other hand, you have an issue with a legally qualified and educated licensed contractor, an infraction puts their license at risk. These contractors work hard to obtain licensure compliance and worry about an infraction issued by the licensing board. The client has legal recourse against the licensed contractor’s license for nonperformance, poor workmanship, breaking the contract, et cetera. The licensing board has jurisdiction and can take action to remedy the infraction in the client’s favor. They also may impose sanctions, probation, fines, and board-ordered restitution against the licensed contractor. Licensed contractors are aware of this, and the last thing they want to do is face the licensing board for harming a customer.
A few other important items to know are: it is illegal in most jurisdictions for an unlicensed company to simply hire a licensed company to perform the contracting work. For example, a company with a contract outside a state must also hold an electrical contractors license in the state they are conducting business, even if they hire a licensed installing company to perform the work inside the state. It comes down to who has the contract with the customer and who the customer is paying for the work. For example, if the customer is doing business with ABC Group, then ABC Group must hold an electrical contractors license in the state, county, or city in which the work is taking place. If not, then the licensed company who takes on the work from the out-of-state unlicensed company is aiding and abetting the out-of-state company. The licensed company is risking their license if they perform the work. Additionally, it is illegal in most states for a licensed company to hire another company or subcontractors/independent contractors who are unlicensed. W2 employees are the only individuals covered under a licensed company. Licensed contractors cannot hire subcontractors to perform electrical work unless they also have a qualifying license.
Mr. Dale advises building managers to have the contractor complete a prequalification Contractor Check List and then do due diligence on what is being presented by the contractor. “Do not believe all you are told without verification.” states Mr. Dale.
Here are a few tips that should help building owners and managers avoid falling victim:
- Verify the contractor holds the required professional license for the scope of work under the company name they have on the contract you are signing. This can easily be verified via the state, county, or city building department’s website or with a phone call.
- Verify to see if an installation permit is required for the work being performed. In most cases, electrical work requires a permit. The permit inspection helps protect you from shoddy work and improper installation of wiring and devices. Unlicensed contractors will not be able to pull a permit under the company named on the contract if their company is not licensed. So, what they may do if they are unlicensed is either attempt to convince you that a permit is not required, say it is too costly, or they may pay a licensed contractor to pull the permit for them. This is known as aiding and abetting an unlicensed contractor and is illegal and could put the building owner in a legal bind. So, if they are required to pull a permit, you can verify this by contacting the local building department in the county or city where the work is being performed.
- Verify all required insurance and bonds. Don’t just trust the contractor if they say they are insured or bonded. Ask for a copy of the current policies in force. Some required insurances and bonds may include; workers compensation coverage, commercial general liability, umbrella liability, errors & omissions, builder’s risk insurance, professional liability, and contractor’s pollution coverage as well as performance, payment, and surety bonds.
The hiring of an unlicensed contractor could cost a building owner thousands of dollars in legal fines and liability. The purpose of licensing requirements is to protect the public against those who have not fulfilled the requirements set forth by the licensing boards, thus reducing unprofessional conduct and ensuring the safety of your building and occupants. Licensed individuals are required to meet educational standards which involves understanding laws, regulations, and safety codes. Additional requirements include passing criminal background and credit checks, having documented work experience in the trade, fingerprinting, and more. The mission of the National Low Voltage Contractors Association is to Promote Safety, Code Compliance, Licensing, Professionalism, and Prosperity in the Low Voltage Electrical Industry. The NLVCA is a not-for-profit association dedicated to supporting its members, protecting public safety, and developing and instituting programs for the betterment of the electrical industry. Members of the NLVCA are recognized as Licensed Professional Low Voltage Electrical Contractors. Their clients can be reassured the service they are provided is being done by a licensed professional who is properly educated, trained, experienced, and performing the work legally.
The NLVCA can refer professional, legally licensed electrical contractors in all 50 states. For specifics, send your request via email to License@NLVCA.org or give us a call at 407-801-8553.
Steve Dale – Executive Director SteveDale@NLVCA.org
Visit www.nlvca.org/licensing/index.php for electrical contractor license requirements by State.
Visit www.nlvca.org/file_complaint.php to anonymously report unlicensed activity.
NOTES: A state licensed contractor can conduct electrical contracting throughout the entire state. Some county and city building departments may also have local licensing available in their jurisdiction, which covers only to the county or city border. Permitting is processed at the county and city building department when a permit is required on a job. The county or city requires the license holder to register at the building department before being issued a work permit. There are state, county, and city enforcement code officers that issue citations to the contractor for unlicensed activity. There are county and city enforcement officers who inspect permitted work and issue citations for violations of work not properly performed. During and at completion of the work being performed, the contractor schedules inspection(s) of the work with the building department and an enforcement officer is dispatched to verify that the work meets the electrical safety and fire codes. Enforcement officers can be electrical inspectors, code officers, or fire marshals and all may inspect and enforce state and local licensing and permitting requirements.
