Senate BillChaptered/SignedBusiness and Professions
SB 342: Contractors: unlicensed work.
What SB 342 does, verified October 2, 2026
This bill amends the contractors' state license law to allow individuals to recover compensation for work performed by an unlicensed contractor if they were a licensed contractor at the time the contract was executed and during the relevant portion of the contract's performance. Currently, a licensed contractor cannot recover compensation for work done by an unlicensed contractor, unless they were licensed at all times during the performance. This bill would change that rule, allowing licensed contractors to recover compensation for work done by unlicensed contractors if they were licensed at the time the contract was executed. The bill also changes the rules for individuals who hire unlicensed contractors, allowing them to recover only the portion of compensation paid to the unlicensed contractor for work performed during the time the contractor was unlicensed, rather than all compensa…
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Last action: Chaptered by Secretary of State. Chapter 967, Statutes of 2026. (2026-09-30)Alert me
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| Sep. 30, 2026 | Chaptered by Secretary of State. Chapter 967, Statutes of 2026. |
| Sep. 30, 2026 | Approved by the Governor. |
| Sep. 08, 2026 | Enrolled and presented to the Governor at 4 p.m. |
| Aug. 30, 2026 | Read third time. Passed. (Ayes 75. Noes 0. Page 6856.) Ordered to the Senate. |
| Aug. 30, 2026 | Assembly amendments concurred in. (Ayes 38. Noes 0.) Ordered to engrossing and enrolling. |
Latest bill textChaptered version, September 30, 2026 · 1,204 words
Senate Bill No. 342
CHAPTER 967
An act to amend Section 7031 of the Business and Professions Code, relating to professions and vocations.
[ Approved by Governor September 30, 2026. Filed with Secretary of State September 30, 2026. ]
LEGISLATIVE COUNSEL'S DIGEST
SB 342, Umberg. Contractors: unlicensed work.
Existing law, the Contractors State License Law, establishes the Contractors State License Board in the Department of Consumer Affairs to license and regulate contractors. Existing law prohibits a person engaging in the business or acting in the capacity of a contractor from recovering compensation for work performed that requires a contractor’s license unless the person was a duly licensed contractor at all times during the performance of the act or contract, except as specified.
This bill would further exempt from that prohibition an action for compensation arising from a contract for specified projects, including for a public work of improvement or a commercial or institutional construction project, and would, instead, authorize a person to maintain an action for compensation under one of those contracts if the person was a duly licensed contractor at the time the contract was executed and during the portion of the performance of the contract for which compensation is sought.
Existing law authorizes a person who uses the services of an unlicensed contractor to bring an action to recover all compensation paid to the unlicensed contractor for performance of any act or contract, except as provided.
This bill would additionally exempt from that authorization an action for compensation arising from a contract for specified projects, including for a public work of improvement or a commercial or institutional construction project, and would, instead, authorize a person to bring an action under one of those contracts to recover the portion of compensation paid to the unlicensed contractor for work performed during the time in which the contractor was unlicensed.
The people of the State of California do enact as follows:
SECTION 1.
Section 7031 of the Business and Professions Code is amended to read:7031.
(a) (1) Except as provided in paragraph (2) or 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.(2) Paragraph (1) shall not apply to either of the following:
(A) Any contractor who is individually licensed under this chapter but who fails to comply with Section 7029.
(B) (i) An action for compensation arising from a contract for any of the following:
(I) A public work of improvement.
(II) A commercial construction project.
(III) An institutional construction project.
(IV) Construction of a common interest development, as defined in Section 4100 of the Civil Code, if a tenant or resident is not a party to the contract.
(V) Construction of a multifamily residential project consisting of four or more units if a tenant or resident is not a party to the contract.
(ii) A person may maintain an action for compensation under this subparagraph if the person was a duly licensed contractor at the time the contract was executed and during the portion of the performance of the contract for which compensation is sought, without regard to the underlying merits of the cause of action.
(b) (1) Except as provided in paragraph (2) or 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.
(2) (A) Paragraph (1) does not apply to an action for compensation arising from a contract for any of the following:
(i) A public work of improvement.
(ii) A commercial construction project.
(iii) An institutional construction project.
(iv) Construction of a common interest development, as defined in Section 4100 of the Civil Code, if a tenant or resident is not a party to the contract.
(v) Construction of a multifamily residential project consisting of four or more units if a tenant or resident is not a party to the contract.
(B) A person may bring an action under this paragraph to recover the portion of compensation paid to the unlicensed contractor for work performed during the time in which the contractor was unlicensed.
(c) A security interest taken to secure any payment for the performance of any act or contract for which a license is required by this chapter is unenforceable if the person performing the act or contract was not a duly licensed contractor at all times during the performance of the act or contract.
(d) 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 of any act or contract covered by the action. Nothing in this subdivision shall require any person or entity controverting licensure or proper licensure to produce a verified certificate. When licensure or proper licensure is controverted, the burden of proof to establish licensure or proper licensure shall be on the licensee.
(e) The judicial doctrine of substantial compliance shall not apply under this section where the person who engaged in the business or acted in the capacity of a contractor has never been a duly licensed contractor in this state. However, notwithstanding subdivision (b) of Section 143, the court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (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.
(f) The exceptions to the prohibition against the application of the judicial doctrine of substantial compliance found in subdivision (e) shall apply to all contracts entered into on or after January 1, 1992, and to all actions or arbitrations arising therefrom, except that the amendments to subdivisions (e) and (f) enacted during the 1994 portion of the 1993–94 Regular Session of the Legislature shall not apply to either of the following:
(1) Any legal action or arbitration commenced prior to January 1, 1995, regardless of the date on which the parties entered into the contract.
(2) Any legal action or arbitration commenced on or after January 1, 1995, if the legal action or arbitration was commenced prior to January 1, 1995, and was subsequently dismissed.
Text of SB 342 as chaptered, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions