Historically the "B" licensed contractor (aka general contractor) could only contract for projects involving at least three unrelated building trades. Then along came the Home Depot case throwing the Contractors State License Board’s licensing scheme into disarray by holding that a "B" licensed contractor could take any project, even those involving a single trade. The Home Depot case virtually wiped out the need for obtaining the specialty "C" license (aka subcontractor). Recently, the state legislature has saved the day (or ruined it depending upon your perspective) by enacting legislation which resurrects the "C" license by limiting (somewhat) the contracting ability of the "B" license holder.

The case of Home Depot v. Contractors’ State License Bd. (41 Cal.App.4th 1592) was decided in 1996, and was a topic of much debate and many articles at that time. For those of you who are new to the California construction industry or somehow managed to miss all the hoopla over the case in 1996, a quick summary of the Home Depot case follows. Home Depot, the mega home improvement chain, offers an installation program to its customers. Through this program a particular customer hired Home Depot to install a water heater. Home Depot, holding only a "B" license, hired a licensed "C" subcontractor to perform the installation. The customer then complained to the Licensing Board (CSLB) that Home Depot was performing contracts which involved only one trade, and the CSLB charged Home Depot with a license violation. Home Depot appealed to a higher court, and won a ruling which stated that "B" contractors could bid and take any job, big or small. And this was the law of the land (for about eighteen months).

After Home Depot, several attempts were made by the legislature to redefine the "B" contractor. The first of these attempts to make it through both houses of the legislature was killed by Governor Pete Wilson. In his rejection of the bill, Governor Wilson claimed that he would not accept any legislation which limited the ability of the "B" license holder to contract for projects, except possibly those trades involving health or safety issues. After stringent lobbying efforts, and compromises by all sides, the California Legislature and Governor Wilson reached an agreement and SB857 was passed and signed into law on October 8, 1997. This legislation modified the definition of the "B"license as provided at Business & Professions Code section 7057. This section now reads, in part, as follows:

". . . [A] general contractor shall not take a prime contract for any project involving trades other than framing or carpentry unless the prime contract requires at least two unrelated building trades or crafts other than framing or carpentry, or unless the general building contractor holds the appropriate specialty license or subcontracts with an appropriately licensed specialty contractor to perform the work."

There are several key changes in the post-Home Depot legislation from what existed previously. First, the new legislation lowered the minimum number of different trades requirement from three to two. Second, the code now allows a "B" license holder to accept contracts for less than two trades if they hold the appropriate "C" license or subcontract with a licensed specialty contractor to perform the work. Thus, the Home Depot type contractors, taking contracts for a single trade and subbing them out, are still in business. The only exceptions to the general rules involve contracts for (1) "C-16" fire protection and "C-57" well drilling which are required to be done by an appropriately licensed specialty contractor, and (2) framing and carpentry which may be performed by a "B" contractor without meeting the two unrelated trades requirement nor require the hiring of a licensed "C" contractor.

In the aftermath of Home Depot many feared that the specialty contractor, skilled in a particular trade, would become a thing of the past with most contractors obtaining a "B" license to do any and all work available (whether they had the skill or knowledge necessary for such work). Such monumental changes never happened, and now it appears that California has enacted legislation which should appease the fears of most, if not all, specialty "C" contractors. The Home Depot case is now dead, supplanted by legislation which resurrected the specialty "C" contractor.

This article is intended to provide the reader with general information regarding current legal issues. It is not to be construed as specific legal advice or as a substitute for the need to seek competent legal advice on specific legal matters.