Those are words no one ever wants to hear. Hearing them is no doubt worse when, in fact, you don't have one. In the last two months, two construction projects were brought to a halt when an unlicensed subcontractor was discovered. On April 11, the California Contractors State License Board (CSLB) issued a press release confirming that work on the drywall portion of the $150 million, 45-story Pinnacle Towers construction project in downtown San Diego has stopped after the CSLB determined the drywall sub-contractor is not properly licensed as a contractor in California. Yesterday, it announced (CSLB #14-15) that it has ordered Nova Drywall Systems Inc., based in Vancouver, British Columbia, to halt work on a $100 million apartment and retail center that is being constructed by Onni Group, a Canadian developer, in downtown Los Angeles after finding that Nova Drywall is not properly licensed in California; the drywall subcontract is reportedly worth $5.5 million. Nova Drywall applied for a CSLB license last January, but it has not yet completed the licensing process.

Acting on a tip, on May 7, the CSLB and California Department of Industrial Relations/Division of Labor Standards Enforcement (DLSE) investigators made an unannounced visit to the 32-story tower being constructed at 888 South Olive Street. An inspection revealed that Nova Drywall does not have a contractor license for the drywall work being performed by its 28 employees on the project since January. Onni Contracting California has a valid California contractor license.

California law defines "contractor" broadly to include "any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, parking facility, railroad, excavation or other structure, project, development or improvement, or to do any part thereof ... " (emphasis added). "Contractor" also includes subcontractors and specialty contractors.

The DLSE cited Nova Drywall for performing services without a contractor's license, including a $180,400 fine based on when it started work and the number of its employees on the project. The CSLB levied a $15,000 civil penalty, its maximum, against Nova Drywall for acting in the capacity of a contractor without a license, as permitted by Bus. & Prof. Code § 7028.7. In turn, DLSE fined Onni Contracting California$10,800 for contracting with an unlicensed contractor, as permitted by Bus. & Prof. §7118. The CSLB warned that Onni Contracting California may also face CSLB administrative action and a fine for contracting with a non-licensee.

Steve Sands, the CSLB Registrar of Contractors, warned: "To perform contracting work in California, a company must be licensed by CSLB," and "This company should not have been working until its license was in place." In turn, Julie A. Su, the California Labor Commissioner, further warned: "Those who hire contractors are obligated to make sure they are dealing with contractors who play by the rules. If they do not, we will work with CSLB and other law enforcement to level the playing field."