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CSLB Sting Operations Continue To Defy Common Sense

Sal Rodriguez
September 5, 2013, 8:12am

Since July 30th, the Contractor State License Board (CSLB) has conducted at least four sting operations in Napa, Hanford, and Roseville, California. The CSLB, which refers to itself as “as one of the leading consumer protection agencies in the United States,” conducts sting operations on a weekly basis aimed at unlicensed contractors and licensed contractors who bid on projects they aren’t licensed to work on.

The most recent stings resulted in the arrests of 34 unlicensed contractors, all of whom given notices to appear (NTAs) in court for unlicensed contracting. Most were also charged with “illegal advertising,” and some for requesting an “excessive down payment. Most of the unlicensed contractors were busted for being willing to do landscaping or painting, but unwilling to abide by the onerous and excessive licensing requirements established by the CSLB.

Several licensed contractors were also busted in the sting operations for “using a business name not listed with CSLB, failing to include license numbers in advertisements, and submitting a bid for work outside the job classification.” For example, one licensed electrician was busted because he “submitted a bid for painting.” The licensed contractors caught in the sting face possible administrative citations, which can range from fines to suspended licenses.

The CSLB’s Statewide Investigative Fraud Team (SWIFT) partners with local police departments and district attorney’s to set up To-Catch-A-Predator-style sting operations. Members of SWIFT pose as homeowners seeking various home improvement projects and contact unlicensed contractors through online boards as Craigslist or business cards. Unlicensed contractors who arrive at the home are then arrested and charged with various misdemeanors.

Unlicensed contractors who advertise through the Internet face fines of between $700 and $1000 for the misdemeanor crime of “advertising by unlicensed person.” For bidding on projects above $500 without a license, unlicensed contractors can face up to six months imprisonment and/or a fine of $5000 for a first time offense. Subsequent convictions face steeper punishments, with a third conviction potentially resulting in  “imprisonment in a county jail for not more than one year or less than 90 days.”

In California, aspiring contractors must meet the following requirements:

To apply for a contractor’s license, individuals must have more than $2,500 worth of operating capital (defined as assets minus liabilities), submit an application along with $300, as well as at least four years of experience. To meet this four-year requirement, individuals may take three years of schooling, followed by one year of work experience under the supervision of a CSLB-approved contractor. Once applicants meet this requirement, they must submit fingerprints for a background check. Applicants must disclose any criminal history, even if the record was sealed, expunged or reduced; failure to do this is grounds for being rejected at this stage. Applicants then must take two exams: a Law and Business examination, and an exam covering the specific classification being applied for...This is just the licensing part, and speaks to no other regulations, insurances, permits and certifications they may need.

Not surprisingly, many Californians simply refuse to abide by licensing requirements that the state sets. As an indication of this, there have been over 300 arrests of unlicensed contractors in California so far this year.

These licensing requirements are justified by the government on the basis that government licensing of (presently 300,000) contractors is necessary to protect the health and safety of consumers. Considering that issues such as fraud or harm caused by negligence are already crimes, the regulatory scheme of occupational licensing is a preemptive one. However, considering that the targets of these sting operations are generally people willing to work on fairly low risk home improvement projects, such as house painting or landscaping, the necessity of government regulation is difficult to discern.

Cases of actual harm, such as fraud and negligent work, are distinct from being willing and able to work on a project without government permission. Blanket criminalization of economic activity wrongly punishes individuals who may be just as competent and professional as those who had the resources to navigate and fulfill regulatory obligations. Consequently, it limits competition and therefore the freedom of choice of consumers.

Even more ridiculous is the idea that homeowners aren't capable of assessing the quality and competence of someone they're willing to pay thousands of dollars to work on their home. If an individual is willing to hire someone to work on a project who doesn't have a license or certification, but offers a lower price than those that do, they should be allowed to make that choice.  There isn't any need for government to step in and criminalize any component of that decision making process.

For more on Reason's work on occupational licensing, click here.



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