The Expert Podcast

As a licensed contractor, you probably run into situations where a client says, "Look, I got this lower quote from somebody else. I got a better bid, a better offer." You come to find out these are people who are not licensed as contractors. They don't have insurance, they don't have Surety bonds, and they don't have the right documentation. Here's a really good case of where a sheriff in Central Florida did a sting operation. They went out and put ads or contacted people who were doing work on houses and said, "Look, we need to have a renovation done, a roof done," and had people give them quotes and bids. These are the people they found who were allegedly unlicensed, or they were licensed but didn't have the right kind of work comp insurance for their business.

This is important for customers and clients who are looking to hire someone to do work on their property. If they don't have the right insurance and somebody gets hurt or injured, you could be liable. If someone falls down and breaks their leg, you could be liable for hiring an unlicensed or uninsured contractor. The sheriff's office did this sting to try to get some of these unlicensed operations off the streets. If you're a legitimate contractor doing business the right way, it's going to cost you more money to do work because you have to pay these bills—insurance, Surety bonds, work comp, all these other fees, and your license fee. Whereas someone who doesn’t have all this might cut corners and offer a lower price. However, there’s more risk for the customer.

In most cases, when someone is operating without a license, there’s a reason for it. It's not just that they didn't want to pay the license fee. They might not be quite as experienced. Any good contractor or skilled tradesperson could get a job instantly at a legitimate contracting company and make more money than they could doing odd jobs as a handyman. The problem is many times they can't get a job because they may have a criminal background, a drug problem, or can't pass a drug test. These people do handyman jobs and odd jobs. I'm not judging whether or not that's good or not, but it does put people at risk—even if they do a good job.

As a licensed contractor, you may be aware of this. You may have had applicants who came to you wanting to work, but you can't hire them because they may have a criminal record, some type of background that doesn’t allow them to be bonded, or they may not be reliable and show up. So now these people are out there competing against legitimate contractors. The legitimate contractor may not be trying to gouge customers, but their price is going to be higher because they have to hire more quality people. They pay a higher hourly rate because the people who work cheap usually do so for a reason—they can't get a job anywhere else.

This sting was just the tip of the iceberg. We've seen in some markets where there are hundreds of unlicensed contractors doing work. So, if you're a potential client, how do you prevent this? Well, anytime someone comes to you to do work, make sure they have a license they can show you. Make sure they have insurance and can show you. Verify the insurance by calling the insurance company to make sure the insurance is still valid. Many times, what they do is get insurance and then cancel it.