California law imposes severe penalties on unlicensed contractors, including mandatory disgorgement of all compensation paid under Business and Professions Code §7031(b), potential treble damages, criminal penalties (misdemeanor charges, fines up to $15,000, imprisonment), and civil penalties of $200 to $15,000 per offense. Property owners who hire an unlicensed contractor—even unknowingly—can recover all money paid. This guide explains every available remedy, how to calculate total recovery, key deadlines, and step-by-step guidance for pursuing a claim in 2026.
What Is the Disgorgement Remedy Under B&P §7031(b)?
Disgorgement is California’s most powerful remedy against unlicensed contractors. Under Business and Professions Code §7031(b), any person who uses the services of an unlicensed contractor may bring a lawsuit to recover all compensation paid to that contractor for performance of any act or contract requiring a license. The statute operates as both a “shield” and a “sword” for consumers.
The reach of this remedy is sweeping. Courts have held that disgorgement applies to all compensation—including amounts paid for both labor and materials—regardless of whether the contractor’s work was satisfactory. Even if the property owner knew the contractor was unlicensed and encouraged the work, disgorgement remains available. California’s Supreme Court has ruled that unlicensed contractors remain subject to full disgorgement even if they were induced to enter the contract by a false promise to pay.
Critically, the contractor need not have been completely unlicensed for disgorgement to apply. If the contractor was not properly licensed “at all times” during performance of the work, the full disgorgement remedy is triggered. Even a brief lapse in licensure—such as failure to renew on time or a temporary bond deficiency—can result in a contractor forfeiting all compensation received for the entire project.
What Is the Substantial Compliance Exception?
The one narrow escape hatch for contractors is the “substantial compliance” exception under B&P §7031(e). A contractor may argue at an evidentiary hearing that they were in substantial compliance with licensure requirements if they can demonstrate they had a valid license at some point, the lapse was inadvertent or technical in nature, and they acted promptly to correct the deficiency. However, courts have interpreted this exception very narrowly, and the burden is entirely on the contractor to prove compliance.
What Are Treble Damages for Unlicensed Contractor Work?
Beyond disgorgement, property owners may pursue additional damages when an unlicensed contractor’s work causes harm. Treble damages—meaning triple the actual damages suffered—may be available under several legal theories.
California Civil Code §3345 provides for treble damages when a defendant targets a senior citizen or disabled person through unfair or deceptive practices. If an unlicensed contractor takes advantage of a vulnerable adult, the court can award up to three times the actual damages.
Additionally, Business and Professions Code §17200 (California’s Unfair Competition Law) allows courts to order restitution for unlawful, unfair, or fraudulent business practices. Operating without a license constitutes an unlawful business practice, and courts may award enhanced remedies when the conduct is particularly egregious—such as when a contractor deliberately conceals their unlicensed status.
What Criminal Penalties Do Unlicensed Contractors Face?
California treats unlicensed contracting as a criminal offense under Business and Professions Code §7028. The penalties escalate with each subsequent violation.
| Offense | Penalty Type | Fine | Jail Time |
| First offense | Misdemeanor | Up to $5,000 | Up to 6 months |
| Second offense | Misdemeanor | 20% of contract price or $5,000 | Mandatory 90 days |
| Using another’s license | Felony | Varies | State prison |
| Disaster area fraud | Felony | Up to $10,000 | Up to 3 years |
In addition to fines and incarceration, courts may order restitution to compensate victims for actual economic losses. The restitution obligation is separate from, and in addition to, the disgorgement remedy available in civil court.
What Civil Penalties Can the CSLB Impose?
The Contractors State License Board (CSLB) has authority to impose administrative civil penalties of $200 to $15,000 per offense against unlicensed contractors under Business and Professions Code §§7028.6, 7028.7, and 7028.13. The CSLB’s Statewide Investigative Fraud Team (SWIFT) proactively conducts undercover sting operations and construction site sweeps across California each week to identify licensing violations.
SWIFT operations have resulted in hundreds of citations and arrests annually. In recent years, the CSLB has intensified enforcement in wildfire and disaster recovery zones, where unlicensed contractors frequently target vulnerable homeowners. Individuals caught contracting without a license in a state or federal natural disaster area face felony charges.
The CSLB also revokes 400 to 500 licenses annually for egregious violations of the Contractors’ State License Law, and it maintains a public database of violators accessible through its website.
How Do You Calculate Total Recovery Against an Unlicensed Contractor?
The total recovery available to a property owner who hired an unlicensed contractor can be substantial. Here is how to calculate the potential recovery:
- Disgorgement: All compensation paid to the unlicensed contractor under B&P §7031(b), including payments for both labor and materials.
- Actual damages: The cost to repair or complete defective or unfinished work, including hiring a licensed contractor to redo the work.
- Treble damages: Up to three times actual damages if the contractor targeted a senior citizen or disabled person (Civil Code §3345), or enhanced remedies under the Unfair Competition Law (B&P §17200).
- Penalties: Criminal fines of up to $5,000-$15,000 per offense, plus administrative penalties of $200-$15,000.
- Attorney’s fees and costs: Recoverable in many unlicensed contractor actions, particularly under B&P §17200.
For example, if you paid an unlicensed contractor $80,000 and suffered $30,000 in damages from defective work, your potential recovery could include $80,000 in disgorgement plus $30,000 in actual damages plus attorney’s fees—totaling well over $100,000 before any treble damages or penalty enhancements.
What Is the Statute of Limitations for Disgorgement Claims?
The statute of limitations for disgorgement claims under B&P §7031(b) is one year. This one-year clock begins to run from the date of completion or cessation of the contractor’s performance on the project—not from the date you discover the contractor was unlicensed.
This is one of the most critical deadlines in California construction law. Two California appellate courts—in Eisenberg Village of Los Angeles Jewish Home for the Aging v. Suffolk Construction Co. (2020) and San Francisco CDC LLC v. Webcor Construction L.P. (2021)—have confirmed that the one-year limitations period is not subject to equitable tolling or delayed discovery. The rationale is that disgorgement is classified as a penalty rather than damages, and claimants have a duty to investigate whether their contractor was properly licensed.
If you suspect your contractor was unlicensed, act immediately. Consult a construction attorney to verify the contractor’s license status and preserve your right to file a claim before the one-year window closes.
What Steps Should You Take to Pursue a Claim Against an Unlicensed Contractor?
- Verify the contractor’s license status: Search the CSLB’s online license lookup tool at cslb.ca.gov to confirm whether the contractor held a valid, active license at all times during the work.
- Gather documentation: Collect all contracts, invoices, payment records (checks, credit card statements, wire transfers), photographs of work performed, correspondence, and any permits pulled for the project.
- Calculate your total payments: Add up every payment made to the contractor, including deposits, progress payments, and final payment—this is your disgorgement amount.
- File a CSLB complaint: Report the unlicensed contractor to the CSLB to trigger an investigation and potential administrative penalties. See our guide on filing a CSLB complaint for step-by-step instructions.
- Consult a construction attorney: A qualified attorney can evaluate your total potential recovery, including disgorgement, treble damages, and penalties, and advise on the best litigation strategy.
- File a civil lawsuit within one year: Remember the strict one-year statute of limitations for disgorgement claims. Your attorney should file the action promptly after cessation or completion of the contractor’s work.
- Consider a B&P §17200 claim: An unfair business practices claim can provide additional remedies and may have a longer statute of limitations for non-disgorgement claims.
What Recent Legislative Changes Affect Unlicensed Contractor Penalties?
California has continued to tighten enforcement against unlicensed contractors. In particular, enforcement in disaster recovery zones has become a top priority following the 2025 Los Angeles wildfire season. Authorities have increased criminal penalties for contractor fraud in declared disaster areas, with potential sentences of up to three years in prison and fines up to $10,000.
The CSLB has also expanded its SWIFT operations and increased collaboration with local law enforcement agencies to conduct sting operations targeting unlicensed contractors who solicit work in disaster-affected communities. Property owners should verify contractor licenses before signing any agreement—particularly in post-disaster rebuilding situations where unlicensed operators are most active.
Talk to a California Construction Law Attorney
Bay Legal’s construction law team helps owners, contractors, and subcontractors resolve disputes and protect their rights under California law. Whether you need help pursuing a claim, filing a complaint, or understanding your legal options, we can help.
Schedule a consultation: call (650) 668-8000 or visit baylegal.com/practice-areas/construction-law/.
Frequently Asked Questions
Q: Can I recover money from an unlicensed contractor in California?
A: Yes. Under Business and Professions Code §7031(b), you can bring a disgorgement action to recover all compensation paid to an unlicensed contractor—including amounts paid for labor and materials—regardless of whether the work was satisfactory.
Q: What is the statute of limitations for disgorgement claims against unlicensed contractors?
A: California courts have held that the statute of limitations for disgorgement claims under B&P §7031(b) is one year from the date of completion or cessation of the contractor’s performance on the project. No equitable tolling or delayed discovery applies.
Q: What criminal penalties do unlicensed contractors face in California?
A: A first offense is a misdemeanor carrying up to six months in jail and/or a $5,000 fine. Second offenses require a mandatory 90-day jail sentence plus a fine of 20% of the contract price or $5,000. Felony charges apply for using another person’s license or working in disaster areas.
Q: What are treble damages for unlicensed contractor work?
A: Under certain circumstances, property owners who suffer harm from unlicensed contractor work may pursue treble (triple) damages in addition to disgorgement. This typically arises under California Civil Code §3345 or through unfair business practices claims under B&P §17200.
Q: Does the contractor have to be completely unlicensed for disgorgement to apply?
A: No. Disgorgement under B&P §7031(b) applies if the contractor was not properly licensed ‘at all times’ during performance. Even a brief lapse in licensure can trigger full disgorgement of all compensation paid.
Disclaimer: This content is for informational purposes only and does not constitute legal advice. Results depend on the specific facts of each situation. No attorney-client relationship is created by reading this article. Contact Bay Legal, PC for advice on your specific situation.
