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Construction Law

Kent Lang

Licensed Contractor, Unlicensed Work

The Arizona Court of Appeals rules that a licensed contractor can sue to collect only for work covered by its license.

 

On a construction job, it is not unusual for a licensed subcontractor to perform additional services that fall outside the scope of its license. In many instances, the unlicensed work is incidental to the main focus of the services for which the sub is licensed and is requested by the general contractor as a matter of convenience.

 

Piece Work and the FLSA

This article appeared in the September 2015 issue of "The Construction Advisor" published by Lang & Klain, P.C.


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However, a recent case involving a general contractor that used the performance of unlicensed services as an excuse not to pay a subcontractor for even his licensed work illustrates the risks of venturing beyond the license’s scope.

Dispute

A general contractor, Armor Designs, hired a licensed electrical subcontractor, Antonio Chavira, to disassemble equipment at Armor’s plant in Phoenix. The work was completed, and Armor paid Chavira in full.

Armor then hired Chavira to reinstall the same equipment at Armor’s new plant. After Chavira completed the installation work – some electrical, some not – Armor refused to pay him, claiming that 18 of the 77 invoiced tasks for which he sought payment were outside of his license.

Chavira sued Armor for breach of contract. In Superior Court, Armor argued that A.R.S. § 32-1153 barred Chavira from using the courts to collect because he had performed significant work for which he had no license.

A.R.S. § 32-1153 states:

No contractor [shall] maintain any action in any court of the state for collection of compensation for the performance of any act for which a license is required ... without ... proving that the contracting party ... was a duly licensed contractor when the contract sued upon was entered into and when the alleged cause of action arose.

The trial court dismissed Chavira’s lawsuit, and he appealed.

Appeal

The sole issue in Chavira’s appeal was whether A.R.S. § 32-1153 did indeed bar him from suing to recover any payment for work he performed if some of the work was not covered by his license.

Chavira argued that, because he was a licensed electrical contractor when he entered into the contract with Armor and during the time he did the work, he should be allowed to recover payment for, at least, his electrical work.

Armor countered that, because Chavira was not licensed to perform all of the work he performed, the statute barred him from recovering for any of his work.

The Court did not buy Armor’s argument. While acknowledging that the “plain language of § 32-1153 prohibits an unlicensed contractor from bringing an action to recover payment for unlicensed acts,” the Court of Appeals also cited prior cases in which it found that

“the plain language of the statute allows a licensed contractor, or one who has substantially complied with the licensing requirements ... to sue for payment for work performed under the license.”

The Court sent the case back to Superior Court, where Chavira could “pursue his breach of contract claim against Armor for the value of the work that was completed under his license.”

Lesson for Contractors

While the Court’s ruling was a partial victory for Chavira, it sends a clear message to contractors that working outside the confines of your license is risky business.

You can sue a non-payer in an attempt to get your money, but your recovery will not include work for which you are not properly licensed.