Significant change has once again come to California’s construction industry with the introduction of Assembly Bill (AB) 2622. Effective January 1, 2025, AB 2622 expands the “minor work” exemption of the contractor licensure requirements of the Business and Professions Code. The new law allows unlicensed contractors to perform up to $1,000 of work, instead of $500. Any work that exceeds $1,000 must be completed by a licensed contractor. Unlicensed contractors who exceed this threshold can face significant fines and disciplinary actions or proceedings, including being charged with a misdemeanor.

Under the new reform of Section 7027.2 of the Business and Professions Code, an unlicensed person can advertise for construction or improvement work if the total price of the contract (to include labor, material and all other items required by the project) is less than $1,000. The new law allows unlicensed contractors to perform up to $1,000 of work on projects that are considered to be casual, minor, or inconsequential in nature, assuming that the work does not require a building permit. As additional protection, the Contractors State License Board (“CSLB”) monitors and investigates consumer complaints, particularly for complaints involving work under $1,000.

The new law does not allow an unlicensed contractor to perform work if such work is part of a larger construction project or if the unlicensed contractor employs another person to perform or assist in performing minor work. And an unlicensed contractor cannot misrepresent their licensure status in an attempt to deceive consumers.

 

Impact on Licensed Contractors and Consumers

This increased exemption for unlicensed contractors largely reflects the economic reality, as the cost of construction materials and services have increased. The new law provides a balance between the consumer’s needs and the construction industry’s standards. The current state of the economy has created conditions where basic and minor work is ever more expensive. And this is why AB 2622 was passed into law – to provide consumers an increased opportunity to hire unlicensed contractors for smaller jobs, at potentially reduced costs, while allowing licensed contractors to focus their expertise and qualifications on relatively more expensive and complex jobs.

The new law largely applies to small home improvement projects that can be done by handymen: projects and jobs that more skilled, licensed contractors typically do not perform. In addition, the new law aims to protect consumers by requiring a licensed contractor for construction work that could affect the building’s safety or structure. In short, the new law maintains the industry standard by requiring more complex work to be performed by licensed contractors.

 

Conclusion

Ultimately, AB 2622 is a win for licensed contractors, handymen, and consumers alike. It provides consumers with additional affordability when undertaking small-scale home-improvement and construction projects, while ensuring that consumers select licensed contractors with the requisite expertise and standards required for larger-scale construction projects.

As a business owner navigating through the construction industry, ensure that you and your employees are in compliance with the new law and that your subcontractors are properly licensed under the CSLB when undertaking larger projects. Conducting business in accordance with AB 2622 protects your company and elevates California’s construction industry standards.

 

Brett M. Johnson, Esq. is an associate with the law firm of Dunn DeSantis Walt & Kendrick. Brett’s practice is focused on the representation of businesses that are involved in disputes and in counseling business owners about employment law matters.

Dunn DeSantis Walt & Kendrick provides a broad spectrum of legal services to businesses of all sizes, from small, local start-ups and non-profits to large, national companies. DDWK’s real estate development and construction practice includes representing all segments of the development and construction industries on both private and public projects. 

You can find additional information and resources related to helping business owners and their businesses on the DDWK website.