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REALTOR®: Homeowners Need to be Careful about Hiring Unlicensed Contractors

Sunday, October 1, 2006

A California court recently included a homeowner in its definition of "employer," sending a strong message to homeowners that they should be extremely careful about hiring unlicensed contractors.

"The case is significant to homeowners because it subjects them to potential liability if they hire an unlicensed contractor to perform work on their property for which a license is required, if that employee is injured on the job, even if the homeowner has workers' compensation coverage in place," said D. Kent Westerberg, an attorney with Atwood, Haiman & Westerberg in Saratoga.

In the case of Mendoza v. Brodeur (2006), a private homeowner hired an unlicensed contractor to replace the roof of his home. When the roofer became injured during the job, he sued the homeowner, seeking compensation for his injuries. The homeowner claimed the no-fault workers' compensation coverage from his homeowner's insurance applied, and that he was not responsible for the costs of the roofer's injuries. The California Court of Appeals disagreed.

Glenn Brodeur hired his neighbor Ernesto Mendoza, an unlicensed roofer, to replace the roof of his house. On his first day on the job, Mendoza fell from the roof, broke his leg and suffered other injuries. He then sued Brodeur, seeking compensation for his injuries.

Mendoza asserted he was an employee and, because he was not eligible for workers' compensation due to his limited amount of work hours with Brodeur, believed he could sue Brodeur. Brodeur, on the other hand, claimed Mendoza was not his employee because he was a contractor, and therefore, Mendoza could not sue him. He also claimed the no-fault workers' compensation coverage from his homeowner's insurance applied, and that he was not responsible for the costs of Mendoza's injuries. The trial court agreed and dismissed the case.

The Court of Appeals, however, reversed the trial court's decision and noted that California law says a person who hires an unlicensed individual to perform duties that require a license is in fact an "employer." Once an employment relationship is created, the hiring individual may be sued for any injuries sustained on the job. There is no workers' compensation protection for the homeowner in this case because Mendoza had not worked enough hours to be covered by it. The Appeals court then sent the case back to trial to determine the extent of the homeowner's liability to the injured worker.

"Hiring unlicensed contractors can expose homeowners to liability," said Westerberg. "As can be seen from the Mendoza case, simply having workers' compensation insurance is not enough to protect the homeowner. While most homeowners will probably continue to not be overly concerned about the contractors they hire to perform minimal tasks or work on relatively inexpensive projects, because in most cases, the chances of an injury or something going wrong are minimal, the Mendoza case reminds us of the problems that can arise when that one project goes awry."

Westerberg cautioned, "It is better to be safe than sorry and homeowners need to be prepared and cautious in their selection of laborers or contractors who will perform services on their property."

When hiring an independent contractor to do work on your property, Westerberg recommends the following to homeowners:

  1. Only hire licensed contractors for work which requires a license.
  2. Make sure the person you hire has appropriate general liability insurance coverage in place for all work or activities occurring on the property.
  3. Put all contractor agreements in writing. Make sure the written agreement confirms an independent contractor relationship and protects you with release of liability and hold harmless and indemnity provisions by specifying whose responsibility it is to obtain proper licensure and insurance.
  4. If you are entering into a contract with a business entity or employer, make sure the business entity or employer also has workers' compensation coverage of their own.
  5. Ensure that your insurance is up to date and covers all activities that may occur at your workplace.

The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, e-mail , or phone (408) 200-0109.

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The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.


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