A Class B contractor's net worth drops to $35,000 due to business losses. What action must the contractor take?
Correct Answer
C) Cease operations immediately
Class B contractors must maintain minimum net worth of $100,000. When net worth falls below this amount, they must cease operations until requirements are met per B&P Code Section 7067.5.
Why This Is the Correct Answer
Per B&P Code Section 7067.5, Class B contractors must maintain a minimum net worth of $100,000. If net worth falls below this threshold, the contractor must immediately cease all contracting operations until the financial requirement is met again. There is no grace period or notification window — operations must stop.
Why the Other Options Are Wrong
Option A: Apply for hardship exemption
There is no 'hardship exemption' mechanism under CSLB rules that allows a contractor to continue working below the minimum net worth threshold. The law requires compliance, not accommodation based on financial hardship.
Option B: Increase bond amount to compensate
Increasing bond amount does not substitute for net worth requirements. The bond (contractor's license bond) and net worth are separate requirements. A higher bond does not offset a deficient net worth.
Option D: Notify CSLB within 30 days
Notifying CSLB within 30 days is not the required action — and it would be insufficient on its own. The contractor must stop working immediately, not merely report the shortfall. Continuing to work while notifying CSLB would still violate the law.
Memory Technique
Think of it like a car with no insurance — you can't legally drive until you fix the problem. Similarly, a contractor with insufficient net worth can't legally work until they restore the $100,000 threshold. No grace period, no workaround.
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