A general contractor receives payment from the owner but fails to pay subcontractors. Under California Penal Code Section 484b, this constitutes what type of violation?
Correct Answer
C) Misdemeanor theft
California Penal Code Section 484b makes it a misdemeanor theft when a contractor receives payment for work but willfully fails to pay subcontractors, laborers, or material suppliers. This construction trust fund law carries criminal penalties, not just civil liability, emphasizing the serious nature of payment diversion.
Why This Is the Correct Answer
California Penal Code Section 484b elevates the failure to pay subcontractors after receiving payment from an administrative or civil matter into a criminal one. When a contractor willfully diverts funds intended for subcontractors, laborers, or material suppliers, it constitutes misdemeanor theft — not merely a contract breach. This 'construction trust fund' doctrine treats owner payments as trust funds held for the benefit of downstream parties. Criminal liability deters fund diversion by imposing personal consequences beyond civil damages, reflecting California's strong policy favoring subcontractor payment protections.
Why the Other Options Are Wrong
Option A: Administrative violation
An administrative violation is a regulatory sanction imposed by licensing agencies like the CSLB, not a criminal classification. While the CSLB may take disciplinary action for non-payment, Penal Code Section 484b creates a separate criminal liability that is more serious than an administrative finding.
Option B: Professional negligence
Professional negligence involves a failure to meet a professional standard of care — it requires a technical error or omission, not an intentional act. Willfully withholding payment already received is a deliberate act, which disqualifies it from negligence classification and elevates it to a theft-based crime.
Option D: Civil breach of contract only
Civil breach of contract alone would only entitle the subcontractor to sue for damages. Penal Code Section 484b specifically adds criminal exposure on top of any civil liability, meaning the contractor faces both civil suits from unpaid parties AND potential criminal prosecution.
Memory Technique
484b = '4-8-4 Betrayal': when you receive (4) payment, hold (8) it in trust, and divert (4) it instead — that's a betrayal California calls theft.
More law-business Questions
Under B&P Code Section 7071.9, a contractor may deposit cash or securities instead of obtaining a surety bond. If a contractor chooses this option, where must the deposit be maintained and what happens to interest earned?
Under California's AB 5 law (Dynamex decision), which factor is NOT part of the ABC test for determining independent contractor status?
According to Business and Professions Code Section 7031, what is required when a licensed contractor supervises work performed by unlicensed employees on a construction project?
Under California Building Standards Code Title 24, which entity has the authority to issue building permits for most residential and commercial construction projects?
According to B&P Code 7159.5, service and repair contracts must include specific provisions. Which statement is correct regarding these contracts?
Which of the following activities is exempt from California contractor licensing requirements under Business and Professions Code Section 7048?
Under Cal/OSHA regulations in Title 8 CCR Section 5192, Safety Data Sheets (SDS) for hazardous chemicals used on construction sites must be readily accessible to employees during which hours?
Under California Business and Professions Code Section 7071.9, in lieu of a surety bond, what alternative security may a contractor provide to satisfy the contractor license bond requirement?
According to Cal/OSHA regulations, which of the following is NOT a required element of a written Injury and Illness Prevention Program (IIPP)?
A homeowner requests that a B-General Building Contractor provide a certificate of insurance naming the homeowner as an additional insured on the contractor's general liability policy. Under California law, what is the contractor's obligation?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass
Related Study Resources
Previous Question
According to Cal/OSHA regulations, what is the maximum depth at which an excavation can be entered without requiring a protective system if the soil is classified as Type A?
Next Question
Under California Business and Professions Code Section 7159.10, what is the maximum down payment a contractor may demand for a home improvement contract valued at $60,000?