A general contractor subcontracts plumbing work to an unlicensed individual on a $75,000 project. What is the contractor's potential liability under the Business and Professions Code?
Correct Answer
B) Joint and several liability for all damages plus penalties
Under B&P Code Section 7118, contractors are jointly and severally liable when they use unlicensed subcontractors, including full liability for damages and potential penalties.
Why This Is the Correct Answer
Under B&P Code Section 7118, a licensed contractor who knowingly employs or subcontracts with an unlicensed person is jointly and severally liable for all damages resulting from that work, plus potential civil and administrative penalties. 'Joint and several' means the general contractor can be held 100% responsible regardless of the subcontractor's ability to pay.
Why the Other Options Are Wrong
Option A: Administrative fine not exceeding $1,000
A $1,000 administrative fine vastly understates the exposure. Section 7118 imposes joint and several liability for all damages — on a $75,000 project this could be far more than $1,000.
Option C: Warning letter only for first offense
A warning letter only applies in limited low-severity situations and not when an unlicensed subcontractor is knowingly used on a mid-to-large project. The B&P Code treats this as a serious violation.
Option D: 50% liability for subcontractor's work only
There is no '50% liability' rule in California contractor law. Joint and several liability means each party can be held for the full amount, not a proportional share.
Memory Technique
GC + unlicensed sub = GC holds the entire bag. 'Joint and several' means ALL or nothing — the licensed party pays everything if needed.
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