Many homeowners aim to save money by hiring an unlicensed contractor. However, in most states hiring unlicensed contractors is illegal. Contractors doing work requiring a permit need to be licensed. Work requiring a permit, in turn, is defined by the county building permit authority, and includes such jobs as roofing repair, tree trimming over a number of feet, retaining wall erection over a certain height, or backyard deck construction.
In some states, homeowners can be arrested for hiring an unlicensed contractor. In other states, homeowners will be held liable for any injury that occurs on the property, even if the homeowner did not know the contractor was unlicensed. Therefore, it is the homeowner’s responsibility to check the contractor’s license, and to obtain proper building permits.
One of the advantages of hiring a contractor to work on your home as opposed to a direct employee is that the contractor is responsible for any injury that occurs. However, if the contractor is unlicensed, it and its employees automatically become employees of the homeowner. Then the injured worker/employee may sue the homeowner.
An injured employee may be able to collect worker’s compensation from the homeowner’s insurance, if they worked for the necessary number of hours or earned a certain minimum amount. The employee may also be able to collect directly from the homeowner in a negligence lawsuit (even if the homeowner is only 1% liable), or may be able to collect from a state worker’s compensation fund.
The contractor may be the employer of an injured employee and an employee of the homeowner at the same time. Therefore, the contractor and the homeowner both have equal and “joint” liability for the employee’s injuries. The homeowner may also be subjected to a “presumption” of negligence, depending on the state or whether the job was “inherently dangerous.” This will make it easier for an injured worker to recover.