Risks of hiring an unlicensed subcontractor in California (for GCs)

Short answer

In California, work of $1,000 or more (labor and materials together), or any job that needs a permit or uses workers, needs a contractor's license. The limit was $500 before January 1, 2025.
An unlicensed contractor generally can't sue to get paid, and whoever hired them can sue to get back what they paid (B&P §7031).
A licensee who contracts with an unlicensed contractor can face CSLB discipline (§7118). So can a licensee working outside their classification (§7117.6).
An unlicensed sub's workers can be treated as your employees for workers' comp. Check the license, the classification and the comp before they start.

When a license is required

Since January 1, 2025, an unlicensed person can only do small jobs under $1,000, and only if they don't hire workers and no building permit is needed. The $1,000 includes all costs on the project, labor and materials together (CSLB, AB 2622). The exemption doesn't apply when the work is part of a larger operation, or when a project is split into smaller contracts to stay under the limit (B&P §7048).

For a GC, that means almost any sub on a real job needs a license in the right classification.

Risk 1: payment fights you can't win cleanly

Under B&P §7031, someone acting as a contractor can't sue to collect pay for work that needs a license unless they were licensed the whole time they did it, "regardless of the merits" of their claim. And a person who used an unlicensed contractor can sue to get back all compensation paid. There are narrow exceptions, so talk to a lawyer about a real dispute. The point for a GC: an unlicensed sub on your job turns every payment into a possible legal fight.

Risk 2: your own license

Contracting with an unlicensed contractor is a cause for CSLB discipline against you (B&P §7118).
Wrong classification. A licensee acting in a classification they don't hold is also cause for discipline (B&P §7117.6). Match the class to the scope: a C-10 for electrical, a C-36 for plumbing, a C-39 for roofing.

Risk 3: workers' comp

Under California Labor Code §2750.5, a person doing work that needs a contractor's license has to hold a valid license to count as an independent contractor. California's State Compensation Insurance Fund puts it plainly: unlicensed people doing licensed work are employees for workers' comp purposes, and if you can't show a certificate from a sub without a valid license at audit, it may treat that sub as your employee and charge premium (State Fund). Because those workers can count as your employees, an injury claim can land on your policy. See workers' comp audits and subs.

A licensed sub's comp matters too. If a licensee fails to keep required workers' comp, their license is suspended automatically (B&P §7125.2). A sub who was fine last month may not be today.

How to check

Get the license number and look it up on CSLB's Instant License Check or on HatBench Sub Check.
Confirm the status is Active and the business name matches your subcontract.
Confirm the classification fits the work.
Read the workers' comp section: a policy with dates, or an exemption. See workers' comp and subs.
Save the date you checked, and check again before the sub starts. Full steps: how to check a CSLB license.

General information for California contractors, current as of November 3, 2026. It isn't legal advice; rules change, so check the official source linked above.