Good question. The quick answer is easy- that is called Bait and Switch and you should NOT go with that. The long answer however, is a bit more complicated.

See- here in sunny California one needs to carry a State License to do 95% of the work out there. The remainder 5% is NOT monitored by the State- Carpet Cleaning, Window Cleaning, etc- so what happens is that you have certain Restoration companies advertise for "Mold", "Dry outs", "Crawlspace Remediation", etc- who do NOT hold a License BUT say that a Licensed contractor does come behind them to do the portion of the work that does require a License.

Most of these Restoration/Construction companies come in teams and know exactly what they are doing. They know their one-two punch and that is why it is called "Bait and Switch". From the get go it is understood that the UNLICENSED Restoration company can NOT do part of the work and that the Licensed Contractor needs to come in right behind them to complete the FULL Restoration work.

Your average water loss or crawlspace cleanup will have to be (1) estimated (2) approved/signed for and (3) the work done. Now, when you have to remove cabinets or remove soil (which is considered part of the structure of a house by the CSLB) how would you go about having the Water Damage Company estimate for removing soil or cabinets if they are NOT licensed? Or remove drywalls, insulation, etc?- ALL very basic parts of a standard water damage restoration work (reference the IICRC standards for water damage handling, the IICRC is the certification body for the water damage industry). You see the Licensed IS in FACT needed from the get go to even estimate the work!!!

The explanation of "oh...we do not do the construction part, the other guys does it" is not a legitimate one.

The homeowner would get one estimate for the water damage which would not even include half of the work. The homeowner may sign with these guys with out knowing that the first estimate is not even half the work and that the second guys showing up mysteriously to the jobsite with another estimate are going to want more money!

Then comes the big problem, here in California an Unlicensed Contractor CAN NOT be at the same jobsite as the Licensed Contractor even to mop up the floor, not even to have equipment, not even to Clean the Windows!!! That is the law, we do not make it up, whether it is a good law or a dumb law is up for discussion- but IT IS the law.

So you see the dilemma, the unlicensed contractor goes in first does what he "can" which is not much but set up equipment. The Unlicensed guy has to AVOID touching walls and floors and pretty much any and all damaged materials!!! Yet he is expected to do the work properly?? Then the Licensed guys are called in a day or two later- to remove walls and cabinets that SHOULD have been removed or cut the very FIRST day! (even for ventilation one must open the wall the first day. Reference the IICRC standards for water losses) Well by then you have Mold in there and you can kiss your hardwood floors good bye.

What if the licensed guy is sick or on vacation? All work is stopped?

Then, since the Licensed and unlicensed guys can not be at the jobsite working at the same time under California law. Then the Licensed guy comes in to remove affected structural materials BUT then- the UNLICENSED water damage company MUST remove all equipment and workers from the site!

So everything is left half wet and well you should get the dilema by now.

A Water Damage Company here in California SHOULD always be a Licensed one. Other states have different laws and there- an Unlicensed Contractor can actually even build you a house- I wouldn't want that, but those are the laws and they vary from state to state.

This would be comparible to an Unlicensed "handyman" repairing a sewer line. He KNOWS the work is going to be more than $500 but starts the work anyhow, then bills for the $500 and calls in a Licensed company to complete the work!!!

(8)QUESTION: "Hello again, I have one more question for you- Are Referral Fees and Commissions allowed between two Licensed Contractors?"

I believe I have that already answered under the Licensing Q&A Section. However, I have received quite a few questions regarding that and ALL of them have been within the last 6 or 7 weeks.

This was the original answer back in May 2009:

"The CSLB does not at any point mention or suggest that finder fees/commissions are an illegal act between two PROPERLY LICENSED contractors. If you have further questions on this subject you may contact the CSLB or a Construction Lawyer (like we did) or if you would like we can refer you to ours (he is very good)."

Since I have received recent requests for a more exact answer, I will get these answers from the duly appointed legislative body that controls ALL licensed contractors here in California, the one and only CSLB. Give me a week or two.

(6)QUESTION: "The restoration company we were working with attempted to pass themselves off as a 'referral company' for the restoration industry. In other words this company (********) had as a front that they themselves were NOT the restoration company but just the 'management company'. Moreover, this would mean that they 'referred and managed more than one restoration company', just like an answering service or a company that provides temporary labor, it would not be exclusive. The funny thing is that they did all the work for themselves and when questioned about it we found out that the only reason they advertised as a 'management company' was because they NEVER had a license!!! My question is- Is this legal?"

Of course NOT. This is as legal as selling real estate on the moon!!! Do not refer them anymore, refer companies that are NOT complicated and have a simple business plan. Normally, a simple and forward business plan communicates an honest one.

This company you mention is a rather large company, so it is not a matter of whether or not they can't afford to have a license and run the business legitimatelly. The real truth is that this company hides behind their lawyers and complicated scheams. This same company says that they are "Insurance Approved" when in reality when a friend of mine (and many emails from my readers confirm) had work done by this company earlier this year, his insurance carrier had to remove them from the job site AS SOON as they found out. My friend found later on that MOST insurance companies actually will NOT work with them. They charge too much, have bad labor, have no license- just a few irrelevant certifications and when they have been attempted to hold accountable for their work they say that they are the 'management company' ONLY and carry zero liability.

Even though I can not mention their name, I can tell you that they are rather large and have a very large market over all of California. Most of my readers have figured out who these guys are. Demand honest work and there are plenty of honest restoration companies around, there is no reason to refer these other girls.

(4)QUESTION: "The company we refer does not seem to be licensed and their technicians are 'sub contractors', can they still do the Restoration work?"

The answer is NO. And that is for two reasons, #1 for what you tell me this company does not seem to hold the needed license (always check!) and I do not mean the $50 city license anyone can go and get in 30 minutes under a fictitious name from the local city office.

Number 2 this "sub" that they are using is MOST likely less licensed and operates under some business name that probabbly holds NO Insurance or Workman's comp and since "the sub" is doing the work, if anything were to go wrong, YOU the client, would have no where to turn. If you try to go after the "sub" he probabbly close the fictitious business name and open up shop under a different name the very next day. Then if you try to go after the "Main Contractor" or company, they would tell you that "they" did not do the work they just passed on down the line to their "sub". This "method" is actually currently in use by one of the bigger companies around in Northern California, maybe we are talking about the same one. Take a look at Section 7028 in our Resources page, all the way at the bottom.

An additional interesting note would be that a "sub contractor" is NOT an employee. A true sub contractor shows up to work based on his schedule and takes no direct orders from the company sub contracting. I bet the "sub contractors" employed by this company ONLY get work from that company and do as they are told by the owner and have to sign non disclosure agreements, etc. Moreover they may use the company trucks and uniforms and equipment and still attempt to say that they are "sub contractors". It is quite amuzing.

There is more to it, this is a link to the IRS website which talks more about this very abused method (http://www.irs.gov/businesses/small/article/0,,id=99921,00.html)

(3)QUESTION: "You make some interesting points on your website (http://www.waterdamagecompany.net/) regarding the need for a restoration company to have a CA state license in order to dry a building or remove moldy drywall from a home. Would you mind pointing out which category from the list below you think would cover a restoration company and the work they do?

Thanks so much...

Licensing Classifications
Business & Professions Code
Division 3, Chapter 9. Contractors, Article 4. Classifications


7055. For the purpose of classification, the contracting business includes any or all of the following branches:

Print a complete list of the "Description of Classifications" or click the specific classification below for the individual description.

(A) General Engineering Contractor
(B) General Building Contractor
(C) Specialty Contractor....."

The answer is simple a "B" General Contractor's License.

WHY?

A restoration company can NOT only carry one sub-classification like a C-9 (drywall contractor) and attempt to remove flooring with it. He would also need to have a C-15 which is the actual flooring license.

The point of a B General License is to be able to handle projects that require more than one type of classification at once. A restoration project could include electrical work, drywall, roofing, flooring, etc. That is why a restoration company should have a B license.

Note a B license does not include Asbestos, Lead or Hazardous Materials, these other specialties could be attained separately.

(2)QUESTION: "How do I check for the license"

The thorough way to do it is:

(a) Ask for the Lic#

(b) Check the lic# in the CSLB website

(C) Make sure that the Lic# matches the contract or promo or truck, etc. This is important, make sure that the name AND the license are both the SAME as in the contract or promo, etc and that it actually represents the company you have chosen to refer or do the work for you.

(d) A couple of the companies we have run into do this- use a license from a different company, A WHOLE DIFFERENT entity and get away with it! This is normally done in order to avoid liability and taxation and/or franchise illegaly or even worst to hire illegal "sub-contractors". If the CSLB found out about it, BOTH entities would be put out of business and the owners arrested. So double check that they are not pulling a fast one on you!

(e) Inspect the Contract in order to verify that the correct Name and License is on it before signing and staring the work.

(1)QUESTION: "What about when the Restoration Company says that they deal with drying carpets and just detach them because the padding obviously will NOT dry out and much less the flooring underneath? They advertise they do not need a Contractor's License for that, they told me that Carpet Cleaners do it all the time."

The answer is very simple just let me direct you to our "Resources page" were I will upload tons of Construction Law information as we go along. The code section is 7026.3 and it deals with Contractors and Carpets.

Now, the quick answer is- ONLY a licensed contractor can install carpet and only a licensed contractor can remove carpet. Carpet Cleaning companies with out a license can NOT do this type of work, not even the sellers of carpets can. If the carpet is in anyway attached to the structure an unlicensed restoration company can NOT detach it even if to see what is underneath, much less remove all the carpet. Chances are that restoration work will require for ALL the padding to be remove and ALL the sub-flooring be dried, thus ALL the carpet removed- to the extent of the damage.