Contractor Referral Services Are Legal – Within Limits

The increased use of contractor "referral" companies – and whether some are violating the law – is drawing attention from CSLB. Contractor referral services offer to connect potential customers with a contractor.

But CSLB is finding that at least some of these referral businesses neither possess contractor licenses, nor do they employ registered home improvement salespersons (HIS). It's important to remember, for licensees who use these services, that a referral service cannot solicit or negotiate contracts on behalf of a contractor or offer to undertake to, or purport to have the capacity to undertake himself or through others a construction project (see Business and Professions Code [BPC] section 7026, definition of "contractor").

There is nothing unlawful about connecting a consumer to services they seek. A referral company MAY serve as a warehouse for licensed contractors. The important distinction is the representations that a referral company makes to the public through its website, advertising, or employees – such businesses must not lead a consumer to believe they have the capacity to perform construction work themselves or through others.

Tactics to be avoided by referral services include directly contacting prospective customers on behalf of a contractor (BPC section 7154 – The referral company employee would be required to be registered for the contractor represented), and/or taking responsibility for completion of a construction project (BPC section 7028 – Acting in the capacity of a contractor without a license).

Violations of BPC section 7154 and BPC section 7028 can result in misdemeanor criminal charges.