from the Contractors State License Board
More than 15 percent of the complaints CSLB received during the 2009-2010 fiscal year were about contractors who failed to pay subcontractors or materials suppliers. Contractors must have sufficient funds to pay for the supplies and the labor required for each contract they bid.
If suppliers and subcontractors file a complaint with CSLB, the contractor who failed to pay them could be cited under Business and Professions (B&P) Code Section 7120 for failure to pay for materials or services. If you are cited for 7120, you could face civil penalty fines of $200 to $2,000.
Also, don't use funds received from a new client's job to pay your subs or suppliers from a previous project. Doing so could subject you to fines between $200 and $5,000 for violating B&P Code Section 7108 for diversion or misapplication of funds. Diversion of construction funds can also subject you to criminal prosecution, which carries fines of up to $10,000 and state prison or county jail time up to one year for violation of Penal Code Section 484(b).
In addition to citations and fines for such violations, your license could be subjected to suspension or revocation. Subcontractors and suppliers may also seek payment through your contractor license bond or through a lawsuit in the civil court system. If subs or suppliers file a lien on the homeowner to recover costs, the homeowner might also pursue a complaint against your license through CSLB, or attempt to recover financial losses through your license bond or the civil courts.
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