Eric R. Reed


California’ s contractor licensing statutes severely penalize unlicensed contractors. Even a brief license disruption may result in a contractor being unable to collect unpaid invoices or having to disgorge money received for past work. Courts began developing a “substantial compliance” exception to these statutes shortly after the legislature enacted them. This institutional tug-of-war prompted the legislature to codify the exception in section 7031(e) of the California Business and Professions Code, and, later, to create a unique stand-alone procedure for adjudicating substantial compliance. Section 7031(e) refers to this procedure as an “evidentiary hearing” but gives little guidance about how to conduct such a hearing.

This Article first explores the evidentiary hearing’s equitable roots in the judicial substantial compliance doctrine. Next, it discusses how counsel and judicial officers can use substantial compliance hearings to confront and resolve disputes involving contractors with licensing problems. Lastly, the Article concludes by proposing minor revisions to section 7031(e) that will clarify existing ambiguities, and, ideally, ensure the long-term viability of the statute and the unique procedure it created.