Unlicensed contracting continues to plague the Florida construction industry, and police stings and other enforcement activities against unlicensed contractors are a regular feature of local news. This article reviews Florida's contractor licensing statutes and cases, offers a comment on the so-called illegality of contracts with an unlicensed contractor, and also comments on a Middle District case, the existence of which continues to hamper proper enforcement of Ch. 489. In 1967, under the premise that it was in the public interest to do so, (1) the Florida Legislature initiated state regulation of contractors, and the following year authorized contractor licensing, now regulated through F.S. Ch. 489. (2) Licensing laws are penal statutes and, along with statutes in derogation of common right and of the common law, are in the class of statutes that are to be strictly construed. (3) While penal statutes do not generally provide for a private right of action, causes of action are nevertheless available to those damaged by the activities of an unlicensed contractor.
Contractor Licensing--Ch. 489
* Licensing Requirements--Under our current statutory scheme, F.S. Ch. 4894 provides the regulatory vehicle for contractor licensing, establishing a Construction Industry Licensing Board (CILB), imposing barriers to entry based on competence, (5) creditworthiness, (6) insurability, (7) and moral rectitude, (8) and setting forth the various classes of contractors (9) and the scope of work covered by each class. (10) Specifically, state contractor licenses are grouped into two divisions. Division I consists of general contractors, building contractors, and residential contractors, and are defined in [section]489.105(3)(a), (b), and (c), respectively. Division II consists of contractors such as air conditioning, plumbing, and roofing contractors, and their various scopes of work as set forth in [section]489.105(3)(d)-(o). (11) Chapter 489 also describes the process by which an individual license holder must "qualify" a company in order that it may carry out the business of contracting and identifies prohibited activities for licensed and unlicensed contractors, 12 as well as the associated penalties. (13)
Corporate entities (14) wishing to operate as contractors in Florida must follow a two-step process that starts with individual "certified contractors." (15) An individual must first demonstrate requisite competence in one of the categories identified in [section]489.105(3)(a)-(o), (16) whereupon the state will issue a certificate of competency (17) to that individual, who will then be deemed a "certified contractor," and "allowed to contract in any jurisdiction in the state without being required to fulfill the competency requirements of that jurisdiction." (18)
The second step of the licensing process applies to all forms of business organization except the sole proprietorship. (19) An individual certificateholder who seeks to practice construction under any other corporate form must attach him or herself to the entity by becoming its "qualifying agent" by completing certain application forms, background checks, (20) fingerprinting, (21) and credit checks. (22) Once an individual has satisfied these requirements, the CILB issues a license that allows that individual to operate as a contractor through the "qualified" company.
The term "qualifying agent" can cause some confusion (23) in reading Ch. 489, and this muddle is exacerbated by its reduction to "qualifier" in popular parlance and by its conflation with a common term for competence. Chapter 489 adds to the confusion by using the term "qualified" to refer to both licensing and competency, (24) and more than one trial court has held that a competent contractor is a qualified (read: licensed) contractor, (25) despite CILB records showing otherwise.
A qualifying agent is responsible for all of the activities of the licensed entity, specifically to "supervise, direct, manage, and control the contracting activities of the business organization with which he or she is connected [and] has the responsibility to supervise, direct, manage, and control construction activities on a job for which he or she has obtained the building permit." (26)
Florida's administrative and circuit courts repeatedly insist on the qualifying agent's hands-on involvement (27) under the rationale that to "allow a contractor to be the 'qualifying agent' for a company without placing any requirement on the contractor to exercise any supervision [over work done] under his [or her] license would permit a contractor to loan or rent his [or her] license to the company." This practice would completely circumvent "the legislative intent that an individual, certified as competent, be professionally responsible for supervising construction work on jobs requiring a licensed contractor." (28)
In Gatwood v. McGee, 475 So. 2d 720 (Fla. 1st DCA 1985), the Fifth District Court disagreed with the license holder's claim that he satisfied his duty to supervise by hiring an apparently competent but unlicensed person to supervise. (29) On the other hand, in Department of Business and Professional Regulation, Construction Industry Licensing Board, Petitioner v. Edwin A. Henry, Respondent, 2000 WL 248376, at * 15, the administrative court observed that there is no prescribed method for reasonably achieving such supervision, and found that "[i]t is reasonable for a person to rely on other qualified individuals in the performance of such supervision." (30)
This decision directly contradicts the holding in Alles v. Department of Professional Regulation, 423 So. 2d 624 (Fla. 5th DCA 1982), and Gatwood, and no other decision has been found that supports this dilution of a qualifying agent's supervisory responsibilities.
With this background, one might ask how a large contractor is able to comply with this rule. (31) The qualifying agent for a large construction company simultaneously building three or four or more high-rise condominiums cannot plausibly argue that he or she supervises, directs, manages, and controls construction activities on all ongoing projects. Perhaps the legislature will review the decisions in Gatwood and Edwin A. Henry, and decide that the realities of the construction industry are such that a qualifying agent should be permitted to delegate his or her supervisory obligations to others. A decision of this import should not be taken lightly, for it would require a rewrite of [section]489.1195, (32) and result in a delegation of the legislative interest in "the public health, safety, and welfare" (33) to persons whose interests may not be aligned with the goals of Ch. 489.
* Exemptions--The licensing requirements of Ch. 489 apply to all contracting, subject to certain exemptions. Section 489.103 identifies the bulk of these exemptions, which includes material suppliers, road and bridge contractors, and other specialized categories. (34) Property owners, (35) subject to some restrictions, are also exempt, as are the direct employees of a contractor working within the scope of their employer's license. (36)
F.S. [section]489.113(2) provides that subcontractors working within the scope of the contractor's license are exempt if a state license is not required. For example, if a licensed general contractor employs a subcontractor to perform concrete placement work, and the contractor supervises and takes responsibility for the subcontractor's work, the subcontractor need not be licensed. This exemption does not apply to plumbing or other subcontractors whose work requires a state license. The close supervision that must be exercised over independent contractors to comply with F.S. [section]489.113(2) appears to contradict the federal definition of an independent contractor, (37) but no case or scholarly article has been found to shed any light on this interrelationship.
The Jim Walter (38) Exemption: Set forth in F.S. [section]489.117(4)(d), (39) this exemption applies to "[a]ny person who is not required to obtain registration or certification pursuant to s. 89.105(3)(d)-(o)," (40) performing work on single-family homes and townhouses, and allows the subcontractor to avoid local licensing requirements if the contractor is under the supervision of a licensed general, building, or residential contractor. (41)
The Big Boy Exemption: The so-called Big Boy Exemption, found in F.S. [section]489.119(7), allows an entity with a minimum net worth of $20 million to skip the qualification process if it employs one or more licensed individuals to pull permits and supervise construction on its own property. Under such a scenario, a theme park or other large business can carry on construction without needing to engage the services of an outside contractor.
The Developer Exemption: The Developer Exemption, buried in [section]489.105(6), is more of a clarification than an exemption, and states that an entity selling "completed residences on property in which [it] has any legal or equitable interest," is not engaged in contracting, and neither is an entity that "sells manufactured or factory-built buildings." This exemption only extends to the sale of residences; actual construction must still be undertaken by properly licensed entities.
As in most if not all states, unlicensed contractors are viewed with disfavor in Florida, and the DBPR actively prosecutes unlicensed...