Understanding risks posed by unlicensed contractors

March 20, 2015 Updated: April 23, 2016

Contractors can prove to be immense business value adders in several scenarios. Whether it’s a niche industrial requirement, a complex house building project, or a short term project that does not warrant hiring long term employees, contractors bring in a lot of advantages to your work space. However, there’s one contentious issue that you, as a business decision maker, must be aware and watchful about. Several contractors posing as professionals in the market are unlicensed. What does that mean for you? Here’s a detailed discussion of the business risks posed by hiring unlicensed contractors.

Severe property risks that remains unguarded      

If you are employing a contractor to conduct any home repairs, extensive commercial property plumbing, interior designing, or even rebuilding a part of your property, the service provider will invariably bring several of his employees and heavy machinery to your property. It is not uncommon for property damages such as irreparable cracks in the floor, defiling of your walls, breaking of expensive tiles, etc. to occur. A licensed contractor will also invariably prove to be a thoroughly professional service provider who’d take care to ensure that there are no property damages at all. On the other hand, an unlicensed contractor will, in all likelihood, not be professionally equipped with knowledge of best practices to avoid accidents and deviations from ideal execution. To make matters worse, unlicensed contractors don’t even carry any insurance that can help them repay the damages caused to your property. There have been several cases in Queensland, Melbourne, Adelaide, and NSW where local courts have refused to entertain any pleas involving consciously employed unlicensed contractors.

The responsibility of unforeseen outcomes falls on you!

Whether it’s a building contractor you’ve hired to add another floor of living space to your house, or a service contractor you’ve employed for your commercial workspace, let it be known that it’s your responsibility to hire licensed contractors. Consider a case where an unlicensed contractor ends up causing serious injuries to any of your office workers because of his faulty equipment. What will happen if any of the contractor’s employee suffers an unforeseen accident at your house? What if your neighbor trips over a rope or wire left out by your contractor and breaks a bone? Well, your unlicensed contractor will not be covered by any workers compensation or personal injury insurance, which leaves you exposed to all kinds of legal hazards. At the very least, you would be forced use your homeowner’s insurance policy to compensate your contractor’s employee if he suffers an injury while working at your place. This will make your insurance rates zoom higher when you renew the policy. As you see, you will end up on the losing side if anything goes wrong!

No contracts to govern your work relationship

The Australian government asks business owners to go into contracts with contractors in most cases, so that the rules, expectations, guidelines, and SLAs that define the business relationship are well chalked out and can be referred to in case of any legal issues. However, unlicensed contractors would never guide you on the contractual obligations posed by law, as most of them do not have valid work permits to render commercial services. Imagine being left to fend for yourself without a contract to prove your case! What’s worse, unlicensed contractors are not bonded, so if they leave the promised project unfinished, you will not have any bond to fall back upon. Plus, if you are sub contracting any service, you will be required by your employer to pay to finish the project from your pocket if your hired unlicensed contractor doesn’t do it.

You miss out on the professional services delivered by licensed contractors

Licensed contractors procure their licenses from the Australian government only when they fully comply with all ethical, professional, and legal requirements defined by the licensing authority. This automatically implies that licensed contractors can be trusted to deliver professional services in a competent, safe, and legal manner. Employing unlicensed contractors will come back to haunt you one day. For instance, if an unlicensed contractor works on your property on renovation, rebuilding, and upgrade projects, you will have to disclose the same as ‘work done without permit’ when you try to sell off your property. This will cause a huge dent on the property’s valuation.

These are just a few of the obvious business and legal risks that unlicensed contractors pose. There’s no cost too high and no discount too lucrative to lure you into working with unlicensed contractors. Make the smart business choice; go for licensed contractors, always.