by Bill Reid CGR, President  “If you pay cash I can lower my price”  If you hear this run.  This is the first sign that you are dealing with a person that does not run a reputable business.  Why is this?  Because not only is this flaky contractor planning not to report the income to the IRS he also doesn`t`t plan to claim his payroll to the insurance companies.  This is against the law and typical profile of a contractor that does not intend to be around very long. Many homeowners are tempted to accept this offer but be aware of the risks.  Once you agree to this you have now insured your own project.  Should an employee become injured on your project be prepared to cover the costs because your next in line after your contractor disappears.  What are the odds it could happen to you?  Who knows?  But is it worth it?  Many homeowners have been sued for millions and lost.  Why?  Because their contractor is in jail or nowhere to be found. How do you protect yourself? Research the contractor you are considering hiring at the State Board.  Visit California State License Board and check the following:  License Type and Status and Workers Compensation Status.  HINT 1:  The state requires that all contractors carry Workers Compensation Insurance policy but can claim exempt with the state because they have “no employees”.  This means that the contractor plans to never hire an employee and accomplish all physical work by himself or with sub contractors (see below).  Many whom do not plan to run a reputable business likely hire employees “under the table” and pay them cash.  This enables them not to report the payroll to the IRS and Insurance companies therefore pocketing the extra money or offering their clients a discounted price.  Want the cheapest price?  This is the way to go?  Just as long as you are prepared to crawl out on a limb for a contractor you barely know. For those contractors that elect not to have any employees and subcontract everything to other companies (i.e. plumbers, electricians, roofers, etc.) they have a responsibility to both you and the law to require each subcontractor carry workers compensation on their employees.  This is not an uncommon way to run a General Contracting Business but you would be amazed at the amount of General Contractors that don`t even ask their subs for this proof of insurance.  What can you do?  Hint 2: When negotiating your contract ask the contractor if they plan to have any employees on your property.  If so request evidence of Workers Compensation Insurance with you and your property as ADDITIONAL INSURED.  This means that you should receive, in the mail directly from his insurance company` a certificate with you and your property printed on it.  If the Contractor is planning to hire subcontractors request a list of all subcontractors that will be working on your property and obtain certificates of insurance with you named as ADDITIONALLY INSURED.  Should the contractor or subcontractors insurance policy lapse or cancel the insurance company is obligated to provide you a notice therefore acting as a security blanket. 
About the author

Bill Reid

Founder and Owner of Remodel West, a residential design and construction firm, originally established as Cupertino Kitchen Design in 1992. I have created a very progressive company with a high level of quality standards. Over the years, the company has built revenues to 8.5 Million and scaled operations as we rolled with the times. By re-branding the business in 2007 to Remodel West, we aimed to better align our name with the scope of work performed. I am a Certified Graduate Remodeler through NAHB and Certified Green Building Professional through Build It Green and most recently Certified Renovator through the EPA which is now a federal requirement. My primary goals are to design and build more eco-friendly projects, to do projects for those clients seeking high quality. My professional background stems from twenty-six years of hands on experience beginning in 1985 in cabinetry design and sales, and progressed to my involvement with a startup company from 1987-1991. In 1992, at age 26, I started Cupertino Kitchen Design/RemodelWest. My strengths are creating a vision for our company, planning, and empowering our employees to accomplish our goals. Sue and I have been married 26 years with three wonderful children, Jessica, Michael and Adam and of course our dog Ellbee. We live in Los Gatos and enjoy visiting our home in Lake Almanor, fishing, brewing beer, reading and relaxing.

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