A license lapse on a single-family house can still cost you the right to collect for the entire job. You may also have to return everything the customer already paid.
SB 342 does not change that result for most residential service work. It softens Business and Professions Code section 7031 for listed commercial, public, institutional, common-interest-development, and larger multifamily projects. A single-family home is not on the list.
The law takes effect January 1, 2027, the normal start date for a bill without an urgency clause.
SB 342 protects some contracts, not single-family work
SB 342, by Senator Thomas Umberg, was approved by the Governor on September 30, 2026. The Secretary of State chaptered it as Chapter 967, Statutes of 2026. The Assembly vote was 75-0, and the Senate concurred 38-0, both on August 30, 2026.
Before SB 342, section 7031(a) required a contractor suing for payment to allege that the contractor was “a duly licensed contractor at all times during” the performance of the act or contract.
That is the harsh rule. If your license lapsed halfway through a job, the gap could affect your right to collect for the whole job. Section 7031(b) also allowed the customer to recover all compensation paid to an unlicensed contractor. Not just the amount tied to the unlicensed period. Everything paid.
SB 342 adds an exception in section 7031(a)(2)(B), with a parallel exception in section 7031(b)(2). It covers contracts for:
- “A public work of improvement.”
- “A commercial construction project.”
- “An institutional construction project.”
- “Construction of a common interest development, as defined in Section 4100 of the Civil Code, if a tenant or resident is not a party to the contract.”
- “Construction of a multifamily residential project consisting of four or more units if a tenant or resident is not a party to the contract.”
On those projects, you may maintain an action for compensation if you were licensed when the contract was signed and during the portion of the work for which you seek payment.
The customer’s recovery is also limited. The customer may recover the portion of compensation paid for work performed while you were unlicensed.
That is a real change. It is not a general forgiveness rule.
A house, duplex, or triplex stays under the old rule
You still must have been licensed when the contract was executed. SB 342 does not help if you were unlicensed when you signed the contract.
The exception also does not cover everything outside its list. A single-family home, duplex, or triplex remains under the old “at all times” rule. So does a job where a tenant or resident is a party to the contract, such as a condo owner hiring you directly for work in that owner’s unit.
That puts most residential service calls outside the exception. A panel swap, EV charger, or service upgrade at a house does not become protected because the lapse was short or accidental.
The bill does not define “commercial construction project” or “institutional construction project.” It also creates no exception based on why the license lapsed. A missed renewal and another type of lapse receive no separate treatment in the text.
Do not assume another licensing or permit exception saves the job. The separate small-job exemption under section 7048 does not rescue permit-required electrical work, as explained in the $1,000 exemption rule for electrical permits.
Working while expired also remains unlicensed activity with its own consequences, including the CSLB penalty increase that took effect July 1, 2026, which set a $1,500 minimum for unlicensed activity.
The lapse usually starts with paperwork, not intent
The problem usually begins with an unopened renewal notice or an unreturned phone call. CSLB sends a renewal application approximately 60 days before the license expiration date. The notice lands while you are pricing a job, driving between calls, or working in an attic.
The insurance broker’s call about a workers’ compensation cancellation can come mid-day while you are under a house. It becomes a voicemail. You hear it days later.
That is enough to create a licensing problem.
Active contractor licenses expire every two years. CSLB states that “An acceptable renewal application must be received at CSLB’s Headquarters Office prior to the expiration date of the license to avoid any unlicensed time.”
Submitting something near the deadline is not the same as CSLB receiving it before expiration. Put the expiration date on your calendar at least 60 days out. Mail or submit the renewal early enough that CSLB receives it before the deadline.
CSLB also states: “Any work performed while the license is expired is considered to be unlicensed and disciplinary action can be taken against you.”
Workers’ compensation can suspend the license automatically
Business and Professions Code section 7125.2 says failing to obtain or maintain required workers’ compensation coverage “shall result in the automatic suspension of the license by operation of law.” The suspension is effective on the date coverage lapses, or on the date coverage was required.
There is no hearing or notice period built into that automatic suspension. A canceled policy can create the lapse before you understand what happened.
The requirement that every contractor carry workers’ comp, whether or not they have employees, was pushed to 2028, as covered in the California workers’ comp requirement deadline moved to 2028. That does not remove the section 7125.2 risk when coverage is required and then lapses.
Watch insurer cancellation notices. Check your own license status through CSLB’s public license lookup before starting a long job. If you find a lapse in the middle of a job, stop and fix it before doing more work.
Put license warnings in the calls you might miss
Wirewoman answers every call 24/7, including calls from people who are not customers. Within 30 seconds after hang-up, she texts you the caller’s name, the reason for the call in the caller’s own words, and how urgent it is. Every call is logged to a dashboard.
You set which keywords mean “call me now.” Wirewoman routes those calls under your escalation rules. Tell her that “cancellation,” “workers’ comp,” “CSLB,” or “license” should go straight to your cell.
She will not track your license dates or file renewals. That remains your responsibility. The point is operational: a call carrying a license warning should not sit unheard until the lapse has already started.
Put the expiration date on your calendar 60 days out. Submit the renewal early enough for CSLB to receive it before expiration. Watch every workers’ compensation cancellation notice. Check the public license lookup before a long project begins. If the status is not active, stop work and correct the problem before you add an unlicensed day.
