Lessons Learned: Risks of Working Outside License Classification
In the high-stakes business of building custom outdoor living spaces that feature swimming pools and associated amenities, success is driven by creativity, craftsmanship, and client satisfaction. But behind the artistry and engineering lies a legal framework that contractors sometimes ignore at the risk of losing everything.
By Scott Cohen
One of the most dangerous and costly mistakes a pool contractor can make is working outside of their contractor license classification—something that can result in not just fines, but a devastating legal outcome called “disgorgement.”
In brutally simple terms, this means you must give back all the money you’ve been paid, because in the eyes of the law you had no right to do the work in the first place. It’s a brutal outcome that can lead to financial devastation, if not an end to your business.
Let’s break it down:
NOT JUST RED TAPE
In California, contractor classifications are clear-cut. A C-53 license is for swimming pool construction. A C-27 is for landscaping. A B license covers general construction. Each license has strict guidelines about what you’re legally allowed to do.
Note: Although states vary in their licensure structure, the same basic principle applies regarding the need to work within the scope of your license. For illustration purposes here, I’ll stick with the California rules.
In an effort to increase revenue and more fully serve their clients, pool builders often want to expand their offerings including things like outdoor kitchens, fire pits, shade structures, patios, sports courts and even driveways. These add-ons are enticing for clients and lucrative for builders—but if they aren’t considered incidental to the swimming pool construction, they’re outside the scope of a C-53 license.
What’s “incidental?” In general, if an item is essential to the function or aesthetics of the pool (like surrounding decking), it may be allowable. But a front yard driveway or a pizza oven? That’s not incidental—and now you’re working without a license in that scope.
Here’s the kicker: If you perform work outside your classification, you’re legally acting as an unlicensed contractor. Under California law, unlicensed contractors cannot enforce their contracts. Even worse, homeowners can sue for disgorgement—which means you’re forced to return every dollar they paid you, regardless of whether the work was done correctly.
MOST COSTLY MISTAKE
In a recent case in which I was an expert witness, a pool contractor with a C-53 license installed an elaborate backyard with a patio cover, kitchen, and bocce court—none of which fell within the incidental scope. The homeowner, who happened to be an attorney, demanded disgorgement. The court agreed. The contractor had to give the money back. No mediation, no negotiation—the ruling was absolute.
Worse still, the homeowner threatened a class-action lawsuit after discovering the contractor had performed similar work on other properties. It became a franchise-wide legal hazard.
Even if your workmanship is flawless, you’re still exposed. Keep in mind, general liability insurance only covers resultant damage—not the work itself. But if you’re performing work without a valid license in that category, the insurance company can walk away. You’ve essentially voided your coverage.
One contractor in California built a large pond and waterfall system under a C-27 license. Local code classified anything over 18 inches deep as a swimming pool, requiring a C-53 license. When a dispute arose, the insurance company refused to cover the damage, citing lack of proper licensure. They left mediation, and the contractor was on the hook for all damages out-of-pocket.
The key to avoiding this gruesome set of outcomes is to know your boundaries, or to expand them legally.
Want to install pergolas, kitchens, or build complete outdoor environments? Then get the right license. That may mean adding a general contractor’s license or subcontracting out work that doesn’t fall within your scope.
It’s tempting to stretch your services to win bigger jobs or please clients. But doing so without proper licensure can destroy your business. You risk:
- Disgorgement of all payment received
- Inability to enforce your contract
- Loss of insurance coverage
- Hefty fines and citations
- Potential criminal penalties
ON THE RIGHT SIDE
At the heart of this issue is a simple truth: your contractor license is more than a piece of paper. It’s the legal foundation of your work. Respecting its boundaries protects you, your client, and your industry reputation.
If you want to grow, do it the right way. Apply for additional licenses. Partner with properly licensed trades. And always consult a construction attorney before taking on a project that pushes the limits of your classification. In an industry built on water, don’t let legal missteps sink your business.
The lesson to be learned here is simple: Stay compliant. Stay protected. Build with integrity.
Scott Cohen is a nationally respected expert witness in pool-construction defect cases. He is a “garden artisan” and president of Green Scene Landscaping & Pools, a watershape design and construction firm based in Chatsworth, CA. A widely published author and popular speaker, Cohen is known for his gardens that combine outdoor living with inspired artistic details.
Opening graphic by Jenn Miranda | Shutterstock.