EmploymentQuestion 948 of 1605
A licensed contractor has employees but lets his workers' compensation insurance lapse. Beyond the safety-law issues, why is maintaining proper payroll and workers' comp critical to the contractor's LICENSE?
a.A contractor with employees must maintain workers' comp coverage as a condition of an active license, and lapse can lead to automatic suspension
b.It only matters for public works projects
c.It only affects the bond amount
d.It has no effect on licensing
Explanation
Under Business & Professions Code §7125, a licensed contractor who has employees must carry and maintain workers' compensation insurance as a condition of licensure. If coverage lapses, the CSLB can automatically suspend the license until valid coverage is restored. This ties proper payroll/employment practices directly to the ability to legally operate, not just to labor-law compliance.
Law Reference: Business & Professions Code §7125; Labor CodePractice all 1605 questions free — no signup required.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)