CSLB Law & Business Practice Test

Since January 1, 2025, an unlicensed handyman may do a job without a contractor's license only if the total price for labor and materials is below what amount (and no permit is needed and no one is hired)?

AB 2622 raised the minor-work exemption in B&P §7048 from $500 to $1,000, counting labor, materials and everything else. The job also cannot need a building permit, and the person cannot employ anyone.

What is the basic accounting equation behind every balance sheet?

A balance sheet always balances: what the business owns (assets) equals what it owes (liabilities) plus the owner's stake (equity).

Under California's ABC test, which condition must the hiring business prove for a worker to be an independent contractor?

Labor Code §2775 presumes a worker is an employee unless the hirer proves all three: (A) free from control, (B) work outside the usual course of the hirer's business, and (C) customarily engaged in an independent business of that kind. A signed agreement or pay method does not decide it.

What must an active licensee with employees keep on file with CSLB at all times?

Section 7125(a) requires a current Certificate of Workers' Compensation Insurance or Certification of Self-Insurance in the business name, unless a valid exemption applies.

Above what total price does a home improvement job require a home improvement contract that meets §7159?

Section 7159(b) applies the home improvement contract rules when the aggregate contract price for labor, services and materials exceeds $500. The $1,000 figure is the separate minor-work exemption.

Above what contract amount must prevailing wages be paid on a California public works project?

Labor Code §1771 requires prevailing wages on public works except projects of $1,000 or less; it covers contract work, including maintenance, but not work done by the agency's own forces.

Which California employers must have a written Injury and Illness Prevention Program (IIPP)?

Title 8 CCR §3203(a) and Labor Code §6401.7 require every employer to establish, implement and maintain an effective written IIPP; construction employers also follow 8 CCR §1509.

An unlicensed person quotes $850 to replace a bathroom fan and plans to bring a paid helper. The work needs no permit. Does the minor-work exemption apply?

Under §7048(c) the exemption does not apply to anyone who employs another person to do or help with the work, even when the price is under $1,000.

Which financial statement shows a company's revenue, expenses and profit over a period of time?

The income statement (profit and loss) covers a period, such as a month or a year. The balance sheet is a snapshot on a single date.

How many of the three ABC-test conditions must be met for a worker to be treated as an independent contractor?

Section 2775(b)(1) requires the hiring entity to show that all three conditions are satisfied; failing any one makes the worker an employee.

In 2026, which licensees must carry workers' compensation even if they have no employees?

Under the current §7125(b), an exemption is allowed only for a licensee with no employees that does not hold the concrete (C-8), HVAC (C-20), asbestos (C-22), roofing (C-39) or tree service (D-49) classifications.

A tenant in a 40-unit apartment building hires a contractor to remodel her own unit for $6,000. Is this a home improvement contract?

Section 7159(b) covers contracts with a tenant for work on the tenant's own dwelling unit, regardless of how many units the building has.

Which work is a public work under Labor Code §1720?

Section 1720(a)(1) defines public works as construction, alteration, demolition, installation or repair done under contract and paid for in whole or in part with public funds.

Which of these is a required element of an IIPP?

Section 3203(a) requires naming the responsible person, a compliance system, a communication system, hazard inspections, injury investigation, timely hazard correction, training, and employee access to the program.

A homeowner wants a $2,400 fence. The unlicensed worker offers to write three separate $800 contracts. What is the legal effect?

Section 7048(b) removes the exemption when a project is divided into contracts under $1,000 to evade the licensing law, or when the work is part of a larger operation.

Which statement shows the company's financial position on a single date?

The balance sheet lists assets, liabilities and equity as of one date. The other reports cover a period or look forward.

A drywall installer with no contractor's license works for a licensed general contractor. How is the installer treated?

Labor Code §2750.5 makes holding a valid contractor's license a condition of independent-contractor status for licensed work, so the unlicensed installer is the contractor's employee.

A C-10 electrical sole owner has no employees. How can the license stay active without a workers' comp policy?

A licensee without employees, and not in the C-8, C-20, C-22, C-39 or D-49 classes, may file a statement certifying it employs no one subject to workers' comp (§7125(b)).

What is the maximum down payment on a home improvement contract?

Section 7159.5(a)(3) caps the down payment at $1,000 or 10 percent of the contract amount, whichever is less.

What must a contractor or subcontractor have before it may bid on, be listed in a bid for, or work on a California public works project?

Labor Code §§1725.5 and 1771.1 require DIR public works contractor registration to bid, be listed, or perform public work (with small-project exceptions).