Michael F. Sabitoni, President of the Rhode Island Building and Construction Trades Council, wrote a piece for the Providence Journal last year entitled “Contractors behaving badly: Secret economy cheats workers, state.”
It dealt more directly with a few local incidents in Rhode Island with contractors receiving kickbacks from their workers, who were under paid, and in some cases not national citizens. This basically, again, unearthed that this practice is rampant in the construction industry and that many workers, or laborers, are paid under the table. By doing this it allows the contractor and the laborers to skip out on many taxes.
If you’re doing a home improvement project at home and the contractor you hire isn’t licensed with the state you’re setting yourself up for a great deal of financial hurt.
Firstly: By not having a license they’re not recognized in the state as a proper HIC business. This also should shoot up a red flag of warning that they are also not properly insured. Many states link the two together, you must have insurance to get your HIC license for the state and before you can do ether, you must be locally registered and state registered as a business with the Chamber of C\ommerce.
Secondly: If something goes wrong in the project, damage, abandoning the work and contract, or not fulfilling obligations you have a few options. I always suggest trying to work something out directly with the contractor. Many things can be simply corrected just with straight forward. However, if things get bad and lawyers need to be called, the state can’t help you to locate, find, prosecute, or help you mediate with an unlicensed contractor.
Thirdly: The contractor, who isn’t licensed, doesn’t pay fees/dues every year to have their license renewed. This is essentially more tax money that the local government will have to find elsewhere. Combine this with the other money that’s not being paid in local, state, or federal taxes by paying workers under the table and you can see hundreds to thousands of dollars being withheld (depending on the size of the business it can be much more!).
Just last year $4.5 million was missing, in Illinois, based on the amount of money that wasn’t declared by license and unlicensed contractors. The licensed contractors can at least be reprimanded and forced to pay this money. But the unlicensed contractors get away with your cash to make their wallets fatter.
In my series or blogs that I’ve done with consumer protection issues I’ve strongly urged people to change the way they shop for contractors. Doing a little bit of research can not only help you get a better project done, but provide reassurance that you’re not hurting your town or state tax payers (your neighbors).
Be Aware: Offers that sound too good to be true (i.e. Basement Finishing for under $9k, or total bathroom remodeling for some small amount) often are. Contractors can be skipping out on both quality materials and on proper employee wages in order to cut costs and get more jobs. If something sounds too good, it probably is.
Do you research: HIC numbers are public knowledge and any company that is properly licensed should have evidence of it on their person, vehicles, or a wallet copy that can be verified online with your Department of Public Safety.
Don’t Sign Anything: If you’re not convinced or having double-checked the contractors’ credibility, don’t sign anything. Reschedule for a revisit; give yourself time to find the answers and the verification you’re looking for. But be upfront about it!
Companies would rather have you as a comfortable customer than an uncomfortable panicked whistle blower. If a company wants to do business the right way, they provide the customers will all the information they need to know that they’re covered and protected in their purchase. Unlicensed and uninsured contractors create more liability and won’t be able to provide proper information that would set you at ease.
Bottom Line: It’s better, overall, to do business with a licensed and insured contractor.
Recent Construction Industry News in Rhode Island:
New partnership to provide training to contractors and enhance safety during construction of new Warwick Intermodal Station