In the strictest enforcement of regulatory requirements since Seinfeld’s “Soup Nazi” declared “no soup for you!” the District of Columbia’s Court of Appeals recently issued fair warning to contractors operating in D.C.—if you want to get paid, get licensed. And for unlicensed contractors already working in D.C., it may be too late.

 

In HVAC Specialist, Inc. v. Dominion Mech. Contractors, 201 A.3d 1205 (D.C. 2019), an HVAC sub-subcontractor brought a multi-million dollar action for indemnification or contribution and breach of contract against a mechanical subcontractor, Dominion Mechanical Contractors (“Dominion”). Upon finding that the sub-subcontractor was not properly licensed in D.C., Dominion filed a motion to dismiss the lawsuit. The D.C. Superior Court granted the motion to dismiss, holding that it was “constrained to grant” the motion “inasmuch as the statutes and regulations requiring licenses for businesses operating in the District of Columbia are very clear that businesses performing refrigeration or air conditioning work must have a license to do so and there are no exceptions.” (Emphasis added). The District of Columbia Court of Appeals affirmed the trial court’s ruling, issuing a no-nonsense interpretation of the D.C. licensure statute.

 

In its opinion, the court made clear that it was opting for a “clear-cut, unmistakable requirement, with equally clear consequences for noncompliance.” Contracts in violation of licensing requirements directed at protecting the public are void and unenforceable, regardless of effects that “may appear to be harsh and disproportionate in some cases.” Licensure requirements, such as those for HVAC contractors and other trades, exist “to protect public health, safety or welfare, or to assure the public that persons engaged in such occupations or professions have the specialized skills or training required to perform the services offered.” The ruling leaves any contractor subject to licensure requirements in D.C. with little or no room for error.

 

Not only did the court find that the subcontract was void and unenforceable, but also that any quasi-contractual agreement related to the business activity requiring licensure was as unenforceable as the written subcontract—including tasks such as ordering equipment and materials. Even a contracting party’s knowledge of the other’s unlicensed status, which was disputed in the case, did not provide a basis for recovery on an illegal contract. Nor could the contractor’s license be held to cover the subcontractor’s employees. As noted by the court, D.C. Code § 47-2851.02(c) prohibits any “person issued a license under this subchapter” from “willfully allow[ing] any other person required to obtain a separate license to operate under his or her license.”

 

The District of Columbia Court of Appeals’ holding and its ramifications for contractors is particularly noteworthy given the more lenient approaches taken in neighboring jurisdictions. Both Maryland and Virginia offer contractors pathways to redemption if they run afoul of those jurisdictions’ licensing statutes. For example, in Alcoa Concrete & Masonry v. Stalker Bros., 191 Md. App. 596 (Md. Ct. Spec. App. 2010), the court interpreted Maryland’s Home Improvement Law such that “if a subcontractor is not licensed at the time of subcontracting, but is licensed at the time any payment is due under the contract, the subcontractor’s right to payment is protected” because the law only explicitly requires licensure at the time of payment. Under Virginia law, contracts entered by unlicensed persons are unenforceable, but a relatively broad exception exists for contractors who 1) substantially perform within the terms of the contract in good faith, and (2) do not have actual knowledge that a license or certificate was required to perform the work for which payment is sought. Va. Code Ann. § 54.1-1115(c); see, e.g., Crawford Constr. v. Kemp, No. CL11-153, 2012 WL 5930483 (Va. Cir. Ct. November 7, 2012).

 

The upshot of this ruling from the District of Columbia Court of Appeals for contractors is straightforward: be certain to strictly comply with all licensing requirements before contracting to perform work in the District of Columbia. A contract for business activities requiring licensure entered by an unlicensed contractor is likely not worth the paper on which it is written.

 

Watt Tieder represented Dominion Mechanical Contractors in this action. If you have a similar dispute or any questions regarding proper licensing in any state, please feel free to contact Edward J. Parrot (eparrott@watttieder.com) or Noah Meissner (nmeissner@watttieder.com).