In U.S. Pipelining v. Johnson Controls, which can be found online here, the court found that a an unlicensed subcontractor was allowed to bring a civil action for nonpayment against a licensed general contractor. Hawaii’s contractor licensing laws contain a strict prohibition against offering and performing work without a valid license. Section 444-22 imposes a harsh penalty on contractors who contract for and perform construction without a license: “The failure of any person to comply with any provision of this chapter shall prevent such person from recovering for work done, or materials or supplies furnished, or both on a contract or on the basis of reasonable value thereof, in a civil action, if such person failed to obtain a license under this chapter prior to contracting for such work.” Despite this clear language, the court in U.S. Pipelining held that an unlicensed subcontractor was entitled to bring a civil action against a general contractor, because the general and more broadly read provisions of the licensing chapter as a whole, together with certain appellate cases issuing from Hawaii courts, suggest that the provisions of the licensing code need not be interpreted and enforced so strictly. The Court argued that appellate courts had previously allowed a licensed contractor to bring suit to collect for work for which the contractor was licensed, even though the contractor also performed work for which it lacked a proper license, and this showed flexibility in application of the law. The Court also noted that the licensing statutes were formed for the protection of the general public, and NOT to protect industry participants such as the general contractor in this case.
This decision is notable on a number of levels. First, it casts doubt on a clearly written provision applicable to all unlicensed contractors. Despite the Court’s claims otherwise, there is no ambiguity in 444-22. The subcontractor in this case was wholly unlicensed. It was not licensed and simultaneously performing work outside of its scope. This is the first time any court has issued a written opinion expressing its interpretation of Hawaii law in this manner. Presumably, work performed by an unlicensed subcontractor is just as harmful to the public as work performed by an unlicensed general contractor — ultimately the public will be the recipient of the work — so allowing an unlicensed subcontractor to bring a civil action would not provide greater protection for the public. Finally, the Hawaii Supreme Court has already acknowledged that section 444-22 carries harsh results: “HRS chapter 444, providing for the licensing of contractors, expresses a very strong public policy that contractors in this state should apply for, and retrieve licenses, and the provisions of HRS 444-22, which are sweeping in their terms, are obviously intended to produce harsh results in furtherance of this policy.” Butler v. Obayashi, 71 Haw. 174, 177 (1990). Nowhere in this case did the Court state that the scope of the provisions of 444-22, which were “sweeping in their terms,” were not intended to include claims by and between subcontractor and general. Such a ruling arguably gives unlicensed specialty subcontractors incentive to avoid the cost, expense, and inconvenience of seeking legal licensure in the State, leaving the risk and expense of those endeavors to the generals with whom they contract and from whom, now, they can apparently legally collect in civil actions.