Keith Mack
Louisiana's Contractor Licensing Laws require a commercial contractor's license for projects of $50,000 or more, hazardous materials projects, and plumbing, mechanical, and electrical work on commercial projects of $10,000 or more. Subcontractors who perform labor without bidding on or managing projects may be required to obtain a contractor's license or a home improvement registration. The type of license required is determined by the project's nature and total value. For instance, a subcontractor bidding or performing commercial work where the total project cost, including labor and materials, exceeds $50,000, must be licensed. Additionally, Louisiana's Public Works Act protects the payment rights of subcontractors and other construction workers on public projects, while the Private Works Act allows them to obtain a privilege on the improved property. Furthermore, specific clauses in construction contracts outline the payment obligations and rights of subcontractors, such as the use of pay-if-paid or pay-when-paid clauses.
| Characteristics | Values |
|---|---|
| Subcontractors performing labor | Must hold a contractor's license or a home improvement registration with the LSLBC board |
| Subcontractors performing labor only | Must be in contract with a licensed contractor, not an owner |
| Commercial projects | If the total project amount exceeds $50,000, a contractor's license is required |
| Home improvement projects | If the total project amount exceeds $7,500 but is less than $50,000, a home improvement registration is required |
| Furnishing materials or equipment | No license is required, and suppliers can ship products to the job site without further involvement |
| Bidding to furnish and install | A license is required, even if a licensed contractor is hired to perform the installation |
| Commercial work | A license is required for projects costing $50,000 or more (major and specialty classifications) or $10,000 or more for electrical, mechanical, and plumbing |
| Residential work | A license is required for projects costing $75,000 or more, or if the work exceeds $7,500 for specific types of work (e.g., roofing, masonry) |
| Public works projects | Prime contractors must be paid within 45 days of submitting a pay application or project completion; other payments are due within 14 days of receiving funds |
| Retainage on public projects | Cannot exceed 10% for projects under $500,000 and 5% for projects over $500,000 |
| Payment remedies | La. R.S. 9:2784 provides that contractors receiving payment from owners must promptly pay subcontractors and suppliers in proportion to the percentage of work completed |
| Payment clauses | "Pay-if-paid" clauses have been enforced, allowing contractors to avoid paying subcontractors until they receive payment from the owner; "Pay-when-paid" clauses may also impact a subcontractor's ability to recover payment |
| No-lien clauses | Not allowed under Louisiana law, as there would be no existing lien rights at the time of entering into a contract |
| Licensing exemptions | Homeowners can build their primary residence and adjacent structures (e.g., a shed) without a license |
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What You'll Learn
Licensing requirements
For commercial projects, a contractor's license is required if the total project amount exceeds $50,000. This includes projects involving hazardous waste, such as lead and paint removal, asbestos mitigation, and mold remediation, which demand special credentials in addition to the commercial license. For plumbing, mechanical, and electrical work on commercial projects, a commercial license is needed if the total project value surpasses $10,000.
For residential projects, a license is mandated if the total project cost is $75,000 or higher. This includes home improvements or the new construction of one to four-unit family dwellings. However, for specific types of residential work, such as pile driving, foundation, framing, roofing, masonry, or swimming pool work, a license is required if the project cost exceeds $7,500.
The Louisiana State Licensing Board for Contractors (LSLBC) governs the licensing requirements for contractors operating within the state. To obtain a license, applicants must typically complete an application and pass two exams: a general business and law exam, and a trade exam specific to their chosen classification. The business and law exam is open-book and covers topics like licensing, bidding, contract management, job safety, and tax basics. The trade exam, on the other hand, varies depending on the classification selected.
It is important to note that subcontractors who only provide labor and do not manage projects may still need a contractor's license or a home improvement registration, depending on the project's nature and cost. For instance, if a labor-only subcontractor works on a commercial project valued at over $50,000, they must be in contract with a licensed contractor and hold a specialty classification called "Labor Only." On the other hand, for home improvement projects valued between $7,500 and $50,000, a home improvement registration is necessary.
In addition to licensing requirements, contractors in Louisiana must also comply with continuing education obligations. While there are no such requirements for commercial, mold, or home improvement contractors, residential construction contractors must complete a minimum of six hours of continuing education annually through a board-approved provider.
For out-of-state contractors, it is important to note that possessing a license in another state does not automatically qualify them to work in Louisiana. They must obtain their own license to bid, contract, or perform work within the state.
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Payment remedies
Prompt Payment Law
Louisiana's Prompt Payment Law requires that subcontractors be paid within 14 days of their hiring party receiving payment. Late or wrongfully withheld payments incur a penalty of 0.5% interest per day, up to a maximum of 15% of the unpaid balance. Attorney fees will be awarded to the prevailing party in a claim.
Public Works Act
The Louisiana Public Works Act protects the rights of subcontractors, materialmen, laborers, and others involved in the construction of public works. It provides that a "claimant" (a person to whom money is due pursuant to a contract) may, within 45 days of the recordation of acceptance of the work or notice of default, file a sworn statement of the amount due. However, under the Public Works Act, a true "pay-if-paid" clause precludes the existence of an obligation to pay under the contract.
Other State Laws
La. R.S. 9:2784 provides that when a contractor receives payment from the owner, they must promptly pay subcontractors and suppliers in proportion to the percentage of work completed.
Additionally, under Louisiana law, attorneys for owners, claimants, or privilege holders who convoke a concursus under certain circumstances may be awarded reasonable fees by the court, payable by the contractor and their surety.
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Contract clauses
In Louisiana, construction contracts outline the obligations, rights, and remedies of each party involved in a project. While the specific language of contract clauses is typically negotiable, there are certain rules that govern what must be included and what is prohibited.
One important aspect of Louisiana contractor law is the inclusion of "pay-if-paid" clauses in construction contracts. These clauses state that the contractor is only obligated to pay the subcontractor if the owner pays the contractor. Courts in Louisiana have generally enforced these clauses, as seen in cases like Imagine Construction, Inc. vs. Centex Landis Construction Co., Inc. In this case, the court held that because the owner had not paid the general contractor, the subcontractor could not recover payment from them or their sureties. Even the presence of a “pay when paid” clause in a subcontract can lead to the dismissal of a subcontractor's suit as premature. However, it's worth noting that the courts interpret these laws, and their interpretations can change over time.
The Louisiana Public Works Act provides specific protections for subcontractors, material suppliers, labourers, and others involved in public works projects. Under this Act, a "claimant" is defined as a person to whom money is owed pursuant to a contract. The Act allows claimants, after the maturity of their claim and within 45 days of the recordation of acceptance of the work or notice of default, to file a sworn statement of the amount due. However, a true "pay-if-paid" clause precludes the existence of an obligation to pay under the contract.
Additionally, Louisiana law does not allow the use of "no-lien clauses" in contracts. The Louisiana Supreme Court has held that a waiver of lien rights in a contract would be unenforceable as there would be no existing lien rights at the time the contract is entered into. While there is no explicit statutory requirement for a written contract to file a lien in Louisiana, an "enforceable" contract, whether oral or written, is necessary. Therefore, it is generally safer to obtain a written agreement.
Another aspect of Louisiana contractor law related to payment is retainage. On public projects, retainage cannot exceed statutory limits, which depend on the total project cost. If the project cost is less than $500,000, retainage cannot exceed 10%. For projects over $500,000, the limit is 5%. These payment deadlines, particularly for prime contractors, cannot be modified by contract, as specified in the relevant statute.
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Public works projects
In Louisiana, subcontractors working on public works projects are protected by the Louisiana Public Works Act. This Act ensures that subcontractors, suppliers, and labourers are paid for their work. Under the Act, subcontractors have the right to file a sworn statement of the amount due to them within 45 days of the recordation of acceptance of the work or notice of default of the contractor or subcontractor.
The Act also provides that when a contractor receives payment from the owner, they must pay subcontractors and suppliers in proportion to the percentage of work completed. Payment to subcontractors is due within 14 days of the contractor receiving payment. If payment is late, the unpaid balance will accrue an interest penalty at a rate of 0.5% per day, up to a maximum of 15% of the payment due.
It is important to note that subcontractors who only perform labour and do not bid on or manage projects may be required to hold a contractor's license or a home improvement registration. The requirement for licensure depends on the type of project and the total project amount. For commercial projects exceeding $50,000, a contractor's license is necessary, while for home improvement projects ranging from $7,500 to $50,000, a home improvement registration is required.
Additionally, subcontractors who wish to bid or perform work on public projects must be licensed with the relevant board if the total cost of the project, including labour and materials, exceeds certain thresholds. For major and specialty classifications, the threshold is $50,000, while for electrical, mechanical, and plumbing classifications, it is $10,000.
The Louisiana Public Works Act also differs from the Private Works Act in that it does not allow subcontractors and suppliers to obtain a privilege on the property they have improved. Instead, it provides them with remedies against the contractor and, in some cases, the government entity.
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Residential work
In Louisiana, a contractor's license is required to bid, contract, or perform work. The Louisiana Contractor Licensing Laws require a commercial contractor's license for projects of $50,000 or more, hazardous materials projects in excess of $1, and plumbing, mechanical, and electrical work on commercial projects of $10,000 or more.
For residential work, the requirements are slightly different. Residential contractors must be licensed if the project awarded is $75,000 or more, or if the work exceeds $7,500 for residential pile driving, foundation, framing, roofing, masonry, or swimming pool work. Licensing for subcontractors and specialty trades is necessary unless the project's contract price is below $75,000.
To obtain a Louisiana contractor's license, applicants must provide various information, including business registration details, qualifying party information, a financial statement affidavit, and proof of insurance coverage. Once the application is approved, applicants must pass two exams: a general business and law exam and a trade exam.
It is important to note that licensure requirements for subcontractors in residential construction may vary depending on the type of project and the total project amount. Subcontractors who perform labor only and do not bid on or manage projects may be required to hold a contractor's license or a home improvement registration.
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Frequently asked questions
Subcontractors who perform labor only and do not bid on or manage projects may be required to hold a contractor’s license or a home improvement registration. The licensure requirement is determined by the type of project and the total project amount. For commercial projects, if the total project amount exceeds $50,000, a contractor’s license is required. For residential work, if the total project amount is $7,500 to $50,000, a home improvement registration is required.
Retainage laws in Louisiana dictate that on public projects, no more than 10% can be withheld if the project is less than $500,000. For projects over $500,000, no more than 5% may be withheld. Retainage laws do not govern the amount withheld on private construction projects; this is determined by the contract.
Prime contractors must be paid within 45 days of submitting a pay application or completing the project. All other payments must be made within 14 days of receiving funds.
"Pay-if-paid" clauses in contracts state that the contractor does not have to pay the subcontractor unless the owner pays them. This clause has been enforced in Louisiana, protecting contractors from having to pay subcontractors if the owner does not pay them.
