2026 California Contractor Law Changes
Seven new laws affecting California contractors took effect in 2026. Most started January 1. One takes effect July 1. This page covers what each law does, who it applies to, and what you should change in your contracts or operations.
SB 779: Higher Fines for Unlicensed Work (July 1, 2026)
Starting July 1, 2026, the minimum civil penalty for unlicensed contracting jumps from $200 to $1,500. For serious violations like willful disregard of building laws (Section 7110), aiding unlicensed contracting (Section 7114), or knowingly contracting with an unlicensed person (Section 7118), fines can reach $30,000.
The law also allows the CSLB to adjust all minimum penalty amounts for inflation every five years, tied to the California Consumer Price Index. This matters because previously, minimum fines had not been updated since 2007. When contractors appealed citations, administrative law judges routinely cut fines down to the outdated minimums. Between 2019 and 2023, appealed fines were reduced by 43% on average.
For licensed contractors, the practical impact is small. For unlicensed operators competing against you, the cost of getting caught just went up significantly.
SB 291: Stricter Workers' Comp Penalties (January 1, 2026)
Minimum fines for failing to maintain required workers' compensation insurance increase to $10,000 for sole proprietors and $20,000 for other contractor entities. The law also tightens the CSLB's verification process for "no employee" exemptions and requires the CSLB to report annually on exemption-related disciplinary actions.
If you currently file a workers' comp exemption, make sure it reflects your actual employment situation. For more on what this means and who is affected, see our workers' comp guide.
AB 1002: Wage Theft Can Cost Your License (January 1, 2026)
The California Attorney General can now file civil actions to suspend, revoke, or deny a contractor license based on unpaid wage judgments, unsatisfied court orders, or wage-payment injunctions. This is a new enforcement path that operates alongside the CSLB's existing authority and the Labor Commissioner's complaint system.
The AG must give the CSLB registrar 30 days' notice before filing suit. Contractors are protected from discipline for good-faith prevailing wage mistakes. But if you have an outstanding wage judgment against you, resolve it. Your license is now directly at risk.
AB 1327 and SB 517: Contract and Cancellation Updates (January 1, 2026)
Two related laws update home improvement contract requirements. AB 1327 modernizes the cancellation process. Homeowners can now cancel home improvement contracts via email in addition to mail or hand delivery. Your contracts must include an email address where cancellations will be accepted and a phone number to help the buyer locate and fill out the cancellation notice.
SB 517 requires contractors using subcontractors on home improvement projects to disclose that fact. If the homeowner requests it, you must provide the subcontractor's name, license number, classification, and contact information. The prime contractor remains fully responsible for project completion.
If you use a standard home improvement contract template, update it. The required cancellation notice language and subcontractor disclosure fields need to be included. Contracts missing these provisions can trigger CSLB disciplinary action.
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AB 521: Bond Cash Deposit Clarification (January 1, 2026)
Most contractors maintain a surety bond. But some file a cash deposit with the CSLB instead. AB 521 clarifies that the CSLB is not liable for attorney fees in civil actions involving contractor cash deposits. This resolves a narrow legal exposure created by recent court rulings. For the majority of contractors who carry a standard surety bond, this has no practical impact.
SB 456: Muralist Exemption (January 1, 2026)
Individuals who paint or restore murals under agreement with a legally authorized party no longer need a contractor license, provided the mural is a unique work of fine art painted by hand directly on an interior or exterior wall or ceiling and protected by copyright. Painted wall signs are excluded from the exemption.
What to Do
The items that require action from most contractors: update your home improvement contract template to include the email cancellation address and subcontractor disclosure provisions; verify your workers' comp status is correctly filed; and resolve any outstanding wage judgments before they become grounds for license discipline.
For a broader understanding of what your license record shows and how homeowners use it, see our verification guide.