California contractors are preparing for a series of new state laws set to take effect beginning Jan. 1, 2026, with additional changes scheduled midyear. The measures introduce stricter enforcement tools, updated consumer protections, higher penalties, and new licensing exemptions, according to guidance from the Contractors State License Board (CSLB).
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The changes affect everything from contractor bonds and wage enforcement to home-improvement contracts and workers’ compensation compliance, with one law taking effect July 1, 2026.
Under existing law, licensed contractors must maintain a $25,000 contractor’s bond or cash deposit filed with the CSLB. Recent court rulings raised concerns that the CSLB could be treated as a “surety” and held responsible for attorney fees in disputes involving cash deposits.
Assembly Bill 521 addresses that exposure. Effective Jan. 1, 2026, the law exempts the CSLB from liability for legal fees and costs in civil actions involving contractor cash deposits, regardless of when the deposit was filed.
John Bly, executive vice president of the Engineering Contractors Association of Northern California, said AB 521 is unlikely to significantly impact most contractors.
“AB 521 will have minor impact on smaller contractors.”
Legislative analysts said the change protects CSLB’s licensee-funded revenue and clarifies its role as a regulator rather than a financial guarantor.
Assembly Bill 1002 significantly expands enforcement options for unpaid wages in the construction industry. Beginning Jan. 1, 2026, the California Attorney General may file civil actions against licensed contractors or applicants with unpaid wage judgments, unsatisfied court orders, or violations of wage-payment injunctions.
The CSLB retains its existing authority, while the Attorney General must give the CSLB registrar 30 days’ notice before filing suit. Contractors remain protected from discipline for good-faith mistakes related to prevailing wage compliance.
Bly described the law’s impact as targeted.
“Significant for violators. For all others, minor clerical costs.”
Assembly Bill 1327 modernizes consumer “right to cancel” provisions in construction contracts. Starting Jan. 1, 2026, contractors must allow contract cancellations via email, include an email address and phone number in contracts, and clearly state that email cancellation is permitted.
The law is aimed at high-pressure sales environments, particularly for home repairs and disaster-related construction work. Contractors who fail to include the required information may face complaints filed with the CSLB.
Senate Bill 291 increases penalties for contractors who fail to maintain required workers’ compensation insurance. Effective Jan. 1, 2026, minimum fines rise to $10,000 for sole owners and $20,000 for other contractors.
The law also tightens license renewal requirements and enhances reporting and verification for “no employee” exemptions. While universal workers’ compensation coverage was delayed until 2028, lawmakers said the stricter penalties target contractors who falsely claim exemption.
The bill’s author, Sen. Tim Grayson, said the changes are meant to strengthen enforcement while improving data collection for legitimate exemptions.
Beginning Jan. 1, 2026, artists who create or restore murals will no longer need a contractor’s license, provided the work qualifies as a unique, hand-created work of fine art. Painted wall signs remain excluded from the exemption.
Supporters argue the previous licensing requirement stifled public art projects.
“Furthermore, artistic works are protected under Article 1, Section 8, Clause 8 of the US Constitution and the 1976 Copyright Act. Additionally, the California Arts Preservation Act (CAPA) and the Visual Artists Rights Act (VARA) protect an artist’s moral rights, distinguishing their work from commercial painting,” the group wrote to the Legislature.
Opponents expressed concern that the definition of “muralist” could be misused to avoid licensing requirements for construction-related work.
Bly said contractors should see negligible impact from SB 456.
Senate Bill 517 strengthens consumer protections in home-improvement contracts by requiring contractors to disclose subcontractor information upon request. Beginning Jan. 1, 2026, contractors must provide the subcontractor’s name, license number, classification, and contact information.
The law clarifies that prime contractors remain fully responsible for project completion while ensuring homeowners have clearer information to protect against unpaid subcontractor liens.
Taking effect July 1, 2026, SB 779 raises minimum civil penalties for licensing violations. The minimum fine for unlicensed work jumps from $200 to $1,500, with new minimums established for serious and routine violations.
The law also allows the CSLB to adjust penalties for inflation every five years. Legislative analyses noted that outdated minimum fines had allowed administrative law judges to significantly reduce penalties on appeal, weakening enforcement.
Supporters said the higher minimums are intended to improve compliance and deter repeat violations.
Originally reported by The Press Democrat.
