Many aspiring contractors focus all their study time on the trade exam and neglect the Law & Business exam until the last minute. That’s a mistake — the L&B exam has its own challenges and a separate pass requirement. Here are the 8 most tested topics you need to master.
1. Contract Requirements (B&P Code §7159)
Know the written contract rules cold: required for projects over $500, must include license number, start/completion dates, payment schedule, scope of work, and the 3-day right to cancel notice. This is one of the most frequently tested areas.
2. Contractor License Bond ($25,000)
Understand the bond requirement: $25,000 for all contractors, protects consumers, must be maintained continuously. Know the difference between the license bond, disciplinary bond ($15,000), and performance bonds on public works.
3. Workers’ Compensation Insurance
Know when it’s required (any employees), the exemption process (sole proprietors with no employees), and consequences of non-compliance (automatic license suspension). Understand the difference between workers’ comp and general liability insurance.
4. Mechanics’ Liens and Preliminary Notices
The 20-day preliminary notice requirement, mechanics’ lien filing deadlines (90 days from completion or 60 days from Notice of Completion), and stop payment notices. Know who must serve a preliminary notice and who doesn’t.
5. Employee vs. Independent Contractor (AB 5)
California’s ABC test for worker classification is heavily tested. Understand when a worker is an employee vs. independent contractor and the penalties for misclassification.
6. Change Orders and Extra Work
Written authorization required before performing extra work, proper change order documentation, and the down payment limit ($1,000 or 10%, whichever is less).
7. OSHA/Cal-OSHA Safety Requirements
Injury and Illness Prevention Program (IIPP), hazard communication, fall protection at 6 feet, excavation safety at 5 feet, and employer obligations for PPE and training.
8. License Requirements and Penalties
4 years experience, 2-year renewal cycle, penalties for unlicensed work ($15,000 first offense), and CSLB complaint/disciplinary procedures.
Our free Law & Business study guide (included with every classification purchase) covers all of these topics in detail with practice questions.