What Does An Injunction Mean For An Unlicensed Contractor in NC?
In North Carolina, the line between a legal side hustle and a serious legal crisis is often exactly $40,000. For an unlicensed contractor, crossing that line doesn’t just mean a fine; it can lead to a complete "business death sentence" in the form of a Superior Court injunction.
Understanding the mechanics of North Carolina’s licensing laws and the aggressive stance of the North Carolina Licensing Board for General Contractors (NCLBGC) is vital for anyone operating in the construction space.
The Legal Divide: Licensed vs. Unlicensed Contractors
In North Carolina, the distinction between a licensed and unlicensed contractor is more than just a certificate on the wall. A Licensed General Contractor has undergone a process defined by the NCLBGC, which includes proving financial stability and passing a technical examination.
An Unlicensed Contractor is someone who has not yet met these state-mandated benchmarks. While "unlicensed" is not necessarily synonymous with "unqualified," the law treats the lack of a license as a matter of public safety. The state’s police power is used to regulate this industry specifically to protect homeowners from fraud and incompetent workmanship.
The $40,000 Threshold and Administrative Code
The primary "trigger" for licensing requirements is found in N.C. Gen. Stat. § 87-1. This statute defines a general contractor as any person or entity who, for a fixed price or fee, undertakes to bid upon or construct any building, highway, or improvement where the cost of the undertaking is $40,000 or more.
It is a common misconception that you can simply split a $60,000 job into two $30,000 contracts to avoid the law. The North Carolina Administrative Code (21 NCAC 12A) clarifies these limits, and the Board usually looks at the total cost of the undertaking. If the project's scope reasonably exceeds the threshold, the Board has the authority to investigate.
The NCLBGC’s Power: Statutory Injunctions
When the Board identifies an unlicensed contractor working on a project valued over the limit, they don’t just send a polite letter. Under N.C. Gen. Stat. § 87-13.1, the Board is explicitly granted the power to apply to the Superior Court for a restraining order and injunction.
This is a civil action that essentially asks a judge to order the contractor to stop all work immediately. Because this power is granted by statute, the Board does not have to prove that anyone was actually "hurt" by the work; they simply have to prove that the law (licensing) is being violated.
Rule 65: The Mechanics of an Injunction
To obtain this order, the Board utilizes Rule 65 of the North Carolina Rules of Civil Procedure. This rule governs how injunctions are issued.
The Two-Prong Test
To succeed, the Board must generally show two things:
Likelihood of Success on the Merits: The Board must show it is probable they will win the case—usually by proving the defendant is unlicensed and the project exceeds $40,000.
Irreparable Harm: In most civil cases, "irreparable harm" is hard to prove. However, usually this is argued as a public safety concern constituting harm to the public interest by its very nature.
Rebuttals and the 12(b)(6) Motion
If you are served with an injunction, you have the right to fight back. One common tactic is filing a Rule 12(b)(6) Motion to Dismiss for "failure to state a claim upon which relief can be granted."
A rebuttal often hinges on the math. If a defense attorney can show that the "total cost of the undertaking" was actually under $40,000—perhaps because the scope was narrower than the Board alleged—the case for an injunction may crumble.
The "Death Penalty" for Contracts: Brady v. Fulghum
Perhaps the most terrifying consequence for an unlicensed contractor is not the injunction itself, but the inability to get paid. North Carolina follows a strict "bright-line" rule established in the landmark case Brady v. Fulghum, 309 N.C. 580 (1983).
In the Brady case, the North Carolina Supreme Court ruled that a contract entered into by an unlicensed general contractor (for a project over the limit) is illegal and unenforceable.
This means:
You cannot sue the homeowner for breach of contract.
You cannot file a valid mechanic’s lien.
You cannot even recover the cost of your materials under "quantum meruit" (unjust enrichment).
If you do $100,000 worth of work and the homeowner discovers you are unlicensed, they can legally refuse to pay you a single penny, and the courts will likely not help you. The law views the contract as void from the beginning because it violated public policy.
Using Injunctions as Leverage
It is also worth noting that in private civil litigation, an unlicensed status is often used as a "sword." If a homeowner is unhappy with work and discovers the contractor is unlicensed, their attorney may use the threat of a Board complaint or a Superior Court injunction to force a settlement. Being unlicensed puts the contractor in a position of zero leverage; you are fighting a battle where the law has already decided you cannot win the financial argument.
Protecting Your Business
If you are facing an investigation from the NCLBGC or have been served with a summons for an injunction, the stakes could not be higher. You are facing:
Criminal Charges: Under N.C. Gen. Stat. § 87-13, practicing without a license is a Class 2 misdemeanor.
Total Financial Loss: Per Brady v. Fulghum, you lose the right to collect payment.
Future Licensing Issues: A permanent injunction on your record can make it much harder to obtain a legitimate license in the future.
If you believe you have been wrongfully accused or if the project math is being misrepresented by the Board, you need to reach out for guidance. A contractor defense attorney focused on North Carolina professional license defense can help you navigate the response to the Board, handle Rule 65 hearings, and protect your ability to earn a living.
Contact Brooks Peterson PLLC today to schedule a consultation or call (919) 616-3317.
This is not legal advice. If you do need legal representation call the office at: (919) 616-3317