Referral Fees

Law Talk

Sam K. Abdulaziz
Attorney at Law

I believe after all of the push and shove, I have a final document that all contractors should refer to if they deal in the area of referral fees. The following is from a consensus of several people pretty high up.

There has been a lot of talk about referral fees and whether they are acceptable, not acceptable, or hurting the economy. There have been a number of people complaining about contractors and unlicensed contractors with respect to the referral fee issue.

I have met with a number of people and specifically with members of the Contractors' State License Board. Each of the people that this matter has been discussed with, including members of the Board, agree with the following:

For quite some time now, there has been some question as to whether one contractor can provide another contractor with a referral fee. We have been receiving many phone calls and emails about this very issue. Although the consensus believes (I use the word "believes" because I do not know if it would be accurate to say exactly what the law says) that the answer should be No, we thought it best to actually spell it out.

The portion of the law that was discussed among several people was Business & Professions Code section 7157. After various discussions back and forth, it was unanimously agreed among us that the answer to this questions is that no referral fees should be allowed between contractors - ever. Of course, contractors can be compensated for work that they do. However, they should not benefit from this work in the form of an inducement or referral fee.

Please note that this analysis does not include anything having to do with non-contractors.