Extracontractual Claims and Defenses Concerning Bonafide Representatives
The State Plumbing License Law of 1968 (N.J.S.A. 45:14C-1, et seq.) and the regulations of the New Jersey Administrative Code which interpret it forbid the business of plumbing contracting without a bonafide representative, i.e., a licensed master plumber who is the holder of not less than 10 percent ownership of the plumbing contractor in the State of New Jersey. N.J.S.A. 45:14C-2(h); N.J.A.C. 13:32-1.3. The purpose of the requirement of a 10% ownership by a master plumber is, as the State Attorney General has acknowledged, to ensure adequate supervision of unlicensed apprentice and journeymen employees. Informal Op. Att’y Gen. 97-0198 (December 18, 1997); In re Public Serv. Elec. & Gas Co., 325 N.J. Super. 477 (1999).
In any dispute between a plumbing contractor and its customer, each side should make diligent inquiry into the identity and involvement of the bonafide representative on the project in issue. Compliance problems on the part of the contractor and its representative may supply the customer with defenses and claims outside the contract of the parties. Inquiry into the legal ownership of the plumbing contractor partnership, corporation, LLC or other form of business is an important first step to ruling these claims and defenses in or out of the case. Since a master plumber can lawfully serve as a bonafide representative for only one plumbing contractor at any time, it is also worth checking into the character and scope of a bonafide representative’s work for other plumbing contractors, including himself, during performance of the contract in issue. N.J.A.C. 13:32-3.3.(a)5.
Lacking a bonafide representative with the requisite ownership interest, a plumbing contractor will lose any enforceable claim to payment for plumbing contracting services provided. In the case of Accountemps Div. of Robert Half of Philadelphia. Inc. v. Birch Tree Group. Ltd., 115 N.J. 614, 626 (1989), the New Jersey Supreme Court held that public policy precludes enforcement of a contract entered into in violation of a licensing statute enacted to protect the public from fraud or incompetence:
Our courts have consistently held that public policy precludes enforcement of a contract entered into in violation of licensing statute. (citations omitted). … Thus, the Appellate Division was correct in its assumption that a failure to comply with the Act’s licensing requirements would ordinarily serve as a bar to enforcing a contract.
See also, Material Damage v. Open MRI, 352 N.J. Super. 216 (2002), in which the Court held:
“A belief, even a good faith belief, that one is performing these services in a reasonable or otherwise sound manner is not a defense. As a matter of law, entities wishing to engage in a highly regulated business which directly impacts upon the safety and welfare of the public, such as the delivery of health care, are constructively on notice of the existence of legal requirements governing its practice and operations. Those who nonetheless, venture forth without first obtaining the required governmental approvals, whether out of ignorance or arrogance, do so at their own risk and must face the legal consequences for their actions. Sound public policy can accept no lesser standard.”
If a plumbing contractor conducts business without a licensed master plumber serving as its bonafide representative (subject to short term grace periods allowed upon withdrawal or inability to serve), the contractor not only loses the right to be paid, but (in the opinion of the author) perpetrates a fraud and a consumer fraud upon its customers. Those customers may prove in court that unfinished, delayed, or shoddy workmanship resulted from failure to have a bonafide representative to fulfill his or her separate legal responsibilities (detailed in N.J.A.C. 13:32-3.2 and 3.3) to the contractor and the consumer.
Alternatively or in addition, the Attorney General may bring suit pursuant to the Uniform Enforcement Act (UEA) governing professional and occupational boards, N.J.S.A. 45:1-14 to 27, seeking to enjoin the violator from engaging in the business of plumbing contracting without a license and to collect statutory penalties and costs.
Even where the bonafide representative has qualified to serve, care should be taken to inquire into the representative’s compliance with above-cited regulatory standards of performance. The regulations make it plain that a plumbing contractor must answer to its customers for restitution, damages and costs assessed against its bona fide representative while acting within the scope of his or her employment on behalf of the plumbing contractor. N.J.A.C. 13:32-3.2(a)4. Moreover, those failures are properly laid at the door of the plumbing contractor under the doctrine of respondeat superior.
In addition, an aggrieved customer could sue to recover against the surety bonds of the bona fide representative and any other licensed master plumber who had failed to perform duties required by Plumbing License Law. N.J.A.C. 13:32-4.3.
The law concerning plumbing contractors and their bona fide representatives, detailed in Subchapter 3 of the administrative rules which implement the provisions of the State Plumbing Licensing Law, should not be overlooked for extracontractual grounds to contest a plumbing contractor’s claim for payment in the appropriate case.