A contractor is licensed by the Contractors State License Board after passing a rigorous state exam covering the areas in which he or she has applied, and providing documentation proving that the applicant has the required experience to perform the work permitted by the licensee competently. Contractors are required by law to be bonded and to obtain workers' compensation insurance to protect their clients.

A handyman is someone who may do work for another as long as each job is less than $500. By law, jobs cannot be divided to satisfy the dollar limitation. A handyman is not licensed or bonded and has not passed the state examination proving competence. A handyman has also not provided the state proof of experience in the specific areas of work he or she intends to perform. There are no state certifications for handymen.

Those who are caught contracting without a license likely will have to appear before a Superior Court judge to answer to misdemeanor charges that can carry a sentence of up to six months in jail and/or a $5,000 fine, as well as an administrative fine of $200 to $15,000. If illegal contracting continues, the penalties become more severe. A second offense results in a mandatory 90-day jail sentence and a fine of 20 percent of the contract price of $5,000.

Felony charges are filed against anyone who illegally uses another person's contractors license or who tries to mislead consumers into believing that he or she is a licensed contractor. Anyone who contracts for work in a state of federal natural disaster area without an active state contractor license can also face felony charges. If convicted of a felony, the person may have to serve time in state prison.

The State Contractor's License Board Investigative Fraud Team accepts complaints against unlicensed individuals performing construction work where the combined cost for labor and materials is $500 or more.

The use of an unlicensed handyman is appropriate for jobs of under $500 only when the handyman has demonstrated complete competence in the specific area of work to be done and the cost savings justify not hiring a licensed, bonded contractor. Like all people performing work for another, handymen are required to have liability insurance and possible workers' compensation insurance depending on the circumstances.

Most importantly, a handyman who is hired by the hour or by the day is by law an employee and not an independent contractor. This means that the handyman must be paid through payroll with all required deductions and the employee is required by law to provide workers' compensation insurance. Failure to comply with these requirements will subject the property owner or board to major liability which is not likely to be covered by insurance.

Lastly, it is unlawful to conspire with a handyman to break the law. Such an act will likely result in the property owner or board of directors being subjected to significant liability.