Business and Labor Practices Flashcards

A Maryland MHIC-licensed contractor completes the final work on a deck renovation on October 1. The homeowner refuses to pay the $6,200 balance. The contractor decides to file a mechanic's lien. What is the absolute last date by which the contractor must file the petition for mechanic's lien in the circuit court?

Answer: March 30 of the following year (180 days after last work)

Under Maryland law, a contractor must file a petition for mechanic's lien within 180 days after the work was finished or materials were furnished. 180 days from October 1 falls on March 30 of the following year. Missing this hard deadline eliminates the lien remedy entirely, regardless of the validity of the underlying debt.

An MHIC-licensed contractor operates under 'ABC Remodeling LLC.' He forms a second company, 'XYZ Home Services LLC,' to take on jobs in a different county under a different trade name. Both entities perform home improvement work exceeding $500. Under Maryland law, which of the following is correct?

Answer: XYZ Home Services LLC must obtain its own separate MHIC license because each distinct legal entity performing home improvement work must be independently licensed

Maryland law requires each distinct legal entity performing home improvement work over $500 to hold its own MHIC license. A license is issued to the specific business entity, not to an individual who may control multiple entities. Operating XYZ Home Services LLC without a separate license exposes that entity — and potentially the qualifying individual — to unlicensed contractor penalties.

A homeowner cancels a home improvement contract within the three-day right of rescission period. The contractor had already ordered $1,800 in custom-fabricated materials specifically for this project, which are non-returnable. Under Maryland's Home Improvement Law, what is the contractor legally entitled to recover from the homeowner?

Answer: Nothing — the right of rescission is absolute and the contractor bears all pre-cancellation costs

Maryland's three-day right of rescission under the Home Improvement Law and aligned federal FTC Rule is absolute for contracts solicited at the consumer's home. When a homeowner validly rescinds, the contractor must refund any payments and cannot retain or claim compensation for pre-cancellation expenditures, including custom-ordered materials. The risk of ordering materials before the rescission window closes rests entirely with the contractor.

During an MHIC audit, an investigator discovers that a licensed contractor consistently classifies all workers performing on-site labor as '1099 independent contractors.' Which factor would most strongly indicate to a Maryland enforcement authority that these workers are actually employees who must be classified as such?

Answer: The contractor supplies all tools, equipment, and materials, and directs the workers' daily tasks and hours on each job site

Maryland applies a multi-factor 'economic reality' and common-law control test to worker classification. The most determinative factor is behavioral control: if the contractor dictates the manner, method, tools, schedule, and sequence of the work — rather than simply specifying the desired end result — the workers are employees. Supplying all equipment and directing daily tasks is the clearest indicator of an employer-employee relationship, triggering payroll tax, workers' compensation, and unemployment insurance obligations.

A licensed MHIC contractor is awarded a $40,000 kitchen remodel. Before any work begins, the homeowner asks to add a $9,000 home office renovation down the hall. The contractor performs both scopes of work but documents the addition only in a text message exchange, never in a signed written change order. Under Maryland Home Improvement Law, what is the most accurate legal consequence?

Answer: The original $40,000 contract remains enforceable, but the $9,000 addition is unenforceable because all home improvement contracts and modifications must be in a signed writing

Maryland's Home Improvement Law requires that all home improvement contracts — including change orders and material amendments — be in writing and signed by both parties. A text message exchange does not satisfy this requirement. As a result, the original signed contract for $40,000 remains valid and enforceable, but the $9,000 modification is legally unenforceable. The contractor cannot compel payment for the addition through contract law, though a quantum meruit claim is a separate (and uncertain) equitable remedy.

An MHIC licensee's license is placed under a formal reprimand (not suspended or revoked) by the Maryland Home Improvement Commission following a consumer complaint. Which of the following actions is the licensee PROHIBITED from taking solely as a result of this reprimand?

Answer: Nothing — a reprimand is a disciplinary notation on the record but does not restrict active licensure or business operations

A formal reprimand is the least severe formal sanction the Commission can impose. Unlike a suspension or revocation, a reprimand does not restrict the licensee's ability to contract, advertise, act as qualifying agent, or conduct any business operations. It creates a public disciplinary record and may influence future penalty calculations for subsequent violations, but it imposes no operational restrictions on its own. Contractors sometimes incorrectly assume reprimands carry operational limitations — they do not.