Home Depot, U.S.A., Inc. v. Contractors' State License Board

At issue here is the validity of a regulation adopted by the Contractors’ State License Board (Board) prohibiting a licensed general building contractor from taking a contract or subcontract unless (1) the contract involves at least three unrelated building trades or crafts, or (2) the contractor holds the required specialty license. The regulation is title 16, California Code of Regulations, section 834, subdivision (b), and, for the reasons explained below, we conclude it is invalid under these circumstances.

Factual and Procedural Background

Home Depot, U.S.A., Inc., which is headquarted in Atlanta, Georgia, sells home improvement products in more than 200 stores nationwide, including 64 stores in California at the time of the administrative proceedings here.

In 1990, Home Depot hired Peter Smith to institute a “We can install it” program on a test basis in the San Diego stores. Under the program, Home Depot hires specialty contractors to perform installation of certain products it sells if the customer so desires. Home Depot does not undertake the installation work. Home Depot screens the specialty contractors in the program to make sure they are properly licensed…