California Court of Appeal Highlights Licensing Risk for Equipment Suppliers and Installers
A newly published California decision, AVL Test Systems, Inc. v. Hensel Phelps Construction Co. (Cal. Ct. App. Apr. 28, 2026), is worth close attention for contractors, specialty trades, equipment suppliers, and anyone operating in the gray area between “supplying equipment” and “performing construction.”
In AVL Test Systems, the Fourth District Court of Appeal addressed a recurring and high-stakes issue under California’s Contractors State License Law: when does the installation of equipment require a contractor’s license, and when does it fall within the exemption for finished products that do not become a “fixed part of the structure”?
Why This Case Matters
California Business and Professions Code Section 7031 remains one of the most unforgiving statutes in the construction industry. If a license is required and the claimant was not properly licensed during performance, the result can be complete forfeiture of payment claims.
AVL supplied and installed vehicle emissions testing equipment on a public project. In a payment dispute, the general contractor argued AVL’s claims were barred because AVL allegedly performed licensed contractor work before obtaining the proper license. AVL argued its work was exempt under Section 7045, which excludes the sale or installation of finished products that do not become a fixed part of the structure.
The Court’s Holding
The Court of Appeal reversed summary judgment for the general contractor.
Importantly, the court did not decide that AVL was exempt from licensing. It held that the issue could not be resolved as a matter of law because the record contained conflicting evidence — including competing expert opinions — on whether AVL’s equipment became a “fixed part of the structure.” The court reaffirmed that this is generally a fact question.
Key Takeaway
This decision is a reminder that California licensing disputes are often not as simple as asking whether equipment was bolted down, tied into utilities, or supported by structural work. The court identified several practical considerations that may bear on whether installed products become a fixed part of the structure, including:
- How the items are attached.
- How difficult they are to remove.
- Whether removal damages the product.
- Whether removal damages the building.
- Whether the items are designed for replacement.
- Whether they are reusable.
- Whether they are pre-manufactured or assembled off-site.
- Whether the installed connections are incidental or instead part of the building itself.
Why This Is Especially Relevant Now
Modern projects increasingly involve prefabricated systems, specialty equipment, controls packages, lab systems, industrial/process equipment, EV infrastructure, and other integrated technologies. Those scopes often do not fit neatly into traditional licensing categories.
This case is therefore highly relevant to:
- Equipment suppliers that also install.
- Specialty subcontractors with hybrid scopes.
- Design-build teams.
- Public works participants.
- General contractors evaluating downstream licensing risk.
Practical Implications
For contractors and suppliers – If your scope is described as “furnish and install,” do not assume you are outside the licensing statutes simply because the core deliverable is equipment. The installation details matter, and they may determine whether payment rights are preserved or lost.
For owners and general contractors – Licensing defenses remain powerful, but AVL shows they may require a developed factual record. That makes early diligence on subcontractor licensing status and scope characterization even more important.
For construction lawyers – This is a useful published decision on Section 7045. It confirms that the “fixed part of the structure” analysis is fact-intensive and that expert testimony may be central in close cases.
Bottom Line
AVL does not relax California’s strict licensing rules. It does, however, reinforce that where a party invokes the Section 7045 exemption, courts may need to closely examine the nature of the installed product and the method of installation before deciding whether licensure was required.
For companies operating at the intersection of equipment supply and construction, that question can be outcome-determinative.
