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What's on the CSLB Law & Business Exam: 7 Sections, Weights, and How to Study Them

Updated

The CSLB Law and Business exam has 7 sections and 25 subtopics. The two biggest sections are Contract Requirements and Execution (21%) and Employment Requirements (20%). Public Works is the smallest at 5%. These weights come from CSLB's own Law and Business study guide, which says the percentages are approximate.

This page walks through each section, shows where the points are, and gives a study order based on the weights. Every fact below links to the official source it comes from.

The 7 sections and their weights

The CSLB study guide (form 13E-LAW, dated 03-2026, for exams scheduled on or after December 1, 2021) divides the exam into these sections:

# Section Weight Subtopics
1 Business Organization and Licensing 13% 3
2 Business Finances 15% 4
3 Employment Requirements 20% 4
4 Insurance and Liens 12% 3
5 Contract Requirements and Execution 21% 5
6 Public Works 5% 3
7 Safety 14% 3
Total 100% 25

The guide marks these percentages as approximate. CSLB does not say how many questions are on the exam, so you cannot turn a percentage into an exact number of questions. Treat the weights as a guide to where to spend your study time.

Where the points are

Ranked by weight:

  1. Contract Requirements and Execution: 21%
  2. Employment Requirements: 20%
  3. Business Finances: 15%
  4. Safety: 14%
  5. Business Organization and Licensing: 13%
  6. Insurance and Liens: 12%
  7. Public Works: 5%

Two things stand out:

  • Contracts and Employment together are about 41% of the exam. If you are short on time, start there.
  • The top four sections add up to about 70%. Safety (14%) carries nearly three times the weight of Public Works (5%), so do not leave it for last.

The 25 subtopics, section by section

The subtopic names below are copied from the study guide. Each section heading links to our study notes for that section. The example rules show the kind of law each section tests; each one links to the statute or official guide it comes from.

1. Business Organization and Licensing (13%)

  • Company organization
  • Licensing requirements
  • Advertising and subcontracting

This section covers how a contracting business is set up and what it takes to get and keep a license. Example rule: a licensee must have a contractor's bond of $25,000 on file as a condition of issuing, renewing or keeping a license (Bus. & Prof. Code §7071.6). Study notes: Business Organization and Licensing.

2. Business Finances (15%)

  • Cash management
  • Budget and planning
  • Taxes
  • Financial reporting

This is the money side of running a contracting business: cash flow, budgets, taxes and financial statements. Example rule: a Form 941 filer that reported $50,000 or less of taxes in its lookback period is a monthly schedule depositor; above $50,000, it is a semiweekly depositor (IRS Publication 15). Study notes: Business Finances.

3. Employment Requirements (20%)

  • Hiring employees
  • Supervising and training employees
  • Evaluation and record-keeping
  • Payroll

This section is about your duties as an employer, from hiring through payroll. Example rule: under the ABC test, a person paid for labor or services is an employee unless the hiring business shows that all of the test's conditions are met (Lab. Code §2775). CSLB lists the EDD California Employer's Guide (DE 44) as a study resource. Study notes: Employment Requirements.

4. Insurance and Liens (12%)

  • Workers' compensation insurance
  • Business insurance
  • Liens and other remedies

This section covers protecting the business with insurance and getting paid through liens and related remedies. Example rule: a preliminary notice must be given no later than 20 days after the claimant first furnishes work on the project (Civ. Code §8204). Study notes: Insurance and Liens.

5. Contract Requirements and Execution (21%)

  • Bidding
  • Cost control
  • Project organization
  • Contracts
  • Payments

The largest section. It covers the job from bid to final payment. Example rule: on a home improvement contract, the down payment may not be more than $1,000 or 10% of the contract amount, whichever is less (Bus. & Prof. Code §7159.5). Study notes: Contract Requirements and Execution.

6. Public Works (5%)

  • Prevailing wage requirements
  • Bonding requirements
  • Insurance requirements

The smallest section, about work for public agencies. Example rule: except on public works projects of $1,000 or less, workers on public works must be paid at least the general prevailing rate of per diem wages (Lab. Code §1771). CSLB lists the DIR Public Works Manual as a study resource. Study notes: Public Works.

7. Safety (14%)

  • Training and reporting requirements
  • General safety
  • Hazardous/unknown materials

This section covers Cal/OSHA safety duties on the job site. Example rule: every employer must have an Injury and Illness Prevention Program in writing that, at a minimum, names the person or persons with authority and responsibility for carrying it out (8 CCR §3203). Study notes: Safety.

How the questions work

The study guide describes the format:

  • Closed book. No reference materials may be used during the exam.
  • Four choices per question, written so that only one is the BEST answer.
  • Some questions require math. A calculator is provided.
  • No penalty for guessing. CSLB says it is better to answer a question than to leave it blank.
  • Questions are written and reviewed by licensed contractors who are actively working in the trade.

CSLB's Get Licensed to Build guide adds that the exam is taken on a computer, that you have 3½ hours to complete each exam, and that the percentage needed to pass varies for each exam. You can ask CSLB about it. CSLB does not publish a fixed passing score or a question count, so be wary of sites that quote exact numbers for either.

What the math looks like

The study guide does not list which topics use the calculator. Rules with numbers in them are a natural place for it. Two examples from the sections above:

  • Down payment limit. On a $25,000 home improvement contract, 10% is $2,500. The lesser of $1,000 and $2,500 is $1,000, so the limit is $1,000 (Bus. & Prof. Code §7159.5).
  • Deposit schedule. A Form 941 filer with $38,000 of lookback-period taxes is under $50,000, so it is a monthly schedule depositor (IRS Publication 15).

CSLB's three sample questions

The study guide includes three sample questions. Their topics show the range of the exam:

  1. What decides how often an employer's payroll deposits go to the IRS? Answer: the amount of payroll liability.
  2. Within how many days must an "agreement to arbitrate" be returned after CSLB's Registrar mails it? Answer: within 30 calendar days.
  3. A construction company buys a car for general use by its sales staff. Where is its depreciation charged? Answer: general and administrative costs.

Your score report points back to these sections

The section list matters after the exam too. According to Get Licensed to Build, candidates who pass are told they passed but get no detailed score information. Candidates who do not pass see how they did on each section, and those sections match the "Content of the Examination" list in the study guide. If you need to retake, start with the sections where you scored lowest.

A 3-week study order by weight

This is our suggested plan, not a CSLB requirement. It front-loads the heaviest sections and leaves a few days for review.

Week Sections Combined weight
1 5 Contract Requirements and Execution (21%), 3 Employment Requirements (20%) 41%
2 2 Business Finances (15%), 7 Safety (14%) 29%
3 1 Business Organization and Licensing (13%), 4 Insurance and Liens (12%), 6 Public Works (5%), then mixed review 30%

Tips for using it:

  • Read, then practice. Read the section notes first, then answer practice questions on that section the same day.
  • Track misses by section. That is how CSLB reports a failing result, so practice the same way.
  • Do the math by hand once. A calculator is provided, but you still need to know which numbers to compare.
  • Study without notes open. The exam is closed book.

Official resources CSLB recommends

The study guide lists these reference materials:

  • California Contractors License Law & Reference Book (Matthew Bender). Get Licensed to Build says free access to the book is on CSLB's website, and suggests reviewing the current edition.
  • California Employer's Guide (DE 44) from the Employment Development Department (DE 44).
  • IRS Publication 15 (Circular E), Employer's Tax Guide (Publication 15).
  • Public Works Manual from the Department of Industrial Relations (Public Works Manual).
  • Cal/OSHA safety orders in Title 8 of the California Code of Regulations, including the Construction Safety Orders (Cal/OSHA Construction Guide).
  • California Labor Code and California Financial Code (the latter for the PACE program).
  • NASCLA Contractors Guide to Business, Law and Project Management, 14th Edition.
  • CSLB's own Get Licensed to Build and Maintain and Change Your License publications.

You do not need to read all of these cover to cover. Use the section weights to decide where to go deep.

Practice questions

Think of your answer first, then open the explanation.

  1. Contract Requirements and Execution

    1. A home improvement contract price is $25,000. The contractor has no bond or joint control that exempts it from the down payment rule. What is the largest down payment the contractor may charge?

    • A. $750
    • B. $1,000
    • C. $2,500
    • D. $3,500
    Show answer

    Correct answer: B

    • A. $750

      Wrong. $750 is the price limit for a service and repair contract, not a down payment limit.

    • B. $1,000

      Correct answer

      Correct. The down payment may not exceed $1,000 or 10 percent of the contract amount, whichever is less; 10 percent of $25,000 is $2,500, so the lesser amount is $1,000.

    • C. $2,500

      Wrong. $2,500 is 10 percent of the contract price, but the rule requires the lesser of that and $1,000.

    • D. $3,500

      Wrong. $3,500 adds the two limits together; the rule uses only the lesser of $1,000 or 10 percent.

    Explanation

    Business and Professions Code section 7159.5 says the down payment may not be more than $1,000 or 10 percent of the contract amount, whichever is less. Step 1: 10 percent of $25,000 = $2,500. Step 2: Compare $2,500 with $1,000; the lesser amount is $1,000. So the largest down payment is $1,000. $2,500 uses 10 percent without choosing the lesser amount, and $3,500 adds the two limits together. $750 is the price limit for a service and repair contract, not a down payment limit.

    Source

  2. Employment Requirements

    2. Under the ABC test in Labor Code section 2775, a person is paid to do work for a business. What must be shown for that person to be treated as an independent contractor?

    • A. The worker must prove that he is not an employee
    • B. The state must prove that the worker is an employee
    • C. The hiring business must prove any one ABC condition
    • D. The hiring business must prove all three ABC conditions
    Show answer

    Correct answer: D

    • A. The worker must prove that he is not an employee

      This puts the burden on the wrong party. A paid worker is considered an employee unless the hiring entity demonstrates the conditions are met, so the worker does not have to prove anything.

    • B. The state must prove that the worker is an employee

      The state does not have to prove employee status, because employee status is the starting point. The burden is on the hiring business.

    • C. The hiring business must prove any one ABC condition

      Meeting just one condition is not enough. Section 2775 requires the hiring entity to demonstrate that all of the conditions are satisfied.

    • D. The hiring business must prove all three ABC conditions

      Correct answer

      Correct. Under section 2775, a person paid for labor or services is considered an employee unless the hiring entity demonstrates that all three ABC conditions are satisfied.

    Explanation

    Labor Code section 2775 says a person paid for labor or services is considered an employee unless the hiring entity demonstrates that all of the conditions of the test are satisfied. So the burden is on the hiring business, and it must meet all three conditions, not just one. The worker and the state do not have to prove employee status, because employee status is the starting point.

    Source

  3. Business Finances

    3. A contractor files Form 941. The total taxes it reported for its lookback period were $38,000. According to IRS Publication 15, when are its deposits due for employment taxes on wages paid in May?

    • A. By the next business day after each payday
    • B. By the Wednesday or Friday after each payday
    • C. By the 15th day of the following month
    • D. By the due date of the quarterly Form 941
    Show answer

    Correct answer: C

    • A. By the next business day after each payday

      Next-business-day deposits apply only under the $100,000 rule, not to a monthly schedule depositor.

    • B. By the Wednesday or Friday after each payday

      Wednesday or Friday deposits are for semiweekly depositors. With $38,000 of taxes in the lookback period, this contractor is a monthly schedule depositor.

    • C. By the 15th day of the following month

      Correct answer

      Reporting $50,000 or less in the lookback period makes it a monthly schedule depositor. Taxes on May wages are due by the 15th day of the following month.

    • D. By the due date of the quarterly Form 941

      Waiting for the Form 941 due date is too late. A monthly schedule depositor must deposit taxes on May wages by the 15th day of the following month.

    Explanation

    IRS Publication 15 says a Form 941 filer that reported $50,000 or less of taxes in the lookback period is a monthly schedule depositor. Here $38,000 is less than $50,000. A monthly schedule depositor deposits taxes on wages paid during a month by the 15th day of the following month. Wednesday or Friday deposits are for semiweekly depositors, and next-day deposits apply only under the $100,000 rule.

    Sources

  4. Safety

    4. A contractor is writing its first Injury and Illness Prevention Program (IIPP). Under Title 8 section 3203, which item must the written program include?

    • A. The person or persons with authority and responsibility for the program
    • B. The name of the company's workers' compensation insurance carrier
    • C. A list of every job site the company will work on
    • D. The amount the company will spend on safety this year
    Show answer

    Correct answer: A

    • A. The person or persons with authority and responsibility for the program

      Correct answer

      Correct. Section 3203(a) says the written IIPP must, at a minimum, identify the person or persons with authority and responsibility for implementing the program.

    • B. The name of the company's workers' compensation insurance carrier

      The rule does not require the IIPP to name the workers' compensation insurance carrier.

    • C. A list of every job site the company will work on

      The rule does not require the written program to list future job sites.

    • D. The amount the company will spend on safety this year

      The rule does not require the program to state a yearly safety budget.

    Explanation

    Title 8 section 3203(a) says the IIPP must be in writing and must, at a minimum, identify the person or persons with authority and responsibility for implementing (carrying out) the program. The rule does not require the program to name the workers' compensation insurer. It also does not require a list of future job sites or a yearly safety budget.

    Sources

  5. Business Organization and Licensing

    5. A homeowner files a complaint with CSLB about a licensee's remodel work. The homeowner claims $40,000 in damages. The required license bond under section 7071.6 is $25,000. Under section 7085, is arbitration required for this dispute?

    • A. Yes, because the damages are less than $50,000
    • B. No, it needs the licensee's and the homeowner's agreement
    • C. Yes, because every remodel complaint must go to arbitration
    • D. No, because claims over $25,000 can never be arbitrated
    Show answer

    Correct answer: B

    • A. Yes, because the damages are less than $50,000

      The $40,000 claim is under $50,000, but that only puts it in the range where the registrar may refer it to arbitration with both sides' agreement. Arbitration is not required.

    • B. No, it needs the licensee's and the homeowner's agreement

      Correct answer

      Correct. The $40,000 claim is more than the $25,000 bond but less than $50,000, so the registrar may refer it to arbitration only with the concurrence of both the licensee and the homeowner.

    • C. Yes, because every remodel complaint must go to arbitration

      Not every remodel complaint must go to arbitration. Referral is required only when the contract price or damages demand is equal to or less than the bond amount, and $40,000 is more than the $25,000 bond.

    • D. No, because claims over $25,000 can never be arbitrated

      Claims above the $25,000 bond but below $50,000 are "material damages" that can be arbitrated if both the licensee and the complainant agree.

    Explanation

    Business and Professions Code section 7085 says the registrar may refer a dispute to arbitration with the agreement (concurrence) of both the licensee and the complainant when the material damages are more than the bond amount but less than $50,000. The $40,000 claim is in that range, so arbitration is possible but not required. Referral is required only when the contract price or the damages demand is equal to or less than the bond amount. So it is wrong to say claims over $25,000 can never be arbitrated, and wrong to say every complaint must go to arbitration.

    Sources