I'm Lucy, and I'd be happy to answer your questions today. I'm sorry to hear that this happened.
She has no legal basis for withholding payment on the painting work. If any of the miscellaneous work you performed requires a license you did not have, I'm sorry to say, that's an illegal contract and you cannot sue her for compensation. A judge will not order a person to pay you for work that you weren't legally permitted to do in the first place. You CAN sue her for any work that is covered by the legal painting business you have, or work that doesn't require a license. As long as she was clear that she was hiring the other worker separately under an agreement that you weren't a part of, she can't withhold your money based on him not doing the work.
Note that she can't both sue you for being an unlicensed contractor and for not doing the work. If you're unlicensed, you can't do the work. But you could have problems if you referred her to someone who wasn't licensed to do work that requires a license within the scope of your business. He's your employee and your agent, so if she thought she was hiring your company to do the work, based on the fact that he was doing it, you could have an issue. Gather any documentation you have, like a written estimate from him, texts between the two of you, or testimony from him, that would help. If the state is investigating you for being an unlicensed contractor, you need to be able to prove you're not.
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