BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1387
                                                                  Page  1

          Date of Hearing:   April 24, 2013

                     ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
                               Roger Hernández, Chair
               AB 1387 (Roger Hernández) - As Amended:  April 18, 2013
           
          SUBJECT  :   Car washes.

           SUMMARY  :   Makes changes to existing law regulating the car  
          washing and polishing industry.  Specifically,  this bill  :

          1)Eliminates the sunset date on existing law regulating the car  
            washing and polishing industry, thereby making it a permanent  
            enforcement program under California law.

          2)Increases the surety bond amount required from $15,000 to  
            $150,000.

          3)Provides that the surety bond requirements do not apply to an  
            employer covered by a valid collective bargaining agreement if  
            the agreement expressly provides for wages, hours of work,  
            working conditions, and an expeditious process to resolve  
            disputes concerning nonpayment of wages.

           EXISTING LAW  :

          1)Regulates the car washing and polishing industry by requiring  
            specific recordkeeping requirements of car wash employers on  
            employee wages, hours and working conditions.

          2)Requires car wash employers to register with the Labor  
            Commissioner (LC) and post a wage surety bond of not less than  
            $15,000, as specified.

          3)Establishes a car wash worker fund for which penalties and  
            registration fees are deposited for disbursement by the LC to  
            employees of car washing or polishing businesses found to be  
            in violation of current law.

          4)States that charitable groups, rental car agencies,  
            self-service or automated car wash that have no more than two  
            full-time employees for cashiering and/or maintenance  
            purposes, and licensed vehicle dealers or automotive repair  
            businesses are exempted.









                                                                  AB 1387
                                                                  Page  2

          5)Contains a January 1, 2014 sunset date on these requirements. 

           FISCAL EFFECT  :   Unknown

           COMMENTS  :  California leads the nation in both the number of car  
          washes and number of employees employed by car washes.  By some  
          estimates, there are more than 1600 car washes in California and  
          more than 22,000 employees employed therein.

          Over the past decade, well-documented cases of abuse of car wash  
          workers has led to the enactment of a comprehensive statutory  
          enforcement program aimed at the car wash industry.

          In 1999, SB 1097 (Hayden), which sought to regulate the car wash  
          industry, was vetoed by the Governor.  In his veto message the  
          Governor said, in part: "I am vetoing this bill.  I do not  
          believe that the need to register car washes with the LC has  
          been demonstrated.  I am however asking the Director of  
          Industrial Relations (DIR) to review the activities of the car  
          washing industry and make any and all appropriate recommendation  
          to me by June 30, 2001."
                       
          In response to the Governor's veto directive, DIR filed an  
          internal report about labor law violations in the industry and  
          possible remedies, considering limited resources and widespread  
          violations that affect other industries in the state.   
          Additionally, in early 2003, DIR conducted a coordinated  
          enforcement sweep of the car washing and polishing industry in  
          the Los Angeles area, finding numerous labor law violations,  
          collecting back wages and penalties due totaling over $250,000.

          As a result of proven violations in this industry AB 1688  
          (Goldberg) "The Car Wash Worker Bill" was signed into law and  
          took effect on January 1, 2004.  AB 1688 contained a sunset date  
          of January 1, 2007.  The final car wash regulations were  
          promulgated by DIR and finally adopted by the Office of  
          Administrative Law December 2005.

          SB 1468 (Alarcon) of 2006 extended the sunset date relating to  
          the regulation of  the car washing and polishing industry to  
          January 1, 2010, and  required the LC to report to the  
          Legislature no later than December 31, 2008, on the status of  
          labor law violations and enforcement in the car washing and  
          polishing industry.









                                                                  AB 1387
                                                                  Page  3

          In March 2008, the Los Angeles Times reported the results of an  
          investigation of the car wash industry finding that many owners  
          pay less than half of the required minimum wage and that  
          two-thirds of those inspected by the state since 2003 were out  
          of compliance with one or more labor laws.  Some violations  
          included underpaying workers, hiring minors, operating without  
          workers' compensation insurance and denying workers their meal  
          and rest breaks.

          The Division of Labor Standards Enforcement in the Department of  
          Industrial Relations released the mandated study of the car wash  
          and polishing industry in April of 2009.  In the report, DLSE  
          said the number of registered firms increased from 2007 to 2008  
          and that the number of citations decreased in that period.   
          However, the report found that there continue to be hundreds of  
          violations of labor standards.  Many firms had no workers'  
          compensation for their workers, and there were many other  
          violations of labor law (e.g., child labor violations, and  
          failure to pay minimum wages and overtime pay).

          AB 236 (Swanson) of 2009 extended the sunset date to January 1,  
          2014.

          In 2011 (the most recent year for which data is available), the  
          Bureau of Field Enforcement (BOFE) within DLSE inspected 626 car  
          washes and issued 468 citations.  BOFE found wages due of  
          $210,092 and collected $282,603 (which included claims from  
          prior years).  In addition, BOFE assessed civil penalties to car  
          washes in the amount of $3,086,892, of which $868,912 was  
          collected.

          As stated above, the current law contains a January 1, 2014  
          sunset date.  This bill would eliminate the sunset date, making  
          the program a permanent enforcement program under the law.


          Existing law requires employers in the car washing and polishing  
          industry to obtain a surety bond of not less than $15,000.   
          Supporters of this bill state that a typical wage claim for an  
          individual employee in this industry is around $35,000.   
          However, if multiple workers file a wage claim, the amount of  
          wages owed can be much higher.  Supporters of this bill have  
          provided the Committee with data on 23 prior or pending wage  
          claims which range from $23,000 (for an individual wage claim)  
          to approximately $2 million (for a class action lawsuit).   








                                                                  AB 1387
                                                                  Page  4

          Therefore, supporters contend that the current bond requirement  
          amount of $15,000 is insufficient and propose that the bond  
          requirement be increased to $150,000.  Employers generally  
          purchase the bond from an insurance provider for a percentage of  
          the total coverage, generally between 1% and 10% of the total  
          bond amount.

          This bill would also provide that the surety bond requirement  
          would not apply to an employer covered by a valid collective  
          bargaining agreement that contains, among other things, an  
          expeditious process to resolve disputes concerning nonpayment of  
          wages.  In such situations, unpaid wage claims are generally  
          resolved through the grievance process under the collective  
          bargaining agreement, rather than seeking to collect against the  
          surety bond.

           ARGUMENTS IN SUPPORT  :


          Supporters of this bill argue that carwash workers in Los  
          Angeles are overwhelmingly Latino immigrants and their work is  
          very labor intensive.  On a typical weekday, a carwash may  
          service up to 500 cars.  The workers must work at a fast pace  
          for long periods of time, often drenched in water and exposed to  
          high summer temperatures.  In order to wash and clean such a  
          high number of vehicles, carwash employers routinely violate  
          basic labor laws such as those requiring rest breaks or  
          providing shade and clean drinking water.  Workers have reported  
          kidney damage, respiratory problems and nerve damage due to  
          chemical exposure.


          Because of the rampant violations of labor law, the Legislature  
          passed a law requiring car washes to register with the State and  
          post a bond in 2004.  As that law has been implemented,  
          enforcement efforts in the underground economy have improved and  
          - for the first time- workers have had access to justice.  This  
          registry has become a model of a way to bring an industry into  
          compliance.


          Unfortunately, the car wash registry has a few shortcomings.  It  
          has a sunset so that it is continually on the verge of being  
          eliminated. It has a surety bond amount that is too low to cover  
          the wages actually owed to workers.  Lastly, it has no  








                                                                  AB 1387
                                                                  Page  5

          exceptions for upstanding employers who are doing right by their  
          workers and raising the bar for the industry.


          Supporters content that this bill is the answer. It eliminates  
          the sunset date, preserving one of the most effective tools in  
          labor law enforcement. It raises the bond to cover stolen wages  
          to make sure workers are protected.  It also creates an  
          exemption for employers who exceed state minimal standards to  
          reward the good actors.

          The CLEAN Carwash Campaign supports this bill, and states that  
          it will help to continue to better regulate the carwash industry  
          in California that for too long has been part of the underground  
          economy in our state.  Carwash workers in California have been  
          able to utilize this law in the past to assert their rights and  
          this should be the case permanently.  Lifting the sunset clause  
          in this law will ensure that thousands of carwash workers in our  
          state can assert their rights.  A 2009 study conducted by UCLA  
          found that 655,000 workers in Los Angeles alone experience  
          serious wage theft.  Thirty percent receive less than minimum  
          wage, while a staggering 80% are denied lawful breaks.  The sum  
          total of these violations amounts to $26.2 million in stolen  
          wages each year.  One of the industries that this study focused  
          on was the carwash industry and these violations are  
          continuously happening.  Because of the rampant violations of  
          labor law in this industry, the Legislature passed a law in 2004  
          requiring car washes to register with the State and post a bond.  
           As that law has been implemented, enforcement efforts in the  
          underground economy have improved and - for the first time-  
          workers have had access to justice.  This registry has become a  
          model of a way to bring an industry into compliance.  However,  
          the bond amount has not been sufficient to cover all the  
          outstanding judgments against this carwashes and needs to be  
          raised.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Asian Pacific American Legal Center
          California Labor Federation, AFL-CIO
          California Rural Legal Assistance Foundation
          CLEAN Carwash Campaign
          United Steelworkers Local 675








                                                                  AB 1387
                                                                  Page  6

          Wage Justice Center

           Opposition 
           
          None on file.

           
          Analysis Prepared by  :    Ben Ebbink / L. & E. / (916) 319-2091