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