BILL ANALYSIS Ó AB 1387 Page 1 ASSEMBLY THIRD READING AB 1387 (Roger Hernández) As Amended April 18, 2013 Majority vote LABOR & EMPLOYMENT 6-1 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Roger Hernández, Alejo, |Ayes:|Gatto, Bocanegra, | | |Chau, Gomez, Gorell, | |Bradford, | | |Holden | |Ian Calderon, Campos, | | | | |Eggman, Gomez, Hall, | | | | |Ammiano, Pan, Quirk, | | | | |Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Morrell |Nays:|Harkey, Bigelow, | | | | |Donnelly, Linder, Wagner | | | | | | ----------------------------------------------------------------- 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. FISCAL EFFECT : According to the Assembly Appropriations Committee, this bill will result in no additional fiscal impact to the Department of Industrial Relations (DIR) to repeal the sunset of the carwash enforcement program. The 2012 Budget Act provided $197,000 in the Car Wash Worker Fund (registration and fine revenue). By continuing the enforcement program, the collection of the one-time $250 fee and annual $50 fee will continue as well. AB 1387 Page 2 COMMENTS : 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 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). 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. 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 AB 1387 Page 3 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 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, AB 1387 Page 4 the bond amount has not been sufficient to cover all the outstanding judgments against this carwashes and needs to be raised. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0000767