BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
William W. Monning, Chair
Date of Hearing: June 26, 2013 2013-2014 Regular
Session
Consultant: Deanna D. Ping Fiscal:Yes
Urgency: No
Bill No: AB 1387
Author: Hernandez
As Amended: April 18, 2013
SUBJECT
Car washes
KEY ISSUES
Should the Legislature remove the sunset on existing law
regulating the car washing and polishing industry, making it a
permanent enforcement program in California law?
Should the Legislature approve an increase in the surety bond
amount required for employers to do business in the state?
Should the Legislature approve an exemption for employers with a
valid collective bargaining agreement?
ANALYSIS
Existing law requires every employer to register annually with
the Labor Commissioner and lists the following conditions for
registration or renewal:
1) The employer must present proof of compliance with the
local government's business licensing or regional
regulatory requirements to the Labor Commissioner
2) The employer has obtained a surety bond with a principal
sum no less than $15,000 and file a copy of the bond with
the Labor Commissioner. The bond shall be payable to the
people of California for the benefit of any employee
damaged by his or her employer's failure to pay wages,
interest on wages, or fringe benefits
3) The employer has documented that a worker's compensation
insurance policy is in effect and has paid necessary fees
(Labor Code §§2054 and 2055)
Existing law regulates the car washing and polishing industry by
requiring specific recordkeeping requirements of car wash
employers on employee wages, hours and working conditions.
(Labor Code §2052)
Existing law establishes a car wash worker fund for which
penalties and registration fees are deposited for disbursement
by the Labor Commissioner to employees of car washing or
polishing businesses found to be in violation of current law.
(Labor Code §2065)
Existing law 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. (Labor Code §2051)
This bill 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.
COMMENTS
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 2
Senate Committee on Labor and Industrial Relations
1. Background on Legislative Efforts to Regulate 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
Labor Commissioner 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 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.
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 -including
underpaying workers, hiring minors, operating without workers'
compensation insurance and denying workers their meal and rest
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 3
Senate Committee on Labor and Industrial Relations
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.
2. Need for this bill?
According to the author, California leads the nation with
estimates of more than 1600 car washes and more than 22,000
employees by said car washes in the State. Legislative
enforcement efforts over the last decade have targeted this
industry to deter the future abuse of car wash workers. In
2011, 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. In 2012, the BOFE inspected 162 car
washes and issued 157 citations. BOFE found wages due of
$652,389 and collected $74,665 and assessed over $2 million in
penalties.
As stated above, the current law contains a January 1, 2014
sunset date. According to the author, this bill would
eliminate the sunset date on existing law regulating the car
washing and polishing industry, thereby making the much needed
program a permanent enforcement program under the law.
Existing law also requires employers in the car washing and
polishing industry to obtain a surety bond of not less than
$15,000. However, according to the author, a typical wage
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 4
Senate Committee on Labor and Industrial Relations
claim for an individual employee in this industry is around
$35,000, and can be much higher when multiple workers file a
claim. The author's office 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) - illustrating that the current bond
requirement amount of $15,000 is insufficient. If passed, AB
1387 would increase the bond requirement to $150,000.
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.
3. Proponent Arguments :
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. CLEAN states that 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. CLEAN contends that by lifting the sunset clause
in this law will ensure that thousands of carwash workers in
our state can assert their rights. CLEAN references a 2009
study conducted by UCLA that found 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 -a sum total of these violations amounts
to $26.2 million in stolen wages each year. CLEAN argues that
because of the rampant violations of labor law in the car wash
industry, the Legislature passed a law in 2004 requiring car
washes to register with the State and post a bond. CLEAN
contends that 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.
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 5
Senate Committee on Labor and Industrial Relations
Supporters of this bill argue that 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. They also
contend that workers have reported kidney damage, respiratory
problems and nerve damage due to chemical exposure. Supporters
argue that the car wash registry is continually on the verge
of being eliminated and the surety bond amount is too low to
cover the wages actually owed to workers. Supporters also
argue that there are no exceptions for upstanding employers
who are doing right by their workers and raising the bar for
the industry.
Supporters contend that this bill is the answer as it
eliminates the sunset date -preserving one of the most
effective tools in labor law enforcement and raises the bond
amount to cover stolen wages, making sure workers are
protected.
4. Concerns from the Surety Industry :
The Surety & Fidelity Association of America (SFAA) expressed
concern with the increased surety bond provision of AB 1387.
According to SFAA, the $150,000 surety bond requirement would
not be widely available. SFAA contends that when bond amounts
increase or if the scope of the obligations expands, surety
companies may tighten their underwriting parameters. SFAA
states that if the statute requires an unduly high bond size,
some car wash companies in California may not be able to
obtain the required higher bonds because they will need to
demonstrate a higher financial position (net worth, working
capital, liquid assets) relative to the bond amount. According
to SFAA such a high bond amount could unduly preclude small
car wash companies from doing business in California. SFAA
suggests a more moderate increase to $20,000 or $25,000 as to
not unduly restrict participation in the market for car wash
companies.
5. Opponent Arguments :
None on file.
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 6
Senate Committee on Labor and Industrial Relations
6. Prior Legislation :
AB 236 (Swanson), Chapter 224, Statutes of 2009 - extended the
sunset date of the licensing and registration program for car
washes from January 1, 2010 to 2014.
SB 1468 (Alarcon), Chapter 656, Statutes of 2006 - extended
the sunset date of the licensing and registration program to
January 1, 2010 and required the Labor Commissioner to report
on the status of labor law violations and enforcement in the
car washing and polishing industry.
AB 1688 (Goldberg), Chapter 825, Statutes of 2003 - enacted
regulations for the car wash industry including registration
and bonding requirements, as well as protections against
'successor' entities avoiding previous judgments for unpaid
wages or penalties.
SB 1097 (Hayden) of 1999 - would have required persons who
employ others in car washing and polishing to register with
the Labor Commissioner and would have required an employer who
has violated specified labor laws to obtain a surety bond and
meet other specified requirements. SB 1097 was vetoed by
Governor Davis.
SUPPORT
American Civil Liberties Union of California
Asian Americans Advancing Justice - Los Angeles
Asian Pacific American Legal Center
California Labor Federation, AFL-CIO
California Rural Legal Assistance Foundation
Clergy and Laity United for Economic Justice - Los Angeles
Coalition for Humane Immigrant Rights of Los Angeles
Communications Workers of America, District 9
Community - Labor - Environmental Action Network (CLEAN) Carwash
Campaign
Enlace
Koreatown Immigrant Workers Alliance
The Wage Justice Center
United Steelworkers, Local 675
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 7
Senate Committee on Labor and Industrial Relations
CONCERNS
The Surety & Fidelity Association of America
OPPOSITION
None on file.
Hearing Date: June 26, 2013 AB 1387
Consultant: Deanna D. Ping Page 8
Senate Committee on Labor and Industrial Relations