BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 1505 Hearing Date: June 10,
2015
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|Author: |Committee on Labor and Employment |
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|Version: |March 4, 2015 |
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|Urgency: |No |Fiscal: |No |
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|Consultant:|Deanna Ping |
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Subject: Car washes.
KEY ISSUE
Should the legislature require a car wash employer to provide
written notice to a successor employer regarding the
requirements of existing law prior to the sale or other transfer
of the business?
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 $150,000 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
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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)
Existing law also provides that a successor to an employer that
owed wages and penalties to the predecessor's employees is
liable for those wages and penalties under specified
circumstances. (Labor Code §2066)
This bill would require a car wash employer to provide written
notice to a successor employer regarding the above provisions,
such as owed wages and penalties, prior to the sale or other
transfer of the business.
COMMENTS
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
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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
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,
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and failure to pay minimum wages and overtime pay).
In 2013, the legislature passed and the governor signed AB
1387 (Hernandez) which eliminated the sunset date on existing
law regulating the car washing and polishing industry. AB 1387
also increased the surety bond from $15,000 to $150,000 and
provided a specified exemption for employers with a valid
collective bargaining agreement.
2. California Courts and Successorship Provisions:
In People ex rel. Harris v. Sunset Care Wash, LLC (205 Cal.
App. 4th, 2012) the plaintiff filed an action against Sunset
Car Wash, LLC to recover unpaid wages and penalties owed by
the defendant Auto Spa Express, Inc. which had operated a
carwash at the same location before being evicted by the
property owner. The trial court denied a motion for summary
judgment filed by Sunset Carwash and ruled that because it
operated at the same location and performed the same services
it was considered a successor under Labor Code section 2066.
In its decision the Court noted that the Legislature was
motivated to enact the Section 2066 provisions by its findings
that carwash operators sometimes employed practices that
resulted in state labor law violations.
3. Need for the bill? :
Existing law regulates the employment practices of car washes
and requires employers of car wash employees to register with
the Labor Commissioner and pay a specified registration fee or
be subject to a specified civil fine. Existing law also states
that a successor car wash employer may be liable for unpaid
wages and penalties incurred by a predecessor car wash
employer if certain conditions are met.
This bill would require a car wash employer to notify a
successor in writing of the requirement of the car wash
registration law. According to the author this bill would
provide important information about the law's requirements to
a prospective purchaser and would ensure greater compliance.
4. Proponent Arguments :
According to the author's office, this bill would require a
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car wash employer to notify a successor in writing of the
requirement of the car wash registration law, including the
potential for successor liability for unpaid wages, prior to
the sale or other transfer of the business. Further, the
author's office argues that requiring a person selling their
car wash business to inform a prospective purchaser about the
requirements of the law will ensure greater awareness of and
compliance with the law.
5. Opponent Arguments :
None on file.
6. Prior Legislation :
AB 2750 (Hernandez) of 2013 - would have required a car wash
employer to provide written notice to a successor employers
regarding the requirements of existing law prior to the sale
or other transfer to the business. The bill was amended out of
Labor Code and into Business and Professions Code.
AB 1387 (Hernandez), Chapter 751, Statues of 2013 - eliminated
the sunset date on existing law regulating the car washing and
polishing industry. Also, AB 1387 increased the surety bond
from $15,000 to $150,000 and provided a specified exemption
for employers with a valid collective bargaining agreement.
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
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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
None on file.
OPPOSITION
None on file.
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