BILL ANALYSIS �
AB 132
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
AB 132 (Logue) - As Amended: April 26, 2011
SUBJECT : Car washes: regulations: civil penalties.
SUMMARY : Revises the civil penalty provisions for an employer
engaged in the business of car washing and polishing that fails
to register with the Division of Labor Standards Enforcement
(DLSE). Specifically, this bill :
1)Authorizes DLSE to reduce the fine for failing to register as
an employer in the car washing and polishing industry if he or
she determined both of the following:
a) The failure to register was not intentional or knowing.
b) The employer is guilty of no other wage and hour law
violations and agrees to a payroll audit.
2)Authorizes DLSE to increase the fine for failing to register
up to $250 per day (not to exceed $25,000) if he or she
determines both of the following:
a) The failure to register was intentional or made to evade
wage and hour laws.
b) The employer is guilty of other wage and hour law
violations.
EXISTING LAW :
1)Requires an employer engaged in the business of car washing
and polishing to register annually with DLSE.
2)Further regulates the industry by requiring specific
recordkeeping requirements of car wash employers on employee
wages, hours and working conditions, and requires car wash
employers to post a wage surety bond as specified.
3)Establishes a car wash worker fund for which penalties and
registration fees are deposited for disbursement by DLSE to
employees of car washing or polishing businesses found to be
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in violation of current law.
4)Provides that an employer who fails to register is subject to
a civil fine of $100 for each calendar day, not to exceed
$10,000.
5)Contains a January 1, 2014 sunset date.
FISCAL EFFECT : Unknown
COMMENTS : According to some estimates, California leads the
nation in both the number of car washes and number of employees
employed by car washes. There are more than 1600 car washes and
more than 22,000 employees respectively.
Background on the Car Wash Registration Law
The first legislative effort to regulate the car wash industry
was Senate Bill 1097 (Hayden) of 1999. That measure was vetoed
by the Governor, who stated (in part): "I am vetoing this bill.
I do not believe that the need to register car washes with the
�DLSE] has been demonstrated. I am however asking the
Department 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 and found numerous labor law violations,
collecting back wages and penalties totaling over $250,000.
As a result of these efforts, Assembly Bill 1688 (Goldberg) 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. Senate Bill 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 DLSE to
report to the Legislature no later than December 31, 2008, on
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the status of labor law violations and enforcement in the car
washing and polishing industry.
The 2008 DLSE report made the following findings:
In 2006 (the first year of registration) 435
applications were received and 286 registrations were
issued.
In 2007, 641 registrations were issued (an increase of
124 percent).
In 2008, 863 registrations were issued (an increase of
35 percent).
In 2008, DLSE inspected 576 car washes and issued:
o 142 citations for failure to maintain workers'
compensation
o 25 citations for child labor violations
o 4 minimum wage citations
o 7 overtime citations
o 274 citations for failure to register
The 2008 DLSE report also stated the following with respect to
outreach efforts:
"Through its core enforcement function?DLSE attempts to
proactively reach out to the car washing and polishing
community in an effort to provide education regarding their
legal duties, to help reduce the need to perform
traditional enforcement activities of inspections and
citations. Such outreach efforts include: maintaining a
website and public information lines containing detailed
information on a myriad of labor law topics and regulatory
information; making presentations to, and regularly meeting
with industry groups; providing information on labor law
compliance to employees and employers in the form of
information sheets and resource information ate the time
of, and following field inspections; and providing
post-inspection labor law compliance presentations to
employers with specific emphasis on the violations found
during inspection sweeps."
The most recent DLSE enforcement report available states the
following:
"On January 1, 2007 the Bureau began a concerted
enforcement effort to ensure compliance with the
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registration requirements of car washing and polishing
businesses? For the year 2009, these efforts resulted in
623 car wash establishment inspections/re-inspections and
the issuance of 469 citations for violations of various
labor laws including non-registration and penalty
assessments in the amount of $3,098,050. In addition,
$311,325 was collected on behalf of workers as wages due.
Part of the continued effort of enforcement in the industry
which began in 2008 was a focus on re-inspections of
approximately 10% of the businesses previously cited for
Labor Code violations, selected on a random basis, as a
means to identify both repeat offenders and to verify
continued compliance. That re-inspection focus, which
actually exceeded the 10% goal, was continued in 2009?.As
in 2008, likely as a result of the Division's increased
focus on enforcement in the car washing industry, while the
number of inspections conducted increased, the number of
citations issued in all citation categories including
non-registration, and the corresponding dollar amount of
penalties assessed decreased, indicating continually
increasing industry compliance."
Assembly Bill 236 (Swanson) of 2009 extended the sunset date
until January 1, 2014.
ARGUMENTS IN SUPPORT :
The author states the following in support of this bill:
"Last year a family owned car detail business in Grass
Valley was visited by an agent of the �DLSE], who asked the
owner if he had registered his business with �DLSE]. The
owner honestly answered that he had not, and was unaware
that he was required to. The agent then issued a fine of
$10,000 for the violation. The owner appealed, and at the
administrative hearing before the Department of Industrial
Relations the agent acknowledged that the owner was
credibly unaware of the requirement to register, and that
the owner had initiated registration immediately upon being
informed. However, statute does not allow �DLSE] to
exercise any discretion, such as reducing the fine for
first offense or delaying the fine pursuant to a business'
pending registration.
This story is not anecdotal, but exemplary of the current
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enforcement of the law. Small businesses that would likely
comply with the requirement if they were made aware of it
are instead fined such large amounts that they are pushed
to the brink of bankruptcy. As a result, employees, instead
of being made aware of their legal rights by �DLSE] after
the business registers, are laid off when the business
either has to cut costs to pay the fine or closes its doors
because it cannot afford it."
The author states that this bill would give DLSE discretion in
how much to fine a business for failure to comply. The author
contends that this will continue the current policy of fining
violators who flout the law, while not excessively punishing
small businesses that would gladly come into compliance upon
being made aware of their legal obligation.
Similarly, the Western Car Wash Association argues that this
bill will improve the current regulations by allowing
flexibility for DLSE and providing increased, meaningful,
sanctions for those operating outside the law.
ARGUMENTS IN OPPOSITION :
Writing in opposition to this bill, the California Labor
Federation, AFL-CIO states the following:
"The carwash industry has long been a hotbed of labor law
abuses. This largely immigrant workforce is paid low wages
and subjected to daily violations of minimum wage,
overtime, and health and safety protection. It was the
widespread extent of these abuses and the inadequacy of
enforcement that led to the passage of the Car Wash
Registry Act in 2003.
Since that time, violations in the industry have become
even more apparent. In March 2008, the Los Angeles Times
reported that two-thirds of car washes inspected by the
state's labor department since 2003 were out of compliance
with one or more labor laws. Violations included wage
theft, child labor, operating without workers' compensation
insurance, and denying meal and rest breaks. Data from the
Labor Commissioner's office also shows that between 2003
and 2007, there have been over 700 carwash wage claims in
14 counties, including many in the Central Valley and the
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Bay Area.
In 2009, the Los Angeles City Attorney filed criminal
charges against two carwash owners, alleging 176 counts of
criminal misconduct including conspiracy, witness
intimidation, grand theft, brandishing a deadly weapon,
failure to pay wages, and failure to comply with wage
orders of the state's Industrial Welfare Commission
regulating workplace conditions.
The Car Wash Registry Act has helped to increase and
improve enforcement efforts. Since the law was implemented
in 2006, the percentage of registered car washes has grown
significantly. Yet three years later, close to 40% of the
applicable car washes in the state were out of compliance
with the law. In 2009 alone, labor investigators assessed
more than $3 million in fines and penalties for labor
violations and failure to register. This has provided
funding for greater efforts in this industry and ensured
the solvency of the worker restitution fund.
�This bill] would give the Labor Commissioner discretion to
reduce or increase the fine for a car wash that fails to
register. The problem is that while the increase is capped
at $25,000, there is no minimum penalty for a reduction. In
other words, the penalty could go as low as $1 dollar. This
eliminates the incentive to comply with the registration
law, seriously jeopardizing enforcement efforts."
REGISTERED SUPPORT / OPPOSITION :
Support
Fresno Truck Wash
Royal Car Care, Inc.
Victorville Speedwash, Inc.
Western Car Wash Association
Opposition
California Labor Federation, AFL-CIO
AB 132
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Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091