Improving labor conditions in the car wash industry by UCLA Luskin School of Public Affairs

REGULATING THE CAR WASH INDUSTRY An Analysis of Californiaâ&#x20AC;&#x2122;s Car Wash Worker Law

Kevin Barry | Marcy Koukhab | Chloe Osmer UCLA School of Public Affairs, April 2009 This report was prepared in partial fulfillment of the requirements for the Master in Public Policy degree in the Department of Public Policy at the University of California, Los Angeles. It was prepared at the direction of the Department and of the CLEAN Carwash Campaign as a policy client. The views expressed herein are those of the authors and not necessarily those of the Department, the UCLA School of Public Affairs, UCLA as a whole, or the client.

Table of Contents 1. EXECUTIVE SUMMARY .........................................................................................................................3 2. INTRODUCTION.......................................................................................................................................5 3. CAR WASH WORKER LAW BACKGROUND ..................................................................................8 3.1. ABOUT THE LAW ..................................................................................................................................9 3.2. REGULATORY OVERVIEW .............................................................................................................12 3.3. INDUSTRY OVERVIEW.....................................................................................................................13 4. METHODOLOGY....................................................................................................................................16 5. FINDINGS ..................................................................................................................................................19 5.1. IMPLEMENTATION AND ENFORCEMENT .............................................................................20 5.2. IMPACT OF THE LAW ON WORKERS AND ADVOCATES .................................................31 5.3. IMPACT OF THE LAW ON CARWASH OPERATORS .............................................................35 5.4. IMPLICATIONS OF FINDINGS.......................................................................................................41 6. POLICY OPTIONS...................................................................................................................................42 7. POLICY CRITERIA ..................................................................................................................................46 8. POLICY RECOMMENDATIONS ........................................................................................................50 9. CONCLUSION ..........................................................................................................................................58 10. APPENDIX...............................................................................................................................................60 APPENDIX A: FULL TEXT OF ASSEMBLY BILL 1688 AND SENATE BILL 1468 ................61 APPENDIX B: CAR WASH WORKER LAW REGULATIONS.......................................................70 APPENDIX C: AB 1688 REGISTRATION FORMS............................................................................82 APPENDIX D: ALTERNATIVES TO THE DLSE WAGE CLAIM ADJUDICATION PROCESS .........................................................................................................................................................91 APPENDIX E: EMPLOYER SURVEY ...................................................................................................92 APPENDIX F: BACKGROUND ON AN APPLICATION TO THE CAR WASH WORKER RESTITUTION FUND ................................................................................................................................97

1. EXECUTIVE SUMMARY Carwash workers in California are among the lowest-paid and most poorly treated workers in California. According to worker advocates, media reports and academic studies, labor law violations—including minimum wage, overtime, and break period violations—are endemic to the carwash industry. In 2003, the California legislature passed Assembly Bill 1688, the “Car Wash Worker Law,” to address many of these problems through a system of registration and enforcement.1 The purpose of this report is to provide our client, the CLEAN Carwash Campaign, with an assessment of how well the law has furthered efforts to improve conditions for workers in the industry, and to provide a set of policy recommendations that would enable the law to do so more effectively. Our analysis is based on findings in three areas: the implementation and enforcement of the law, the law’s impact on workers and their advocates, and the perspectives of carwash operators. In each year since the implementation of AB 1688 began, the number of carwashes applying and successfully registering has grown significantly. This represents noteworthy industry progress towards compliance with the law’s registration requirement. However, as of February 2009, close to 40% of the applicable carwashes in California were not in compliance with the law. Enforcement of AB 1688’s registration requirement and other labor laws by the state’s Division of Labor Standards Enforcement (DLSE) has increased in the carwash industry during the past two years; state labor investigators visited approximately a third of carwashes covered by the law in both 2007 and 2008, assessing approximately $10.7 million in fines and penalties for labor violations and failure to register in accordance with the law. Nonetheless, many carwash operators continue to violate state labor laws. 1

For the remainder of this report, we use “AB 1688” and “Car Wash Worker Law” interchangeably.

Carwash worker advocates have found several key provisions of AB 1688 to be useful to their advocacy efforts, and believe that the law has had a positive overall impact on workers and the industry. However, they have also identified a number of limitations to the law, including the lack of information needed for workers to recover wages through the law’s surety bond and restitution fund provisions, insufficient penalties, and ineffective enforcement. Although carwash operators are predictably less supportive of AB 1688 than worker advocates, the concerns they voiced about the law echo, to some degree, what we heard from worker advocates: that the law’s provisions are not strong enough to compel compliance, that more widespread and effective enforcement is needed, and that many employers continue to violate labor laws. Based on our findings, we developed a number of policy options to address AB 1688’s key deficiencies, and we evaluated these policies according to their effectiveness in improving the law’s outcomes, their political feasibility, and their administrative feasibility. As a result of our analysis, we recommend that our client first advocate for changes to internal DLSE policy that would make the surety bond and restitution fund wage recovery mechanisms better known and more easily accessible to workers and their advocates. Our client should also consider, though as more of a future priority, petitioning the Labor Commissioner to make enforcement more effective and transparent by assigning specialized investigators to the carwash industry and posting enforcement data to its website. Additionally, if the Car Wash Worker Law is successfully reauthorized in 2009, we recommend that our client attempt to strengthen the law through statutory amendments in 2011 when a new, perhaps more labor-friendly governor is in office.

2. INTRODUCTION Carwash workers in California are among the lowest-paid and most poorly treated workers in California. According to worker advocates, media reports and academic studies, labor law violations—including minimum wage, overtime, and break period violations—are endemic to the carwash industry.2 Carwash workers often earn significantly less than California’s $8 minimum hourly wage, and some work for tips alone.3 Workers who do not receive the wages they earn under the law often have little chance of successfully recovering these wages from their employers. Additionally, carwash workers face serious health and safety hazards, including heat stress and hazardous chemical exposure.4 Many workers face employer harassment and intimidation, and may not be aware of their legal rights.5 A 2008 Los Angeles Times investigative report examined state labor inspection data from 2004 to 2007, and found that two-thirds of carwashes inspected in southern California had violated one or more state labor laws.6 DLSE officials have noted that this puts the industry’s non-compliance above even the garment manufacturing sector, which is notorious for labor violations.7 Some of the

2 For example, according to a Los Angeles Times story in March 2008, the lead investigator from the Division of Labor Standards and Enforcement (DLSE) estimated that at least half of carwashes in California violate minimum wage laws. Sonya Nazario and Doug Smith, “Inspectors Find Dirt on Books at Southern Calif. Carwashes.” Los Angeles Times, March 23, 2008, available at http://articles.latimes.com/2008/mar/23/local/me-carwash23; accessed on March 2, 2009. 3 California law does not permit workers to work for tips alone, nor for tips in combination with a below-minimum wage, as in the case in other states. Comments from worker advocates at the Los Angeles Legal Aid Foundation, Neighborhood Legal Services, and Bet Tzedek Legal Services, all of whom have interviewed workers from the carwash industry at wage-and-hour clinics, offer further testimony that such illegal practices are routine. 4 Matt Parker, “Wage, Labor and Safety Conditions in the California Car Wash Industry.” Unpublished manuscript, UCLA Department of Urban Planning (2006), p. 22. Obtained from Victor Narro (UCLA Downtown Labor Center) in November 2008. 5 Comments from worker advocates at the Los Angeles Legal Aid Foundation, Neighborhood Legal Services, and Bet Tzedek Legal Services, all of whom have interviewed workers from the carwash industry at wage-and-hour clinics, offer further testimony that such abuses are routine. 6 Nazario and Smith, 2008. 7 Ibid.

more serious violations have included the failure to provide workers’ compensation, underpayment of wages, and child labor violations.8 Between 2007 and 2009, union organizers interviewed over 200 carwash workers from 24 carwashes in Los Angeles County.9 Workers reported being paid less than the minimum wage at 22 of the 24 carwashes.10 One of the most commonly reported practices is for employers to underreport workers’ hours, and thus not pay them for their entire workday.11 Another common practice, according to workers, is for carwash employers to pay workers a daily rate, typically ranging from $35-60 for a 10-hour day.12 In addition, workers at 10 of the carwashes reported that the owners used propineros — workers paid only in tips.13 In 2003, the California legislature passed Assembly Bill 1688, the “Car Wash Worker Law,” to address many of these problems in the carwash industry. The purpose of this report is to provide an assessment of how well the law has furthered efforts to improve conditions for workers in the carwash industry, and to provide a set of policy recommendations that would enable the law to do so more effectively. Specifically, we evaluate the law’s registration system, wage recovery provisions, and enforcement. The report primarily seeks to inform the efforts of worker advocates and other interest groups seeking to reauthorize AB 1688 during the 2009 legislative session, but will also be available to the public-at-large so that key stakeholders in both government and industry, as well as any other interested persons, can better assess the pertinent issues related to the law.14

Division of Labor Standards Enforcement, “2007 Annual Report on the Effectiveness of Bureau of Field Enforcement,” p. 3, available at http://www.dir.ca.gov/dlse/BOFE-2007.pdf; accessed on February 26, 2009. 9 The organizers chose these carwashes based on their geographic location, not because of any prior indication of labor violations, which makes them a more representative sample of establishments in Los Angeles County. The carwashes span a variety of neighborhoods in the county with significant variance in household income and demographics. 10 Per interviews with CLEAN Carwash Campaign organizers, March 2-9, 2009. 11 Ibid. Workers at 13 of the 24 carwashes cited this practice. Many noted that their paychecks would routinely report 6-8 hours of work, when in reality they had worked a 10-hour day. 12 Ibid. Daily wage rates range depending on the type of position at the carwash. 13 Ibid. This practice is more commonly used by employers with newer workers, and in slow business periods. 14 In February 2009, Assembly Bill 236 was introduced in the state legislature. In its current form, the passage of AB 236 would reauthorize the Car Wash Worker Law, though without a sunset provision. The legislation will be heard on April 8

We have prepared this report for the CLEAN Carwash Campaign, a joint effort of the Community-Labor-Environmental-Action Network (CLEAN) and the Carwash Workers Organizing Committee (CWOC) of the United Steelworkers (USW). CLEAN consists of more than 100 community and labor organizations that came together in early 2007 to support the efforts of carwash workers to organize and improve conditions in the industry. The group includes faithbased, neighborhood, legal advocacy, immigrant rights, environmental, and labor organizations. CWOC is composed of carwash workers from establishments throughout Los Angeles who are seeking to form their new union as an affiliate of the USW. The CLEAN Carwash Campaign was established after worker advocates identified the need for a long-term solution to widespread labor violations reported by carwash workers. As part of its mission, the Campaign is committed to â&#x20AC;&#x153;improving working conditions and ensuring that carwash employers meet labor standards and abide by fair workplace practices.â&#x20AC;?15

22, 2009 in the California State Assembly Committee on Labor and Employment. If AB 236 does not pass before the end of the legislative session, the law will expire at the end of the year. 15 CLEAN Carwash Campaign homepage, available at www.cleancarwashla.org; accessed on February 5, 2009.

3. CAR WASH WORKER LAW BACKGROUND The impetus for a law regulating the carwash industry emerged during the late 1990s in response to reports to community organizations from carwash workers about illegally low pay, dangerous working conditions, and employer harassment. In 1999, the state legislature passed a bill to regulate the carwash industry, but Governor Gray Davis vetoed it. In 2002, a group of organizations representing low-wage workers in Los Angeles formed the Los Angeles Worker Advocates Coalition (LAWAC), with one of its first goals being the passage of legislation to address the labor abuses in the carwash industry.16 LAWAC thus helped draft a new bill, incorporating elements from the previous bill and modeling several provisions after Assembly Bill 633 (the “Garment Worker Law”), which lawmakers enacted in 1999 after years of severe labor law violations in the California garment industry. The legislation, introduced as AB 1688, was enacted in 2003 and became effective on January 1, 2004.17 To obtain legislative approval, advocates agreed to include a three-year sunset provision in the bill, meaning that the law would expire at the end of that period. However, the law was not actually implemented until 2006, when the administering agency, the Division of Labor Standards Enforcement (DSLE), completed the rulemaking process.18 Because the implementation of AB

Susan Garea and Alexandra Stern, “An Analysis of California Assembly Bill 1688 (AB 1688) and Senate Bill 1468 (SB 1468): How the Car Wash Worker Law Can Be Used by Workers’ Rights Advocates.” Unpublished manuscript, UCLA Department of Urban Planning (2006), p. 5. Obtained from Victor Narro (UCLA Downtown Labor Center) in November 2008. 17 See Appendix A of this report for the full text of the legislation, which is also available at http://www.leginfo.ca.gov/pub/03-04/bill/asm/ab_1651-1700/ab_1688_bill_20031011_chaptered.html; accessed on March 17, 2009. 18 See Appendix B for the law’s regulations. Regulations are adopted through a formal rulemaking process in which the rulemaking agency publishes its proposed regulatory changes in a public document, allows for a public hearing, accepts written comments from the public, and submits the required documentation to the Office of Administrative Law for approval or disapproval based on a number of criteria. If approved, the regulations are incorporated into the California Code of Regulations and have the force of law. For more details, see http://www.caichildlaw.org/Misc/Rulemaking_Process.htm; accessed on March 17, 2009. 16

1688’s registration requirement was staggered by geographic location, the law was only in effect statewide for less than six months before its sunset date. The Car Wash Worker Law was set to expire at the end of 2006 and LAWAC, which had recently merged with other advocate groups to become the Coalition of Low-wage and Immigrant Worker Advocates (CLIWA), again led the lobbying effort to reauthorize the law. Despite opposition from the Western Carwash Association, the major industry trade group in California, CLIWA successfully advocated for Senate Bill 1468, which extended the Car Wash Worker Law for an additional three years, until January 1, 2010.19 SB 1468 also required the California Labor Commissioner to report to the state legislature by December 31, 2008, on labor law violations and enforcement in the carwash industry.20 However, as of March 2009, the Labor Commissioner’s report had not yet been submitted to the legislature.

3.1. ABOUT THE LAW AB 1688, which amended the California Labor Code, targeted the carwash industry for increased supervision in an attempt to address its underground nature.21 While carwashes were already covered by the same basic labor laws as businesses in other industries, proponents of AB 1688 concluded that additional provisions were needed due to the frequency and severity of labor violations in the carwash industry, which is characterized by informal, often illegal practices that leave workers underpaid and unprotected, put law-abiding operators at a competitive disadvantage, and may be depriving the state of income tax revenue. Advocates also sought to include provisions in the law to improve the likelihood that workers could successfully collect on wages they were owed in the event of continuing wage violations. Cal. Labor Code § 2067. Cal. Labor Code § 2068. The Labor Commissioner is the administrative chief of the DLSE. Governor Arnold Schwarzenegger appointed the current commissioner, Angela Bradstreet, in 2007. For Bradstreet’s profile, see http://www.dir.ca.gov/dlse/AngelaBradstreet.htm; accessed on March 2, 2009. 21 AB 1688 was codified as Cal. Labor Code § 2050, et seq. 19 20

The recovery of unpaid wages was an issue of particular concern to advocates because of the gross nature of the wage violations and the difficulties encountered by carwash workers in seeking remedies. Carwash workers owed back wages have limited avenues available for recovering that money in a timely way. They generally have three options: filing a wage claim with the Division of Labor Standards Enforcement; filing in small claims court, which is limited to claims under $5,000; or filing a private lawsuit. In general, carwash workers are low-wage earners, tend to be non-English speaking, and may have limited literacy even in their native language.22 These limitations, combined with significant backlogs in DLSE wage claims, make it especially difficult for workers to collect back wages. The DLSE receives over 40,000 wage claims every year, and has acknowledged that long waits for claims are a problem.23 AB 1688 requires carwash operators to register annually with the DLSE. The law applies to all employers in the business of “car washing and polishing” with at least one employee directly involved in the washing and polishing of cars.24 Establishments where such services are “ancillary,” such as rental car agencies and auto repair shops, are exempt. Also exempt are self-service and automated carwashes with no “employees” as defined by the law.25 For each carwash, registration consists of completing and submitting a detailed packet of information along with a $250 registration fee, a $50 “restitution fund” assessment, and a $15,000

Irma Hernandez and Guillermo Mayer, UCLA Law. Untitled, unpublished manuscript, 2002. Obtained from Victor Narro (UCLA Downtown Labor Center) in February 2009. 23 Speech made by Labor Commissioner Angela Bradstreet to the California Labor Federation Legislative Conference, Sacramento, California, March 16, 2009. 24 Specifically, Cal. Labor Code §2051(a) states, “‘Car washing and polishing’ means washing, cleaning, drying, polishing, detailing, servicing, or otherwise providing cosmetic care to vehicles. ‘Car washing and polishing’ does not include motor vehicle repair, as defined in Section 9880.1 of the Business and Professions Code.” Cal. Labor Code § 2051(c) states, “‘Employee’ means any person, including an alien or minor, who renders actual car washing and polishing services in any business for an employer, whether for tips or for wages, and whether wages are calculated by time, piece, task, commission, or other method of calculation, and whether the services are rendered on a commission, concessionaire, or other basis.” 25 Cal. Labor Code § 2051(b)(2). 22

surety bond.26 The surety bond is a form of insurance that employers must provide as a source for the payment of wages owed to workers in the event that an employer is unable or unwilling to pay a wage judgment. This provision was established because of the difficulty carwash workers have had in collecting back wages after receiving judgments in their favor.27 Employers who operate without a registration face civil penalties of $100 per day, up to a maximum of $10,000. The registration provision serves multiple purposes. First, by making compliance with other state labor laws a condition of registration, the provision provides the DLSE with additional leverage to ensure that employers do not continue to break the law. For example, carrying workers’ compensation insurance and not having unpaid wage judgments are both conditions of registration.28 Registration has also allowed labor officials, workers, and worker advocates to better identify carwash owners. Prior to the law, the DLSE sometimes rejected carwash worker wage claims because workers and their legal representatives were unable to locate even basic ownership information for a carwash.29 The registration fee serves as the funding mechanism for the administration and enforcement of the law.30 AB 1688 also created the “Car Wash Worker Restitution Fund,” which provides an additional mechanism for workers to recover owed wages if they cannot recover directly from employers or through their surety bonds. The $50 assessment, along with 50% of the fines for nonregistration, is allocated to this fund.31 In addition, the law includes a “successorship” clause that

See Appendix C for the registration requirements for new and renewal applications, as well as the registration application. 27 Per interviews with worker advocates from the Los Angeles Legal Aid Foundation, Neighborhood Legal Services, and Bet Tzedek Legal Services, who represented carwash workers with wage claims prior to implementation of AB 1688. 28 Ryan Spillers, “Legal Analysis of the Carwash Worker Law (AB 1688).” Gilbert & Sackman, A Law Corporation. Memorandum dated November 15, 2006, p. 2. 29 Parker (2006), p. 3. 30 Per Cal. Labor Code §2065(b), the registration fee is deposited into the “Car Wash Worker Fund.” 31 Cal. Labor Code §2065(a). 26

holds employers liable for the penalties and back wages owed by their predecessors.32 AB 1688 also stipulates that carwash employers must keep complete and accurate payroll records for at least three years, in response to the prevalence of “off-the-books” employment in the industry.33

3.2. REGULATORY OVERVIEW The Division of Labor Standards Enforcement (DLSE), a division of the California Department of Industrial Relations, administers and enforces AB 1688. The Labor Commissioner, a gubernatorial appointee, heads the DLSE, which includes several units relevant to the enforcement of AB 1688, such as the Wage Claim Adjudication unit and the Bureau of Field Enforcement (BOFE). Adjudicating wage claims and enforcing the state labor code are among DLSE’s primary responsibilities. The Wage Claim Adjudication unit holds hearings and issues rulings on workers’ wage claims, while BOFE investigates potential labor violations, including failure to carry workers' compensation, child labor, and operating without a license, as well as group minimum wage and overtime violations.34 Workers can file wage claims through either Wage Claim Adjudication or BOFE. If they submit a claim to Wage Claim Adjudication, the claim may be referred to BOFE upon determination that the issues in the claim are likely to affect other workers at the same business as well. If workers file a claim with BOFE, an investigation of the employer may follow— particularly if there are multiple claims for the same employer—though it is not mandated. Aside from following up on these referrals, BOFE also conducts “sweeps,” which are investigations of multiple employers that check for labor law violations, including noncompliance with AB 1688’s registration provision. The Economic and Employment Enforcement Coalition Cal. Labor Code § 2066. Prior to the law’s enactment, workers and legal advocates found that carwash owners would avoid liability by selling their businesses, often to a relative, when faced with wage claims or lawsuits. 33 Cal. Labor Code § 2052. 34 “About the DLSE.” Department of Industrial Relations website, available at http://www.dir.ca.gov/dlse/aboutDlse.html; accessed on February 28, 2009. 32

(EEEC) also conducts carwash sweeps. EEEC is a multi-agency government task force that targets certain industries in the “underground economy,” including the carwash and garment industries, and is composed of investigators from several agencies, including the DLSE, California Occupational Safety and Health Administration, Employment Development Department, and U.S. Department of Labor.35 As noted, carwash workers can file DLSE wage claims with either Wage Claim Adjudication or BOFE. However, the process can take a long time, and it offers no guarantee of payment even for workers with favorable judgments. To begin with, it can take from six to eight months just for a hearing to be scheduled, and over one year for a judgment. Then, when workers do obtain judgments, employers can appeal—and sometimes they simply refuse to pay—extending the process for months or perhaps years. Even seasoned legal advocates have described this process as timeconsuming and complex, and the alternatives are difficult as well.36

3.3. INDUSTRY OVERVIEW According to various business listings, there are approximately 4,000 carwashes statewide.37 The industry is also heavily concentrated in southern California: one query listed almost 250 in the city of Los Angeles alone.38 While it is not exactly clear how many such establishments fall under

“Economic and Employment Enforcement Coalition (EEEC).” Department of Industrial Relations website, available at http://www.dir.ca.gov/EEEC/EEEC.html; accessed on March 17, 2009. 36 Per interview with Kevin Kish, Bet Tzedek Legal Services, February 26, 2009. If workers wish to bypass the DLSE wage claim process, they can file a claim in small claims court or through a private lawsuit. See Appendix D for a more detailed description of these processes and the related issues. 37 This figure is based on separate Hoover’s (a subsidiary of Dun & Bradstreet) and LexisNexis business listings, per February 26, 2009 queries. The Hoover’s database is available with a subscription at www.hoovers.com; the LexisNexis database is available with subscription at http://www.lexisnexis.com/us/lnacademic/search/fla. Our queries used the North American Industry Classification System (NAICS), which classifies businesses for purposes of U.S. economic data analysis. NAICS code 811192 (“Car washes”) consists of “establishments primarily engaged in cleaning, washing, and/or waxing automotive vehicles, such as passenger cars, trucks, and vans, and trailers.” This code is the equivalent of Standard Industrial Classification (SIC) code 7542. 38 Hoover’s business listings, per February 26, 2009 query. 35

the scope of AB 1688, the number likely exceeds 1,500 statewide, with some estimates as high as 2,000.39 The three basic categories of carwashes—in California and elsewhere—are self-service bay, in-bay automatic, and conveyor.40 Carwashes covered by AB 1688 are primarily conveyor carwashes. However, AB 1688 also applies to mobile carwashes, which move from site to site in a van with built-in carwashing equipment.41 In addition, the law covers “hand wash” operations, where cars are washed through a completely manual process. AB 1688 further applies to auto detail operations as well, regardless of whether they wash cars.42 Mobile carwashes, hand-wash-only establishments, and auto detailers are typically much smaller than conveyor carwashes. The proportion of businesses subject to AB 1688 that consists of these smaller operators is not clear. Most carwashes are small-scale, family-owned private businesses. The industry is not very concentrated: although some carwash operations are chains, most have just one location.43 The industry is also competitive, and very labor intensive, averaging annual gross revenue of $40,000 per employee.44 A typical conveyor carwash has between 11 and 20 employees, though many have

Per interview with Western Carwash Association director, February 19, 2009. “IBISWorld Industry Report: Car Wash and Auto Detailing in the US: 81119a,” IBISWorld, Inc. (2009), pp. 8-9. At self-service carwashes, customers clean their own cars using water and soap provided by the station. With an in-bay automatic (IBA) carwash, the customers drive into an automated facility with washing equipment that moves over the surface of the car. AB 1688 does not typically apply to self-service and IBA carwashes, which, for the most part, are fully automated and have no employees directly involved in the car washing. Conveyor carwashes generally require drivers to exit their cars, which may then be vacuumed and placed on a conveyor belt that takes them through a tunnel, where they are washed by the tunnel’s machinery. The workers then drive the cars out to be dried and further cleaned. This is commonly known as a basic wash. Many carwashes also offer premium services, such as polishing, waxing, rug shampooing, and tire-dressing. Prices for a basic wash usually range from $10 to $25, and full detailing services can exceed $100. Because employees perform these services directly, AB 1688 covers all such conveyor operations. 41 Mobile carwash owners who do all the work themselves and have no employees, however, are not subject to AB 1688. To the extent that these operators wash cars in parking lots and at sites without wastewater systems that prevent pollutants from entering storm drains, they operate illegally. In 2008, the city of Calabasas, California enacted a local ordinance requiring such operators to obtain a permit and take measures to ensure proper wastewater discharge. Fort Worth, Texas is the only other city in the US to have such an ordinance. For more information, see http://www.cityofcalabasas.com/enews/2008/september2008.html#CARWASH; accessed on February 26, 2009. 42 Detailing usually consists of beautification work on a car, such as polishing and cleaning of the rims, wheels, and engine, as well as paint touch-ups. Because auto detailers are included under the NAICS carwashes code, and since they are similarly subject to AB 1688, we do not otherwise distinguish them from carwashes in this report. 43 “First Research Industry Profile – Car Washes: Quarterly Update 2/9/2009,” First Research, Inc. (2009), p. 1. 44 Ibid. 39 40

more.45 Large establishments can service several hundred cars per day. Profit margins vary, normally anywhere from the single-digits to as high as 25%.46 However, profits are more recently on the decline, as the economic downturn has led to falling consumer demand in the carwash industry as it has in many other industries.47

IBISWorld Industry Report, p. 20 Although the data are national and do not distinguish between type of carwash, the IBISWorld Industry Report estimates that profit margins generally range from 3-5% [p. 28], while the First Research Industry Profile estimates them at closer to 7% [p. 9]. Randy Cressall, past president of the Western Carwash Association (WCA), estimated that California carwashes typically experience profit margins in the 8-10% range. [Nazario and Smith, 2008.] However, another former WCA director told us that a highly efficient carwash in a favorable economic environment could generate profit margins in the 20-25% range. 47 IBISWorld Industry Report, p.3. 45 46

4. METHODOLOGY To evaluate the effectiveness of the AB 1688, we contacted several individuals involved with the law in various capacities. We conducted a series of interviews, administered a written survey, and collected additional data from a number of different sources. We discuss this methodology in further detail below.

Interviews with Key Players We conducted telephone and in-person interviews with government officials, worker advocates, private attorneys, and carwash owners, including both past and present directors of the Western Carwash Association (WCA). The purpose of the interviews was to collect programmatic and policy-level information about the law, and to learn more about the experiences of legal advocates and carwash operators. The government officials we contacted consisted of personnel from the Division of Labor Standards Enforcement, including the current Deputy Labor Commissioner as well as one former official and one former investigator. We interviewed these individuals on topics such as citations for labor violations, carwash registration compliance rates, and the agencyâ&#x20AC;&#x2122;s AB 1688 enforcement policies and procedures. We also interviewed more than a dozen worker advocates and private attorneys to hear their perspectives on the benefits and shortcomings of AB 1688, as well as to better understand the extent to which they have used the law to assist workers. Many of the individuals we spoke to were very knowledgeable about the law and have themselves conducted extensive interviews with workers through wage clinics and other forums; thus, they could speak capably to the impact of the law on workers. In addition, we interviewed two current directors and one former director of the WCA to

learn more about the Association’s position on AB 1688, including how the WCA believes the law has performed and how it could be improved.

Employer Survey To determine industry attitudes and reactions to AB 1688, we mailed a two-page survey to all known carwashes in California covered by the law, based on a list of almost 1,500 establishments throughout the state.48 The initial query listed approximately 4,000 carwashes; however, we narrowed this list to eliminate duplicate entries and remove carwashes listed as having only one or two employees, under the assumption that many such businesses were automated carwashes exempt from AB 1688.49 The survey included 17 questions, most of which we designed to learn more about carwash operators’ perspectives on AB 1688, including how they believe the law has and has not worked well, and how they see it impacting their own businesses as well as the industry as a whole. We also included additional space for survey respondents to elaborate on earlier questions or to discuss their thoughts about the law generally.50 Of the almost 1,500 surveys we mailed, the Post Office returned close to 200 of them for incorrect or outdated addresses; of the remainder, we received 83 replies, a response rate of approximately 6%. Nevertheless, because our mailing list undoubtedly had some omissions (the DLSE’s list has approximately 1,600 carwashes, and the actual number of carwashes subject to AB 1688 could be higher), the aggregate response likely captures, at most, only about 5% of all relevant employers. Furthermore, due to the problem of self-selection, we cannot claim that the data capture a representative sample of industry attitudes. As a result, it is difficult to make any inferences about

We obtained the list of carwashes through a LexisNexis search for establishments listed under the NAICS code for carwashes, 811192. 49 Because the DLSE’s list of AB 1688 carwashes is confidential and was not made available to us, this was the closest approximation we were able to create using public data. The estimation process may have unintentionally excluded some carwashes covered by the law and included some carwashes not covered. 50 See Appendix E for the employer survey. 48

the population of carwash operators as a whole. Despite this limitation, however, the survey feedback provides some valuable information about AB 1688 from an employer perspective. We discuss the highlights and assess their policy implications later in the report.

Additional Data We used both public and private documents consisting of academic studies, advocate research reports, and industry publications to better understand conditions in the carwash industry and the history of AB 1688â&#x20AC;&#x2122;s enactment and implementation. In addition, we obtained data on the enforcement of the law through the DLSE website and Public Records Act requests that our client had previously submitted. These data include records on Bureau of Field Enforcement (BOFE) investigations of carwashes between 2003 and 2008, as well as data on carwash wage claims between 2004 and 2007.

5. FINDINGS We assess the overall effectiveness of the Car Wash Worker Law based on how well it appears to have accomplished its legislative intent. The preamble to AB 1688 begins with a declaration outlining the labor problems in the carwash industry, and then concludes: Existing labor laws and enforcement efforts have failed to remedy these problems. Therefore, it is the intent of the Legislature, in enacting this act, to establish a system of registration, bonding requirements, and enforcement to impose prompt and effective criminal and civil sanctions for the violation of the provisions set forth in this act or any provision of law applicable to the employment of workers in the car washing and polishing industry.51 Evaluating the extent to which the law has been successful in this regard—and understanding why— enables us to make policy recommendations to improve the law accordingly. We primarily address the following questions: 

How well has the registration system functioned? To what extent are carwash operators in compliance?



How rigorously has the law been enforced? To what extent has such enforcement deterred and detected labor violations?



How effective have the provisions of the law been in helping carwash workers recover back wages?



If AB 1688 has fallen short in any of these respects, how can the law be improved?

We attempt to answer these questions through a combination of qualitative and quantitative measures. Information from government officials—such as data on compliance levels, enforcement activities, and labor violations—as well as feedback from worker advocates and carwash operators, all inform our understanding of AB 1688’s impact. 51

AB 1688, Section 1(j).

5.1. IMPLEMENTATION AND ENFORCEMENT In each year since the implementation of AB 1688 began, the number of carwashes applying and successfully registering has grown significantly. This represents noteworthy industry progress towards compliance with the law’s registration requirement. However, as of February 2009, close to 40% of the applicable carwashes in the state were not in compliance with the law.52 DLSE enforcement of AB 1688’s registration requirement and other labor laws has increased in the carwash industry during the past two years; investigators visited approximately a third of carwashes in the state that are covered by the law in both 2007 and 2008. BOFE and the EEEC cited several hundred carwashes for failure to register during this period, assessing approximately $10.7 million in fines and penalties.53 Nonetheless, DLSE sweeps may still be failing to deter many carwash operators from violating wage-and-hour laws because investigations are not comprehensive enough to uncover the underpayment of wages, and owners may see fines as simply a cost of doing business.

Statewide Registration Levels The Office of the Labor Commissioner has indicated that its most recent statewide list of carwashes covered by the Car Wash Worker Law numbers about 1,600.54 However, due to the unregulated nature of the industry, the actual number of carwashes may be higher. Given the lack of a more comprehensive list, our estimation of registration rates is based on the DLSE’s most recent figure of roughly 1,600 carwashes.55

DLSE carwash registration database, available at http://www.dir.ca.gov/ftproot/CarWaCMS.xls; accessed on February 22, 2009. 53 Division of Labor Standards Enforcement, “2008 Report on the Status of Enforcement in the Car Washing and Polishing Industry, Labor Code Section 2068,” p. 2, available at http://www.dir.ca.gov/dlse/carwashreport-2008.pdf; accessed on April 22, 2009. 54 Per interview with Ethera Clemons, DLSE, November 21, 2008. 55 The Office of the Labor Commissioner receives this list from the Employment Development Department, but it is not public information. 52

According to data provided by the Deputy Labor Commissioner, 435 carwashes (27% of covered establishments) applied for registration in 2006, although only 286 (18%) successfully completed the process and were issued registration certificates.56 In 2007, the number of carwashes applying for registration increased to 770 (48%), while the number of carwashes that registered successfully grew to 641 (40%).57 In 2008, there were 972 applications (61%), of which the DLSE granted 863 (54%).58 As of February 22, 2009, 1,013 carwashes, or approximately 63% of those covered by the law, were listed in the carwash registration database on the DLSE website.59

Source: Data from Labor Commissioner’s Office and DLSE registration database, 2/22/09

Per interview with Ethera Clemons, DLSE, November 21, 2008. Division of Labor Standards Enforcement, “2008 Report on the Status of Enforcement in the Car Washing and Polishing Industry, Labor Code Section 2068,” p. 1, available at http://www.dir.ca.gov/dlse/carwashreport-2008.pdf; accessed on April 22, 2009. 58 Ibid. 59 DLSE carwash registration database, available at http://www.dir.ca.gov/ftproot/CarWaCMS.xls; accessed on February 22, 2009. 56 57

The DLSE registration application approval rate has grown each year as well. In 2006, only 66% of applicants were issued registration certificates; however, that percentage increased to 83% in 2007 and to 89% in 2008.60 This increase may indicate an improved awareness and understanding of AB 1688 among carwash owners.

Registration by County A preliminary analysis of carwash registration figures by county shows that the majority of registered carwashes are located in southern California, although a sizable number are also located in the Central Valley, Greater Bay Area, and Sacramento.61 Highlighted in Table 1 below are the counties with 10 or more carwashes that have approximate registration compliance rates below 60%.62 There are 14 counties in this category—spread widely throughout the state—including Placer County in northern California, Alameda and Contra Costa Counties in the Bay Area, and Los Angeles and Orange Counties in southern California. The Central Coast Counties of Santa Cruz and Monterey, moreover, appear to have some of the lowest compliance rates, at 27% and 35%, respectively.

Division of Labor Standards Enforcement, “2008 Report on the Status of Enforcement in the Car Washing and Polishing Industry, Labor Code Section 2068,” p. 1, available at http://www.dir.ca.gov/dlse/carwashreport-2008.pdf; accessed on April 22, 2009. 61 DLSE carwash registration database, available at http://www.dir.ca.gov/ftproot/CarWaCMS.xls; accessed on February 22, 2009. 62 County Business Patterns, 2006 U.S. Census, available at http://censtats.census.gov/cbpnaic/cbpnaic.shtml; accessed on March 13, 2009. Census data indicate that only carwashes with payroll records are listed, meaning that the list may exclude automated carwashes, which are generally exempt from AB 1688. However, this could not be determined definitively, and it is possible that the list includes some carwashes not subject to the law. Furthermore, given that the most recently published County Business Patterns Census data are from 2006, the registration compliance rate is only an approximation, but it is nonetheless useful for gauging approximate compliance by county. 60

Table 1: Carwash Registration Figures by County County

Number of carwashes (2006 County Census Data)

Number of registered carwashes (DLSE data as of February 22, 2009)

Approximate registration compliance rate

Alameda Amador Butte Calaveras Colusa

66 0 7 2 1

27 1 5 1 0

40.9% N/A 71.4% 50.0% 0.0%

Contra Costa Del Norte El Dorado Fresno Humboldt

37 1 8 37 8

20 0 2 37 5

54.1% 0.0% 25.0% 100.0% 62.5%

Imperial Inyo Kern Kings Lake Lassen

10 2 33 3 1 1

5 1 22 2 0 0

50.0% 50.0% 66.7% 66.7% 0.0% 0.0%

524 3 11 4 10

296 0 11 2 9

56.5% 0.0% 100.0% 50.0% 90.0%

17 3 4

6 4 1

35.3% 100.0% 25.0%

186

53.2%

20 78 52 2

10 47 32 2

50.0% 60.3% 61.5% 100.0%

95 166 10 20 13 24

50 101 8 26 9 23

52.6% 60.8% 80.0% 100.0% 69.2% 95.8%

Santa Barbara Santa Clara

23 63

12 46

52.2% 73.0%

Santa Cruz Shasta Siskiyou

11 7 2

3 7 1

27.3% 100.0% 50.0%

Solano

56.3%

Los Angeles Madera Marin Mendocino Merced Monterey Napa Nevada Orange Placer Riverside Sacramento San Benito San Bernardino San Diego San Francisco San Joaquin San Luis Obispo San Mateo

Sonoma Stanislaus Sutter Tehama Trinity

21 34 5 4 1

12 21 5 4 0

57.1% 61.8% 100.0% 100.0% 0.0%

Tulare Tuolumne

11 3

4 1

36.4% 33.3%

Ventura Yolo

42 7

20 4

47.6% 57.1%

Sources: Number of establishments – U.S. Census Bureau, 2006 County Business Patterns, available at http://censtats.census.gov/cbpnaic/cbpnaic.shtml; accessed on March 14, 2009. Number of registered carwashes – DLSE carwash registration database, available at http://www.dir.ca.gov/ftproot/CarWaCMS.xls; accessed on February 22, 2009. Note: Counties with more carwashes registered than the total number listed in the Census data are rounded to 100%.

BOFE and EEEC Enforcement As noted, one of the primary mechanisms for the enforcement of AB 1688 is through investigative sweeps of carwashes, which are conducted by the DLSE’s Bureau of Field Enforcement (BOFE) and the Economic and Employment Enforcement Coalition (EEEC). According to a 2007 DLSE report on BOFE’s effectiveness, BOFE ramped up its enforcement efforts in 2007. Publicly available figures appear to confirm this: the number of carwash inspections in 2007 was nearly equal to the number of garment industry inspections, despite the fact that there are thousands more garment industry operators than carwash operators in the state.63 Data on BOFE investigations obtained from the DLSE appear to show only 50 citations to carwashes in 2006, with assessed fines totaling $702,050.64 By contrast, BOFE and EEEC investigators conducted a total of 559 carwash inspections in 2007.65 Investigators issued a total of

Division of Labor Standards Enforcement, “2007 Annual Report on the Effectiveness of Bureau of Field Enforcement,” p. 2, available at http://www.dir.ca.gov/dlse/BOFE-2007.pdf; accessed on February 26, 2009. The report notes that there were 559 carwash inspections and 572 garment industry inspections during the year. As of March 2009, there were 4,977 garment operators listed in the DLSE registration database alone, more than triple the amount of known carwash operators. 64 Per BOFE data obtained through an October 2007 Public Records Act request from Bet Tzedek Legal Services to the DLSE for investigation records on carwashes dating back to January 1, 2003. 65 Division of Labor Standards Enforcement, “2007 Annual Report on the Effectiveness of Bureau of Field Enforcement,” p. 2, available at http://www.dir.ca.gov/dlse/BOFE-2007.pdf; accessed on February 26, 2009. 63

732 citations, resulting in $6,861,400 in fines issued for labor law violations. Of this total, 408 citations and $3,759,400 in fines were for failure to register.66 In 2008, BOFE and EEEC investigators inspected 576 carwashes and issued 519 citations for a total of $3,835,972 in fines. Of these citations, 274 were issued for failure to register, for a total of $ 2,216,622 in fines.67 The remaining citations and fines are related to other labor law violations. Despite these improvements, enforcement in the industry is still clearly lacking. While the DLSE issued 274 citations for failure to register in 2008, there were more than 700 unregistered carwashes. Many carwashes continue to operate in violation of labor laws after they are penalized, in part because the fines are low relative to the money saved by paying below-minimum wages; for many operators, these fines are thus simply a cost of doing business. Part of the problem with enforcement may also be understaffing at the DLSE: there are only 12 DLSE investigators statewide who take part in EEEC task forces, which are responsible for investigating potential violations at the state’s 1,600 or more carwashes, as well as a half-dozen other targeted industries, and only 50 BOFE investigators tasked with investigating all of the state's other business establishments.68 Because investigators do not specialize in the carwash industry, they may therefore not be as capable of uncovering violations. For example, investigators reportedly sometimes ask workers about labor violations in the presence of managers and owners, which likely results in censored responses from workers afraid of losing their jobs.69 Furthermore, the very nature of “sweeps”—investigations of many carwashes in a short period of time—makes it difficult for investigators to complete the more detailed and timeDivision of Labor Standards Enforcement, “2008 Report on the Status of Enforcement in the Car Washing and Polishing Industry, Labor Code Section 2068,” p. 2, available at http://www.dir.ca.gov/dlse/carwashreport-2008.pdf; accessed on April 22, 2009. 67 Ibid. 68 Per interviews with Ethera Clemons, DLSE, November 21, 2008 and April 21, 2009. 69 Per interview with Betty Hung and Anel Flores, Los Angeles Legal Aid Foundation, January 23, 2009. 66

consuming inspections needed to recover wages owed to workers, rather than simply citing operators for easier-to-detect labor law violations. One former investigator with many years of experience at the DLSE noted that the agency had increasingly sought higher numbers of inspections and citations over the past years, though at the expense of more thorough investigations. With investigations typically lasting less than one hour per establishment, inspectors were able to produce a larger number of fines for easily identifiable violations, such as failure to register or carry workers’ compensation coverage, but had little time to uncover more systematic wage violations and produce citations extensive enough to effectively discourage carwash operators from continuing to violate the law.70

Collection of Fines and Penalties The amount of BOFE and EEEC citations is significant not only because it demonstrates increased enforcement of the law over previous years, but also because a portion of collections is allocated to the Car Wash Worker Restitution Fund, while the remainder helps fund further enforcement efforts and return back wages to workers. However, it is important to distinguish the amount of fines assessed by the DLSE from that which it actually collects from employers. Former DLSE employees have indicated that collections is a chronic problem for the agency—one former official stated that investigators are encouraged to issue citations, but very little follow-up is done.71 Another former DLSE official, however, indicated that collections may be somewhat less of a problem in the carwash industry because the agency is able to withhold registration for a carwash until previous citations are paid.72 Data from the DLSE’s annual report on field enforcement activities supports this assessment. A total of $ 3,835,972 in fines was assessed to employers in the carwash industry in 2008, and $2,024,687 was collected, a collection rate of 53%. This is Per interview with former DLSE investigator, March 3, 2009. Per interview with former DLSE official, February 18, 2009. 72 Per interview with former DLSE investigator, March 12, 2009. 70 71

significantly higher than the DLSE’s performance in the garment and construction industries, both of which had 29% collection rates.73

Targeting of Unregistered Carwashes The number of carwashes cited and the amount of fines issued in each of the last three years point to significant increases in the enforcement of AB 1688’s provisions along with other labor laws. However, one important question is the extent to which the DLSE has targeted unregistered carwashes for investigation. An analysis of figures from two large BOFE sweeps, one in 2007 and the other in 2008, indicates that the agency has appeared to focus on unregistered carwashes for at least some of its sweeps. The first sweep, from September 2007, investigated 98 carwashes, of which 90 were cited for operating without a registration. Given the high percentage of unregistered carwashes in this sweep, it is very likely that the investigation was targeted. In July 2008, BOFE also performed a sweep of 72 carwashes, but only fined 24 of them for non-registration. Given the much lower percentage of carwashes fined for non-registration than in the 2007 sweep, this sweep does not appear to have been targeted exclusively at unregistered carwashes.74 According to the Deputy Labor Commissioner, the DLSE mails carwashes with soon-toexpire registrations an application renewal packet 90 days before the annual expiration date. If the carwash fails to submit a renewal application by the expiration date, protocol indicates that the Labor Commissioner should refer the case to BOFE for investigation, so it can determine whether the business has continued to operate despite not renewing its registration. If so, BOFE levies a fine Division of Labor Standards Enforcement, “2008 Annual Report on the Effectiveness of Bureau of Field Enforcement,” p. 2, available at http://www.dir.ca.gsov/dlse/BOFE-2008.pdf; accessed on April 21, 2009. All three industries had similar numbers of citations issued and fines assessed. The DLSE issued 516 citations and assessed $3.1 million in penalties in the garment industry, as well as 547 citations and $3.6 million in fines in the construction industry. 74 For both sweeps, however, the prevalence of non-AB 1688 labor violations was similar: BOFE cited 56% of carwashes in the 2007 sweep for other labor violations, and 54% of carwashes in the 2008 sweep. Per DLSE spreadsheet on BOFE sweeps, provided by the Department of Industrial Relations communications office in response to a request by CLEAN Carwash Campaign staff. 73

for failure to register, and the carwash then has 60 days to obtain a certificate of registration.75 If it fails to register while continuing to operate in the meantime, BOFE issues a second citation. At that point, the Labor Commissioner’s next step is to take legal action by seeking an injunction to shut down the carwash until it registers.76 To date, the DLSE has taken legal action against only two carwash operators for continuing to do business without a registration. In April 2008, the agency filed a lawsuit seeking an injunction against the operator of two carwash locations in Sacramento.77 The suit was subsequently dropped when the operator paid the fines he owed and registered his businesses. Then, in December 2008, the DLSE filed a lawsuit seeking to shut down a San Diego carwash that had also failed to register, and which owed $28,000 in fines for non-registration and other violations.78 As of March 2009, the outcome of this litigation was still pending. AB 1688 also appears to give the DLSE the authority to revoke carwash registrations, though the Labor Commissioner has not yet used that authority.79

As noted, the fine varies based on the number of days the carwash has operated without a registration. Daily fines are $100, up to a maximum of $10,000. 76 Per interview with Ethera Clemons, DLSE, January 20, 2009. 77 Kathy Robertson, "Scrub Boys hit with suit as state stiffens car wash regulation," Sacramento Business Journal, April 4, 2008, available at http://sacramento.bizjournals.com/sacramento/stories/2008/04/07/story6.html?t=printable; accessed on February 26, 2009. 78 Department of Industrial Relations press release (“CA Labor Commissioner files $250,000 lawsuit for unpaid wage”) dated December 23, 2008, available at http://www.dir.ca.gov/DIRNews/2008/IR2008-75.html; accessed on March 17, 2009. 79 Labor Commissioner Angela Bradstreet has stated that she does not believe her office has the power to revoke registration, although CLIWA advocates disagree and have pushed for clarification of this question in order to strengthen the DLSE’s enforcement capabilities. Cal. Code Regs., tit. 8, § 13686 states, “An employer’s registration is void when…the Labor Commissioner revokes an employer’s registration.” Cal. Code Regs., tit 8, § 13681(b) also states, “Failure to provide the Labor Commissioner with all of the requested records within ten calendar days after the date of a request, or providing records that are falsified, constitutes grounds for suspension or revocation of an employer's registration, or denial of an employer's application for registration.” 75

Denial and Revocation of Registration In 2006, 149 carwashes either failed to complete the registration process or were denied registration. This number fell to 40 in 2007 and then rose to 158 in 2008.80 While the DLSE keeps records of carwash registration denials, noting the reason for denial in each carwash’s individual file, it does not maintain any summary statistics on the reasons for denial. Thus, there is no way to determine to what extent the DLSE has refused to register carwashes with unpaid wage judgments—which, as noted, is one of the ways that the Labor Commissioner can leverage AB 1688 to enforce wage-and-hour laws in the carwash industry.81 According to the DLSE, whenever BOFE investigators issue citations, they are supposed to send a memo to the Labor Commissioner’s office for placement in the carwash’s individual file for review upon expiration of its registration.82 In addition, DLSE staff checks the BOFE database for any unpaid citations or judgments against carwashes whenever a carwash submits a new or renewal registration application. However, due to the lack of data on reasons for registration denials, it is difficult to assess how well this system is working to prevent carwashes with unpaid judgments from renewing their registrations.

Wage Claims and Settlements Information on wage claim cases filed with the DLSE against carwashes between 2003 and 2007 shows 719 claims across 14 counties, as illustrated in Table 2 below.83 While it is not clear from our data how many separate carwashes were the targets of such claims (multiple workers may 80

Division of Labor Standards Enforcement, “2008 Report on the Status of Enforcement in the Car Washing and Polishing Industry, Labor Code Section 2068,” p. 1, available at http://www.dir.ca.gov/dlse/carwashreport-2008.pdf; accessed on April 22, 2009. 81 Aside from having unpaid wage judgments, denials may also result from failure to provide the full information required in the application, failure to show proof of current workers’ compensation insurance, failure to remit the registration fee, or noncompliance with other requirements. When the DLSE denies carwash registration applications as a result of paperwork errors, it informs registrants of the deficiency and provides them an opportunity to correct it. 82 Per interview with Ethera Clemons, DLSE, January 20, 2009. 83 Per memorandum dated January 29, 2007 from Helen Morales (DLSE) to Becky Monroe (Bet Tzedek Legal Services).

submit wage claims for a single carwash), the data are nonetheless useful in illustrating the geographic extent of labor violations in the industry. It is noteworthy that several counties have a particularly high number of claims relative to the number of carwashes and to other counties. For example, the number of claims in both Kern and Santa Barbara Counties is more than twice the number of carwashes, while Fresno has only 2.3% of carwashes but 7.4% of claims, and Los Angeles County has only about 33% of the carwashes in the state, though nearly 45% of the total number of claims. Highlighted in Table 2 are counties that have a higher relative percentage of wage claims than carwash establishments.

Table 2: Total Wage Claims Filed by County County

Number of claims

Number of establishments

Percentage of claims in state

Percentage of establishments in state

Alameda

3.3%

4.1%

Fresno

7.4%

2.3%

Kern

9.3%

2.1%

322 75 12 39 33 2

524 186 52 95 166 10

44.8% 10.4% 1.7% 5.4% 4.6% 0.3%

32.8% 11.6% 3.3% 5.9% 10.4% 0.6%

San Joaquin

1.4%

1.3%

Santa Barbara Santa Clara

50 15

23 63

7.0% 2.1%

1.4% 3.9%

9 8

7 21

1.3% 1.1%

0.4% 1.3%

Los Angeles Orange Sacramento San Bernardino San Diego San Francisco

Shasta Sonoma

Sources: Number of wage claims â&#x20AC;&#x201C; DLSE data, January 2004 through January 2007. Number of carwashes â&#x20AC;&#x201C; U.S. Census Bureau, 2006 County Business Patterns.

Los Angeles Times reporters who gained access to carwash worker claims and lawsuits found that one-fifth of carwashes in southern California had wage claims brought against them between 2003 and 2007. In addition, the Times report revealed that carwash workers who received

settlements for wage claims during that time collected only one-third of the amount claimed.84 Recently published data by the DLSE indicate that unlike collections on employer fines, collection of recovered wages in the carwash industry may be quite low compared to other industries. In 2008, the DLSE found due $305,939 in wages owed to carwash workers, but only $161,549 was collected, a 53% collection rate.85 The DLSE has also announced two significant wage settlements in recent years. These settlements occurred after the Labor Commissioner filed lawsuits against the offending carwashes to collect the back wages they owed their workers.86

5.2. IMPACT OF THE LAW ON WORKERS AND ADVOCATES During our interviews, carwash worker advocates noted that they have found several key provisions of AB 1688 to be useful to their advocacy efforts, and believe that the law has had a positive overall impact on workers and the industry.87 However, they have also identified a number of limitations to the law, including the lack of information needed for workers to recover wages through the law’s surety bond and restitution fund provisions, insufficient penalties, and ineffective enforcement. Since the law’s inception, worker advocates have seen increased enforcement of wageand-hour violations through BOFE and EEEC sweeps, and some have seen conditions improve as a

A similar problem exists in the garment industry, where collection rates are similar. Christina Chung and Judy Marblestone, “Reinforcing the Seams: Guaranteeing the Promise of California’s Landmark Anti-Sweatshop Law.” Asian Pacific American Legal Center and Garment Worker Center (September 2005), p. 24. 85 The 2008 collection rate in the garment sector was 96%, while in both the construction and janitorial sectors the rates were over 100%, due to the collection of wages found owed in previous years. Division of Labor Standards Enforcement, “2008 Annual Report on the Effectiveness of Bureau of Field Enforcement,” p. 3, available at http://www.dir.ca.gsov/dlse/BOFE-2008.pdf; accessed on April 21, 2009. 86 The first settlement, from 2005, provided $29,350 to four carwash workers from the Crescent Car Wash in La Palma. [Department of Industrial Relations press release (“Car wash cited by labor commissioner for no workers' compensation: $29,350 for back wages and citations collected”) dated June 30, 2005, available at http://www.dir.ca.gov/DIRNews/2005/IR2005-29.html; accessed on February 26, 2009]. The second settlement came in 2008, totaling $450,000 paid to 60 workers at the Hollywood Riviera Car Wash in Redondo Beach. [Department of Industrial Relations press release (“Cal/OSHA Cites Los Angeles Carwash Businesses for Unsafe Practices”) dated December 23, 2008, available at http://www.dir.ca.gov/DIRNews/2008/IR2008-75.html; accessed on March 17, 2009]. 87 According to advocates, the law has served as a tool to increase advocacy among workers and other legal professionals. To date, advocates have put together how-to guides for representing carwash workers, provided legal advice at intake clinics, and conducted worker trainings to educate workers about their rights under the law. 84

result, at least in the initial period following the sweeps—though they were unsure if such improvements have been sustained in the longer run.88

Use of AB 1688’s Provisions Per California Labor Code § 2063, the DLSE maintains a database of registered carwashes on its website. This database has been a helpful tool for legal advocates in obtaining additional information about which carwashes are registered, as well as their legal names and addresses. Such information has allowed workers to file claims with the DLSE and also made it easier for legal advocates to serve carwash owners with lawsuits. Having this information also enables advocates to better establish an employer’s record of labor violations, which is useful evidence in wage claim cases.89 Another component of the law helpful to workers and their advocates is the successorship clause, which makes carwash owners responsible for the liabilities of their predecessors. Previously, owners were able to evade legal liability for unpaid wage judgments by selling their businesses, often to a relative, when faced with wage claims or lawsuits.90 Many of the advocates noted that the existence of this provision was vital to the success of carwash wage claim cases. AB 1688 also has multiple provisions intended to help workers recover back wages. The surety bond requirement and restitution fund both function as safety nets for workers unable to recover wages when their employer refuses or is unable to pay a judgment.91 Advocates indicated that apart from being a source for direct payouts, the surety bond has also been useful in Per interview with Betty Hung and Anel Flores, Los Angeles Legal Aid Foundation, January 23, 2009. Betty Hung noted that wages at certain carwashes did increase, but are still below the legal minimum. Another advocate also referenced an instance where a carwash stopped using propineros (workers who only earn tips and no base wages) after a sweep, but he did not know if the carwash had since resumed the practice. Per interview with Matt Sirolly, Wage Justice Center, January 23, 2009. 89 Per interviews with Betty Hung and Anel Flores, Los Angeles Legal Aid Foundation, January 23, 2009; and Hannah Silk Kapasi, Neighborhood Legal Services, February 6, 2009. 90 Per interviews with Betty Hung and Anel Flores, Los Angeles Legal Aid Foundation, January 23, 2009; and Kevin Kish, Bet Tzedek Legal Services, January 12, 2009. 91 Per interview with Betty Hung and Anel Flores, Los Angeles Legal Aid Foundation, January 23, 2009. 88

encouraging employers to settle workers’ wage claims, rather than face bond rate increases or losing their insurance altogether. The existence of a bond has also encouraged workers and advocates to file claims due to the additional source of recovery.92 However, none of the advocates we spoke to have yet successfully recovered wages through an employer’s surety bond. Because bond information is not publicly listed and does not require the involvement of DLSE action to be accessed, there is no way of knowing to what extent workers have been able to use employers’ surety bonds to recover wages.93 In addition to the surety bond, the restitution fund is another source of recovery for workers owed back wages. As of December 2008, the fund had a balance of $993,000.94 To date, there have been three applications to the fund, yet there appears to have been only one payout.95 The other two applications are still pending.96 There are a number of likely reasons that so few claims seeking restitution fund payouts have been filed. The protracted nature of the DLSE wage claim process, the lack of public data on employer surety bonds (which workers must attempt to access before applying to the restitution fund), and the lack of worker knowledge about the restitution fund in general all appear to be significant factors. In making a claim for restitution fund money, workers or their advocates must also include a declaration or affidavit disclosing what previous attempts they have made to recover wages. However, it is not clear to worker advocates what constitutes a sufficient attempt in this Per interviews with Kevin Kish, Bet Tzedek Legal Services, January 12, 2009; and a private attorney, February 6, 2009. Two respondents to our employer survey indicated that their surety bonds had been accessed, but they did not provide any further detail. 94 Per email from Ethera Clemons, DLSE, January 20, 2009. 95 A private attorney who we spoke to applied for a restitution fund payout on behalf of his client in October 2006. According to the attorney, the worker was owed approximately $30,000 and had received an arbitration award from the Los Angeles Superior Court, but the worker only received $2,500 from the restitution fund. 96 The second application to the fund was submitted by Bet Tzedek Legal Services in July 2008 on behalf of workers at Mike’s Hand Wash in Los Angeles, although they did not receive a response until March 2009, when Bet Tzedek attorneys received a request from the DLSE to submit the worker’s judgment award, and the outcome is still pending. [Per Kevin Kish, Bet Tzedek Legal Services, March 11, 2009.] This application to the fund was made for a wage claim originally filed in 2005, and is a notable example of the protracted nature of the claims process: see Appendix F for a detailed description of this case. The third application to the fund was made by Anel Flores from the Los Angeles Legal Aid Foundation in March 2009. [Per Betty Hung, Los Angeles Legal Aid Foundation, March 11, 2009.] 92 93

regard, and there is no standardized form they can use to file a restitution fund claim.97 Moreover, workers who receive judgments from the DLSE may not even be aware that the restitution fund option is available, as it is not specifically disclosed on the judgment letter.

Limitations to Implementing AB 1688 Effectively Apart from the information on employers available in the DLSE’s registration database, the availability of relevant data on carwashes is otherwise fairly limited. The lack of information about employers’ surety bonds on the DLSE website is a particularly problematic omission. The difficulty that workers and their advocates face in finding surety bond information for any given employer makes it harder to file a claim to the bond, thus making it harder to access the restitution fund, given that filing a surety bond claim is a prerequisite. Worker advocates seeking to file a claim to a carwash employer’s surety bond have reported difficulty identifying the bond company name and number when employers refuse to provide the information. When this happens, worker advocates must obtain the bond information through a Public Records Act (PRA) request, which further delays and complicates the process.98 In addition, PRA requests are sometimes sent back incomplete and require follow-up with the DLSE to obtain all the information requested.99 Furthermore, the DLSE does not publish information from past years’ registrations, which compounds the problem by making it difficult for workers or advocates with wage claims to locate carwashes that may have been registered at one point. Nor does the DLSE’s website list carwash registration denials, revocations, and suspensions, despite the fact that they are listed for the garment

Per interview with Kevin Kish, Bet Tzedek Legal Services, January 12, 2009. The DLSE has, however, created such a form for AB 633 (Garment Worker Law) restitution fund claims. 98 According to advocates, the response time to provide materials typically ranges from two weeks to two months, though there appears to be no correlation between response time and the amount or complexity of the information requested. Per interviews with Betty Hung and Anel Flores, Los Angeles Legal Aid Foundation, January 23, 2009; and Kevin Kish, Bet Tzedek Legal Services, January 12, 2009. 99 Per interview with Matt Sirolly, Wage Justice Center, January 23, 2009. 97

industry, which has similar registration requirements.100 Other data, which the DLSE have on hand but does not publish, include a list of carwashes cited by BOFE and EEEC, as well as citation details. Worker advocates note that the information on citations is useful in establishing employer history in wage claim cases, but currently can be obtained only through PRA requests. The surety bond requirement of just $15,000 is also limiting. According to one advocate, a typical wage claim for an individual worker is around $10-15,000; however, if multiple workers file a wage claim against one owner—which is often the case—the surety bond would need to be several times the current requirement in order to cover the group’s claim.101 The Labor Commissioner currently has the discretion to raise the amount of the surety bond for carwashes with previous labor violations and in other circumstances, but she has not yet used this authority.102 Another problem with the law that many advocates have noted is that the wage claim process is not as successful in the carwash industry as in the garment industry because there are no investigators who work exclusively on carwash cases. Unlike the Car Wash Worker Law, moreover, the Garment Worker Law requires that the DLSE launch an investigation when a worker files a garment wage claim and that the investigators present their findings in wage claim proceedings.103 Advocates have stated that the investigators’ reports can be extremely helpful in settling cases; in addition, they can serve as persuasive evidence in a hearing.104

5.3. IMPACT OF THE LAW ON CARWASH OPERATORS Discussions with directors of the Western Carwash Association (WCA), as well as the responses to our employer survey, have informed our understanding of how AB 1688 has affected

There is a section on the DLSE website for this information on the carwash industry, but it contains no data. Per interview with Matt Sirolly, Wage Justice Center, January 23, 2009. 102 Cal. Code Regs., tit. 8, § 13682(b)(3). Per interview with Ethera Clemons, DLSE, April 20, 2009. 103 Per email from Anel Flores, Los Angeles Legal Aid Foundation, February 18, 2009. 104 Per interview with Hannah Silk Kapasi, Neighborhood Legal Services, February 6, 2009. 100 101

carwash operators in California.105 Although these operators are predictably less supportive of AB 1688 than worker advocates, the feedback they provided echoes, to some degree, what we heard from worker advocates: that the law’s provisions are not strong enough to compel compliance, that more widespread and effective enforcement is needed, and that many employers continue to violate labor laws. This feedback, taken together with our other findings, has helped us formulate a number of potential policy options to address these difficult problems. We discuss these policies later in the report.

Western Carwash Association The WCA actively lobbied against both AB 1688 and SB 1468, but they have not yet taken an official position on AB 236.106 Although WCA leadership has expressed significant reservations about the law, the Association has worked with the DLSE to inform its members about their legal obligations and help boost compliance.107 One of the WCA’s concerns is that the registration process is too complex, such that many of its members have had a difficult time understanding and completing the initial registration. Despite these issues, however, the WCA believes that many of the problems employers have encountered during initial registration continue to become less pronounced as registrants gain familiarity and experience with the process. The WCA has also expressed concern that the maximum $10,000 fine for operating without a registration has not sufficiently deterred noncompliance. Not only is the maximum fine too small, according to the WCA, the law does not provide the Labor Commissioner with the statutory

The WCA’s Executive Office did not formally respond to our requests for its official positions on key issues relating to the Car Wash Worker Law. Accordingly, what we learned about the WCA’s positions is the result of conversations with individual directors. 106 The WCA recently hired a new lobbyist, Lee Adler. Per email from Hannah Silk Kapasi, Neighborhood Legal Services, January 7, 2009. 107 Bill Carbonel, “Car Washing & Polishing Registration Act: AB 1688 & SB 1468 History, Current Status,” WCA Express News, Vol. 13, No. 4 (July 2007), pp. 4-5. 105

authority to shut down businesses due to their unregistered status.108 As a result, the WCA believes that the law lacks the â&#x20AC;&#x153;teethâ&#x20AC;? to bring all covered employers into compliance. In addition, the Association would like to see the DLSE do more to develop a complete and accurate list of operators, and to pursue those on its list who are currently unregistered. The WCA believes that its members, most of whom are already registered, are at a competitive disadvantage compared to unregistered nonmembers to the extent that those carwashes are not pursued and penalized. The Association therefore feels that the law, if it is to remain in effect, ought to be strengthened and more strictly enforced so that more employers comply.

Employer Survey Results Employers who responded to our survey offered wide-ranging feedback on AB 1688, though many expressed opposition to the law. Approximately two-thirds of employers included additional written comments at the end of the survey; of those, about half indicated a belief that the law is unnecessary and that state regulators should simply enforce existing labor laws, while several others also voiced objections on different grounds. To some extent, these results are not surprising: many employers do not welcome additional regulations, and, in this case, those with particularly strong feelings were probably more inclined to complete the survey than those without. Therefore, our interpretation of the results takes into consideration this general negative bias towards AB 1688 in the sample. Despite this overall negative sentiment, however, a significant number of respondents did express support for the law. To gain a better understanding of how employers view the cost of compliance with AB 1688, we asked them how burdensome they found (1) the $300 combined annual registration fee

108

As noted, the Labor Commissioner is currently testing this authority in court.

and restitution fund assessment, and (2) the $15,000 surety bond requirement.109 Although different employers may have interpreted the word “burdensome” in different ways, the distribution of responses is nonetheless meaningful.110 Carwash Operator Characterizations of Registration Requirement 13%

Regarding the registration fee, the results are mixed, with 42% of respondents characterizing it as

42%

Excessively burdensome Somewhat burdensome Not burdensome Don't know

“excessively burdensome,” 41% as “somewhat burdensome,” and 13% as “not burdensome.”111

41% The registration fee requirement is $300 per branch Source: Survey of California carwash operators covered by AB 1688, 2/1/2009-3/15/2009

It is noteworthy that, despite respondents’ general opposition to the law, less than half of them believe this

fee to be excessive, which suggests to us that the fee is fairly reasonable.112

We also asked employers how burdensome they found AB 1688’s recordkeeping requirements; however, we chose to discard the results to this question because the law does not impose any penalties for recordkeeping violations beyond those already existing in other sections of the Labor Code. 110 For example, one employer who characterized the registration fee as “excessively burdensome” commented that “all taxes, fees and required registrations are burdensome.” For this employer and others, it is therefore possible that such responses are simply a reaction to any additional regulation and/or their general objections to the law. It is also possible that the responses reflect employers’ frustration with the registration process, rather than its financial cost: 30% of respondents who included additional comments at the end of the survey complained that the process was too difficult, although many also indicated that the DLSE has been responsive to their problems and questions about the law, and that they had received information and assistance from the WCA as well. 111 The remaining 4% said that they did not know. 112 When segregating the sample into smaller groups, the one exception to the “less than half” result is the subset of respondents with 10 or fewer employees—70% find the registration fee to be excessively burdensome. However, this percentage falls as the number of employees rises: 45% of respondents with 11-20 employees believe the fees are excessively burdensome, though only 36% of respondents with 21-40 employees feel this way, as do only 7% of respondents with more than 40 employees. This does not necessarily imply that the registration fee is unreasonable for the smallest employers, but it does illustrate the differential impact of a flat fee on a heterogeneous group of employers. 109

Carwash Operator Characterizations of Surety Bond Requirement 4% 2%

Responses to the question about the surety bond requirement were more negative: 73% of respondents said the

21%

Excessively burdensome Somewhat burdensome Not burdensome 73%

Don't know

requirement was excessively burdensome, vs. only 21% somewhat burdensome and 4% not burdensome.113

Approximate cost of surety bond is between $150 - $450 Source: Survey of California carwash operators covered by AB 1688, 2/1/2009-3/15/2009

However, because the cost of surety bond coverage is generally similar to the

registration fee, this difference in results for the two questions seem to be due less to the financial cost of the bond than to the idea of the bond requirement in the first place.114 Therefore, if employersâ&#x20AC;&#x2122; responses to the question about the registration fee are any indication, the cost of compliance with the surety bond provision seems fairly reasonable as well. To assess employer perceptions of the value of AB 1688, we asked them to indicate their level of agreement or disagreement with the following three statements: 1. Requiring all carwashes to register with the state evens the competitive playing field for employers who operate legally. Registration promotes fair competition by ensuring that all car washes follow the law. Slightly more than half of respondents disagreed with this statement, either strongly (47%) or somewhat (10%), while one-third agreed, 20% somewhat and 13% strongly. The remaining 10% neither agreed nor disagreed. While more respondents disagreed with this statement than agreed, we

The remaining 2% said that they did not know. Typically, surety bonds cost anywhere from 1-3% of coverage, which for $15,000 of coverage would be anywhere from $150 to $450. (See http://www.jwsuretybonds.com/blog/what-does-a-bond-cost/ for more information; accessed on March 15, 2009.) For many employers, therefore, the cost of the surety bond may approximate the combined cost of the registration fee and restitution fund assessment. Because of the likely similarities in cost, much of this difference in results could be due to the way we phrased the two questions. While we specifically asked employers how burdensome they found the annual registration fee, we did not ask them how burdensome they found the cost of the surety bond, but rather the bond requirement in general. It is possible that had we worded the question differently, the distribution of responses would have better matched that of the registration fee question. 113 114

believe it is significant that so many of them did agree—or were at least neutral—which may imply a certain level of support for the concept of registration as a way to even the playing field. However, some respondents indicated in their comments that the current lack of compliance actually has actually had the unintended effect of making the playing field even more uneven—and it is possible that even more employers would have agreed with this statement if they saw the playing field being evened in practice. These results underscore the need for additional enforcement of AB 1688’s registration provision to bring more employers into compliance. 2. In the absence of a registration system, there is no way to stop employers who have violated labor laws in the past from continuing to violate these laws in the future. Approximately two-thirds of respondents disagreed with this statement, either strongly (52%) or somewhat (13%). Of the remaining one-third, 13% agreed strongly, 12% agreed somewhat, and 9% neither agreed nor disagreed. These results may reflect many respondents’ belief that AB 1688 would be unnecessary if the DLSE better enforced existing labor laws. However, the results also appear to indicate a lack of awareness among respondents that AB 1688’s registration provision has actually, to certain extent, facilitated the enforcement of other labor laws by giving the DLSE additional resources to do so. This points to a potential lack of transparency surrounding the agency’s use of the registration database, as well as revenues generated from fees and fines, to investigate and pursue violators. 3. This law will help protect workers and ensure they can collect unpaid wages.115 Approximately 60% of employers disagreed with this statement, either strongly (42%) or somewhat (18%), while just over a quarter of them agreed, 14% strongly and another 14% somewhat. The 115 The full statement was actually this: “Before legislators passed this law, some employers took advantage of car wash workers and failed to pay them the wages they were owed. This law will help protect workers and ensure they can collect unpaid wages.” One employer differentiated his strong agreement with the first sentence and his strong disagreement with the second. However, we assume for purposes of this analysis that respondents were generally reacting to the second sentence.

remaining 12% neither agreed nor disagreed. This distribution of responses continues the general pattern in which a sizable minority of respondents—one-third or more—reacted favorably, or at least neutrally, to the notion that AB 1688 helps address important problems in the industry. Although a majority of respondents feel otherwise, these results should nevertheless be encouraging to supporters of the law, especially given the probable negative bias in the sample. Furthermore, agreement with this statement may be limited by what many respondents see as a general lack of enforcement: AB 1688’s supporters and detractors alike commented on the lack of enforcement and noted that many employers still continue to break the law.

5.4. IMPLICATIONS OF FINDINGS The findings from this section of the report have implications that both inform and influence potential policy options; moreover, they provide the basis for additional analysis by helping us focus on the key areas where AB 1688 has yet to fully achieve its objectives. As the findings indicate, AB 1688—despite some notable and continuing progress—has not been as effective as it could be, and its deficiencies fall into three basic categories: a largely inaccessible wage recovery mechanism, a need for more effective and transparent enforcement, and limited fines and penalties for violators. Accordingly, we have developed a set of policy options to address each of these problems. We present these options in the following section.

6. POLICY OPTIONS The following policy options are the result of our evaluation of the effectiveness of the Car Wash Worker Law, based on our findings from the previous section. As noted, these potential policies seek to address (1) problems with the law’s wage recovery provisions, (2) enforcementrelated issues, and (3) the inadequacy of current fines and penalties. Each set of options has multiple components based on their complementary nature. We describe them in detail here, and then provide further analysis and our final recommendations later in the report.

I. Increase Access to Surety Bonds and the Restitution Fund for Workers with Unpaid Wages This policy option has three specific components: Post employers’ surety bond information to the DLSE website. The lack of easily accessible information on employer surety bonds has created a barrier to access to the bond itself and to the restitution fund, as workers are required to attempt to access the surety bond before requesting payment from the fund. Public posting of surety bond information to the DLSE website could significantly improve access to bonds and the fund for workers and advocates. The surety bond contact information and amount of available coverage should be listed accordingly for each carwash in the DLSE’s Car Washing and Polishing Registration Database.116 Include information on the surety bond and restitution fund in wage claim award letters to workers. Although carwash workers filed over 700 wage claim cases between 2004 and 2007, there have been only three known applications to the restitution fund. One possible explanation for this

116 The California Contractor State Licensing Board publishes bond information in a user-friendly database, which lists contact information for the bond along with the amount of available coverage, among other information. The database is available at https://www2.cslb.ca.gov/OnlineServices/CheckLicense/LicenseRequest.asp; accessed on March 17, 2009.

is that many workers are simply unaware of the fund’s existence. Notifying them of the potential availability of a surety bond and the restitution fund could help increase the collection of unpaid wages. Similar to administrative protocol under the Garment Worker Law, the Labor Commissioner should include information about the carwash’s surety bond and information on the restitution fund in the “Order, Decision, or Award” (ODA) letter that is sent to successful claimants. The Labor Commissioner could further facilitate wage recovery from surety bonds and the restitution fund by including contact information for non-profit legal aid groups who provide representation for carwash workers. Create a standardized form that workers and their representatives can use to make a restitution fund claim with the DLSE. The California Code of Regulations states that the claim seeking to recover unpaid wages through the restitution fund “need not be in any particular form,” though it lists fifteen items that should be included in the claim.117 Because of the lengthy duration of the claims process, several months may pass before claimants are notified that they are missing easy-to-identify requirements in their application. Having a standard claim form could help avoid unnecessary confusion for workers, advocates, and even the DLSE, and may speed up the processing of restitution fund claims.

II. Improve the Quality and Transparency of DLSE Enforcement Efforts This policy option has two specific components: Assign labor investigators exclusively to the carwash industry. To enforce the Garment Worker Law, the DLSE uses investigators who focus exclusively on the garment industry. The need for specialized investigators exists in the carwash industry as well. Due to the prevalence of employer intimidation and under-the-table payments in the industry, uncovering wage violations at 117

Cal. Code Regs., tit. 8, § 13694(b).

carwashes is especially difficult. However, there appears to be little industry-specific knowledge among investigators who work on carwash cases, which makes them less effective in identifying labor law violations, especially the hard-to-detect ones such as wage-and-hour violations. The DLSE could either hire new investigators to work solely on carwash cases, better train existing investigators to be sensitive to worker concerns, or do some combination of both. Post additional enforcement-related data to the DLSE website. Currently, the DLSE website lists several years of registration and contractor license denials, revocations, and suspensions for both the garment and agricultural industries, but does not list this information for the carwash industry. The DLSE also produces activity spreadsheets for BOFE and EEEC sweeps, which detail the carwashes investigated and the type and amount of any citations issued, but this information is currently available only through PRA requests. Publishing such data to the DLSE website would provide workers and their advocates with information about carwashes that have violated labor and registration laws. This would enable them to serve as better watchdogs over the industry and perhaps alleviate the burden on the DLSE. In addition, distinguishing the different reasons why a carwashâ&#x20AC;&#x2122;s registration was denied, revoked or suspended can help workers and advocates identify the nature of previous carwash violations. This information is also useful to workers with wage claim cases in proving patterns of legal violations. Furthermore, publishing these data may increase awareness of DLSE enforcement efforts among carwash operators, potentially serving as a disincentive for certain employers to continue violating the law.

III. Target Law-Breaking Carwashes More Effectively This policy option has two specific components: Mandatory increases in surety bond coverage for employers cited for labor violations. Currently, carwash owners are required to post a surety bond with a minimum $15,000 value.

However, some worker advocates have found that the amount of wages owed to carwash workers with legal claims, particularly in cases where more than one worker at a carwash is owed wages, significantly exceeds $15,000.118 AB 1688’s regulations already allow the Labor Commissioner to increase the required insurance coverage at her discretion.119 However, this authority has never been used to raise coverage requirements for carwashes with a history of wage violations or for any other reason. Creating a system of automatic and meaningful increases in the required bond amount as a consequence of certain labor violations would better meet the need for unpaid wage claims without placing an undue burden on law-abiding carwashes. Increased fines for non-registration. The maximum fine for operating a carwash without a registration is $10,000, yet the registration rate is only slightly above 60%. Because the DLSE mails registration notices to all establishments on its list and provides detailed instructions and assistance with the registration process, it is unlikely that this low rate is due to a lack of awareness or the difficulty of the process. Rather, it is more likely to be true that the limited fine—combined perhaps with a belief among carwash operators that the probability of detection is low—is simply not enough to act as a significant deterrent to a large proportion of the industry. In order to prevent this fine from remaining an acceptable risk for unregistered carwashes, the maximum amount should be significantly higher.120

Per interview with Kevin Kish, Bet Tzedek Legal Services, January 12, 2009. Kish stated his belief that coverage should be at least $50,000 to be meaningful, given the size of many such claims. 119 Cal. Code Regs., tit. 8, § 13682(b)(3). The regulation states, “Factors that the Labor Commissioner may consider in determining that a surety bond be in an amount greater than [$15,000] include, history of violations including matters such as wage claims, orders, decisions, or awards of the Labor Commissioner, final determinations of the Labor Commissioner in retaliation or discrimination complaints, and final judgments of any type against the employer, and the size of the employer’s business, including number of employees and/or branch locations.” 120 As with the recommended increases in surety bond coverage for labor law violators, we do not attempt to quantify the optimal size of the maximum fine, which is beyond the scope of our analysis. However, the former president of the Western Carwash Association has suggested raising fines “as much as threefold,” so $30,000 might provide a good starting point for consideration. [Nazario and Smith, 2008.] 118

7. POLICY CRITERIA To analyze the aforementioned policy options, determine which ones should take priority over others, and decide which ones are worthy of action, we consider three important criteria: effectiveness in improving key outcomes, political feasibility, and administrative feasibility. The effectiveness criterion relates to the ability of a given option to address one or more of the Car Wash Worker Lawâ&#x20AC;&#x2122;s deficiencies, as described previously. Political feasibility is based on the likelihood of an option becoming law (through either the legislative or rulemaking process) or a discretionary Division of Labor Standards Enforcement policy (based on the willingness of the Labor Commissioner to establish the policy). Administrative feasibility is based on the likelihood that the DLSE could effectively implement any given policy, given agency resources, capabilities, and constraints. In assessing feasibility, we look not only at current constraints, but potential future constraints as well. We value each of these three primary criteria equally, and favor policies that, on the whole, best satisfy all three. We use this overall framework to develop our policy recommendations, which we present in the following section of this report.

I. Effectiveness in improving key outcomes As noted, the intent of AB 1688 was to: Establish a system of registration, bonding requirements, and enforcement to impose prompt and effective criminal and civil sanctions for the violation of the provisions set forth in this act or any provision of law applicable to the employment of workers in the car washing and polishing industry.121 However, the lack of compliance with the lawâ&#x20AC;&#x2122;s registration provision, limited effect on reducing other labor law violations, and barriers to the recovery of back wages have all hampered the lawâ&#x20AC;&#x2122;s progress. The orientation of our recommendations therefore strongly favors policy options that 121

AB 1688, Section 1(j).

seek to improve upon these key outcomes. To do so, we believe that AB 1688 must (1) achieve a high rate of compliance, (2) help bring about reductions in violations of existing labor laws, and (3) provide adequate recourse for workers when such violations continue to occur. Accordingly, we evaluate policy options based on whether they help meet the following three standards in a meaningful way: 

Failure to comply with the provisions of AB 1688 should be sufficiently disadvantageous to employers, whether as a result of rigorous enforcement, meaningful fines and penalties, or both.



AB 1688 should enable the DLSE to better enforce other sections of the California Labor Code, such as wage-and-hour laws.



Workers owed back wages should have an effective mechanism for recovering them.

In weighing alternative policy options based on the effectiveness criterion, we rate them using the following metric: 

High effectiveness: Any option that meets all three standards.



Medium effectiveness: Any option that meets two standards.



Low effectiveness: Any option that meets one standard.



Ineffective: Any option does not meet any of these standards.

We do not recommend any options deemed ineffective.

II. Political feasibility Our assessment of politically feasibility is based on how we believe interest groups, the state legislature, the Governor, and the Labor Commissioner would respond to any given policy option, if proposed. Political feasibility is especially important for any proposed statutory amendments to the law since they require legislative approval; however, regulatory changes are also subject to political constraints due to the involvement of interest groups in the rulemaking process. In addition,

political considerations apply to any proposed DLSE internal policy or procedure that does not carry the force of law, because the Labor Commissioner nevertheless has full discretion in approving them.122 We consider the following questions: 

What is the expected level of support or opposition from lobbying interests?



What is the expected level of support or opposition from current legislators?



How likely is the current Governor to sign any given statutory changes into law?



How likely is the current Labor Commissioner to accept any proposed regulatory or internal management policy changes?123



How might such prospects change in the next legislative term with a new mix of legislators, a new governor, and perhaps a new labor commissioner?

Answering these questions helps assess the overall likelihood that any given policy proposal would gain the necessary approval to take effect. Based on this assessment, we classify political feasibility as high, medium, or low—in both the short and long term. The higher an option’s political feasibility, the easier it would be to enact.

III. Administrative Feasibility Administrative considerations are important because regardless of how well a law is written, it needs effective implementation to be successful. How the DLSE will be able to implement any given policy option depends on various factors: 

How demanding is the policy from a resource standpoint, given the likely constraints in the DLSE’s budget?



How complex and challenging is the policy from a management standpoint, given the likely limits to the DLSE’s organizational capacity?

122 Although the position is not intended to be a political one, the Labor Commissioner is nonetheless a political appointee. 123 Under state law, anyone seeking regulatory changes can petition the DLSE to do so. If the petition is granted, the formal rulemaking process then begins. This process does not apply to internal management policies. For further details, see http://www.caichildlaw.org/Misc/Rulemaking_Process.htm; accessed on March 1, 2009.



How might the DLSE’s budget and organizational capacity change in the future, and how might these changes impact the agency’s ability to effectively implement the policy?

Answering these questions for any given policy option helps assess its likelihood of effective implementation, and based on this assessment, we classify administrative feasibility as high, medium, or low. The higher an option’s administrative feasibility, the easier it would be to implement. As with political feasibility, we consider administrative feasibility in both the short and long term.

8. POLICY RECOMMENDATIONS The following recommendations are the result of our evaluation of the three sets of potential policy options, which we assessed vis-Ă -vis our policy criteria. For each set of options, we based our assessment on its (1) likely effectiveness in improving AB 1688â&#x20AC;&#x2122;s key outcomes, (2) political feasibility, and (3) administrative feasibility. We prioritize our recommendations under the assumption that our client has limited political capital to expend, and will therefore need be judicious in its advocacy efforts. We recommend that our client first advocate for changes to internal DLSE policy that would make the surety bond and restitution fund wage recovery mechanisms better known and more easily accessible to workers and their advocates. Our client should also consider, though as more of a future priority, petitioning the Labor Commissioner to make enforcement more effective and transparent by assigning specialized investigators to the carwash industry and posting additional enforcement data to its website. Further, if the Car Wash Worker Law is successfully reauthorized in 2009, we recommend that our client attempt to strengthen the law through statutory amendments in 2011 when a new, perhaps more labor-friendly governor is in office. We describe these recommendations in further detail below.

Policy Recommendations

Recommendation I. Increase Access to Surety Bonds and the Restitution Fund for Workers with Unpaid Wages II. Improve the Quality and Transparency of DLSE Enforcement Efforts III. Target Law-Breaking Carwashes More Effectively

Effectiveness in Improving Key Outcomes

Political Feasibility

Administrative Feasibility

Medium

High

Medium

Short Term - Low Long Term - Medium

High

Short Term - Low Long Term - Medium

Medium

I. Increase Access to Surety Bonds and the Restitution Fund for Workers with Unpaid Wages 

Post employers’ surety bond information to the DLSE website.



Include information on the surety bond and restitution fund in DLSE wage claim award letters to workers.



Create a standardized form that workers and their representatives can use to make a restitution fund claim with the DLSE.

Recommendation We give this set of policies the highest priority, because it would significantly increase the effectiveness of the Car Wash Worker Law and would likely face no significant political or administrative barriers, now or in the future. We therefore recommend that our client advocate for these changes with the Labor Commissioner. Our client might also consider formally petitioning the Labor Commissioner to propose these policies as official regulations, which would give them the force of law and ensure their continued use during the tenure of future labor commissioners. Although there is no guarantee that the Labor Commissioner would adopt these policies or grant such a petition, we believe our client could make a strong case for doing so.

Analysis Effectiveness in improving key outcomes: medium. This set of options meets two of the three specific criteria related to client objectives, so we consider it to have medium effectiveness. By correcting key flaws in the wage recovery process, these policy changes will significantly increase the effectiveness of AB 1688 in providing recourse for workers with unpaid wages. In addition, it is likely that facilitating this process will lead to a greater number of claims being brought to the Labor Commissioner’s attention, thereby allowing the DLSE to better identify wage-and-hour violators and ensure that these businesses do not continue to break the law. Political feasibility: high. The Labor Commissioner could adopt this set of policies either through the rulemaking process or changes to internal DLSE policy, which occur outside of the political process. Although the establishment of formal regulations and agency management policies does not happen completely independent of politics, we do not believe that any of these policies would be controversial. As such, we see no significant political constraints at the current time, nor do we anticipate any in the future. Administrative feasibility: high. These policies are all highly feasible from an administrative standpoint, both now and in the future. Posting surety bond information would require adding only a few columns of data to the registration database that the DLSE currently maintains—data which the agency already have readily available on file. Creating a standard claim form for the restitution fund would require a one-time effort, one which would likely generate efficiencies on the back end by making it easier for the DLSE to process restitution fund claims. Furthermore, adding surety bond and restitution fund information to the “Order, Decision, and Award” (ODA) letter is another fairly simple change, merely requiring the addition of boilerplate language referring claimants to the registration database (for the employer’s surety bond information) and restitution fund claim form.

II. Improve the Quality and Transparency of DLSE Enforcement Efforts 

Assign labor investigators exclusively to the carwash industry.



Post additional enforcement-related data to the DLSE website.

Recommendation Similar to the previous set of policies, our client could request that the Labor Commissioner implement these policies on her own, bypassing the formal legislative or rulemaking processes. These policies would greatly improve AB 1688’s effectiveness; however, to the extent that our client must prioritize its requests, we believe that they should be less of a priority than the previous ones relating to the wage recovery process. This set of policies seems especially unattractive at the current time, primarily because it might require the expenditure of significant resources during a period of fiscal instability in state government. These policies could be politically sensitive as well, and so we believe that our client should instead save its political energies for the current Car Wash Worker Law reauthorization campaign. Nevertheless, if our client decides to not advocate for these changes now, it should consider doing so at a later time, especially if changes in political and administrative dynamics make such policies more feasible.124

Analysis Effectiveness in improving key outcomes: high. Improving the quality and transparency of enforcement efforts in the manner suggested would help deter and detect labor law violations relating to both the Car Wash Worker Law and other sections of the Labor Code, thus meeting the first two effectiveness criteria. Moreover, having specialized investigators would enhance the 124 While the two specific policies that compose this set of options complement one another effectively—better enforcement and greater efforts to make this enforcement public—our client might consider advocating for just one, should circumstances suggest that one stands a greater chance of implementation than the other. Each policy faces a different set of issues: as we discuss, assigning specialized investigators to the carwash industry might face administrative hurdles, while posting enforcement data to the DLSE website might face political hurdles.

DLSE’s ability to uncover wage-and-hour violations, thereby improving workers’ prospects for recovering back wages. Posting enforcement data to the DLSE’s website would also make it easier for workers with wage claims to establish an employer’s history of past violations. As a result, this set of options meets the third criterion as well, and we consider it highly effective. Political feasibility: medium. As with the previous set of policies, the Labor Commissioner could adopt these policies through changes to internal DLSE policy. Because worker advocates and the Western Carwash Association both support increased enforcement of the law, efforts to put in place specialized investigators would be unlikely to attract any significant political opposition. However, posting employers’ histories of labor law violation to the Internet could be a more sensitive issue, and may lead to resistance from the Labor Commissioner and industry interests. Nonetheless, while it is difficult to say exactly how the Labor Commissioner and others might react to such requests, we have no information that suggests this set of policies would be rejected outright. Furthermore, because we cannot reliably predict how political feasibility might change in the future, we do not distinguish between political feasibility in the short and long term. Administrative feasibility: low in the short term, medium in the long term. Having specialized carwash industry investigators might require the DLSE to hire additional personnel if the agency wishes to maintain current enforcement levels for other low-wage industries. We do not have a sufficient understanding of the agency’s financial situation to know for sure how feasible hiring new investigators—or training existing ones—would be, nor can we say whether diverting investigative staff to the carwash industry from other industries would make operational sense. Still, we suspect that the current budget crisis in California may preclude any additional hiring or new training programs in the short term. However, due to the prevalence of labor law violations in the carwash industry, an increased level of enforcement could generate significant revenue for the DLSE, thereby

sustaining itself through citations without the need for additional public funds. This suggests that a substantial investment in personnel or training might be a more attractive idea if and when the state’s fiscal problems subside. Moreover, while posting enforcement data to the DLSE website would require some additional administrative resources, the DLSE already does some of this for other low-wage industries, and so there is no reason to believe that doing this for the carwash industry would be too financially or technically burdensome to the agency, now or in the future.

III. Target Law-Breaking Carwashes More Effectively 

Mandatory increases in surety bond coverage for employers cited for labor violations.



Increased fines for non-registration.

Recommendation Based on our criteria, this set of options compares similarly to the previous set, and should therefore be a low priority to our client at the current time. As with the enforcement-related options, we believe these policies would help address many of AB 1688’s key outstanding problems. However, due to our concerns about their political feasibility while Governor Schwarzenegger is in office, we suggest that our client take no action at this time. Nevertheless, if the law is reauthorized in its current form this year, and a Democratic, pro-labor governor is elected in 2010, our client should consider lobbying legislators to introduce related statutory amendments in 2011.125

Analysis Effectiveness in improving key outcomes: high. These changes to AB 1688 would be highly effective in furthering the law’s objectives, based on their combined ability to meet all three of the

125 These suggested changes to the law would act as proposed amendments to the Labor Code if the Car Wash Worker Law is reauthorized in its current form. If AB 236 is defeated, however, the recommendations would apply to new legislation.

aforementioned effectiveness criteria. First, we believe that a significant increase in the fine for operating without registration would bring many more operators into compliance with the law, and that a higher compliance rate for AB 1688 would result in an increased level of compliance with other labor laws as well. In addition, the prospect of having to post a larger surety bond should deter operators from violating other labor laws that would trigger the automatic increase. Finally, significant increases in surety bond coverage for those operators most prone to wage-and-hour violations should make it significantly easier for workers to recover back wages and help preserve the restitution fund. Political feasibility: low in the short term, medium in the long term. These changes would require statutory amendments to the Labor Code through the California legislative process. In reauthorizing AB 1688 in 2006, however, the Governor made it clear that he would not accept any enhancements to the legislation, and based on his labor record, we have no reason to believe anything has changed in this regard. The current form of AB 236 (which, as noted, preserves the Car Wash Worker Law in its current form, though without a sunset provision) is therefore probably as aggressive as the bill can be without jeopardizing the very existence of the law.126 However, the Western Carwash Association has indicated support for stronger fine and penalties as well, so it is possible that such proposals would not be met with coordinated industry opposition, thus potentially increasing their chances of legislative enactment during the next gubernatorial term. Still, even if political prospects improve in 2011, our clientâ&#x20AC;&#x2122;s ability to enact statutory amendments would hardly be assured, and so we consider long-run political feasibility to be medium. Administrative feasibility: medium. Increasing non-registration fines and surety bond coverage could require an additional level of DLSE resources to administer and enforce the enhanced If SB 1468â&#x20AC;&#x2122;s narrow legislative victory in 2006 is any indication, AB 236 is unlikely to pass with a veto-proof majority; therefore, avoiding a gubernatorial veto will be critical to the 2009 reauthorization. 126

provisions. Larger fines might require greater collection efforts; moreover, if increasing the fine brings many more operators into compliance, the DLSE would also need to process a larger number of registration applications each year. Furthermore, to make such provisions more meaningful, the DLSE might also need to take legal action against certain noncompliant carwashes, which requires agency resources. Nevertheless, larger fines would also likely raise additional revenue, thereby supporting increased enforcement efforts. A system of automatic surety bond increases would also add a layer of complexity to the DLSEâ&#x20AC;&#x2122;s bond administration process, in that the agency would need to notify individual carwashes of their increased obligations and keep track of compliance with an uneven system of requirements. However, the DLSE already has a communication and recordkeeping system in place for registered carwashes, and so implementing this provision would be unlikely to pose a significant administrative challenge.

9. CONCLUSION The findings of this report indicate that carwash workers in California continue to confront many of the problems and conditions that prompted the passage of AB 1688, and that the need for industry regulation persists. The progress made in implementing the law is encouraging, but there is much room for improvement. While the number of carwashes registered under the law has been growing each year, almost 40% of carwashes remain unregistered. In addition, while it appears that revenue generated from AB 1688â&#x20AC;&#x2122;s registration requirement has resulted in an increased level of labor law enforcement, worker advocates and many carwash employers believe that not enough has been done to crack down on continued violations, improve working conditions, and even the competitive playing field for law-abiding employers. The impact of the lawâ&#x20AC;&#x2122;s wage recovery provisions has thus far also been limited, though these provisions remain a potential source of much-needed assistance for carwash workers, who face a long and often unfruitful attempt to recover the wages they earn but do not receive. Worker advocates indicate that certain provisions, such as the surety bond requirement and successorship clause, have been useful in pursuing recalcitrant employers and pressuring them into settling unpaid wage judgments. However, there are still high barriers to access for the surety bond and restitution fund, the key provisions of the bill intended to enable the collection of unpaid wages. It is important to remember that the Car Wash Worker Law has only been in effect for a relatively short period of time, and that policy implementation is rarely without challenge. To some degree, then, the lawâ&#x20AC;&#x2122;s problems are not surprising, and we expect them to lessen over time as labor officials, workers, advocates, and employers all gain familiarity and comfort with the law. However, the law is unlikely to fully meet its objectives without further action from lawmakers and regulators, as well as a broader commitment on the part of government to address ongoing labor law violations

in the state. We believe that the right changes to the California Labor Code, Code of Regulations, and DLSE internal management policies would help achieve AB 1688â&#x20AC;&#x2122;s goals, and so we urge the CLEAN Carwash Campaign to continue its efforts to reauthorize the law and make it a more effective tool for cleaning up the serious problems in the carwash industry.

10. APPENDIX APPENDIX A: FULL TEXT OF ASSEMBLY BILL 1688 AND SENATE BILL 1468 ................61 APPENDIX B: CAR WASH WORKER LAW REGULATIONS.......................................................70 APPENDIX C: AB 1688 REGISTRATION FORMS............................................................................82 APPENDIX D: ALTERNATIVES TO THE DLSE WAGE CLAIM ADJUDICATION PROCESS .........................................................................................................................................................91 APPENDIX E: EMPLOYER SURVEY ...................................................................................................92 APPENDIX F: BACKGROUND ON AN APPLICATION TO THE CAR WASH WORKER RESTITUTION FUND ................................................................................................................................97

APPENDIX A: FULL TEXT OF ASSEMBLY BILL 1688 AND SENATE BILL 1468 AB 1688 BILL NUMBER: AB 1688

CHAPTERED 10/11/03

CHAPTER 825 FILED WITH SECRETARY OF STATE OCTOBER 11, 2003 APPROVED BY GOVERNOR OCTOBER 10, 2003 PASSED THE ASSEMBLY SEPTEMBER 11, 2003 PASSED THE SENATE SEPTEMBER 9, 2003 AMENDED IN SENATE SEPTEMBER 8, 2003 AMENDED IN SENATE SEPTEMBER 2, 2003 AMENDED IN SENATE JULY 15, 2003 AMENDED IN SENATE JULY 3, 2003 AMENDED IN SENATE JUNE 19, 2003 AMENDED IN ASSEMBLY APRIL 30, 2003 AMENDED IN ASSEMBLY APRIL 21, 2003 INTRODUCED BY Assembly Member Goldberg (Coauthors: Assembly Members Koretz and Montanez) FEBRUARY 21, 2003 An act to add and repeal Part 8.5 (commencing with Section 2050) of Division 2 of the Labor Code, relating to car washes. LEGISLATIVE COUNSEL'S DIGEST AB 1688, Goldberg. Car washes. Existing law regulates various aspects of workplace and employee safety and health. This bill would, until January 1, 2007, regulate the industry of car washing and polishing by providing specific recordkeeping requirements that employers of car washers must implement with regard to car washer wages, hours, and working conditions. The bill would require employers of car washers to register with the Labor Commissioner and pay a specified registration fee. Failure to register pursuant to these provisions would be subject to a civil fine of $100 for each calendar day of violation not to exceed $10,000. These fines and registration fees would be deposited in the Car Wash Worker Restitution Fund and the Car Wash Worker Fund, which this bill would create, for disbursement by the commissioner, upon 61

appropriation by the Legislature. The bill would state the intent of the Legislature to require the Labor Commissioner to report on labor law violations and enforcement in the car washing and polishing industry. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares all of the following: (a) California is home to hundreds of full-time car washes that employ tens of thousands of car wash workers. (b) The work performed by car wash employees is laborious, fast paced, and potentially hazardous. (c) Car wash employees work long hours and may service hundreds of vehicles on any given workday. (d) According to various legal advocates, the car wash industry is plagued with labor law violations, including minimum wage, overtime, and rest and meal period violations. (e) Some car wash employees, commonly known as "propineros,"are not paid a wage by their employers and receive only the tips given by customers. (f) Some other car wash employees are paid below the minimum wage and not paid at an overtime rate for overtime hours worked. (g) A number of car wash employees have been harassed, intimidated, and mistreated by their employers because of their immigration status. (h) As a result of low wages and widespread labor law violations, some car wash employees are forced to work in substandard working conditions. (i) Existing labor laws and enforcement efforts have failed to remedy these problems. (j) Therefore, it is the intent of the Legislature, in enacting this act, to establish a system of registration, bonding requirements, and enforcement to impose prompt and effective civil sanctions for the violation of the provisions set forth in this act or any provision of law applicable to the employment of workers in the car washing and polishing industry.

SEC. 2. Part 8.5 (commencing with Section 2050) is added to Division 2 of the Labor Code, to read:

PART 8.5. CAR WASHES CHAPTER 1. GENERAL PROVISIONS 2050. The enactment of this part is an exercise of the police power of the State of California for the protection for the public welfare, prosperity, health, safety, and peace of its people. The civil penalties provided by this chapter are in addition to any other penalty provided by law. 2051. As used in this part: (a) "Car washing and polishing" means washing, cleaning, drying, polishing, detailing, servicing, or otherwise providing cosmetic care to vehicles. "Car washing and polishing" does not include motor vehicle repair, as defined in Section 9880.1 of the Business and Professions Code. (b) (1) "Employer" means any individual, partnership, corporation, limited liability company, joint venture, or association engaged in the business of car washing and polishing that engages any other individual in providing those services. (2) "Employer" does not include any charitable, youth, service, veteran, or sports group, club, or association that conducts car washing and polishing on an intermittent basis to raise funds for charitable, education, or religious purposes. "Employer" does not include any licensed vehicle dealer, car rental agency, or automotive repair business that conducts car washing and polishing ancillary to its primary business of selling, leasing, or servicing vehicles. "Employer" does not include any self-service car wash or automated car wash that has employees for cashiering or maintenance purposes only. (c) "Employee" means any person, including an alien or minor, who renders actual car washing and polishing services in any business for an employer, whether for tips or for wages, and whether wages are calculated by time, piece, task, commission, or other method of calculation, and whether the services are rendered on a commission, concessionaire, or other basis. (d) "Commissioner" means the Labor Commissioner. 2052. Every employer shall keep accurate records for three years, showing all of the following: (a) The names and addresses of all employees engaged in rendering actual services for any business of the employer. (b) The hours worked daily by each employee, including the times the employee begins and ends each work period. (c) All gratuities received daily by the employer, whether received directly from the employee or indirectly by deduction from the wages of the employee or otherwise. (d) The wage and wage rate paid each payroll period. (e) The age of all minor employees. (f) Any other conditions of employment. 2053. The Division of Labor Standards and Enforcement shall 63

enforce this chapter. The commissioner may adopt any regulations necessary to carry out the provisions of this chapter. CHAPTER 2. REGISTRATION 2054. Every employer shall register with the commissioner annually. 2055. The commissioner may not permit any employer to register, nor may the commissioner permit any employer to renew registration until all of the following conditions are satisfied: (a) The employer has applied for registration to the commissioner by presenting proof of compliance with the local government's business licensing or regional regulatory requirements. (b) The employer has obtained a surety bond issued by a surety company admitted to do business in this state. The principal sum of the bond shall be not less than fifteen thousand dollars ($15,000). The employer shall file a copy of the bond with the commissioner. (1) The bond required by this section shall be in favor of, and payable to the people of the State of California and shall be for the benefit of any employee damaged by his or her employer's failure to pay wages, interest on wages, or fringe benefits, or damaged by violation of Section 351 or 353. (2) Thirty days prior to the cancellation or termination of any surety bond required by this section, the surety shall send written notice to both the employer and the commissioner, identifying the bond and the date of the cancellation or termination. (3) An employer may not conduct any business until the employer obtains a new surety bond and files a copy of it with the commissioner. (c) The employer has documented that a current workers' compensation insurance policy is in effect for the employees. (d) The employer has paid the fees established pursuant to Section 2059. 2056. When a certificate of registration is originally issued or renewed under this chapter, the commissioner shall provide related and supplemental information to the registrant regarding business administration and applicable labor laws. 2057. Proof of registration shall be by an official Division of Labor Standards Enforcement registration form. Each employer shall post the registration form where it may be read by the employees during the workday. 2058. At least 30 days prior to the expiration of each registrant' s registration, the commissioner shall mail a renewal notice to the last known address of the registrant. However, omission of the commissioner to provide the renewal notice in accordance with this subdivision may not excuse a registrant from making timely application for renewal of registration, may not be a defense in any action or proceeding involving failure to renew registration, and may 64

not subject the commissioner to any legal liability. 2059. (a) The commissioner shall collect from employers a registration fee of two hundred fifty dollars ($250) for each branch location. The commissioner may periodically adjust the registration fee for inflation to ensure that the fee is sufficient to fund all costs to administer and enforce the provisions of this part. (b) In addition to the fee specified in subdivision (a), each employer shall be assessed an annual fee of fifty dollars ($50) for each branch location which shall be deposited in the Car Wash Worker Restitution Fund. 2060. No employer may conduct any business without complying with the registration and bond requirements of this chapter. 2061. The commissioner may not approve the registration of any employer until all of the following conditions are satisfied: (a) The employer has executed a written application, in a form prescribed by the commissioner, subscribed, and sworn by the employer containing the following: (1) The name of the business entity and, if applicable, its fictitious or "doing business as" name. (2) The form of the business entity and, if a corporation, all of the following: (A) The date of incorporation. (B) The state in which incorporated. (C) If a foreign corporation, the date the articles of incorporation were filed with the California Secretary of State. (D) Whether the corporation is in good standing with the Secretary of State. (3) The federal employer identification number (FEIN) and the state employer identification number (SEIN) of the business. (4) The business' address and telephone number and, if applicable, the addresses and telephone numbers of any branch locations. (5) Whether the application is for a new or renewal registration and, if the application is for a renewal, the prior registration number. (6) The names, residential addresses, telephone numbers, and Social Security numbers of the following persons: (A) All corporate officers, if the business entity is a corporation. (B) All persons exercising management responsibility in the applicant's office, regardless of form of business entity. (C) All persons, except bona fide employees on regular salaries, who have a financial interest of 10 percent or more in the business, regardless of the form of business entity, and the actual percent owned by each of those persons. (7) The policy number, effective date, expiration date, and name and address of the carrier of the applicant business' current workers' compensation coverage. (8) Whether any persons named in response to subparagraphs (A), 65

(B), or (C) of subparagraph (6) of this section presently: (A) Owe any unpaid wages. (B) Have unpaid judgments outstanding. (C) Have any liens or suits pending in court against himself or herself. (D) Owe payroll taxes, or personal, partnership, or corporate income taxes, Social Security taxes, or disability insurance. An applicant who answers affirmatively to any item described in paragraph (8) shall provide, as part of the application, additional information on the unpaid amounts, including the name and address of the party owed, the amount owed, and any existing payment arrangements. (9) Whether any persons named in response to subparagraphs (A), (B), or (C) of paragraph (6) of this section have ever been cited or assessed any penalty for violating any provision of the Labor Code. An applicant who answers affirmatively to any item described in paragraph (9) shall provide additional information, as part of the application, on the date, nature of citation, amount of penalties assessed for each citation, and the disposition of the citation, if any. The application shall describe any appeal filed. If the citation was not appealed, or if it was upheld on appeal, the applicant shall state whether the penalty assessment was paid. (b) The employer has paid a registration fee to the commissioner pursuant to subdivision (d) of Section 2055. 2062. The commissioner may not register or renew the registration of an employer in any of the following circumstances: (a) The employer has not fully satisfied any final judgment for unpaid wages due to an employee or former employee of a business for which the employer is required to register under this chapter. (b) The employer has failed to remit the proper amount of contributions required by the Unemployment Insurance Code or the Employment Development Department had made an assessment for those unpaid contributions against the employer that has become final and the employer has not fully paid the amount of delinquency for those unpaid contributions. (c) The employer has failed to remit the amount of Social Security and Medicare tax contributions required by the Federal Insurance Contributions Act (FICA) to the Internal Revenue Service and the employer has not fully paid the amount or delinquency for those unpaid contributions. 2063. On the Web site of the Department of Industrial Relations the Labor Commissioner shall post a list of registered car washing and polishing businesses, including the name, address, registration number, and effective dates of registration. 2064. An employer who fails to register pursuant to Section 2054 is subject to a civil fine of one hundred dollars ($100) for each calendar day, not to exceed ten thousand dollars ($10,000), the employer conducts car washing and polishing while unregistered. 66

2065. (a) (1) The Car Wash Worker Restitution Fund is established in the State Treasury. Fifty dollars ($50) of each registrant's annual registration fee required pursuant to Section 2059 shall be deposited into this fund. In addition, 50 percent of the fines collected pursuant to Section 2064 shall be deposited into the fund. (2) Moneys from the fund shall be disbursed, upon appropriation by the Legislature, by the commissioner only to persons determined by the commissioner to have been damaged by the failure to pay wages and penalties and other related damages by any employer, to ensure the payment of wages and penalties and other related damages. Any disbursed funds subsequently recovered by the commissioner shall be returned to the fund. (3) The Department of Industrial Relations may establish through regulation any procedures necessary to carry out the provisions of this section. (b) The Car Wash Worker Fund is established in the State Treasury. Upon appropriation by the Legislature, the remainder of the registrant's annual registration fee collected pursuant to Section 2059 shall be applied to costs incurred by the commissioner in administering the provisions of this part and enforcement and investigation of the car washing and polishing industry. CHAPTER 3. SUCCESSORSHIP 2066. A successor to any employer that is engaged in car washing and polishing that owed wages and penalties to the predecessor's former employee or employees is liable for those wages and penalties if the successor meets any of the following criteria: (a) Uses substantially the same facilities or workforce to offer substantially the same services as the predecessor employer. (b) Shares in the ownership, management, control of the labor relations, or interrelations of business operations with the predecessor employer. (c) Employs in a managerial capacity any person who directly or indirectly controlled the wages, hours, or working conditions of the affected employees of the predecessor employer. (d) Is an immediate family member of any owner, partner, officer, or director of the predecessor employer of any person who had a financial interest in the predecessor employer. CHAPTER 4. OPERATION 2067. This part shall remain in effect only until January 1, 2007, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2007, deletes or extends that date. 67

SEC. 3. It is the intent of the Legislature to instruct the Labor Commissioner, prior to January 1, 2007, to study and report to the Legislature on the status of labor law violations and enforcement in the car washing and polishing industry.

BILL NUMBER: SB 1468

CHAPTERED 09/29/06

CHAPTER 656 FILED WITH SECRETARY OF STATE SEPTEMBER 29, 2006 APPROVED BY GOVERNOR SEPTEMBER 29, 2006 PASSED THE SENATE AUGUST 23, 2006 PASSED THE ASSEMBLY AUGUST 22, 2006 AMENDED IN ASSEMBLY JUNE 29, 2006 INTRODUCED BY Senator Alarcon FEBRUARY 23, 2006 An act to amend Section 2067 of, and to add Chapter 5 (commencing with Section 2068) to Part 8.5 of Division 2 of, the Labor Code, relating to car washes.

LEGISLATIVE COUNSEL'S DIGEST SB 1468, Alarcon Car washes. Existing law, until January 1, 2007, regulates the industry of car washing and polishing by providing specific recordkeeping requirements that employers of car washers must implement with regard to car washer wages, hours, and working conditions. This bill would extend that repeal date to January 1, 2010. The bill would also require the Labor Commissioner to report to the Legislature not later than December 31, 2008, on the status of labor law violations and enforcement in the car washing and polishing industry. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 2067 of the Labor Code is amended to read: 2067. This part shall remain in effect only until January 1, 2010, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2010, deletes or extends 68

that date. SEC. 2. Chapter 5 (commencing with Section 2068) is added to Part 8.5 of Division 2 of the Labor Code, to read: CHAPTER 5. Reporting 2068. The commissioner shall study and report to the Legislature, not later than December 31, 2008, on the status of labor law violations and enforcement in the car washing and polishing industry.

APPENDIX B: CAR WASH WORKER LAW REGULATIONS Title 8, California Code of Regulations Division 1, Chapter 6, Subchapter 11. Car Washing and Polishing Sections 13680 through 13694

13680. Definitions. The following definitions shall apply to the provisions contained in this subchapter 11: (a) “Business days” has the same meaning as defined in Section 9 of the California Civil Code. (b) “Branch” means a separate location of the employer’s business where employees carry out car washing and polishing operations as specified in subdivision (a) of Labor Code Section 2051, including the employer’s main or central location. (c) “Damaged” means the suffering of a loss or diminution of what is the employee’s own by reason of the employer’s failure to pay wages and penalties. (d) “Other related damages” means a loss suffered by an employee or diminution of what is the employee’s own by reason of some action or inaction on the part of the employer other than the employer’s failure to pay wages and penalties, and includes interest on wages, fringe benefits, gratuities, reporting time pay, reimbursable business expenses, and the one hour of pay an employer is required to pay an employee if the employer fails to provide the employee with a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission. “Other related damages” includes only those damages or losses for which recovery can be sought pursuant to laws enforced by the Labor Commissioner, and excludes all others. (e) “Registration packet” means the “Car Washing and Polishing Registration Application [DLSE 666 (9/05)] which is hereby incorporated by reference and the group of documents and items listed below in (e)(1) through (14) as applicable. The registration packet shall be delivered to the Labor Commissioner in order for the application to be processed by the Labor Commissioner. (1) A surety bond as specified in subdivisions (b)(1), (2) and (3) of section 13682 of this subchapter 11; (2) Proof of compliance with the local government’s business licensing or regional regulatory requirements; (3) Annual registration fee as set forth in subdivision (a) of section 13683 of this subchapter 11; (4) Annual assessment as set forth in subdivision (c) of section 13683 of this subchapter 11; (5) A valid workers’ compensation insurance certificate or a copy of the certificate from the Director of the Department of Industrial Relations consenting to the applicant being self insured; (6) A copy of the signed contract between applicant and the employee leasing company, if the applicant intends to contract with an employee leasing company as the employer; (7) A current workers’ compensation insurance certificate provided by the employee leasing company, if the applicant intends to contract with an employee leasing company as the employer; (8) A copy of the fictitious business name statement(s) applicant uses or intends to use;

(9) A copy of applicant’s state employer identification number (SEIN) or a copy of applicant’s application for a SEIN; (10) A copy of applicant’s federal employer identification number (FEIN) or a copy of applicant’s application for a FEIN; (11) A copy of the articles of incorporation, if a corporation; (12) A copy of the statement of information by a domestic stock corporation, if a corporation; (13) A copy of the articles of organization, if a limited liability company; and (14) A sample form of the contract and the 24-hour cancellation notice applicant uses or intends to use, if an employee leasing company. NOTE: Authority cited: Section 55, 59, 95, 98.8, Labor Code. Reference: Sections 2055(b)(1), 2059(a) and (b), 2061(a)(4), and 2065(a)(2), Labor Code.

13681. Recordkeeping. (a) An employer engaged in the business of car washing and polishing shall keep accurate records as required by Labor Code Sections 226, 1174, and 2052, and any applicable order of the Industrial Welfare Commission. These records shall be maintained for at least three years, except for the records required under Section 1174 which must be kept for not less than two years, at the place of employment or at a central location within the State of California, and upon written or oral request from the Labor Commissioner, or his or her agents, shall be made available for inspection or copying, or both. (b) Failure to provide the Labor Commissioner with all of the requested records within ten calendar days after the date of a request, or providing records that are falsified, constitutes grounds for suspension or revocation of an employer’s registration, or denial of an employer’s application for registration. NOTE: Authority cited: Sections 55, 59, 90.5, 95, 98.8, and 2053, Labor Code. Reference: Sections 226, 1174, and 2052, Labor Code. 13682. Conditions for Registration, Initial and Renewal. The Labor Commissioner may not register an employer, either initially or as a renewal, until the employer fully satisfies all conditions of registration, including the following: (a) The employer completes, signs, and submits the application form provided by the Labor Commissioner, “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)], which is hereby incorporated by reference. The employer shall sign the application and certify, under penalty of perjury, that the information he, she, or it has provided on the application form and in any supplementary documents or information submitted by the employer in support of the application is true and correct. Information required on the application includes the following: (1) Whether the applicant is permissively self-insured against liability to pay workers’ compensation insurance claims as described in subdivision(d)(1) of this section; (2) An indication as to whether the employer’s form of legal entity is one of the following: 71

(A) Sole proprietorship; (B) General partnership; (C) Limited partnership; (D) Limited liability company; or, (E) Corporation; (3) The residential address and home telephone number of every person listed on the form, “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] as having any one of the following positions, titles, responsibilities, or interests: (A) Sole proprietor; (B) General partner; (C) Limited partner; (D) Limited liability company member; (E) Corporate officer; (F) A person who exercises management responsibility in the employer’s business, regardless of the form of legal entity; or, (G) A person, except bona fide employees, who has a financial interest of 10 percent or more in the employer’s business, regardless of the form of legal entity. (4) If a corporation or limited liability company, the name and business address of the agent for service of process; (5) Whether the employer or any person having a position, title, responsibility, or interest identified in subparagraphs (A) through (G) of paragraph (3) of subdivision (a) of this section and who is so identified on the form “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] owes an employee any unpaid wages, and if so, the employee’s name, residential address, residential telephone number, amount of wages owed, and a description of any existing payment arrangements; (6) Whether the employer or any person having a position, title, responsibility, or interest identified in subparagraphs (A) through (G) of paragraph (3) of subdivision (a) of this section and who is so identified on the form “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] has any unpaid judgments outstanding, and if so, the name, address and telephone number of the judgment creditor, the amount owed, and a description of any existing payment arrangements; (7) Whether the employer or any person having a position, title, responsibility, or interest identified in subparagraphs (A) through (G) of paragraph (3) of subdivision (a) of this section and who is so identified on the form “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] has an outstanding lien or lawsuit pending in court against him, her, or it, and if so, the name, address and telephone number of the lienholder or opposing party, the type of lien or nature of the lawsuit, the location of the court where the case is pending, and the current status of the lien or lawsuit; (8) Whether the employer or any person having a position, title, responsibility, or interest identified in subparagraphs (A) through (G) of paragraph (3) of subdivision (a) of this section and who is so identified on the form “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] owes any payroll taxes, personal, partnership, or corporate income taxes, social security taxes, or disability insurance contributions, and if so, the type of tax or contribution owed, the agency to whom the tax or contribution is owed, the amount owed, and a description of any payment arrangements; (9) Whether the employer or any person having a position, title, responsibility or interest identified in subparagraphs (A) through (G) of paragraph (3) of subdivision (a) of this section and who is so identified on the form “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] has ever been cited or assessed a penalty for violating any provision of the California Labor Code or an order of the Industrial Welfare Commission regulating wages, hours and working conditions, and if so, the name of the person or business, or both, that was cited or assessed, the date, nature, and amount of the citation or assessment, the disposition of the citation or assessment, if any, whether or not an appeal 72

challenging the citation or assessment was filed, and if so, whether the citation or assessment was upheld on appeal, and if upheld, whether the citation or assessment has been paid, and if paid, the date on which it was paid; (b) The employer obtains a surety bond ensuring the payment of wages, interest on wages, gratuities, and fringe benefits of its employees. (1) Except as provided in paragraph (3) of subdivision (b) of this section, the bond shall be in the principal sum equal to fifteen thousand dollars ($15,000.00). (2) The bond must be issued by a surety company licensed to do business in the State of California, and the original bond must be filed with the Labor Commissioner along with the application for registration. The bond must be in favor of, and payable to the “People of the State of California,” and be for the benefit of any employee damaged by his or her employer’s failure to pay wages, interest on wages, or fringe benefits, or damaged by a violation of Labor Code Section 351(gratuities) or 353 (accurate record keeping of gratuities), or both. The bond shall be on a form provided by the Labor Commissioner, “Car Wash Bond” [DLSE 668 (09/05)], which is hereby incorporated by reference. (3) The Labor Commissioner may determine that the principal sum of the surety bond be an amount greater than that described in paragraph (1) of subdivision (b) of this section. If the Labor Commissioner makes such a determination, he or she will serve written notice of the increased amount on the employer at least 30 calendar days prior to the date. Service of the notice may be by regular firstclass mail. Factors the Labor Commissioner may consider in determining that a surety bond be in an amount greater than that described in paragraph (1) of subdivision (b) of this section include, history of violations including matters such as wage claims, orders, decisions, or awards of the Labor Commissioner, final determinations of the Labor Commissioner in retaliation or discrimination complaints, and final judgments of any type against the employer, and the size of the employer’s business, including number of employees and/or branch locations. (c) The employer presents the Labor Commissioner, along with the application for registration, with proof of compliance with the local government’s business licensing or regional regulatory requirements. For purposes of this subdivision, “proof of compliance with the local government’s business licensing or regional regulatory requirements” includes a copy of the employer’s business license issued by the local government’s business licensing or regional regulatory authority, or both, and such other licenses or permits required by those authorities in order for the employer to operate a car washing and polishing business in that jurisdiction. (d) The employer presents the Labor Commissioner along with the application for registration with either of the following: (1) A copy of the certificate from the Director of the Department of Industrial Relations consenting to the employer being self-insured against liability to pay compensation under the State’s workers’ compensation laws either as an individual employer, or as one employer in a group of employers; or, (2)A certificate of insurance evidencing that a current workers’ compensation insurance policy issued by an insurance company licensed to do business in the State of California is in effect for its employees. (e) The employer completes and submits to the Internal Revenue Service, the form entitled, “Tax Information Authorization.” Form 8821 (4/04), Department of Treasury, Internal Revenue Service. The applicant must submit the completed form to the address of the Internal Revenue Service specified on that form. The Labor Commissioner will provide this form to all persons who are sent the “Car Washing and Polishing Registration Application” [DLSE 666 (09/05)] or to any person who makes a written or oral request to the office of the Labor Commissioner for a copy of Form 8821 (4/04).

(f) The employer presents the Labor Commissioner, along with the application for registration, with payment of the annual registration fee and annual assessment established pursuant to Labor Code subsections 2059(a) and (b), respectively. (g) The employer has fully complied with any citation issued by the Labor Commissioner after the citation is final and has been served on the employer. (h) The employer presents the Labor Commissioner, along with the application for registration, with a complete registration packet. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Sections 2054, 2055, 2059, 2060, 2061, and 2062, Labor Code.

13683. Annual Registration Fee and Assessment; Proof of Registration. (a) An employer shall pay to the Labor Commissioner an annual registration fee of two hundred and fifty ($250.00) for each branch the employer operates. (b) The Labor Commissioner may periodically adjust the registration fee, pursuant to the Administrative Procedure Act, for inflation to ensure that the fee is sufficient to fund all costs to administer and enforce the provisions of part 8.5 of Division 2 of the Labor Code, Section 2050, et seq. (c) In addition to the annual registration fee specified in subdivision (a) of this section, the employer shall pay to the Labor Commissioner an annual assessment of fifty dollars ($50.00) for each branch the employer operates. (d) For employers who operate multiple branches, the Labor Commissioner will issue an official Division of Labor Standards Enforcement certificate of registration for each branch registered. NOTE: Authority cited: Sections 55, 59, 95,and 98.8, Labor Code. Reference: Sections 2054, 2055(d), 2059(a) and (b), 2057, and 2061(b), Labor Code.

13684. Registration, Initial and Renewal. (a) Except as may be provided in subsection (d) of this section with respect to the first renewal of a registration, an employer shall register with the Labor Commissioner annually. (b) To register, an employer must submit a completed and signed application and registration packet (one application and packet for all branches) to the Labor Commissioner. Commencing with the effective date of this subchapter 11 and including the 209 calendar days that follow that date (for a total of 210 days), applications for registration shall be submitted according to the following schedule: (1) For a branch located in the County of Los Angeles, the employer shall submit its application and registration packet to the Labor Commissioner no later than 30 calendar days after the effective date of this section. (2) Except as provided in subdivision (c) of this section, for a branch located in the County of Orange, the employer shall submit its application and registration packet to the Labor Commissioner no earlier than 61 calendar days, and no later than 90 calendar days after the effective date of this section.

(3) Except as provided in subdivision (c) of this section, for a branch located in the County of San Diego, the employer shall submit its application and registration packet to the Labor Commissioner no earlier than 91 calendar days, and no later than 120 calendar days after the effective date of this section. (4) Except as provided in subdivision (c) of this section, for a branch located in the County of Riverside or San Bernardino, the employer shall submit its application and registration packet to the Labor Commissioner no earlier than 121 calendar days, and no later than 150 calendar days after the effective date of this section. (5) Except as provided in subdivision (c) of this section, for a branch located in the County of Santa Clara, Alameda, Sacramento, Ventura, Fresno, or Contra Costa, the employer shall submit its application and registration packet to the Labor Commissioner no earlier than 151 calendar days, and no later than 180 calendar days after the effective date of this section. (6) Except as provided in subdivision (c) of this section, for a branch located in a county other than those specified in (1) through (5) above of this subdivision (b), the employer shall submit its application and registration packet to the Labor Commissioner no earlier than 181 calendar days, and no later than 210 calendar days after the effective date of this section. (c) If an employer operates multiple branches and any of them are located in different counties, the employer shall submit its application and registration packet to the Labor Commissioner during the time period specified for the branch requiring the earliest submission as set forth in paragraphs (1) through (6) of subdivision (b) of this section. (d) Except as otherwise provided by paragraph (1) of this subdivision (d), the registration issued by the Labor Commissioner will be valid for a period of one year. (1) In order to distribute registration dates evenly over the year, the Labor Commissioner may, with respect to the time period for the first renewal of a registration only, shorten to less than 12 months or lengthen to not more than 18 months the period of the registration, and prorate the annual fees accordingly. (2) If the period of the registration for the first renewal is either shortened or lengthened, the Labor Commissioner shall set subsequent renewals at yearly intervals. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Section 2054, Labor Code. 13685. Transfer of a Registration Prohibited. (a) An employer may not transfer its registration to any other person. (b) For purposes of this section, “person” includes an individual, association, organization, partnership, joint venture, business trust, limited liability company, corporation, or private entity of any character. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Sections 2054, 2055(d), 2059(a) and (b), and 2061(b), Labor Code. 13686. Registration Void, When. (a) An employer’s registration is void when: (1) The employer ceases engaging in the business of car washing and polishing. (2) The employer changes its form of legal entity. (3) The employer transfers its registration. 75

(4) The Labor Commissioner revokes an employer’s registration. (b) Upon the voidance of a registration, the employer shall immediately surrender and return to the Labor Commissioner the certificate of registration for each branch location. (c) If voidance of an employer’s registration is due to a change of legal entity, the new legal entity (employer) must submit a complete registration packet to the Labor Commissioner and meet all of the conditions of registration set forth in Section 13682 of this subchapter 11, including payment of the annual registration fee and assessment, in order for a new certificate of registration to be issued. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Sections 2054, 2055(d), 2059(a) and (b), and 2061(b), Labor Code.

13687. Failure to Obtain Tax Clearance. An employer’s failure to obtain a tax clearance from the Internal Revenue Service constitutes a ground for the Labor Commissioner to deny an application for registration, including a renewal. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Section 2054, Labor Code. 13688. Temporary Registration. (a) If in submitting an application for registration, including a renewal, the Labor Commissioner determines that the Internal Revenue Service has issued the employer a temporary tax clearance instead of a full tax clearance, the Labor Commissioner may issue the employer a temporary registration that runs concurrently with the temporary tax clearance. The temporary registration shall expire at the same time the temporary tax clearance expires. (b) If, following the issuance of a temporary registration the Labor Commissioner issues the employer a regular registration, the period of time during which the temporary registration was in effect shall be applied to and counted against the time period for the regular registration. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Section 2054, Labor Code. 13689. Citation for Failure to Register. The Labor Commissioner may cite an employer and impose a civil fine if, upon inspection or investigation he or she determines that the employer has failed to register pursuant to Labor Code Section 2054. The citation may be served personally or by registered mail in accordance with subdivision (c) of Government Code Section 11505. A citation must be in writing and describe the nature of the violation, including reference to the statutory provision allegedly violated. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Sections 2054, 2060, and 2064, Labor Code.

13690. Failure to Comply with Citation for Failure to Register. An employer’s failure to comply with a citation containing an assessment issued pursuant to Labor Code Section 2064 after the citation is final and has been served on the employer, constitutes a ground for the Labor Commissioner to deny an application for registration, including a renewal. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Reference: Section 2064, Labor Code. 13691. Appeal of Citation for Failure to Register. (a) If an employer served with a citation pursuant to Labor Code Section 2064 desires to contest the citation or the proposed assessment of the civil fine therefore, he, she, or it must, within 15 business days after issuance of the citation, notify in writing the office of the Labor Commissioner that appears on the citation of his, her, or its request for an informal hearing. The proceeding under this section is an informal hearing conducted in accordance with the adjudication provisions of the Administrative Procedure Act, Chapters 4.5 and 5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code. Except as provided in subdivision (b) of this section, the Labor Commissioner, or the deputy or agent he or she appoints as the presiding officer, shall, within 30 calendar days after the Labor Commissioner’s receipt of the employer’s request for an informal hearing, hold a hearing at the conclusion of which a decision is made and the citation or proposed assessment of a civil fine is either affirmed, modified, or dismissed. The decision of the Labor Commissioner consists of a notice of findings, findings, and order, which shall be served on all parties to the hearing within 15 calendar days after the hearing by regular first-class mail at the last known address of the party on file with the Labor Commissioner. Service shall be completed pursuant to Section 1013 of the California Code of Civil Procedure. Any amount found due by the Labor Commissioner as a result of a hearing is due and payable 45 calendar days after notice of the findings and written findings and order have been mailed to the party assessed. A party who is assessed a fine may take a writ of mandate from the findings to the appropriate superior court, as long as he, she, or it agrees to pay any judgment and costs ultimately rendered by the court against him, her, or it for the assessment. To take a writ of mandate, an aggrieved party shall file the writ within 45 calendar days after service of the notice of findings, findings, and order thereon. (b) The Labor Commissioner or presiding officer for good cause may extend the 30-calendar day period for holding a hearing described in subdivision (a) of this section. “Good cause” is determined by the Labor Commissioner or presiding deputy. (c) If findings and the order thereon affirm or modify a citation or the proposed assessment of a civil fine after hearing, a certified copy of the findings and the order may be entered by the Labor Commissioner in the office of the clerk of the superior court in any county in which the employer has property, or in which he, she, or it has or had a place of business. The clerk, immediately upon the filing, shall enter judgment for the state against the employer in the amount shown on the certified order. (d) A judgment entered pursuant to the procedure described in either subdivision (c) or (i) of this section bears the same rate of interest and has the same effect as other judgments, and is given the same preference allowed by the law on other judgments rendered for claims for taxes.

(e) A cited employer who appeals his, her, or its citation to the Labor Commissioner and fails to appear at the time and place of the hearing is deemed to have withdrawn his, her, or its appeal, and the citation constitutes a final order of the Labor Commissioner and is not subject to administrative review. (f) Submittal of a written request by an employer for an informal hearing as provided in subdivision (a) of this section stays the time period in which to pay the fine. (g) If the written request for an informal hearing as provided in subdivision (a) of this section is not submitted in writing to the Labor Commissioner within 15 business days after issuance of a citation, the cited employer is deemed to have waived his, her, or its right to a hearing. (h) In lieu of contesting a citation, a cited employer may, within 15 business days after issuance of a citation, transmit to the office of the Labor Commissioner designated on the citation, the amount specified for the violation. (i) If a cited employer does not request a hearing in accordance with subdivision (a) of this section, the Labor Commissioner may file a certified copy of the citation or proposed assessment of civil fine in the office of the clerk of the superior court in any county in which the employer has property, or in which he, she, or it has or had a place of business. The clerk, immediately upon the filing shall enter judgment for the state against the employer in the amount shown on the citation or proposed assessment of civil fine. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code. Sections 11400.20, 11410.10, 11410.40, 11415.10(a), 11445.10(a), 11445.20(c) and (d), Government Code. Reference: 226.5 and 2064, Labor Code.

13692. Immediate Family Member Defined. For purposes of subdivision (d) of Labor Code Section 2066, “immediate family member” means spouse, domestic partner, cohabitant, child, stepchild, grandchild, parent, stepparent, mother-in-law, father-in-law, son-in-law, daughter-in-law, grandparent, great grandparent, brother, sister, half-brother, half-sister, stepsibling, brother-in-law, sister-in-law, aunt, uncle, niece, nephew, or first cousin (that is, a child of an aunt or uncle). NOTE: Authority cited: Sections 55, 59, 95, and 98.8 Labor Code. Reference: Section 2066(d), Labor Code. 13693. Action Against Bond, Inadequacy of Bond, Cancellation of Bond. (a) If an employer fails to pay wages, interest on wages, fringe benefits, or violates Section 351 or 353 of the Labor Code and an employee is damaged thereby, the Labor Commissioner or the employee, who is damaged because of the employer’s failure to pay wages, interest on wages, gratuities or fringe benefits, may proceed against the employer’s surety bond by taking whatever action he or she deems appropriate to obtain the unpaid wages, interest on wages, fringe benefits, or gratuities from the bond. (b) If the Labor Commissioner or an employee who is damaged because of the employer’s failure to pay wages, interest on wages, gratuities, or fringe benefits proceeds against the surety bond and payment is made therefrom to the Labor Commissioner or the employee, the employer shall take all steps and actions necessary to ensure that a surety bond which meets all of the requirements set forth in paragraphs (1) and (2) of subdivision (b) of Section 13682) of 78

this subchapter 11, including the required principal sum, is continuously in place so that there is not a break at anytime in the continuity of the protection afforded by the bond. If the employer at any time fails to provide a surety bond that meets all of the requirements of paragraphs (1) and (2) of subdivision (b) of Section 13682 of this subchapter 11, the Labor Commissioner may suspend or revoke the employer’s registration, or deny his, her or its application for a registration. (c) If the surety bond required by Labor Code Section 2055 is cancelled or terminated, the employer may not conduct any business until he, she, or it obtains a new surety bond that meets all of the requirements of paragraphs (1) and (2) of subdivision (b) of Section 13682 of this subchapter 11, and files a copy with the Labor Commissioner. (d) To ensure that the purpose of the bond is fulfilled, the Labor Commissioner will retain the original of the bond in his or her possession for no less than three years after the employer ceases engaging in the business of car washing and polishing. NOTE: Authority cited: Sections 55, 59, 95, and 98.8, Labor Code, Section 11415.50(a) Government Code. Reference: Section 2055, Labor Code.

13694. Procedure for Obtaining Damages from the Car Wash Worker Restitution Fund, Disbursement of Moneys from the Car Wash Worker Restitution Fund, Hearing. The Labor Commissioner shall determine which claims are accepted, and the amount of money, if any, to be disbursed from the Car Wash Worker Restitution Fund on an accepted claim. The Commissioner shall make these determinations based on a consideration of the information requested in subsection (b) of this section. (a) An employee who has been damaged by an employer’s failure to pay wages, penalties, or other related damages, or a combination of them, must, before making a claim for payment from the Car Wash Worker Restitution Fund, attempt to collect the wages, penalties, or other related damages directly from the employer and the employer’s surety bond. (b) An employee or his or her authorized representative seeking recovery of unpaid wages, penalties or other related damages, or a combination of them, from the Car Wash Worker Restitution Fund must submit a claim in writing to the Labor Commissioner. The claim itself need not be in any particular form, but must include the following information and documents: (1) Name, street mailing address, and home telephone number of employee for whom recovery is sought; (2) Employee’s social security number or individual taxpayer identification number; (3) Name, street address, and telephone number (if known) of the employer that failed to pay the employee his or her wages, penalties, or other related damages; (4) The period of time during which the wages were earned, giving both the beginning and ending dates specified as month, day, year; (5) The number of hours worked or other basis for being paid wages; (6) The promised rate of pay; (7) The actual rate of pay; 79

(8) Amount of wages sought; (9) Amount of penalty sought, if any, and Labor Code section pursuant to which the penalty is imposed; (10) Amount of other related damages sought, if any, described and itemized; (11) Amount of recovery sought less any amount recovered from the employer or the employer’s surety bond, or both; (12) Net amount of total recovery sought, if different from the amount in subsection (11); (13) Proof of actual damages suffered; (14) A copy of the employee’s written assignment of the claim to the representative, if applicable; (15) A declaration or affidavit under penalty of perjury that complies with the provisions of Section 2015.5 of the California Code of Civil Procedure containing information regarding attempts made by the employee or his or her representative to satisfy the claim by demand against the surety bond required by Labor Code Section 2055(b), and the results of the demand. The declaration or affidavit must also disclose the attempt(s) made to collect the recovery sought directly from the employer, and the results of the attempt(s). The employee’s representative may sign the declaration or affidavit required by this subdivision if the information submitted does not require the personal knowledge of the employee. (c )The Information required in paragraphs (3) through (13) must be provided in one of the following ways: (1) Submission of a copy of a judgment obtained from a court or an award from the Labor Commissioner which was issued after a contested proceeding which contains all of the information required in paragraphs (3) through (13) inclusive. If the judgment or award omits any of the required information, it shall be supplemented by a declaration under penalty of perjury which provides the missing information. The declaration must be signed by the employee or the employee’s authorized representative, if the information submitted does not require the personal knowledge of the employee. (2) Submission of a copy of a judgment obtained from the court or an award from the Labor Commissioner which was issued after an uncontested or default proceeding and a declaration under penalty of perjury that provides the information required by paragraphs (3) through (13) inclusive. The declaration must be signed by the employee or the employee’s authorized representative, if the information submitted does not require the personal knowledge of the employee. (3) If no judgment has been obtained from a court or an award from the Labor Commissioner, submission of a declaration under penalty of perjury which contains all of the information required in paragraphs (3) through (13), inclusive. The declaration must be signed by the employee or the employee’s authorized representative, if the information submitted does not require the personal knowledge of the employee. (d) If the Labor Commissioner determines that a declaration required under this section is insufficient to sustain a recovery from the Car Wash Worker Restitution Fund because of lack of information, or reason to believe that the information submitted is inaccurate, incomplete or false, the Labor Commissioner may order an investigatory hearing pursuant to subdivision (d) of this section. (e) The Labor Commissioner shall have the authority to order an investigatory hearing to determine the validity of a claim seeking recovery from the Car Wash Worker Restitution Fund, including the amount of any damages actually suffered by the employee, if any. Notice of a hearing shall be served on the employer and employee either personally or by registered mail in accordance with the provisions of subdivision (c) of Section 11505 of the Government Code. The hearing shall be conducted by a Deputy Labor Commissioner, and may be held in the Division of Labor Standards Enforcement’s district office having jurisdiction over the 80

geographical location of where the nonpayment of wages allegedly occurred, or the Labor Commissioner may designate any other venue he or she deems appropriate. In the hearing, the employer and the employee shall have the opportunity to present evidence. The Labor Commissioner shall issue, serve, and enforce any necessary subpoenas. NOTE: Authority cited: Section 2065(c) Labor Code. Reference: Section 2065, Labor Code.

APPENDIX C: AB 1688 REGISTRATION FORMS

1. CAR WASH REGISTRATION REQUIREMENTS FOR NEW APPLICANTS 2. CAR WASH REGISTRATION REQUIREMENTS FOR RENEWAL APPLICANTS 3. CAR WASHING AND POLISHING REGISTRATION APPLICATION

Arnold Schwarzenegger, Governor

STATE OF CALIFORNIA Department of Industrial Relations DIVISION OF LABOR STANDARDS ENFORCEMENT Licensing & Registration Unit

ADDRESS REPLY TO: P.O. Box 420603 San Francisco, CA 94142

455 Golden Gate Avenue, 9th Floor San Francisco, Ca 94102 (415) 703-5640; FAX: (415) 703-4808

CAR WASH REGISTRATION REQUIREMENTS FOR NEW APPLICANTS Items numbers 1 through 13, as applicable, must be sent at the same time as one packet to the Division of Labor Standards Enforcement (DLSE) at the above P. O. Box mailing address. Items marked with an asterisk (*) are required of all applicants. *1) *2)

*3)

Completed Application form DLSE 666 (Rev. 09/05 ). Application MUST be either TYPED or PRINTED in ink. Annual registration fee AND assessment. Your annual registration fee of $250.00 for each branch you operate and your annual assessment of $50.00 for each branch you operate must be paid by certified check, cashier’s check, or money order made payable to “Division of Labor Standards Enforcement.” The registration fee and assessment may be combined and paid in one instrument. “Branch” means a separate location of the employer’s business where employees carry out car washing and polishing operations, and includes a main or central location. A valid workers’ compensation insurance certificate or a copy of the certificate from the Director of the Department of Industrial Relations consenting to your being self insured against liability to pay compensation under the State’s workers’ compe nsation laws either as an individual employer or as one employer in a group of employers. A valid workers’ compensation insurance certificate MUST: a) b) c) d)

Show the complete and correct name of the legal entity that is the insured employer, i.e. full name of an individual (if a sole proprietorship), all partners, general and limited (if a partnership), name of limited liability company, or corporation, whichever is applicable. Show correct fictitious business na me (the “doing business as” name), if applicable. Contain the complete and correct address of each location where the employer engages in the business of car washing and polishing; and Identify the certificate holder as: Division of Labor Standards Enforcement Licensing and Registration Unit, 9 th Floor West P.O. Box 420603 San Francisco, CA 94142-0603

IMPORTANT: The DLSE will not accept copies of an application for insurance, policy declaration, information page, annual rating endorsement, or payroll report. Only the actual certificate or a readable copy will be accepted. 4)

A copy of the Fictitious Business Name Statement(s) (doing business as (dba)) for any business name(s) you use or intend to use. 83

*5) *6)

A copy of your State Employer Identification Number (SEIN) or a copy of the application for same. A copy of your Federal Employer Identification Number (FEIN) or a copy of the application for same.

7) 8)

A copy of the Articles of Incorporation, if you are a corporation. A copy of the Statement of Information by a domestic stock corporation, if you are a corporation.

A copy of the Articles of Organization, if you are a limited liability company.

10)

A sample form of your contract and the 24 -hour cancellation notice that you use/ intend to use, if you are an employee leasing company.

11)

If you intend to contract with an employee leasing company as the employer, that employee leasing company must be currently registered with the Labor Commissioner as an employer engaged in the business of car washing and polishing, and you must submit the following: a) b)

*12)

*13)

A copy of the signed contract between you and the employee leasing company; and A current workers’ compensation insurance certificate that is provided to you by the employee leasing company. Proof of compliance with the local government’s (i.e., city, county, district, etc.) business licensing or regional regulatory requirements. For example, a car wash operating withi n the jurisdiction of the South County Regional Wastewater Authority is required to have an industrial waste discharge permit certificate, a copy of which would be included in the applicant’s registration packet. Surety bond. A surety bond in the amount of a minimum of Fifteen Thousands ($15,000.00). The bond must be issued by a surety company licensed to do business in the State of California and must be in favor of, and payable to the people of the State of California. The bond may either be on the surety’s form or on the form provided by the Labor Commissioner, Car Wash Bond, DLSE 668 (09/05).

*Included with this new registration packet are Internal Revenue Service (IRS) form 8821 and instructions for completing such form. You must submit a completed form 8821 directly to the IRS Compliance Verification Group (CVG). The address for the IRS CVG is listed on the front page of the pamphlet entitled “Car Wash Registration—Proof of Tax Filing and Payment.” IMPORTANT: Submitting an application for a certificate of registration DOES NOT authorize you to operate a car washing and polishing business. It is illegal to operate a car washing and polishing business without first obtaining a car wash registration certificate from the State Labor Commissioner. If you operate without a valid certificate of registration, you will be subject to a civil penalty.

Arnold Schwarzenegger, Governor

STATE OF CALIFORNIA Department of Industrial Relations DIVISION OF LABOR STANDARDS ENFORCEMENT Licensing & Registration Unit

ADDRESS REPLY TO: P.O. Box 420603 San Francisco, CA 94142

455 Golden Gate Avenue, 9th Floor San Francisco, Ca 94102 (415) 703-5640; FAX: (415) 703-4808

CAR WASH REGISTRATION REQUIREMENTS FOR RENEWAL APPLICANTS Items numbers 1 through 5, as applicable, must be sent at the same time as one packet to the Division of Labor Standards Enforcement (DLSE) at the above P. O. Box mailing address. Items marked with an asterisk (*) are required of all applicants. *1)

Completed Application form DLSE 666 (Rev. 09/05 ). Application MUST be either TYPED or PRINTED in ink.

*2)

Annual registration fee AND assessment. Your annual registration fee of $250.00 for each branch you operate and your annual assessment of $50.00 for each branch you operate must be paid by certified check, cashier’s check, or money order made payable to “Division of Labor Standards Enforcement.” The registration fee and assessment may be combined and paid in one instrument. “Branch” means a separate location of the employer’s business where employees carry out car washing and polishing operations, and includes a main or central location.

*3)

A valid workers’ compensation insurance certificate or a copy of the certificate from the Director of the Department of Industrial Relations consenting to your being self insured against liability to pay compensation under the State’s workers’ compensation laws either as an individual employer or as one employer in a group of employers. A valid workers’ compensation insurance certificate MUST: a)

Contain the complete and correct address of each location where the employer engages in the business of car washing and polishing; and

Identify the certificate holder as: Division of Labor Standards Enforcement Licensing and Registration Unit, 9 th Floor West P.O. Box 420603 San Francisco, CA 94142-0603

*5)

If you intend to contract with an employee leasing company as the employer, that employee leasing company must be currently registered with the Labor Commissioner as an employer engaged in the business of car was hing and polishing, and you must submit the following: a)

A copy of signed contract between you and the employee leasing company; and

A current workers’ compensation insurance certificate that is provided to you by the employee leasing company.

Proof of compliance with the local government’s business licensing or regional regulatory requirements. For example, a car wash operating within the jurisdiction of the South County Regional Wastewater Authority is required to have an industrial waste discharge permit certificate, a copy of which would be included in the applicant’s registration packet.

*Included in the renewal registration packet are Internal Revenue Service (IRS) form 8821 and instructions for completing such form. You must submit a completed form 8821 directly to the IRS Compliance Verification Group (CVG). The address for the IRS CVG is listed on the front page of the pamphlet entitled “Car Wash Registration—Proof of Tax Filing and Payment.” IMPORTANT: Submitting an application for a certificate of registration DOES NOT authorize you to operate a car washing and polishing business. It is illegal to operate a car washing and polishing business without first obtaining a car wash registration certificate from the State Labor Commissioner. If you operate without a valid certificate of registration, you will be subject to a civil penalty.

State of California Department Of Industrial Relations DIVISION OF LABOR STANDARDS ENFORCEMENT

CAR WASHING AND POLISHING REGISTRATION APPLICATION (If additional space is needed, please attach a separate page and indicate the number of the item for which the information is being provided.) 1. Name of legal entity (employer) applyin g for registration

2. Fictitious business name (doing business as (dba)), if applicable

3. Applicant’s street address (number, street, city, county, state, zip code)

4. Telephone number (

) __________________

5. Applicant’s mailing address, if different from street address (e.g., P.O. Box)

6. Fictitious business name (dba) and street address (number, street, city, county, state, zip code) of all car washing and polishing facilities operated by applicant:

7. Telephone number of location listed in item 6

A) Dba: ________________________________________________________________________________________________________

(

) _________________

(

) _________________

(

) _________________

(

) _________________

Address: _______________________________________________________________________________________________________ B) Dba: ________________________________________________________________________________________________________ Address: _______________________________________________________________________________________________________ C) Dba: ________________________________________________________________________________________________________ Address: _______________________________________________________________________________________________________ D) Dba: ________________________________________________________________________________________________________ Address: _______________________________________________________________________________________________________

8. This is an application for a: o New Registration o Renewal Registration

9. Is applicant permissively self-insured against liability to pay workers’ compensation claims? o Yes o No If the answer to the above is “no,” does applicant have current workers' compensation insurance coverage? o Yes o No Name of Insurer: __________________________________________________________________ Address::_________________________________________________________________________ Policy No ________________________________________________________________________ Effective date _________________________ Expiration date__________________________

10. If renewal, give previous registration number CW - ___________________

11. Applicant’s form of legal entity (check one): q

Sole Proprietorship (an individual)

Partnership

Corporation

Limited Liability Company

12. If sole proprietorship - full name, residential address and social security number of owner Name: _________________________________________________________________________________________________________ Home Address: _________________________________________________________________________________________________

13. Home telephone number (

) _________________

Social Security Number:__________________________________________________________________________________________ 14. If partnership - full name, residential address, and social security number of all partners Name: _________________________________________________________________________________________________________

15. Home telephone number of each person named in item 14

(

) _________________

(

) _________________

(

) _________________

Name: _________________________________________________________________________________________________________ Home Address: _________________________________________________________________________________________________ Social Security Number:__________________________________________________________________________________________ Name: _________________________________________________________________________________________________________ Home Address: _________________________________________________________________________________________________ Social Security Number: __________________________________________________________________________________________

DLSE 666 (09/05)

16. If corporation or LLC - full name, title, residential address, and social security number of all corporate officers/LLC members Name and title:_________________________________________________________________________________________________

17. Home telephone number of each person named in item 16

Home Address: ________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ Name and title:_________________________________________________________________________________________________

(

) _________________

(

) _________________

(

) _________________

Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ Name: and title: ________________________________________________________________________________________________ Home Address: ________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ 18. Full name, residential address, and social security number of all persons employed by the applicant who exercise management responsibility over any car washing and polishing facility operated by applicant, regardless of applicant’s form of legal entity

19. Home telephone number of each person named in item 18

Name: ________________________________________________________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ Name:_________________________________________________________________________________________________________

(

) _________________

(

) _________________

(

) _________________

(

) _________________

Home Address:_________________________________________________________________________________________________ Social Security Number _________________________________________________________________________________________ Name:_________________________________________________________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ Name:_________________________________________________________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ 20. Full name, residential address, and social security number of all persons, except bona fide employees on regular salaries, who have a financial interest of 10 percent or more in applicant’s business, regardless of applicant’s form of legal entity.

21. Home telephone number of each person named in item 20

A) Name:______________________________________________________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________

(

) _________________

(

) _________________

(

) _________________

(

) _________________

B) Name: ______________________________________________________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ C) Name: _________________________________________ _____________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ D) Name: ______________________________________________________________________________________________________ Home Address:_________________________________________________________________________________________________ Social Security Number: _________________________________________________________________________________________ 22. Actual percent owned by each person named in item 20. A)____________________ B)____________________ C)____________________ D)____________________

DLSE 666 (09/05)

23. If a corporation: Date of incorporation: _____________________________ State of incorporation: _____________________________

24. Federal and state employer identification numbers FEIN: ________________ SEIN: ________________

25. If a foreign corporation, date articles of incorpor ation were filed with the California Secretary of State _________________________

26. If a corporation, is corporation in good standing with the California Secretary of State? o Yes o No

27. Does any person named in items 12, 14, 16, 18, or 20 presently: A. Owe an employee any unpaid wages?...……………………………………………………………...…..q Yes q No B. Have an unpaid judgment outstanding? ………………………………………………………………....q Yes q No C. Have an outstanding lien or lawsuit pending against him/her?..……………………………………..q Yes q No D. Owe payroll taxes, personal, partnership or corporate income taxes, social security taxes or disability insurance contributions?……………………………………………………………..……... q Yes q No If “yes” to any of the above, provide details be low, including name, address and telephone number of the employee(s), judgment creditor(s), lienholder(s), other party(ies) to the lawsuit, and/or governmental agency that is owed money, case/file number, a description of the type of debt, tax, lien, or lawsuit, amount owed, court where the lawsuit is pending, and a description of any payment arrangements, if any. _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ 28. Has a business named in items 1 or 6, or a person named in items 12, 14, 16, 18, or 20, ever been cited or assessed a penalty for violating a provision of the California Labor Code, or an order of the Industrial Welfare Commission regulating wages, hours and working conditions? q Yes q No If “yes,” provide details below, including, name of the business/person cited, date and nature of citation, amount of penalties assessed for each citation, and the disposition of the citation, if any. Describe any appeal filed contesting the citation, and the outcome. If the citation was not appealed, or if it was appealed and upheld, indicate whether or not the penalty assessment was paid, and if so, the date on which it was paid. _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ 29. Does applicant have any final judgments against him, her, or it for unpaid wages due an employee or former employee of a car washing and polishing business that is required to be registered pursuant to California law that has not been fully satisfied? q Yes q No If, ”yes,” provide details below, including, name of parties, name and location of court and case number, amount of judgment, date judgment became final, and an explanation as to why judgment has not been fully satisfied. _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________________________ 30. Has applicant remitted the proper amount of contributions required by the California Unemployment Insurance Code? q Yes q No If “no,” has the Employment Development Department (EDD) made an assessment for those unpaid contributions that has become final? q Yes q No If “yes,” has the amount of delinquency been paid in full? q Yes q No If “yes,” provide the amount of the delinquency and the date it was paid in full. $______________________________Date________________________________ If “no,” describe the nature and amount of delinquency, and explain why it has not been paid in full. ____________________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________________ 31. Has applicant remitted the full amount of Social Security and Medicare tax contributions required by the Federal Insurance Contributions Act (FICA) to the Internal Revenue Service (IRS)? q Yes q No If “no,” has applicant fully paid the amount or delinquency for those unpaid contributions? q Yes q No If “no,” explain why the full amount of contributions was not remitted to the IRS, and why the delinquency has not been paid in full. ____________________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________________

DLSE 666 (09/05)

Applicant hereby acknowledges that he/she/it is aware of and agrees to comply with the provisions of Labor Code Section 3700 that requires every employer to secure the payment of compensation for liability under the State’s worker compensations law. Applicant hereby submits proof that the payment of compensation for liability under the State’s workers’ compensation law has been secured in a lawful manner.

Applicant understands and acknowledges that any misrepresentation, falsification, or material omission on this application or any document submitted in connection herewith is a ground for denial of this application or subsequent revocation of registration. Applicant hereby agrees to complete and submit to the IRS an IRS Form 8821, Tax Information Authorization.

The undersigned hereby certify(ies) under penalty of perjury that the statements made and information provided on this application are true and correct and that the applicant is in complete compliance with the local government’s business licensing and regional regulatory requirements. Executed at *_____________________________________, California, this ______________ day of ______________________________, 2 __________. SIGNATURES (The individual owner or all general partners must sign. If business is a corporation or limited liability company, any authorized corporate officer or member may sign.) ____________________________________________________

_________________________________________________________

____________________________________________________

_________________________________________________________

* If place of execution is outside California, the foregoing statements must be sworn to before a notary public or other officer authorized to take oaths and affirmations.

SOCIAL SECURITY NUMBER COLLECTION

The social security number will be collected pursuant to California Fam ily Code section 17520(d) and Labor Code section 2061(a)(6). It is used in the administration of registering employer’s in the car washing and polishing industry, and to aid in the collection of monies owed pursuant to a judgment or order for child or family support in a case being enforced under Title IV-D of the Social Security Act. Collection of the social security number is mandatory. Failure to furnish the social security number may result in DENIAL of an application for issuance or renewal of a registration to engage in the business of car washing and polishing.

INFORMATION PRACTICES ACT NOTICE (California Civil Code Section 1798.17) 1. The information on this application is being requested by the Department of Industrial Relations, Division of Labor Standards Enforcement. 2. The state official responsible for maintaining this application, and who shall, upon written request, inform you of the location of where this application is maintained and the categories of any persons who use the information contained herein is: Manager, Licensing and Registration Unit Division of Labor Standards Enforcement, 9 th Floor West P.O. Box 420603 San Francisco, CA 94142 Telephone: (415) 703-4810 3. The information on this application is collected and maintained pursuant to California Labor Code section 2061. 4. With respect to the information requested on this application, all of it is either mandated by California Labor Code section 2061 or must be ascertained by the Labor Commissioner in order to issue a registration, except for the following information, which is provided voluntarily: A) Title of corporate officers/LLC members 5. If you fail to provide all or any part of the information requested in this application, the Labor Commissioner may deny ssuance/renewal i of a registration to engage in the business of car washing and polishing. 6. The principal purposes within the Division of Labor Standards Enforcement for which the information on this application will be used are: (1) administration of the registration program for the car washing and polishing industry, and (2) enforcement of California’s labor laws. 7. The following are known or foreseeable disclosures of the information contained herein which may be made pursuant to subdivision (e) or(f) of Section 1798.24 of the California Civil Code by the Division of Labor Standards Enforcement: Response to a request under the California Public Records Act. 8. You have the right to access records containing your personal information that are maintained by the Division of Labor Standards Enforcement. To make an appointment to access such records, please contact the Manager, Licensing and Registration Unit at the address shown in item 2 above. _______________________________________________________________________________________________________________________________________________ DO NOT WRITE BELOW THIS LINE Registration Annual Date Received Date Posted Application Number______________________ Fee Assessment Approved: State Labor Commissioner__________________________________ o WCI _______________ Date o IRS ________________ Date Cleared o Bond o I.D. o SOS _______________ Date

o o o o o o

Articles of Incorporation LLC Articles of Organization Business License/Regional Regulatory Requirements Leased Employee Agreement FBN Citation(s)/Judgment(s) _______________ Date

91 DLSE 666 (09/05)

APPENDIX D: ALTERNATIVES TO THE DLSE WAGE CLAIM ADJUDICATION PROCESS As an alternative to the Division of Labor Standards’ wage claim adjudication process, workers can also file wage claims in Small Claims Court if the amount of owed wages does not exceed $5,000. This process can be relatively quick compared to other options, with claims resolved in three to four months. 128 However, individuals may not bring attorneys to court hearings and translators are not always available, making the process intimidating and very difficult for many workers to navigate. In addition, employers can disregard judgments made in Small Claims Court, leaving them unpaid and forcing workers to resort to a lengthy and difficult collections process. In addition, carwash workers can file private lawsuits against employers to recover wages. However, many legal aid organizations cannot represent carwash workers, because federal law prevents organizations that receive funds from the Legal Services Corporation (LSC) from representing undocumented immigrants. 129 This presents a significant barrier both because many carwash workers are undocumented, and many legal aid organizations rely on LSC funding. 130 Legal advocates must often refer cases to private attorneys, but have a limited number of options in this regard, as there is little knowledge of the inner workings of the AB 1688 wage claim recovery mechanism outside of the CLIWA network. 131 To remedy this deficiency, however, advocates have set up trainings to recruit private attorneys for carwash cases, which have expanded the number of attorneys willing to represent carwash workers. Irma Hernandez and Guillermo Mayer, UCLA Law. Untitled, unpublished manuscript, 2002. Obtained from Victor Narro (UCLA Downtown Labor Center) in February 2009. 129 “LSC Restriction Fact Sheet #4: The Restriction Barring Legal Services Corporation-Funded Lawyers From Assisting Aliens.” Brennan Center for Justice at NYU School of Law, September 26, 2003, available at http://www.brennancenter.org/content/resource/lsc_restriction_fact_sheet_4_the_restriction_barring_legal_services_c orpora/; accessed on February 27, 2009. 130 For example, see the following list of organizations in California with LSC programs, available at http://www.lsc.gov/map/state_T32_R6.php; accessed on March 8, 2009. 131 Per interview with Jose Tello, Neighborhood Legal Services, January 26, 2009. 128

Nevertheless, the amount of money involved in a wage claim, while large relative to the workersâ&#x20AC;&#x2122; income, is not large enough to provide an incentive for many private attorneys to accept carwash worker wage claim cases. Two private attorneys we spoke with who have represented carwash workers in Los Angeles expressed reluctance to take on such cases in the future, due to the large amount of work, the extended nature of the process, and the uncertainty of an eventual payout from employers. 132

132

Per interviews with two private attorneys, held on February 6, 2009 and February 19, 2009, respectively.

APPENDIX E: EMPLOYER SURVEY

UNIVERSITY OF CALIFORNIA, LOS ANGELES BERKELEY · DAVIS

IRVINE · LOS ANGELES

UCLA

· RIVERSIDE · SAN DIEGO · SAN FRANCISCO

SANTA BARBARA ·

SANTA CRUZ

Kevin Barry DEPARTMENT OF PUBLIC POLICY SCHOOL OF PUBLIC AFFAIRS, UCLA 3250 PUBLIC AFFAIRS BUILDING, BOX 951656 LOS ANGELES, CA 90095-1656

Dear Carwash Owner: We are a team of graduate-level researchers from the UCLA School of Public Affairs conducting an “Applied Policy Project” in consultation with faculty at the UCLA Anderson School of Management. The purpose of our project is to determine how Assembly Bill 1688 (the “Car Wash Worker Law”) has affected the industry. The law requires that car wash operators register with the California Labor Commissioner, pay a registration fee, obtain a surety bond and fulfill other requirements. As part of this project, we plan to speak with, among others, state regulators, car wash employers, and industry trade association representatives. We ask for your participation in a brief written survey to help assess the impact of AB 1688 from a car wash owner perspective. We believe that your input will provide a valuable means of understanding how this law has affected employers, and how it might be improved in the future. Below are some questions and answers about how the survey works. Thank you in advance for your participation!

How do I participate? Your completion and return of this survey constitutes your consent to participate in this research study. If you complete the survey and would like to participate in a follow-up interview, please fill out and return the accompanying contact information form. This contact form will be separated from the survey results in order to maintain anonymity. A self-addressed stamped envelope is included for your convenience.

Will my answers be kept confidential? Although the results of this survey will become part of a public report, all of your individual responses will remain strictly confidential. Your name will not appear on the written survey itself or in notes taken during phone interviews. Information identifying you will not be shared without your permission.

Is my participation mandatory?

Your participation is entirely voluntary. Furthermore, if you do choose to participate, you may skip any question(s) that you do not wish to answer. If you are willing to be considered for a follow-up interview to discuss these topics in further detail, you may indicate so on a separate form provided along with the survey. Participation in the follow-up interview is entirely voluntary as well, and information identifying you will not be shared without your permission. This survey is not intended for owners of coin-operated carwashes. If you are the owner of a coin-operated carwash, you have received this survey in error and should disregard it. If you own multiple carwash branches and have received this survey in the mail at multiple locations, we ask that you please fill out and return just one survey.

How do I contact you if I have questions? If you have any questions or concerns about the research, please feel free to contact: Kevin Barry, (213) 4009228, kbarry03@ucla.edu or Marcy Koukhab, (310) 486-8342, marcykoukhab@ucla.edu. 94

SURVEY FOR CALIFORNIA CAR WASH OWNERS

What is your position at the car wash to which this survey has been addressed? (Please circle the appropriate response.) Owner Manager Other (please specify: ________________________________)

If you are an owner, do you own any additional car washes located in California?

Yes

N/A

Æ IF YES, how many additional car washes do you own? (Please circle the appropriate response.) 1-4

10-19

5-9

20+

In what zip code is your business located?

Approximately how many employees do you have? (Or, if you own multiple car washes, approximately how many employees, on average, do you have at each branch?) ______________________________________________

Approximately how many cars go through your car wash weekly? (Or, if you own multiple car washes, approximately how many cars, on average, go through each branch weekly? _____________________________

In 2003, the California legislature passed the "Car Wash Worker Law" (AB 1688), which requires carwashes to register with the State Labor Commissioner and to pay a registration fee, which will be used to cover the government’s enforcement costs and to establish a fund for workers who are owed unpaid wages. Are you familiar with this law? Yes No

The law requires an annual registration fee of $250, plus an assessment of $50 for a workers’ restitution fund. For your business(es), do you believe that these fees are: Not burdensome | Somewhat burdensome | Excessively burdensome | I Don't know | N/A

The law requires car washes to record all employee wages, tips, hours, and other data. For your business(es), do you believe that this is: Not burdensome

__________

Somewhat burdensome

Excessively burdensome

I Don't know

N/A

The law requires car washes to purchase a $15,000 surety bond. For your business(es), do you believe that this is: Not burdensome

Somewhat burdensome

Excessively burdensome

N/A

10)

Do you display proof of registration for your customers to see?

11)

How useful to you is registered status for your car wash(es) as a means of showing customers that you are in compliance with the law? Very useful

12)

Somewhat useful

Yes

I Don't know No

Not very useful | Not at all useful | I Don't know | N/A

How responsive has the Labor Commissioner's office been to any problems or questions you may have had regarding the law? Very responsive | Somewhat responsive | Not very responsive | Not at all responsive | N/A 95

SURVEY CONTINUES ON REVERSE SIDE Æ

13)

Are you a member of the Western Carwash Association (WCA)?

Yes

Ă&#x2020; IF YES, how has the WCA helped you meet the requirements of the law? (Please select all that apply.) _____ Provided information about the law _____ Assisted with the application process _____ Advocated on your behalf with state regulators _____ No assistance provided _____ Other (please specify: __________________________________________________________) 14)

Please indicate your level of agreement or disagreement with the following statements: (a) Requiring all car washes to register with the state evens the competitive playing field for employers who operate legally. Registration promotes fair competition by ensuring that all car washes follow the law. Strongly agree | Agree somewhat | Neither agree nor disagree | Disagree somewhat | Strongly disagree (b) In the absence of a registration system, there is no way to stop employers who have violated labor laws in the past from continuing to violate these laws in the future. Strongly agree | Agree somewhat | Neither agree nor disagree | Disagree somewhat | Strongly disagree (c) Before legislators passed this law, some employers took advantage of car wash workers and failed to pay them the wages they were owed. This law will help protect workers and ensure they can collect unpaid wages. Strongly agree | Agree somewhat | Neither agree nor disagree | Disagree somewhat | Strongly disagree

15)

Has your registration application ever been denied?

Yes

16)

Has there ever been a claim filed against your surety bond?

Yes

17)

Please use the remaining space to write any additional comments you wish to include, such as elaborating on an earlier question or discussing your thoughts about this law generally (e.g., how the registration process and other requirements of this law have affected the manner in which you operate your business, any suggestions for changes or improvements to the law that you may have, etc.). If you run out of space but have more to say, you may return an additional sheet of paper along with the survey.

THANK YOU FOR YOUR PARTICIPATION! 96

APPENDIX F: BACKGROUND ON AN APPLICATION TO THE CAR WASH WORKER RESTITUTION FUND Per interview with Kevin Kish, Bet Tzedek Legal Services, March 5, 2009

In October 2005, a carwash worker at Mike’s Hand Car Wash in Los Angeles filed a claim with the Labor Commissioner. The claim stated that the carwash had failed to pay the worker minimum wage and overtime or to provide meal and rest breaks as required by law, for a period dating back to 2002. The claim also noted that the worker had suffered a fractured finger on the job but had received no compensation or time off for the injury. In 2006, after roughly a year without a hearing on the case, the worker was put in contact with Bet Tzedek Legal Services, which agreed to assist him. The case was continued several times when the carwash owner’s attorney offered to settle. Although the attorney proposed settlement several times, the owner ultimately never made an offer. The first hearing for the case occurred on September 11, 2007—almost two years after the claim was filed and the worker received an award the following day for $81,000. The carwash owner appealed, and by law he is required to post a bond in the amount of the award in order for the judge to appeal to proceed. However, the owner did not post a bond and the judge failed to dismiss the appeal. Because the owner never filed the bond, Bet Tzedek had to file an order requesting the judge take action accordingly. Ultimately, the case was ultimately dismissed. The worker received a judgment in March 2008 for the original amount plus interest, which totaled $84,000.

However, the owner refused to pay the judgment, and because Mike’s Hand Car Wash was never registered with the DLSE it had no surety bond to access. On July 28, 2008, Bet Tzedek filed against the Restitution Fund for the amount of the judgment. In November of 2008, Bet Tzedek inquired about the case with the Labor Commissioner’s office, but did not get a reply until March 2008, when it received a request for additional paperwork on the case. The trajectory of this application to the restitution fund illustrates how difficult the process of recovering owed wages for carwash workers is—the owner managed to extend the case for three years—from fall of 2005 to the middle of 2008. The worker would likely have received nothing of what he was owed without the restitution fund (and still may not) even though the Labor Commissioner and a judge found the worker was owed over $80,000. This lengthy process has caused hardship for the carwash worker, who is nearly illiterate and now living on the brink of homelessness, despite the considerable money he is owed for his years of work. He has severe vision problems, which he believes may be a result of almost daily exposure to the chemicals used in the carwash during his employment over the past ten years. He is 56 years old and has not been able to continue working at the carwash because of his health problems and age, and now makes his living working as a street vendor. Bet Tzedek also tried to recover attorney fees through this process, and was awarded $3,400 for at least five court appearances in July of 2008. This did not cover the year and a half of Bet Tzedek’s advocacy during the wage claim process with the Labor Commissioner’s Office. The protracted timeline and lack of compensation for advocacy done through the DLSE illustrates why few private attorneys are willing to take on carwash cases.