Reduction: A Continuing Trend
in Tunnel Operations
W. Herschel Kilgore
California has been viewed as a crystal ball for future labor
considerations for all car wash operators. In California, car wash
operators are experiencing new pressures to address several labor
As all California operators know, labor abuse has been
exposed on local as well as national television. Some California
operators have been exposed in their efforts to violate state labor
laws including payment of minimum wage, providing rest or break
periods, required lunch breaks and overtime compensation. Some
car wash employees in California have not been covered by the required
compensation insurance and several have not had their withheld
social-security, federal, and state, income taxes remitted by their
employers. A few California operators have had personnel working
for “tips only” and have even had employees pay the
operator for the privilege of working for tips. All of these are
gross violations that have been exposed in very public ways by
television reporters’ hidden cameras and newspaper reporters’ print
accounts. The result of this abuse has attracted the attention
of various groups including Bet Tzedek Legal Services, UCLA Labor
Center, Legal Aid Foundation of Los Angeles, and other workers’ advocacy
groups. It also attracted the attention of California Assembly
member, Jackie Goldberg.
In 2004, Ms. Goldberg introduced California
Assembly Bill 1688, which passed and was signed by the governor.
The purpose of A.B. 1688 was to curb, if not eliminate, the labor
violations mentioned previously. A.B. 1688 is probably the most
onerous labor bill ever to have been signed into law in the United
States. After several public hearings, regulations implementing
this law went through several revisions before final implementation
in December 2005.
If you are a car wash operator in California in 2006 — and
you have personnel who engage in the wash process by vacuuming,
prepping, brushing or mitting the car; towel drying; or performing
any other function to wash, dry, or detail the vehicle — you
are required to comply with A.B. 1688. What does “compliance” entail?
Operators must complete a registration with the state designed
to disclose to the state the type of ownership of the car wash — corporation,
sole proprietorship, LLC, partnership, or other. In this disclosure,
any person or other entity with 10 percent or more ownership
must be disclosed, including name, personal home address, personal
social-security number, and home phone number. The same disclosure
requirements apply to all management personnel. Why? The regulations
allow the state to proceed against any of the entities mentioned
in the event of a violation or judgment.
Also contained in this registration is the requirement
to provide the following documents:
- Proof of a valid business
- Valid workman’s compensation certificate
- Copy of fictitious
business name registration
- Copy of the State employer identification
- Copy of the Federal employer identification number
- Copy of
your articles of incorporation
- Copy of your statement of information
for domestic Stock Corporation
- Copy of your articles of organization
- A registration fee
- A surety bond in an amount not less than
$15,000. Further, you must submit IRS form 8821 authorizing the
Internal Revenue Service to provide the state with your federal
tax return information.
The reason the State of California is gathering all this
information is clear — they intend to enforce the labor laws
of the state of California and ensure proper and lawfully required
compensation to all car wash employees by reviewing tax returns
and employer records and through interviews with employees. If
violations are discovered, the state will pursue all owners and
managers for redress and compensation. The information provided
by the registration gives the state the tools to compare your labor
records against your workman’s compensation reports and your
federal tax returns. The odds are they will spot any discrepancies,
and you will receive a visit from one or more state and federal
There is also the matter of the surety bond that the
operator is required to post. The bond must be made payable to
of the State of California.” It is there 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
violation of Labor Code Section 351 (gratuities) or 353 (accurate
record keeping of gratuities) or both. Now here’s the real
kicker — you would assume that an employee who has a complaint
or claim would be required to go to the state department of labor
and, after a hearing and finding, be awarded compensation from
the bond. Not so! The regulations provide the employee the right
to “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
I believe the State of California made this provision
knowing that the Division of Labor Standards Enforcement did not
and would not have the manpower to effectively implement these
regulations. By making this provision, the employee can retain
any attorney and proceed against the bond. We are already aware
of situations where attorneys are showing up at car washes and
soliciting the employees. Offers are being extended to car wash
employees to attend a seminar regarding their rights under California
law and they are being offered dinner and drinks during the seminar.
Clearly, I believe the State of California is depending on the
independent attorney to become their enforcement mechanism.
In addition to A.B. 1688, the state assembly will introduce
an increase in the minimum wage this year, which the Governor has
already agreed to. What is also anticipated is that there will
be an effort to have the increase “indexed,” meaning
tied to inflation. This will result in the minimum wage increasing
annually without further legislation being required. This has already
happened in other states at this time.
These are just two examples of pressures on
car wash operators
in California. How do they compensate?
First, recognition of the problem is necessary. Operators who are
guilty of willful labor violations must
recognize they have brought these actions down upon their own heads
along with the heads of those operators who have made every effort
to comply with the labor regulations. The righteous will be punished
along with the wicked in this case.
Second, actions must be taken
to comply with the new regulations. Compliance will be a tricky
task because an operator who has not been in compliance that comes
into compliance risks submitting data that will subject him or
her to audits not only from the state labor agencies, but also
from the state and
federal revenue agencies.
With compliance comes additional labor cost for operators.
Operational changes that result in labor savings must be undertaken.
In California, this will include replacing the “hand wash” with
machine wash. Also, changes in operational platforms from full-service
to exterior-express-type operations will occur. The express wash
capable of producing clean, dry, shiny vehicles without any labor
is exempt from A.B. 1688 regulations. Yes, if you don’t
prep, wash, dry or vacuum the vehicle, you are not required to
comply with A.B.1688.
Many California operators mistakenly believe they can
ignore these new regulations. Don’t make that mistake. While
the state wants to ensure that all employees are compensated properly,
the state also has a greed motive. They have crunched the numbers.
They have realized the amount of money they are losing in employee
and employer taxes — FICA, state income tax, unemployment
taxes, and the others. They know it runs in the multi-millions
of dollars. This is another move to have illegal aliens, who comprise
a large segment of the car wash employee workforce, brought into
the legitimate workforce in the state.
California may indeed be
the crystal ball for the nation. I would be surprised if similar
labor regulations are not widely introduced in many other states
and at the federal level. Already, there have been moves to reduce
the number of illegal aliens in the workforce. In December 2005,
the House of Representatives passed a bill that requires the verification
of all social-security numbers of employees by their employers.
Those employers who fail to do so would be subject to a fine of
$25,000 per occurrence. A similar bill was expected to be introduced
in the Senate in February.
Many of us have read in the headlines — aggressive
enforcement of employment tax evasion is ongoing. Labor law abuses
are not worth the risk. Operators need to plan now for compliance
and look at their operations to minimize the labor requirements
needed to efficiently run their car washes.
W. Herschel Kilgore is director of sales and marketing for
Inglewood, CA-based NS Wash Systems and can be reached via e-mail