Professional Carwashing & Detailing

Updated: WCA weighs in on California carwash surety bond increase

February 4, 2014

SACRAMENTO, Calif. — California bill 1387 went into effect on Jan. 1. The law requires California washes to “post a $150,000 surety bond, unless the wash is covered by a collective bargaining agreement,” according to a release by Surety1.

Around 100 carwash owners, many of them members of the Western Car Wash Association, met at city hall in Los Angeles on Thursday to discuss  California bill 1387 with the Department of Labor Enforcement and officials like Labor Commissioner, Julie Su.

Sander Romick, chairperson of the legislative committee of the Western Car Wash Association, said that the laws and the penalties for not following them were explained at the meeting. Romick said that the increased cost of surety bonds was the “hot issue.”

The law increases the employer’s bond requirement amount from $15,000 to $150,000. It would exempt employers from that requirement if they have a collective bargaining agreement in place that meets specified criteria.

According to documentation from the bill, thelaw was set up to protect carwash workers against their employer in the case that the employer has been found guilty of underpaying or mistreating them.

A letter has been sent out to some California carwash owners informing them that the bill was signed into law on Oct. 11, 2013, and went into effect on Jan. 1. 2014.

The letter goes on to explain that when wash owners renew their carwashing and polishing registration, that they will be required to either produce a bond rider increasing their bond to $150,000, produce a new surety bond to the amount of $135,000 to equal the new $150,000 amount or produce a new surety bond to the amount of $150,000.

The letter states that washes with a valid collective bargaining agreement must submit two documents for their application to be exempt from the surety bond. These two documents are a letter from the union their workers are a part of, confirming a valid collective bargaining, and a copy of their existing collective bargaining agreement.

Wash owners are concerned about what would happen if a wash’s collective bargaining agreement were rejected by workers, according to one owner. The current language of the law does not explain if the wash owner would still have to provide a bond, or would be made exempt because of a collective bargaining offer.

How to start a carwash in California

The letter also explains that the law is permanent, with no sunset provision, which would cease it to have effect after a certain date.

When wash owners renew their state registration, they will need to secure a new surety bond. Surety1 has now included the new California surety bond requirement for $150,000 to its bond applications available online, according to a press release.

President of Surety1, John Page, said “a bond of this size will be more difficult to obtain than [the] predecessor $15,000 surety bond required of car wash owners.” The new bond amount was described as “outside the norm” by one bond account executive, because of the 1000 percent increase requirement.

According to suretybonds.com, “applicants with credit scores at or near 700 will pay premiums of 1-5 [percent] on their new bonds, which amounts to a price of approximately $1,500-7,500.”

For wash owners who do not have good credit, the payment amount would be significantly higher. One number a wash owner with particularly poor credit was quoted at was somewhere in the range of $15,000 to $20,000 that the premiums would cost.

Suretybonds.com explained that steps that wash owners wanting to renew their application must take:  “Professionals must submit their renewed surety bond to the California Division of Labor Standards Enforcement in order to stay in compliance with the laws of the state and industry. The California DLSE Licensing and Registration office can be reached at the following address: PO Box 420603 San Francisco, CA 94142.”

Romick said that small operations may consider letting go of their employees, and only having owners work, in order to avoid the surety bond altogether.

Romick said that the Western Car Wash Association agrees that wash workers deserve to be treated within the law, and thinks the rules need to be strict on those that violate them. He said that is not only unfair to the wash workers who’re not paid adequately, but for the legitimate businesses that have trouble competing with washes that do not comply with the law. However, the association does not think the increase in the bond is fair to owners who operate within the rules.

Romick said that his wash will be able to sustain the increased premiums, but it will hurt his business. “I can afford it, but it may change some of my longterm spending.”  

Phone calls made to the California Governor’s office were not returned. Romick spoke on behalf of the WCWA.  

To read the Surety1 press release, click here

To read information from Security Bond Insider, click here

More resources:

Bryant Surety Bonds

JW Surety Bonds

Lance Surety