New York City Implements Car Wash Bond Requirement

car wash surety bond

Update: Effective December 4, 2017, all New York City car washes are required to have a surety bond in an amount of $150,000. For more information, see our recent blog post or visit our dedicated NYC car wash bond page to get your free, no obligation surety bond quote.

In an effort to better regulate the industry, New York City passed the Car Wash Accountability Act

The act was signed into law on June 29th, 2015, and goes into effect on December 26, 2015. According to a policy brief concerning the rationale for the act, a 2008 investigation by the New York State Department of Labor found that 78% of New York City’s car wash operators were violating minimum wage or overtime laws. The nature of the business has contributed to this exploitation. Many of the state’s car wash employees are immigrants that are paid off the books, making it difficult to prove labor violations. This act includes measures that mandate car wash operators to obtain a license and file a $150,000 surety bond if they are not members of a union and a $30,000 bond if they are members of a union. Below is a quick guide further explaining the situation and the details of the act.

The Issue

Investigations have revealed widespread worker exploitation in the New York car wash industry, comparable to the state’s nail salon fiasco earlier this year. While the nail salon issue incorporated hazardous working conditions and employee underpayment, the car washes are primarily at fault for underpaying employees. Of the 28 car washes the department investigated in NYC, 22 were found guilty of minimum wage and overtime violations. Statewide, nearly half of the car washes were guilty of minimum wage or overtime violations.

Extensive interviews revealed that many employers did not provide the necessary compensation to make up the difference between a base salary plus tips if that total was still below the minimum wage requirement for the state ($8.75/hr). Although the base tipped minimum wage is $6.60 per hour, the tips need to amount to $8.75 per hour or else the employer must make up the remaining difference. In addition, a 2012 survey of 89 car wash employees found that 75% of these workers did not receive overtime pay when they worked more than 40 hours. Further, many employees that clocked in for only a half-hour or so due to weather conditions or slow business were only paid for the half-hour they were there. New York law mandates workers that are sent home to at least be paid the minimum wage for 4 hours.

Recent investigations of car wash operators in the state have resulted in multi-million dollar settlements. The Labor Department estimated that across the state, car wash employees have been underpaid by $6.5 million, spurring legislators to take action.

The Act

The Car Wash Accountability Act establishes a requirement for car wash operators in NYC to obtain a license. All licenses are valid for one year unless they are suspended or revoked. The application fee for each car wash location is $300. The following information must be included in the application:

  • name and home address of the applicant
  • name and form of business entity
  • federal employer identification number and state employer identification number of business
  • address and telephone number of principal place of business
  • names, residential addresses, telephone numbers, photo identifications and social security numbers of individuals with management responsibility or a financial interest of 10% or more in the business
  • written proof of compliance with all applicable laws, including the surety bond requirement
  • signed certificate by applicant ensuring no outstanding judgments or warrants against applicant
  • certificates of insurance for workers’ compensation, unemployment insurance and disability insurance coverage
  • original copies of liability insurance copies carried by the applicant

Licensees must also keep a log detailing complaints of damage to vehicles. Records must be maintained for at least three years and provided at the request of the Labor Department.

To be approved for a license, applicants must file a surety bond. The surety bond ensures the licensee (car wash operator) will pay any penalty or obligation within 30 days of being required to do so. This helps keep car wash operators liable in case they do not properly reimburse employees or provide healthy working conditions. The required amount for the bond depends on how many employees the car wash has. The bond amounts include the following:

  • at least $150,000 for car washes with 10 or fewer employees
  • at least $225,000 for car washes with 11-20 employees
  • at least $300,000 for car washes with more than 20 employees

However, for any car wash that has signed a bona fide collective bargaining agreement with a labor organization lawfully representing the employees, the bond amount must be at least $30,000.

The last component of the act concerns the enforcement of these requirements. If a car wash operator engages in any of the following practices, he or she could be subject to license suspension or revocation:

  • fraud, misrepresentation or false statements in the license application
  • fraud, misrepresentation or false statements in the course of business operations
  • failure to answer a notice of violation, appear for a hearing or pay a fine or civil penalty

Any car wash that operates without a valid license is subject to a $200 fine per day of operation, up to a maximum of $15,000. This act takes effect 180 days after its enactment (June 29, 2015).

The Resistance

The Car Wash Accountability Act has encountered significant resistance since Mayor Bill de Blasio signed the legislation. A group of car wash owners are filing a lawsuit against the city, arguing the act is illegally favoring unions and violating U.S. Supreme Court rulings. These owners point to the fact that non-unionized car washes are required to file a bond at least five times more expensive than unionized car washes, essentially coercing non-unionized car washes to unionize. Only a few of the city’s car washes are currently unionized, and many of the smaller car washes maintain they will struggle to financially keep up with the hefty surety bond requirement. Only time will tell if this requirement is upheld.

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