The Gig is Up for California Car Wash

Sacramento, CA MobileWash Inc. is the first gig company hit with a misclassification lawsuit under Assembly Bill 5 – a law making it illegal for companies to hire independent contractors and has violated the California labor code. The California Labor Commissioner’s Office targeted Mobile Wash because it allegedly “made a calculated business decision to misclassify” car washers who perform services arranged through the company’s app as independent contractors, rather than employees.

MobileWash works like other gig companies. You call the app to order a car wash and detailing service and pay for the service, including a tip. Workers drive their own cars with their own supplies to your vehicle and provide the services you ordered. This sounds like a win-win arrangement. In fact, the Better Business Bureau gives MobileWash an A+ rating, and here is a glance at a few Yelp reviews:

• “I used this service just after xmas and loved it! The people that came to my house were fast and detailed with impeccable manners. My car looks and smells great. So convenient. Will use again!
• “Attention to Detail was my first washer and I wasn't expecting too much. In the end, he exceeded my expectations by far. Will definitely call again for another wash”
• “They did an amazing job for not too much at all! Don't look anywhere else they are professionals and your car will be left looking brand new. Very kind and very quick with responding if I could I would give them 10 stars! Thank you.”

On the flip side, besides workers having to use their own cars, MobileWash requires them to buy their own cleaning equipment, uniforms, insurance, and gas. Workers do not get reimbursed for these expenses nor do they get paid travel time, which is a violation of the California labor law. Workers are also charged a $2 “transaction fee” for every tip left on a credit card.

The Cost of a Car Wash Business

This gig-economy Mobile Wash Inc. lawsuit, filed in Los Angeles Superior Court, asks the court to order the company to stop misclassifying its employees and to halt its operations using employee labor until it meets California’s car wash registration and bond requirements. Mobile Wash Inc. has never been licensed with the Labor Commissioner’s Office.

According to the Department of Industrial Relations of California’s website, “Every business entity engaged in car washing and polishing must register with the Labor Commissioner.” The Car Wash Worker Law that went into effect on January 1, 2014, provides that no car wash can register or renew its registration (as required annually) unless it 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 one hundred fifty thousand dollars ($150,000).” The purpose of the bond requirement is to insure that workers who are not paid in accordance with law can be compensated if their employer disappears or is otherwise unable to pay wages or benefits owed the employees.

According to the Labor Commissioner’s Office analysis, a Mobile Wash employee who works “10 hours a day, 6 days a week is entitled to $1,521 per week for unpaid wages including minimum wage and overtime violation, liquidated damages, rest period violations, reimbursements of business expenses and recovery of stolen tips, and other violations including but not limited to failure to provide paid sick leave. Mobile Wash had over 100 car washers at any given time.”

Really? How did this analysis come up with this information? Gig workers don’t operate like they are factory or warehouse workers. They have the opportunity to earn some cash by working when and where they chose. Who are they hurting? Certainly not their clients. Maybe Mobile Wash workers would prefer to work in a car wash collecting minimum wage –if the job is available.
The lawsuit also seeks the recovery of unpaid wages, penalties and interest on behalf of workers going back to April of 2017 as well as civil penalties and any costs and reasonable attorneys’ fees incurred by the Labor Commissioner’s Office. The Community Labor Environmental Action Network (CLEAN), a nonprofit that assists car wash workers, assisted the Labor Commissioner’s Office with this case.

California Labor Commissioner Lilia García-Brower likely washes her own car, or perhaps patronizes a unionized car wash company. “Willful misclassification of workers harms not only workers but law-abiding employers and the public,” García-Brower said, and reported by Insurance Journal. “Under the ABC test, these workers are clearly employees and were entitled to basic labor protections. My office is committed to combatting this unlawful practice as a business model.”

The ABC Test

AB5 adopted the “ABC” test, determining whether workers in California should be classified as independent workers or employees. To satisfy the ABC test,

• the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
• the worker performs work that is outside the usual course of the hiring entity’s business; and
• the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The lawsuit argues that Mobile Wash is allegedly a “car wash company in the business of selling car washes to its customers,” and the services that car washers perform are “central to the very purpose of Mobile Wash’s business,” the company cannot establish that the washers perform work outside of its usual course of business, as required under the “B” prong of the test.