HR Management & Compliance

New Car Wash Operator Gets Soaked by Old Owner’s FLSA Violations

A car wash operator apparently had a clean record of complying with labor law, but because of a special California labor law, a California appellate court recently held that the car wash was liable for a previous owner’s Fair Labor Standards Act violations, resulting in a $120,000 judgment.  The case, People ex rel. Harris v. Sunset Car Wash LLC, No. B233915 (Cal. Ct. App. May 16, 2012), required the court to consider California Labor Code Section 2066, a section that was motivated by a legislative concern that car wash employees were not being paid in accordance with law.

In the case, Auto Spa operated a car wash on Sunset Boulevard in Los Angeles. Sunset Alvarado Investors foreclosed on the property, evicted Auto Spa, and leased the same premises to Sunset Car Wash. Before the eviction, Auto Spa had failed to pay minimum wage and overtime to its employees and denied paid rest breaks.

There’s where Section 2066, a section of the California Labor Code dealing specifically with car wash operations, came into play. Under Section 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” uses substantially the same facilities or workforce to offer substantially the same services as the predecessor employer.

Thus, because Sunset qualified as a “successor” under Section 2066, Sunset was responsible for Auto Spa’s violations.

The original claim against Auto Spa, filed in 2009, sought $2.6 million for the alleged wage and hour violations. The claim against Sunset, which started this litigation, was for $730,000, but the stipulated judgment affirmed by the California appellate court set Sunset’s liability at $120,000.

While the majority on the appellate court believed it was only enforcing Section 2066 as written, dissenting Justice Armstrong thought the court’s opinion “not only violates the precepts of statutory interpretation and misapprehends the legislative intent behind the statute, but results in a gross injustice to Sunset, which has fully complied with its Labor Code obligations as a car wash operator.”

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