Did you know that there is a car wash bond? Yes. In fact, the most prominent places in the United States that require a car wash owner to secure a car wash bond are in California and New York.
A car wash bond, as with all surety bonds, aims to serve as a financial compensation and protection to the obligee. The obligee, in this case, is the public or the government. The principal is the business owner.
Here, we look into what is a car wash bond, why it is important that car wash owners in California should secure a car wash bond, how it works, and its costs.
A car wash bond is not your traditional type of license and permit bond. Like all surety bonds, car wash bonds offer protection to the obligee from fraud, misconduct or financial damage. It also promises financial guarantee if any of the scenarios mentioned above occur.
As a license and permit bond, a car wash bond must be secured by a car wash owner in California before they can legally run a business. A car wash bond also falls under the category of wage and welfare bonds that intend to ensure that employees working at a car wash business are adequately paid for their work.
Is getting a car wash bond important?
Well, it is. The Division of Labor Standards Enforcement of the State of California Department of Industrial Relations mandates that car wash owners must get car wash bonds before they are eligible to receive a business license and legally hire employees.
A car wash bond ensures that businesses will perform in adherence to state regulations for their licenses and act by industry practices and standards.
A car wash bond works this way:
John notices he is not getting a fair deal at the car wash he works; he receives far below the minimum wage. Since his employer fails to pay him sufficiently in cash and tips, he can receive compensation by filing a claim against the car wash bond. In this scenario, car wash bonds meant to ensure that car wash business employers pay all earned and interest on wages, and fringe benefits to their employees.
What are the costs associated with car wash bonds?
According to California Bill 1387, the law requires car washes applying for a car wash license and permit to post a $150,000 surety bond by the provisions of Labor Code Section 2055(b).
The bill dictates that a car wash bond serves to protect car wash employees against their employer in case the latter is found guilty of worker mistreatment and salary underpayment.
The law is permanent: California car wash bonds have no sunset provision, and once purchased, car washes can legally operate their business until they revoke or terminate their bonds.
How do you start a car wash in California?
Car wash owners are required to secure a car wash surety bond before applying for a license and permit to conduct their business. For car wash owners who are renewing their state registration, they would also need to secure a new car wash bond.
The cost of a car wash bond varies depending on a range of factors; this includes credit rating and history of the principal. Usually, the principal with credit scores at or near 700 can expect to pay premiums between 1 and 5% for their California car wash bond. This approximately amounts to $1,500 - $7,500.
However, the payment amount for car wash owners who have meager credit ratings would be considerably higher. A car wash owner with poor credit was cited to have paid the premium cost between $15,000 and $20,000. It is important to check and review credit history first before applying for a bond.
To sum it up, California car wash bonds not only raise the standards and credibility of local car wash businesses but also help car wash workers by providing them overtime compensation, earned tips, and fringe benefits.
Surety Bond Authority Inc., the leading provider of surety bonds, helps California car wash businesses stay in compliance with the laws of the State and the industry. Do not delay that application. Contact us today at 800-333-7800.