Ask nearly any car wash owner the top three things they fear most. Death and disease rarely make the list. Most, even while tripping over themselves to do things by the book, maintain a stronger fear of government inspections and audits than they do their own mortality. I recently got a call from one such operator after receiving an ominous letter from the U.S. Department of Labor. Less than two years ago he and some partners bought an old full serve and converted it to an express exterior with free vacuums. The dilemma facing any business owner in this situation is that it’s entirely possible to be doing something punishable without meaning to.
The owner of the wash agreed to the interview below to help familiarize other operators with what to expect, but requested that his name be kept confidential, explaining: “I want to help other operators, but I just don’t want my name associated with what could be taken as legal advice, which I’m not qualified to give.” It made me realize I’d better put in my own disclaimer and searched online for something good. I hope this does the trick: “This article does not provide legal advice and neither its author, his employer, this magazine (or website in case it’s ever put online) or anyone or anything connected to its creation could be considered a law firm. Although great lengths have been taken to make sure the information is accurate and useful, it is recommended you consult a lawyer if you want legal advice.” With that out of the way, let’s get started.
ANALETTO: What was your first reaction when you got the certified letter?
ANONYMOUS: I’d love to say I put it down with confidence that I’d done nothing wrong and dealt with it later that day when I had time, but that’s not what happened. I read it, and re-read it. I tried to figure out why I was selected, but the letter simply stated the date and time I had to be there, a list of what I had to prepare, and that they could not tell me why I was selected except that it was likely due to one of three possibilities: former employee complaint; inspecting low-wage, high-turnover businesses; or geography. Now my wash is this brightly lit modern facility in a low-income area. I mean, are you kidding me? If I look in a 5-mile radius at the sea of rundown cash-based businesses that surround me and worked for the U.S. Department of Labor, my wash would be the last business I inspected. I’m thinking there’s no way it could be geography — yet I’m the only one holding a certified letter. Then I re-read “low-wage, high-turnover business” a hundred times before ruling that out too — I mean I’m an express wash with only three people. That left former employee complaint. I racked my brain trying to think whom I could have pissed off but came up blank. I felt like I was guilty of something, but I didn’t do anything wrong.
What exactly did you have to prepare for the audit?
That was pretty straightforward. I just needed two years of accounting and payroll, along with some other basics, e.g., owner names, DBA info, etc. Fortunately my POS system tracks hours, wages, overtime, and forces employees to clock themselves in and out. This wasn’t only a huge time saver; it also eliminated any questions about the accuracy of my records. It still took a ton of time to put everything together and I’ve only employed 12 people over the course of 18 months. I cringe to think how this would have played out when I used to manage full serves where we sometimes filed over 300 W-2 forms in a two-year period.
Did you have to send anything in advance?
No, but during the interview they asked if they could take all my original documentation. I wasn’t about to say no, but the letter didn’t indicate that they would do that. I got a receipt for the 600 some odd pages, and everything was returned, but since an electronic copy would’ve been acceptable, I’d recommend scanning all documentation prior to the meeting.
Do you have any other recommendations to prepare for the audit?
Actually there is one thing I did that wasn’t on the list of requirements that I think made everything go a bit smoother. I printed my own punch list of each document with a summary and any relevant contact info. I gave this to the inspector as a cover sheet and they not only commented on how helpful it was, but also referred to it almost exclusively during the meeting.
What would you recommend not doing?
Mainly, don’t rattle off extra info. If the question is yes or no, answer yes or no. Don’t answer, “Yes, and I also pay bonuses on their checks,” for example, thinking you’ll earn brownie points. In this particular case, I instead learned that discretionary bonuses are different than non-discretionary bonuses, and that it was possible I was supposed to divide the bonus over their hours and calculated into overtime. My accountant never heard of it, it didn’t come back as a violation, and I learned a valuable lesson to answer only what I’m asked in the future.
Did you have any other issues during the audit?
Yeah, I hit another snag in that I found out there’s a guideline that an overtime-exempt, salaried employee should manage at least two other full-time employees. Other guidelines include that they are mainly administrative with the power to hire and fire, which are both true for my manager. During most of the year he did manage two full-timers, but on that particular day I only had the three staff, one of which was a part-time high school kid. I was able to show that I attended job fairs, posted ads, and was genuinely trying to fill the spot, but unemployment in my market is around 1 percent and it’s hard to find people. This didn’t come back as a violation either, and I’m grateful I had all this documentation available.
What happened next?
I actually felt pretty good when the inspector left. They said they’d go through everything and that we could finish over the phone. I thought in a couple of days this whole thing would be over. Then a month went by before the inspector called to setup another meeting at the wash, and I think, oh crap. It turned out they just wanted to bring me documentation about employee bonuses and other stuff to help me be a better employer. I had no penalties and no back wages owed.
Any final thoughts?
My main thought is that even if you do everything right, you can still be subject to an audit. This is complete speculation, but shortly after my first meeting the local news ran a story about the U.S.
Department of Labor cracking down on car washes “in the area.” Other express exteriors didn’t get inspected, only the full serves and, of course, me. My property operated as a full serve for decades, so it’s possible I was selected because of a clerical error. It’s also possible that a single disgruntled employee triggered the inspection. I guess my final thought is that one bad apple can wield a lot of strength to harm your business. You’ve got to stay on top of the law and, even more importantly, you’ve got to track everything electronically and stay on top of your documentation. The success of your business may depend on it.
Washing cars for over 30 years, Anthony Analetto serves as president of SONNY’S The CarWash Factory, creator of the Original Xtreme-Xpress Mini-Tunnel, and the largest manufacturer of conveyorized car wash equipment, parts, and supplies in the world. He can be reached at Aanaletto@SonnysDirect.com or at (800) 327-8723 ext. 104.