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Judge finds Jan-Pro janitors misclassified as contractors, owed expenses

A federal judge agreed without the work of Jan-Pro's janitors, its "business would have cratered."

SAN FRANCISCO (CN) — Janitors for commercial cleaning giant Jan-Pro Franchising count as employees, not independent contractors, under California’s wage orders and must be reimbursed for their uniforms, cleaning supplies, mandatory training, and unlawful deductions for Jan-Pro’s marketing and management fees, a federal judge ruled.

The Georgia-based company operates as a multilevel franchising scheme, selling cleaning businesses to “Regional Master Franchisees” throughout the nation who in turn sign "unit franchisee" agreements with the people who perform the actual janitorial work.

These master franchisee middlemen pay janitors only after deducting 4% for Jan-Pro. The janitors are also required to pay a “franchisee fee” to be allowed to work, from which the master franchisees pass on 10% to Jan-Pro.

In a lawsuit first filed in Massachusetts in 2008, low-wage cleaners accused Jan-Pro of preying on immigrant workers by inducing them to buy cleaning franchises while taking a hefty cut of their earnings as “royalties” and misclassifying them as independent contractors. Claims brought by janitors who live in California were eventually severed and transferred to the Northern District.

In finding for Jan-Pro in 2017, U.S. District Judge William Alsup applied the employment relationship defined by the California Supreme Court in Martinez v. Combs. Alsup also looked to the high court’s ruling in Patterson v. Domino’s Pizza, which determined that franchisors are not vicariously liable for franchisees’ workplace conduct.

Then in 2018, the California Supreme Court ruled in Dynamex Operations West, Inc. v. Superior Court of Los Angeles that employers can only classify workers as independent contractors if they can show A) the hiring entity does not directly control the worker, B) the work falls outside the hiring entity’s usual course of business, and C) the worker is “customarily engaged in an independently established trade occupation, or business of the same nature as the work performed.” 

Alsup was asked to take another look at the case after the state's high court ruled Dynamex applies retroactively.

Alsup ruled that the janitors met the requirements to be considered a class under Dynamex, and that he would consider most of the janitors' reimbursement claims on a classwide basis since Jan-Pro's policies applied across the board.

He wrote in his Tuesday order that there was no question the janitors met the definition of employee under Dynamex, finding Jan-Pro’s arguments to the contrary doomed under the predominant prong B.

While Jan-Pro’s attorneys declared at a hearing in July that Jan-Pro is not a cleaning business but a seller of franchises, Alsup roundly rejected that argument in his ruling. “Defendant was plainly in the business of selling cleaning services. To conclude otherwise would ignore the entire foundation of defendant’s business,” he wrote.

He also found janitors continuously performed cleaning work for Jan-Pro and that as a “matter of common sense,” they were necessary to its business.

“Defendant’s business depended on unit franchisees performing cleaning services,” Alsup wrote. “Without a consistent supply of unit franchisees, defendant’s business would have cratered. And, defendant earned 4% of all cleaning revenue that master franchisees collected from unit franchisees. Defendant’s revenue, therefore, depended on the amount of work that unit franchisees performed.”

Though the other prongs may have tipped in Jan-Pro's favor, the janitors only needed to satisfy one prong of the ABC test.

"Of course, this order’s findings regarding Prong A and Prong C do not change that defendant cannot satisfy Prong B. All unit franchisees were employees under Dynamex," Alsup wrote.

Shannon Liss-Riordan, an employment attorney representing the janitors, said in an email that she's pleased with Alsup's ruling. "We are very pleased with the judge's decision in this long-running case, certifying a class and granting plaintiffs' summary judgment on their main claims," she said. "We look forward to the damage assessment trial.  We filed this case in 2008 on behalf of janitors who were taken advantage of and made to buy their jobs, under the guise of being independent business owners."

Jan-Pro's attorney Jeffrey Rosin with O’Hagan Meyer did not respond to an email seeking comment.

The judge said he will set a trial to determine classwide damages for early 2023.

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