Historic battle over worker classification unfolds in federal court
Cleaning franchisees say they are employees, not owners, in Jan-Pro International’s tiered franchise system.
SAN FRANCISCO (CN) — With a California federal judge set to rule that he wrongly classified janitors as contract workers and the DC attorney general is suing them for theft of wages, the company commercial cleaning Jan-Pro International is now claiming that it is not in the janitorial business at all.
“We have evidence that a reasonable jury could conclude that Jan-Pro is not a cleaning company,” Jan-Pro attorney Jeffrey Rosin told the judge with O’Hagan Meyer’s attorney. U.S. District William Alsup in a hearing Thursday to decide the fate of a landmark. labor case now in its 14th year of litigation.
The Georgia-based company operates as a tiered franchise system, selling cleaning businesses to “regional master franchisees” across the country who, in turn, sign “unit franchisee” agreements with people who do the janitorial work itself.
The master franchisee intermediaries only pay janitors after deduction of 4% for Jan-Pro, and janitors are also required to pay a “franchisee tax” to be allowed to work, from which master franchisees pass on 10 % to Jan-Pro.
“We sell and support master franchises,” Rosin said. “There are a lot of facts here, a lot of real facts that a jury could rely on and conclude that Jan-Pro is not in the cleaning business.”
That argument didn’t seem to sway Alsup, which issued an interim ruling ahead of Thursday’s hearing that mostly sides with the workers – granting them both class certification and summary judgment on a host of claims that include the illegal deduction of royalties and non-payment of the minimum wage. or reimburse supplies, uniforms and travel time.
In a lawsuit first filed in Massachusetts in 2008, low-wage cleaners accused Jan-Pro of preying on immigrant workers by tricking them into buying cleaning franchises while taking a steep cut in their wages. income as “royalties” and misclassifying them as independent contractors. Claims submitted by janitors who live in California were eventually separated and transferred to the Northern District.
In its conclusion for Jan-Pro in 2017, Alsup applied the employment relationship defined by the Supreme Court of California in Martinez vs. Combs. Alsup also looked at the High Court’s decision in Patterson vs. Domino’s Pizzawhich determined that franchisors are not vicariously liable for the conduct of franchisees in the workplace.
The Ninth Circuit Ignored patterson when it overturned Alsup in 2019 because it was not a wage and hour case, but rather a franchisor’s vicarious liability for a worker’s sexual assault .
Then in 2018, the California Supreme Court ruled in Dynamex Operations West, Inc. v. Los Angeles Superior Court that employers can only classify workers as independent contractors if they can demonstrate A) that the hiring entity does not directly control the worker, B) that the work is outside the normal course of business of the hiring entity is recruiting, and C) that the worker is “habitually engaged in an independently established profession or business of a similar nature to the work performed.
The test was enshrined in California’s labor code with the passage of Assembly Bill 5 in 2019.
Alsup was asked to reconsider the case after the Supreme Court ruled that Dynamex applies retroactively. Having done this, Alsup found that janitors are necessary for the activities of Jan-Pro under component “B” of the Dynamex test.
“Defendant’s business depended on franchisees of units performing cleaning services,” he wrote. “Without a steady supply of Unit Franchisees, Defendant’s business would have cratered. And, Defendant earned four percent of all clean-up revenue Master Franchisees collected from Unit Franchisees. Defendant’s revenue therefore depended on the amount of work done by unit franchisees.”
He also flatly rejected Jan-Pro’s argument that it is not a cleaning company.
On Thursday, labor lawyer Adelaide Pagano, a partner at Lichten & Liss-Riordan, urged Alsup to adopt its interim decision. “It was exactly on point,” she said. “These cleaning workers are essential to its business and it is not correct for Jan-Pro to suggest that it is a different business from the cleaning franchisees.”
Rosin asked Alsup to reconsider, saying Jan-Pro should qualify for a Dynamex exemption under AB 5, which allows a more permissive standard for determining independent contractor status for a business that is engaged to provide services to another business.
Pagano said Jan-Pro does not fall under the business-to-business exception, arguing that Jan-Pro does not contract directly with business customers, but with the franchisors who do the work.
Alsup took the arguments being submitted, saying it would give both parties a few more days to submit additional information on the business-to-business issue.
Thursday’s hearing coincides with DC Attorney General Karl Racine suing the company for its labor practices, including misclassifying janitors and charging them unfair franchise fees.
“Defendants imposed a storm of charges on unit franchisees who unlawfully reduced their wages, including thousands of dollars in upfront franchise fees and a slew of recurring monthly fees that consume up to 25% of their monthly revenue. These charges are unlawful payroll deductions amounting to forcing employees to pay for the privilege of working for the defendants,” Racine’s complaint states, adding that Jan-Pro also violates the district’s sick and safety leave law. of Columbia “by not providing unit franchisees with any paid sick leave whatsoever.”
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