Is franchising the new frontier for wage theft? 1

Is franchising the new frontier for wage theft?

By Monique Olivier

The woman who empties your trash in your office, moving quietly around you at your desk as you finish that late night project – did you know there is a good chance she “owns” her own cleaning business?

At least that is what companies like Jani-King, Coverall and Jan-Pro would have you believe, and want the courts to believe as well.  Their business model relies upon the fiction that these janitors — having paid thousands of dollars in cash up front to buy the right to clean — will reap the rewards of being entrepreneurs.

In fact, these janitors do not even control their own wallets, let alone their professional destinies.  A key distinction between a “janitorial franchise” and, say, a McDonald’s or if for example one gets a service station for sale, is that the janitors have no right to control the stream of income they recognize.  Franchisors like Jani-King hold all of the cleaning contracts and grant or refuse permission to franchisees to clean particular accounts.  They also dictate the terms of the accounts – when a janitor will clean, what a janitor will clean and how much the janitor will be paid for each cleaning job.

Sound suspiciously like the janitors are employees?  Several courts and experts think so, and cases decided in the realm of cleaning franchise litigation are being closely watched by business and workers alike.

A case against Jani-King currently pending in the federal Ninth Circuit Court of Appeals, Juarez v. Jani-King International, may provide guidance as to whether these so-called “franchisees” are, in fact, employees under California law.  In Massachusetts, a federal district court already ruled in favor of similar workers, deciding that classifying them as independent contractors instead of employees was against the law.  Another Massachusetts court, in a case filed against Coverall North America, not only concluded that its cleaning worker “franchisees” were employees  under the Massachusetts Independent Contractor Law, but pointed out the similarity between its self-described “franchising business” and a Ponzi scheme.

Boston University’s David Weil agrees.  According to his excellent research, janitorial franchisors’ profitability (which can be upwards of 40%) depends on a steady stream of fees from new “franchisees,” regardless of whether there is sufficient work to sustain the ones it already has.

Recently, the National Employment Law Project weighed in on other widely recognized abuses by so-called “franchise” cleaning companies in the commercial cleaning industry. In a friend-of-the-court brief filed in the Juarez case on behalf of a coalition of workers’ rights organizations, NELP reviews the janitorial industry’s abysmal scorecard on fair pay and working conditions, arguing that janitorial franchising schemes enable rampant non-compliance with basic labor standards.

Even the U.S. Department of Labor has gotten into the act.  Its 2012 proposed budget targets misclassification of workers as an important enforcement priority, noting that the janitorial industry has a higher rate of violations than many other industries.

What it comes down to is this – sophisticated corporations, dissatisfied with earning money the old-fashioned way, are tricking unskilled low-wage workers into paying  thousands of dollars for the privilege of cleaning America’s office buildings in the futile pursuit of a fake American Dream.  The time is now for the courts and the government to rein in these abuses.

Monique Olivier

About Monique Olivier

Monique Olivier is a partner at Duckworth Peters Lebowitz Olivier LLP where she represents individuals and classes in employment, civil rights and consumer cases at the trial and appellate levels. She frequently speaks on and writes about class action and employment issues. She also makes a mean pulled pork.

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