We’ve seen this happen before, and workers need to know about it so they can protect their rights, incomes and livelihoods — especially when they may need a worker misclassification attorney to step in.
This time, it was a nationwide janitorial and commercial cleaning company that operates under the CleanNet brand, along with its four California area operators, who allegedly misclassified employees as independent contractors. The company, which denied the allegations, recently agreed to a settlement that includes $1.7 million in restitution and $150,000 in civil penalties, as well as injunctive terms.
An investigation by the state Attorney General’s Office found that CleanNet misclassified as independent contractors some franchisees who operated as sole proprietors or sole owners, managers or directors of their incorporated janitorial businesses and personally did the cleaning.
“Too often, franchising is used by predatory businesses to misclassify vulnerable workers and avoid paying a fair wage and other employee benefits,” California Attorney General Rob Bonta said in the settlement announcement.
Why is something that sounds like a technicality a big deal?
Misclassification lets companies sidestep certain costs and legal requirements. The workers don’t get the protections of state employment laws, such as the rights to minimum and overtime wages, regular meal and rest breaks, business expense reimbursement, and accurate and itemized wage statements.
In this case, the state alleged, CleanNet used what it called a franchise model to find workers to provide cleaning services for CleanNet clients. These individuals, some of whom were immigrants who spoke limited English or had no prior experience managing a business, paid an initial franchise fee, then were assigned cleaning services contracts and personally did the cleaning (typically with no employees working under them).
According to the state allegations, CleanNet chose which contracts to assign (giving only the option to take it or leave it) and did not let franchisees negotiate or directly communicate with customers. When CleanNet collected monthly payments from customers for the franchisees’ work, it deducted numerous fees (royalty, administrative, finders’, contract negotiation, and more), as well as insurance coverage premiums and loan and interest payments, if applicable. Franchisees got whatever was left, but they also had to pay for any cleaning supplies, uniforms and transportation. Some earned less than minimum wage.
The state also alleged that CleanNet misrepresented the terms and income potential of the arrangement to potential buyers.
In addition to the financial terms of the settlement, CleanNet agreed to change its franchising business model, notify all former and current workers about the settlement, and allow monitoring for three years.
The $1.7 million in restitution reimburses cleaners for losses tied to unlawful deductions, not being reimbursed for cleaning supplies, and not being paid at least minimum wage for all hours worked.
If the distinctions seem ambiguous, an important 2018 decision by the California Supreme Court outlined circumstances for a worker to be considered a contractor (rather than an employee):
- The worker must be free from the control and direction of the company in connection with the performance of the work (the state: CleanNet franchisees were primarily under company control);
- The worker must perform work that is outside the usual course of business for the company (the state: CleanNet workers performed the company’s core service of cleaning); and
- The worker must be regularly engaged in an independently established trade, occupation or business of the same nature as the work performed for the company (the state: many franchisees worked exclusively for CleanNet customers).
If you believe your employer has misclassified your role, you may be entitled to back wages, overtime and expenses. Speaking with an experienced independent contractor misclassification attorney can help you understand your options. Contact Keller Grover here for a free, confidential consultation.