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Franchisor Sued For Overtime Practices With Claim That Franchisee are Really Employees

Because franchisees are representing a larger company in various regions across the country, it makes sense for the parent company to maintain a certain level of control over how the franchisees run their business. After all, it’s the reputation of their brand at stake.

But the amount of control a franchisor can legally exert over its franchisees is limited. Franchisees need to maintain enough control and autonomy in the running of the business to be legally considered independent contractors.

The federal Fair Labor Standards Act (FLSA) is very specific about the requirements workers need to meet in order to be considered independent contractors. They include qualities like being able to make their own hours, control the environment they work in, what they wear while working, how the work is conducted, how they get paid and their rates. If any one of these conditions is not met, then the workers need to be classified as employees and paid accordingly, including benefits.

According to two recent wage and hour lawsuits against Jani-King, the commercial cleaning company’s franchisees allegedly do not qualify for the label and should be compensated as employees.

The first lawsuit was filed by a class of Jani-King’s franchisees from the Philadelphia area, all claiming they were misclassified and should have been paid as employees. Jani-King tried to block certification of the class of plaintiffs, but both the District Court and the Third Circuit Court agreed the class members had common complaints against Jani-King, and so the class was certified and the plaintiffs will be able to move forward with their combined claims.

In citing its decision to certify the class, the District Court pointed out that Jani-King was in control of everything from how and when franchisees communicated with customers, to their system of record keeping. The franchise agreements also gave Jani-King the right to inspect the work its franchisees did and change policies and procedures at its own discretion.

Shortly after the class was certified, the United States Department of Labor (DOL) filed a separate suit against Jani-King seeking injunctive relief that would force the cleaning company to classify and compensate its franchisees as employees. In its wage and hour complaint, the DOL included allegations that Jani-King controlled everything from the rates customers were charged and collecting payments to if and how franchisees were paid for their work. Jani-King even allegedly retained the power to assign cleaning contracts to franchisees.

Normally a franchisee is a type of business owner who purchases part of a larger business and gets to take advantage of a well-known brand to help them build their business. They frequently hire their own employees, but the DOL alleges Jani-King’s franchisees were individuals who had to pay Jani-King fees and royalties in order to receive cleaning assignments.

While the class action wage and hour lawsuit is seeking compensation under the Pennsylvania Wage Payment and Collection Law, the DOL is only seeking an injunction against Jani-King to prevent the cleaning company from continuing its alleged illegal employment practices.

The Chicago class action and employment law attorneys at the Chicago Overtime Law Center have three decades of experience fighting to help employees who are victims of wage, overtime and tip theft by their employers. We have a team of Chicago unpaid overtime lawyers who concentrate on prosecuting state and nationwide class action lawsuits. Our attorneys work out of Chicago and Oak Brook offices and pursue claims for workers all over the Chicago area including Hoffman Estates and Schaumburg We protect unpaid workers who haven’t received overtime throughout the Chicago area including in DuPage, Kendall, Lake, McHenry, Kane and Cook Counties.

Our Warrenville and Glen Ellyn overtime and employment lawyers are intimately familiar with the issues that arise during wage claim litigation, and we know the laws that govern overtime cases well. Many employers mis-classify employees as being exempt from overtime laws and pay workers salaries instead of hourly wages in order to avoid paying them overtime. Some employers mistakenly classify employees as exempt and others intentionally do so in order to circumvent the law. In either case, workers do not receive the wages they should, and a lawsuit may be the only way to recover their earned wages.

The Chicago Overtime Law Center is based in Chicago and Oak Brook, and represents clients throughout the country who have unpaid overtime and other employment right claims.