For decades, some large cleaning companies have run on the franchise model instead of hiring employees. Coverall, CleanNet, and a few other large janitorial companies regularly market themselves to immigrants, often by advertising in foreign-language newspapers. The immigrants are promised the chance to run their own, potentially lucrative businesses, if they pay large franchise fees to the janitorial company. The franchise fees run as high as $30,000. Many of these immigrants end up not getting enough work to support themselves.
Some of these immigrants have brought class action suits against the janitorial companies, claiming they were never truly franchise owners at all. They claim that they were employees of the janitorial companies, and that they should have received at least minimum wage for the time they worked as janitors.
A lawsuit brought against Coverall alleged that the company treated franchise “owners” like employees, controlling every aspect of the jobs, including the uniforms and badges “owners” wore and the clients they received. The U.S. District Court hearing the case sided with the plaintiffs, holding that they were employees.
Coverall is appealing the decision, arguing that its regular activities consist of “selling franchises, promoting the Coverall brand, centrally soliciting customer contracts, and providing billing and collections services to franchise owners.” They say that they do not actually partake in janitorial work, and are therefore in a different line of business from the franchise “owners.”
If the Coverall case decision is upheld on appeal, it could leave franchisors vulnerable to many new lawsuits.
Other similar cases are pending throughout the country. CleanNet agreed to pay $7.5 million to settle a class action in Massachusetts, while Coverall agreed to settle another lawsuit in California.