US Labor Department sues Oklahoma cleaning company, alleging its cleaning ‘franchisees’ are employees

Date of Action: Sept. 29, 2016

Type of Action:  Filing of lawsuit

Name of Defendant: Jani-King of Oklahoma Inc.
Addison, Texas

Allegation: An investigation by the U.S. Department of Labor’s Wage and Hour Division found that Jani-King of Oklahoma Inc. violated the Fair Labor Standards Act when it sold cleaning “franchises” to individuals who were – in reality – employees. The division determined that the company sold franchises with a range of down payment and financing options. Contrary to typical franchise agreements, Jani-King controlled all aspects of the cleaning contracts held by the franchisee; these aspects included setting the cleaning rates, client relations, billing and payroll. Jani-King also controlled the assignment of cleaning contracts among its franchisees, collected payment from clients, kept what it considered to be its share and then distributed what was left to the “franchisee.” Given the characteristics of this business model and the franchisees’ economic dependence on Jani-King of Oklahoma, the division found the franchisees to be, in fact, employees who would be eligible for minimum wage and overtime under the FLSA.

The focus of the complaint filed today in federal court is the employment relationship between Jani-King of Oklahoma and its alleged franchisees. The Secretary of Labor seeks an injunction to compel Jani-King of Oklahoma to comply with the FLSA’s minimum wage, overtime, and record-keeping provisions in the future. The department also alleges that Jani-King of Oklahoma failed to keep the required records.

Quote: “What we are doing in this case is challenging the business model itself, which undermines compliance with our basic labor standards. Jani-King of Oklahoma dictated which jobs a person took and directed almost every aspect of the employment relationship – which makes them an employer not a franchisor,” said Betty Campbell, regional administrator for the Wage and Hour Division in the Southwest. “Despite its claims, this company had an employee-employer relationship with its so-called franchisees. They were not in business for themselves – they were paying for a job, entirely dependent on Jani-King – a hallmark of an employment relationship. There are many legitimate forms of franchising, but this is not one of them.”

Resolution: The department seeks a court ruling that confirms Jani-King of Oklahoma is an employer as the FLSA describes, and that its franchisees are employees. The suit also seeks the court to order Jani King to abide by labor laws, maintain required time and pay records, and ultimately pay its employees accordingly.

Additional Information: The Wage and Hour Division continues to conduct investigations in low-wage industries where data and evidence show high rates of non-compliance, and where workers are less likely to complain. Both education and enforcement continue in the janitorial industry in which a high violation rate exists. The division filed another suit against Grammatico Enterprises Inc., doing business as Heits Building Services of Central and Northern New Jersey last year after an investigation determined that employer’s business model and employment relationship with its franchisees also attempted to circumvent compliance with the FLSA.

Court: U.S. District Court for the Western District of Oklahoma

Docket Number: 3:16-cv-01133-W