In early June 2012, the United States District Court for Massachusetts
issued a summary
judgment ruling which expands and applies the precedent in the Coverall
employee-independent contractor litigation to yet another large corporate
cleaning franchise.
Jani-King is a large national cleaning franchise system, and
it is a competitor of Coverall with similar business operations. A putative class of plaintiffs (represented
by the same plaintiffs’ counsel who participated in the Coverall litigation) filed similar claims against Jani-King
alleging misclassification of Jani-King franchisees as independent contractors,
rather than employees.
On cross-motions for summary judgment, Chief Judge Mark L. Wolf
followed the precedent in Coverall
holding that Jani-King’s franchisees were not independent contractors but
actually employees under Massachusetts law.
Crucial to the court’s finding was the applicable Massachusetts law
which requires an independent contractor to not be conducting the same business
as their putative employer. In the
Jani-King case, the court found that Jani-King was engaged in commercial
cleaning services, and this was the identical business to which its franchisees
were engaged in as well. Because of this
factor, the court, relying on the Coverall
precedent, found that the franchisees were employees rather than independent
contractors. The court also appeared to
rely on the fact that Jani-King directly handled customer contracting and
accounts as well as customer billing for its franchisees as an aspect of why the
franchisees were actually employees rather than independent contractors.
Although not entirely unexpected given the similarity
between Coverall’s and Jani-King’s businesses, this ruling shows that the
impact of the Coverall decision on
other franchise systems continues to grow.
Franchise systems should carefully review their business operations to
ensure that their business practices do not create unexpected liability for
misclassification claims.
