From JDSupra, Manatt, Phelps & Phillips, LLP discuss a recent case in which the court said that janitorial workers were employees and not independent contractors operating as a frachinse under California’s ABC test because their services were not outside the usual course of business of the franchisor. Manatt, Phelps & Phillips, LLP writes:
Janitorial workers were misclassified as independent contractors when they were in fact employees, a California federal court judge has ruled in a long-running dispute.
When a trio of janitorial workers sued Jan-Pro International for minimum wage, overtime, expense reimbursement and other compensation, the company argued that it wasn’t in the janitorial business but was really in the business of selling and supporting master franchises.
The district court initially sided with Jan-Pro, granting summary judgment on the misclassification claim. The workers appealed.
During the appeal, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court, where the court adopted the ABC test for determining employee classification for claims governed by California wage orders. The state’s highest court then ruled that Dynamex has retroactive application.
Pursuant to the ABC test, workers are presumptively considered to be employees and can only be classified as independent contractors if the hiring entity demonstrates that the individual satisfies all of the following three conditions:
(A) The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The worker performs work that is outside the usual course of the hiring entity’s business.
(C) The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
While considering the ABC test, the Ninth U.S. Circuit Court of Appeals has identified three relevant considerations, U.S. District Court Judge William Alsup explained: whether the work of the hiree is necessary or merely incidental to that of the hirer; whether the hiree continuously performs work for the hirer; and what business the hirer proclaims to be in.
“Here, as a matter of common sense, unit franchisees remained at all times necessary to defendant’s business,” he wrote. “Defendant’s business depended on unit franchisees performing cleaning services. Without a consistent supply of unit franchisees, defendant’s business would have cratered. And, defendant earned four percent of all cleaning revenue that master franchisees collected from unit franchisees. Defendant’s revenue, therefore, depended on the amount of work that unit franchisees performed.”
Further, unit franchisees continuously—not occasionally—performed cleaning services and Jan-Pro was in the business of cleaning, the court said, holding itself out as a cleaning business in public advertisements and websites.
“Defendant was plainly in the business of selling cleaning services,” Alsup wrote. “To conclude otherwise would ignore the entire foundation of defendant’s business.”
Because Jan-Pro failed to satisfy prong B of the ABC test, Alsup granted summary judgment in favor of the plaintiffs on the misclassification claim.
To read the order in Roman v. Jan-Pro Franchising International, Inc., click here.
Why it matters: Originally filed in 2008 in Massachusetts, the lawsuit has lived through the landmark Dynamex decision, which resulted in a complete reversal from summary judgment in favor of Jan-Pro to summary judgment in favor of the plaintiffs on the issue of misclassification. A trial on classwide damages will be held in 2023.