CleanNet USA Settles Janitorial Franchisees for nearly $2 million

Oakland, CAA nearly $2 million settlement with CleanNet USA, Inc. and its four California Area Operators has been resolved following an investigation by the Attorney General’s office. The investigation found that a number of CleanNet’s janitorial franchisees were misclassified as independent contractors under CleanNet’s franchising model, which is a violation of the California labor law. The settlement has yet to be approved by a Los Angeles Superior Court judge.

CleanNet USA Settles Janitorial Franchisees for nearly million The defendants include CleanNet USA and its four California area operators: CleanNet of Southern California, Inc. (DBA CleanNet of Southern California), D&G Enterprises, Inc. (DBA CleanNet of the Bay Area), Paqnet, Inc. (DBA CleanNet of San Diego), and FCDK, Inc. (DBA CleanNet of Sacramento), (collectively, CleanNet). According to court documents, the defendants misclassified as independent contractors individuals who operated CleanNet unit franchises as sole proprietors or sole owners, managers, or directors of their incorporated janitorial businesses and who personally performed cleaning work for Defendants’ customers. The individual franchisees who personally worked as cleaners were denied the following protections of California’s employment laws:

The right to minimum and overtime wages,
Regular meal and rest periods,
Reimbursement of business expenses,
Accurate and itemized wage statements,
Unlawful deductions from their wages.

As well, Defendants engaged in unfair and deceptive practices in the sale of CleanNet unit franchises.

An employer generally misclassifies their employees as independent contractors to avoid payroll taxes, avoid paying minimum wage and overtime and not comply with other California labor laws (above). As part of the settlement, the defendants will do the following:

Change their franchising business model,
Pay civil penalties,
Provide restitution to their cleaners for the losses the cleaners incurred due to their unlawful deductions, failure to reimburse cleaners for their supplies, and failure to pay at least the minimum wage for all hours worked,
Preserve all documents and records necessary to demonstrate its compliance with the terms of the stipulated judgment,
Make those records available to the California Department of Justice for at least three years,
Notify all current and former cleaners with next steps to claim restitution,
Provide training to all current and future cleaners as part of a mandatory initial certification program to ensure that all cleaners understand their duties as employers when they hire other workers to perform cleaning work for CleanNet’s customers,
Be aware of the liabilities and risks associated with misclassifying their own employees as independent contractors,
Remove a clause from its template customer service agreement that restrains employee mobility.

This isn’t the first time that CleanNet has violated California’s wage and hour laws. In late 2017, Luis Castillo, a CleanNet janitor, filed a class action lawsuit in San Francisco County Superior Court claiming similar wage and hour violations, namely worker misclassification and wage theft. Castillo was represented by Legal Aid at Work. It is possible that these worker complaints and/or advocacy involvement triggered this state investigation.