Roman v. Jan-Pro Franchising Int'l

Decision Date02 August 2022
Docket NumberC 16-05961 WHA
CourtU.S. District Court — Northern District of California



In this wage-and-hour misclassification action, plaintiffs move for class certification as to all claims. Plaintiffs and defendant move for summary judgment as to all claims. Plaintiffs' motion for class certification is GRANTED IN PART AND DENIED IN PART. Plaintiffs' motion for summary judgment is GRANTED IN PART AND DENIED IN PART. Defendant's motion for summary judgment as to all certified issues is DENIED. A separate order on the instant briefing shall resolve the parties' motions for summary judgment as to the uncertified individual claims and issues that remain in this action.

1. Procedural History.

Plaintiffs Gloria Roman, Gerardo Vazquez, and Juan Aguilar performed janitorial services on behalf of defendant Jan-Pro Franchising International, Inc. Plaintiffs claim defendant misclassified them and the putative class members as independent contractors. They allege defendant violated California minimum wage, overtime, expense reimbursement, and unlawful deduction laws, and they seek compensation on behalf of the putative class.

A prior order in this action granted summary judgment in favor of defendant as to the misclassification claim. Plaintiffs appealed that order. During the appeal, the California Supreme Court adopted the “ABC test” for determining employee classification for claims governed by California wage orders. Dynamex Operations W., Inc. v. Super. Ct., 4 Cal. 5th 903 (2018). Thereafter, our court of appeals directed the parties to brief the effect of Dynamex on the merits of this case. Our court of appeals did not discuss the factor test outlined in Borello, which California courts use to determine employee classification for purposes of nonwage-order claims. S. G. Borello & Sons, Inc. v. Dep't of Indus. Rels., 48 Cal.3d 341 (1989).

Our court of appeals certified the issue of whether Dynamex applied retroactively to the California Supreme Court. The high court answered yes. Based on that answer and the parties' briefing, our court of appeals vacated the previous summary judgment order and remanded for this order to consider the merits in light of Dynamex. Vazquez v. Jan-Pro Franchising Int'l, Inc., 986 F.3d 1106, 1110 (9th Cir. 2021). Specifically, our court of appeals stated that this order “should consider all three prongs of the ABC test ....” Id. at 1122. Our court of appeals also provided significant guidance on whether summary judgment is appropriate as to the misclassification claim. Id. at 1122-28.[1]

2. Factual Background.

At all material times, defendant has been an international janitorial cleaning business.

It uses a franchising model with three tiers. The top tier consists of defendant, Jan-Pro International, Inc. The middle tier consists of “master franchisees” or “master owners” - regional, third-party entities - to whom defendant sells exclusive rights to use the trademarked “Jan-Pro” logo. As of 2009, there were at least 91 master franchisees in the United States. The bottom tier consists of “unit franchisees” who contract with master franchisees to clean businesses. Unit franchisees do not contract with defendant. A given unit franchisee can be an individual or a few partners, and those persons can hire additional workers to help them clean. The First Circuit explained defendant's franchising model:

Jan-Pro and its master owners are separate corporate entities, and each has its own staff. Moreover, master owners may sell or transfer their individual businesses without approval from Jan-Pro. Jan-Pro also reserves the right to inspect any premises serviced by either the master owner or any of the master owner's [unit] franchisees to ensure the Jan-Pro standards are being maintained. Still, master owners have their own entity names and internal business structures, and are responsible for their own marketing, accounting, and general operations.
As for master owners and their unit franchisees, under the terms of the model franchise agreement, master owners agree to provide their franchisees with an initial book of business, as well as start-up equipment and cleaning supplies. Moreover, the master owner furnishes a training program for its unit franchisees. Once initial set-up and training is complete, the master owner agrees to (1) assist in the unit franchisee's customer relations (by, for example, providing substitute employees or contractors to supply services in the event of an emergency impacting the unit franchisee); (2) provide the unit franchisee with invoicing and billing services; (3) advance the unit franchisee amounts that have been billed but not yet collected from customers; and (4) make available to the unit franchisee any improvement or changes in services or business methods that are made available to other franchisees. Additionally, the agreement notes that a unit franchisee is at all times an independent contractor solely in business for itself. As such, the unit franchisee may, for example, hire its own employees and decide what to pay them, as well as decide whether or not to pursue certain business opportunities.

Depianti v. Jan-Pro FranchisingInt'l, Inc., 873 F.3d 21, 23-24 (1st Cir. 2017).

Our plaintiffs were and are unit franchisees who purchased their unit franchises from two different master franchisees. (The master franchisees in question are not parties herein.) Plaintiff Vazquez purchased a unit franchise from New Venture of San Bernardino, LLC, for $2800. Plaintiff Roman purchased a unit franchise from Connor-Nolan, Inc., for $2800. Plaintiff Aguilar, with a business partner, also purchased a unit franchise from Connor-Nolan, for which he and his partner paid $9000.

The diagram below shows the general structure of defendant's three-tier business. Solid lines represent revenue from cleaning services. Cleaning customers (CCs) pay master franchisees (MFs) for cleaning services based on “pricing agreements” between them. For some cleaning customers, master franchisees supplement the pricing agreements with “bid worksheets,” which show calculations of cleaning costs. Master franchisees then pay unit franchisees (UFs) from that revenue (because unit franchisees do the cleaning), with the exception that master franchisees deduct and pay four percent of that revenue to defendant (D). Dotted lines represent revenue from franchise fees. Unit franchisees each pay master franchisees a franchise fee. Then, master franchisees pay ten percent of the franchise fee to defendant. Additionally, master franchisees profit by collecting other fees from unit franchisees, such as “management fees” and “sales and marketing fees” (not depicted), which defendant does not collect.

(Image Omitted)

Plaintiffs seek to certify the following class: all unit franchisees who have signed franchise agreements with master franchisees in the state of California and have performed cleaning services for defendant since December 12, 2004.

This order grants plaintiffs' motion for class certification and summary judgment as to (1) failure to pay minimum wage for mandatory training, (2) failure to reimburse for expenses incurred for (a) required uniforms and (b) necessary cleaning supplies and equipment, and (3) unlawful deductions of (a) management fees and (b) sales and marketing fees for the following group: all unit franchisees who signed a franchise agreement with a master franchisee in the state of California and who performed cleaning services for defendant from December 12, 2004, to the latest date on which a named plaintiff terminated employment.

This order denies class certification as to the remaining labor code claims and issues. A separate order on the instant briefing shall resolve the parties' motions for summary judgment as to the uncertified, individual claims and issues that remain in this action. This order defers resolving damages until a later phase of the action.

This order follows full briefing and oral argument.


Here is the relevant legal framework. The Industrial Welfare Commission of California publishes wage orders that regulate the hours, wages, and working conditions of California employees. The wage orders encompass some, but not all, of the provisions in the California labor code.

Whether a wage order encompasses a labor code claim dictates the applicable misclassification test. When a wage order encompasses a labor code claim (or a discrete issue within a claim), courts determine employee classification under Dynamex for purposes of that claim or issue. When the wage orders do not cover a labor code claim (or a discrete issue within a claim), such as expense reimbursements for gas and tolls, courts determine employee classification under Borello for purposes of that claim or issue. See Dynamex, 4 Cal. 5th at 915-16 n 5.

Given this legal framework, this order proceeds as follows:

First, this order applies the FRCP 23(a) criteria (numerosity, commonality, typicality, and adequacy) to the misclassification claim and simultaneously to the labor code claims. This order finds the FRCP 23(a) criteria satisfied for all claims.

Second, this order considers whether plaintiffs have met their burden under

FRCP 23(b)(3) to establish predominance and superiority as to the misclassification question under (1) Dynamex and (2) Borello. Those considerations show that plaintiffs satisfy FRCP 23(b)(3) for the misclassification question under Dynamex but not under Borello.

This order then applies FRCP 23(b)(3) to...

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