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Roman v. Jan-Pro Franchising International, Inc.

United States District Court, N.D. California

May 24, 2017

GLORIA ROMAN, GERARDO VAZQUEZ, JUAN AGUILAR, Plaintiffs,
v.
JAN-PRO FRANCHISING INTERNATIONAL, INC, Defendant.

          ORDER RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         In this wage-and-hour putative class action alleging misclassification of franchisees of cleaning businesses as independent contractors, rather than as employees, defendant moves for summary judgment. To the extent stated below, the motion is Granted.

         STATEMENT

         At all relevant times, defendant Jan-Pro Franchising International, Inc., operated a three-tiered franchising structure that offered cleaning and janitorial services. Jan-Pro sold exclusive rights to use its trademark in the name “Jan-Pro” to entities known as regional master franchisees that became responsible for the Jan-Pro business in a defined geographic territory and gained the exclusive right to sell cleaning franchises in that territory. In turn, regional master franchisees sold “unit franchises, ” pursuant to which the purchasers gained the exclusive right to service certain accounts provided to them by their regional master franchisees.

         Unit franchisees could purchase franchises in their individual capacities, operate under fictitious names, or form partnerships or corporations with employees to service the accounts assigned by the respective regional master franchisees. Regional master franchisees provided unit franchisees with some initial training and then continued to provide business development, billing and collection, and revenue disbursement services.

         Our plaintiffs each purchased unit franchises from regional master franchisees. (The regional master franchisees in question are not parties herein.) Plaintiff Gerardo Vazquez purchased a unit franchise from New Venture of San Bernardino, LLC, for $2800. Plaintiff Gloria Roman purchased a unit franchise from Connor-Nolan, Inc., for $2800. Plaintiff Juan Aguilar, with a business partner, also purchased a unit franchise from Connor-Nolan and paid $9000 for it.

         Plaintiff unit franchisees contend that they have been improperly classified as independent contractors, rather than as employees of Jan-Pro, and seek minimum wages and overtime premiums accordingly.

         This case began in 2008 in the District of Massachusetts (where Jan-Pro is incorporated) with three plaintiffs who were unit franchisees from three different states (none of which included our plaintiff unit franchisees). An amended complaint added unit franchisees from four more states including our plaintiff unit franchisees. The parties agreed to a summary-judgment procedure that would precede class certification, with Jan-Pro agreeing to waive oneway intervention.

         At summary judgment, the judge in Massachusetts decided to focus only on the claims of the Massachusetts plaintiff, Giovani Depianti, as a test case. He denied that plaintiff's motion for partial summary judgment and granted summary judgment for Jan-Pro on all but two claims. Depianti dismissed those remaining two claims, preserving his right to appeal on two others. Our plaintiff unit franchisees, all residents of California, moved to sever and transfer the action here, which motion was granted over Jan-Pro's objection.

         The severed case arrived here in San Francisco in November 2016, where it was assigned to the undersigned judge. Plaintiff unit franchisees were allowed to file an amended complaint to streamline the issues (paring away the allegations relating to the larger case in Massachusetts), and the parties agreed to an extended schedule for briefing Jan-Pro's instant motion for summary judgment, which included a surreply by plaintiff unit franchisees. This order follows full briefing and oral argument.

         ANALYSIS

         The parties do not dispute the structure of Jan-Pro's three-tiered franchising business. The central dispute is whether, notwithstanding their classification as independent contractors by the regional master franchisees, our plaintiff unit franchisees are nevertheless employees of Jan-Pro. To be clear, this action does not address whether Connor-Nolan and New Venture employed our plaintiff unit franchisees.[1]

         1. Employee Status.

         Both sides agree California law applies to the question of whether our plaintiff unit franchisees should have been classified as employees of Jan-Pro and paid minimum wages and overtime premiums accordingly. They disagree about the standard that applies under California law.

         Jan-Pro contends Patterson v. Domino's Pizza, LLC, 60 Cal.4th 474 (2014), supplies the relevant standard. There, the plaintiff was an employee of a franchisee and alleged she had been subject to sexual harassment by a supervisor, also an employee of the franchisee, but sought to hold the franchisor vicariously liable under California's Fair Employment and Housing Act. Patterson noted that “traditional common law principles of agency and respondeat superior supply the proper analytical framework under FEHA, as they do for franchising generally.” Id. at 499. It rejected as obsolete decades of prior decisions that focused on “the degree to which a particular franchisor exercised general ‘control' over the ‘means and manner' of the franchisee's operations, ” to determine whether vicarious liability should apply. Id. at 478. Specifically, because franchises had grown to include thousands of stores, a franchisor needed the freedom to impose “comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way, ” while leaving “day-to-day decisions involving the hiring, supervision, and disciplining of [the franchise's] employees” to the franchisee. Ibid.

         Accordingly, Patterson held it was not enough for a franchisor to control the “means and manner” of the franchisee's operations to be that franchisee's employer. Instead, that decision held that a franchisor could become “potentially liable for actions of the franchisee's employees[] only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee's employees. Any other guiding principle would disrupt the franchise relationship.” Id. 498. That is, under Patterson a franchisor could not be held vicariously liable vis a vis its franchisee unless it “enter[ed] the arena” of overseeing the day-today operations of the franchise. Ibid.

         Plaintiff unit franchisees respond that Martinez v. Combs, 49 Cal.4th 35 (2010), applies. That decision set forth three alternative definitions of “to employ” under California labor law. “It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” Id. at ...


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