Labor & Employment Law Daily Wrap Up, EMPLOYEE STATUS—W.D. Okla.: Franchisees for janitorial service determined to be ‘employees’ under FLSA, (Sep 22, 2026)

By Ronald Miller, J.D.

Both parties relied upon the economic reality test as a basis for entry of summary judgment in their favor on the Secretary’s FLSA claim.

On cross-motions for summary judgment, a federal district court in Oklahoma ruled that “franchise owners” for Jani-King of Oklahoma were employees under the FLSA. The court determined that the employer’s exercise of “substantial control over the manner and method of [the franchisees’] work,” coupled with the franchisees’ “lack of independence over” customer accounts, “is more consistent with employee rather than independent contractor status.” Further, the court found that franchisees have no independent contractual relationship with customers. Considering the disparity in the amounts invested by the franchisees and Jani-King, the court concluded that these characteristics resembled a pay-for-labor employment model. Moreover, the franchisees’ relationships with Jani-King were sufficiently continuous, and exclusive, to support a finding of an employer-employee relationship. Additionally, the lack of specialized skill supported classification of franchisees as employees. Finally, the court noted that the record reflected that the franchisees’ work “is an important, and indeed integral, component” of Jani-King’s business (Sonderling v. Jani-King of Oklahoma, Inc., No. CIV-16-1133-G (W.D. Okla. Sept. 21, 2026)).

Jani-King of Oklahoma, Inc., is a janitorial company that provides cleaning services. It offers janitorial cleaning services to the public and sells franchises for the performance of those services. The employer licenses its “Jani-King” brand, goodwill, and system of business for use by individuals and corporate entities who sign franchise agreements. Most franchises are owned by a single person.

Employee status. The Acting Secretary of Labor brought this lawsuit alleging that the employer violated the FLSA by failing to classify certain workers as “employees” and by failing to comply with the FLSA’s recordkeeping requirements. The Acting Secretary argued that, for purposes of the FLSA, Jani-King is an employer, and its franchise owners are employees. For its part, Jani-King argued that the franchise owners were independent contractors and that the company is a mere franchise operator, not an employer within the meaning of the FLSA.

Economic reality test. Whether a worker is an employee for purposes of the FLSA is governed by the “economic reality” test. In applying the economic reality test, courts generally look at (1) the degree of control exerted by the alleged employer over the worker; (2) the worker’s opportunity for profit or loss; (3) the worker’s investment in the business; (4) the permanence of the working relationship; (5) the degree of skill required to perform the work; and (6) the extent to which the work is an integral part of the alleged employer’s business.

Both parties relied upon the economic reality test as a basis for entry of summary judgment in their favor on the Secretary’s FLSA claim.

Franchise agreement. Jani-King prescribes the terms and conditions for admitting new franchisees into its territory. Franchisees must complete all segments of a training program, score passing test grades, pass a criminal background check, and sign a franchise agreement that includes non-compete and confidentiality provisions and a guaranty to assure performance of all obligations under the agreement. As a condition to renewing an expired franchise agreement and continuing to provide commercial cleaning services, a franchisee must sign a general release of all claims against the employer.

Jani-King contracts with its customers and retains exclusive ownership of all customer accounts. The employer actively markets and sells commercial cleaning services in its territory and advertises to prospective franchisees.

The franchise disclosure document states that the individual franchise owner “must participate personally in the direct operation of the franchise business.” “The direct, on-site supervision must be done by a person who owns at least 1/3 of the business entity that owns [the] franchise.” Franchisees individually and “unconditionally” guarantee to the employer “the complete and timely performance... of all terms of the Franchise Agreement,” including cleaning services for customers. Jani-King is authorized to suspend or remove a franchisee from an account upon a customer’s request or if the company determines that the franchisee failed to comply with policies or failed to meet performance standards.

Franchisees agree to pay the company a 10 percent royalty fee on monthly gross revenue as defined in the franchise agreement. Franchisees also pay the it an “advertising fee” on monthly gross revenue. Franchisees pay a finder’s fee for business the company offers to them in excess of the initial amount of business it is obligated to offer under the franchise agreement. Jani-King has the “exclusive right” to perform all billing and accounting functions for the services provided by a franchisee owner. Franchisees are subject to a mandatory monthly fee to cover the company’s costs and expenses for this service.

Franchisees must wear “an approved, neat, and clean uniform” and name tag while cleaning for Jani-King’s customers. The Franchise Agreement provides that franchisees must hire at least one employee other than the franchise owner.

Degree of control. The court found that the undisputed material facts established that Jani-King exercised substantial control over admission into and termination from its franchise system. The company exercises substantial control over the franchisees’ assignment to and removal from all customer accounts. Franchise owners cannot perform commercial cleaning services for non-JKO customers during the term of the franchise agreement and for two years thereafter. Jani-King has the authority to control the franchisees’ cleaning schedule, work performance, and customer service. Finally, Jani-King determines the rate and method of payment for franchise owners, controls multiple other working conditions, and may revise its policies or impose additional requirements at any time.

Opportunity for profit or loss. Franchisees were required to service Jani-King customer accounts pursuant to the pricing terms set forth in a maintenance agreement between Jani-King and the customer. Jani-King’s sales team prepares bids for prospective customer accounts, using a process that includes estimating labor hours. Jani-King reserves the right to require a franchisee “to purchase all cleaning equipment and supplies... from one of [JKO’s] affiliates or from an approved vendor.”

Because Jani-King controls or substantially controls all significant financial aspects of the customer accounts, the opportunity for franchisees to affect their profits through their own business decisions and initiatives is limited, the court found.

Investment in business. Jani-King advertises a “Low Cost Franchise Opportunity” and asserts that some of its “investment plans” are “considered to be among the lowest cost franchise opportunities available.” Franchisees can pay a percentage of the initial franchise fee in installments deducted from monthly revenue, without interest. Jani-King also loans money to franchisees to perform cleaning services.

Franchisees are responsible for paying their workers and for payment of payroll taxes and insurance. A franchisee’s initial investment is minimal relative to Jani-King’s and can be deducted over time from the franchisee’s compensation. Thus, the court concluded that the disparity in the amounts invested by the franchisees and Jani-King bears characteristics of a pay-for-labor employment model.

Permanence of working relationship. The term of Jani-King’s franchise agreement is historically 20 years and more recently 10 years. A franchisee may renew a franchise agreement upon its expiration. The employer prohibits franchisees from providing commercial cleaning services for non-JKO customers. Here, while the franchisees’ relationships with Jani-King are not indefinite, they are sufficiently continuous (and exclusive) to support a finding that this is an employer-employee relationship.

Degree of skill required to perform work. Here, the basic service offered by franchisees—commercial cleaning—does not require special skill, according to the court. The fact that a new franchisee must attend initial training “does not change the calculus.” In sum, the summary judgment record reflected a lack of a requirement of specialized skill and, therefore, supported classification of franchisees as employees.

Extent to which work is integral part of business. Finally, the record clearly reflected that the franchisees’ work “is an important, and indeed integral, component” of Jani-King’s business. Thus, this factor supported consideration of the franchisees as employees of Jani-King.

Accordingly, the court concluded that the totality of the circumstances as demonstrated through the undisputed material facts more reasonably reflected that the franchisees “as a matter of economic fact, depend upon [JKO’s] business for the opportunity to render service,” rather than being “in business for themselves.”

The case is No. CIV-16-1133-G.

Judge: Goodwin, C.

Attorneys: Karen E. Bobela, U.S. Department of Labor, for U.S. Department of Labor aka R. Alexander Acosta. Adam W. Childers (Crowe & Dunlevy) for Jani-King of Oklahoma Inc.

Companies: Jani-King of Oklahoma, Inc.; U.S. Department of Labor

Cases: EmployeeStatus WageHour MinimumWage Overtime CoverageLiability OklahomaNews