Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Pa.: Class of Jani-King franchisees certified in dispute over classification as independent contractors, (Mar 12, 2015)

By Jody Coultas, J.D.

Franchisees of Jani-King of Philadelphia, Inc. were granted certification of a Pennsylvania Wage Payment and Collection Law (WPCL) class action against Jani-King alleging that the franchise agreements misclassified the franchisees as independent contractors by the federal district court in Philadelphia (Myers v. Jani-King of Philadelphia, Inc., March 10, 2015, Surrick, R.).

Jani-King offers franchises for commercial cleaning businesses. The franchisees alleged that Jani-King sold them rights to its cleaning services franchise and that the franchise agreements that secured those rights were actually illegal employment agreements in violation of the WPCL. Specifically, Jani-King allegedly misclassified the franchisees, as well as all of the individuals who signed a Jani-King contract and performed cleaning for Jani-King, as independent contractors under the WPCL and that, as a result of this misclassification, Jani-King took improper deductions from their wages.

To obtain class certification, Federal Rule of Civil Procedure 23(a) requires: (1) the class be so numerous that joinder of all members is impracticable; (2) questions of law or fact be common to the class; (3) the claims or defenses of the representative parties be typical of the claims or defenses of the class; and (4) the representative parties must fairly and adequately protect the interests of the class. Rule 23(b)(3) authorizes class certification if “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”

Numerosity. The proposed class, consisting of over 150 members, was sufficient to meet the Rule 23(a) numerosity requirement, according to the court. The Third Circuit has indicated that a class of more than 40 plaintiffs will generally meet the numerosity requirement. The franchisees presented evidence that Jani-King had between 150-300 franchisees who signed contracts with Jani-King and provided cleaning services during the relevant period.

Commonality. The central issues involved were common to the class, according to the court. An issue is capable of class wide resolution when “determination of its truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke.” The franchisees claimed that the proposed class members should have been treated as employees of Jani-King—not independent contractors—because Jani-King’s universal policies and procedures were so controlling that they created an employment relationship. Whether the franchisees were misclassified based on Jani-King’s universal policies would resolve whether the proposed class members were misclassified based on the same policies.

Typicality. The named plaintiffs’ claims were typical of the class, according to the court. Jani-King argued that the named plaintiffs were not typical representatives of the class because there were factual differences between franchisees that personally performed the cleaning services and franchisees that hired employees to perform the cleaning services, and franchisees that were corporate entities and those who were individuals. However, all the class members would be asserting the same legal claim based upon the same conduct by Jani-King. Class members would not have to pursue different legal theories for their claims to succeed because the alleged violations occurred as a result of the same agreements and policies propagated by Jani-King, which apply to all class members equally, regardless of whether they performed cleaning themselves or chose to incorporate their businesses.

Adequacy of Representation. The fact that some franchisees would prefer to continue to be categorized as independent contractors, even if such a categorization violated the WPCL, did not defeat the adequacy requirement, according to the court.

Predominance. Common questions of law and fact predominated over individual issues, according to the court. Whether an individual is an employee or an independent contractor under the WPCL.is determined based on whether the alleged employer possessed the right to control the manner in which the alleged employee’s work is performed. Jani-King argued that the claims would require separate discovery and rulings for each franchisee. To satisfy the predominance requirement, the franchisees must show that Jani-King has the right to control the manner in which its franchisees perform their day-to-day activities through common evidence. The franchisees pointed to specific provisions in the Franchise Agreement, the Policies Manual, and the Training Manual to show that Jani-King had the ability to control the manner in which franchisees perform their day-to-day tasks. All the proposed class members were bound by the Jani-King documents. The issue of Jani-King’s right to control franchisees was capable of common proof, as the Jani-King documents could be read to give Jani-King control over the manner in which franchisees conduct business.

Superiority. The class action was the proper method of adjudication and would not be difficult to manage, according to the court.

The case is No. 09-1738.

Attorneys: David J. Cohen (Kolman Ely PC) for Darryl Williams. Aaron D. Vanoort (Faegre, Baker, Daniels) for Jani-King of Philadelphia, Inc., Jani-King, Inc., and Jani-King International, Inc.

Companies: Jani-King of Philadelphia, Inc.

Cases: FranchisingDistribution PennsylvaniaNews