Franchisee class action against Coverall settles for $5.5 million

Posted on: May 19th, 2015 by Steve Larson
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Blog Wage and HourA Massachusetts federal judge has given preliminary approval to a $5.5 million settlement in a wage-and-hour class action brought by Coverall North America Inc. franchisees who accused the custodial company of misclassifying them as independent contractors.  The settlement, approved by U.S. District Judge William G. Young, covers anyone who purchased a Coverall franchise in that state since February 2004, as well as those who bought a franchise from “master franchisee” R&B Services Inc.

The settlement would end a long-running suit launched in February 2007 by janitors who said the company required its cleaning workers to sign franchise agreements and pay thousands in fees in order to provide commercial cleaning services for Coverall clients.  Judge Young ruled in 2010 that the franchisees were employees under Massachusetts law. Both said the ruling could have an enormous impact on franchise operations in the state.  In his decision, Judge Young said Coverall failed to meet the state’s stringent “ABC Test” for proving that a company has hired independent contractors and not employees.  Specifically, he said the company didn’t establish the franchisees were independent contractors because they didn’t perform services outside the usual course of Coverall’s business.

In September 2013, he ordered a $4.8 million judgement against Coverall, to be distributed to dozens of plaintiffs. The company quickly appealed to the First Circuit, which was followed by a cross-appeal from the franchisees.  A week before appellate arguments were sent to begin, the two sides announced they had reached a settlement.

Similar suits have been brought against other major companies that utilized the so-called “cleaning franchise” model, including Jani King International Inc., Jan-Pro Franchising International Inc. and CleanNet USA, court records indicate.

The case is Awuah et al. v. Coverall North America Inc., case number 1:07-cv-10287, in the U.S. District Court for the District of Massachusetts.