California Attorney General Rob Bonta has announced a settlement of nearly $2 million with CleanNet USA, Inc. and its four California Area Operators. The settlement resolves an investigation by the Attorney General’s Office, which found that some of CleanNet’s janitorial franchisees were misclassified as independent contractors under the company’s franchising model, violating state law.
CleanNet USA is a nationwide company providing janitorial franchising and commercial cleaning services under the “CleanNet” brand name. It grants franchising rights to its California Area Operators, who sell unit franchises to individuals and entities in California. After paying an initial franchise fee, these unit franchisees receive cleaning service contracts from CleanNet and provide cleaning services for CleanNet’s customers.
The investigation revealed that certain individual franchisees who personally performed cleaning work were unlawfully misclassified. This misclassification denied them protections under California’s employment laws, such as minimum and overtime wages, regular meal and rest periods, reimbursement of business expenses, accurate wage statements, and subjected them to unlawful wage deductions.
Under the terms of the settlement, CleanNet will pay $1.7 million in restitution and $150,000 in civil penalties. Additionally, they must comply with injunctive terms requiring cessation of worker misclassification, notification to all former and current workers about the settlement, and undergo monitoring for three years.
Attorney General Bonta stated: “Too often, franchising is used by predatory businesses to misclassify vulnerable workers and avoid paying a fair wage and other employee benefits… My office is watching, and we won’t hesitate to enforce our employment laws.”
Misclassification occurs when employers improperly classify employees as independent contractors to avoid payroll taxes or compliance with wage laws. Employees are entitled to various rights under California law that independent contractors are not.
As part of the settlement agreement, CleanNet USA along with its area operators—CleanNet of Southern California Inc., D&G Enterprises Inc., Paqnet Inc., and FCDK Inc.—will change their business model to address past issues including unlawful deductions from cleaners’ wages.
All current and former cleaners will be notified by CleanNet regarding steps to claim restitution. Furthermore, CleanNet will preserve necessary documents for compliance demonstration for at least three years while providing training programs ensuring awareness among cleaners about employer duties when hiring others.
Attorney General Bonta remains committed to upholding workers’ rights against unfair labor practices citing previous actions taken against US Framing for wage theft; securing settlements with companies like Amalfi Stone & Masonry Company Inc.; launching investigations into gender discrimination within organizations such as NFL; supporting FTC proposals on non-compete agreements; advocating for healthcare workers’ legal battles; defending transportation worker rights alongside immigrant children advocacy efforts.
A copy of both complaint documents along with stipulated judgment awaits court approval.
