United States District Court, E.D. Pennsylvania
R. BARCLAY SURRICK, District Judge.
Presently before the Court is Plaintiffs' Motion for Class Certification. (ECF No. 64.) For the following reasons, Plaintiffs' Motion will be granted.
A. Procedural Background
This case is about whether Defendants Jani-King of Philadelphia, Inc., Jani-King, Inc., and Jani-King International, Inc., (collectively "Jani-King") misclassified Plaintiff franchisees as independent contractors as opposed to employees. Jani-King is the world's largest commercial cleaning franchisor. (Figlioli Dep. 63, Pls.' Mot. Ex. D, ECF No. 64.) Plaintiffs Darryl Williams and Howard Brooks seek class certification of their claim brought pursuant to Pennsylvania's Wage Payment and Collection Law ("WPCL"), 43 Pa. Stat. Ann. § 260.1 et seq.  Plaintiffs allege, on behalf of themselves and all others similarly situated, that Jani-King sold them rights to its cleaning services franchise, and that the franchise agreements that secured those rights were, in reality, illegal employment agreements. (Compl. ¶ 25, ECF No. 1 Ex. A.) Plaintiffs specifically claim that they were misclassified as independent contractors under the WPCL and that, as a result of this misclassification, Jani-King took improper deductions from their wages. ( Id. at ¶ 54.) The proposed class that Plaintiffs seek to represent consists of "all individuals who signed contracts with [Jani-King] and performed cleaning services for them at any time since March 20, 2006." (Pls.' Mot. 2; see id. at ¶ 15.) Plaintiffs calculate that the group of potential class members consists of about 185 individuals with addresses in Pennsylvania and about 61 individuals with addresses outside of Pennsylvania. (Franchisee List, ECF No. 11, Ex. A.)
On August 9, 2013, Plaintiffs filed this Motion for Class Certification. (Pls.' Mot.) On October 11, 2013, Defendants filed an Opposition to the Motion for Class Certification. (Defs.' Opp'n, ECF No. 69.) Plaintiffs filed a Response on November 1, 2013. (ECF No. 79.) Defendants filed their Surreply on November 27, 2013. (Defs.' Reply, ECF No. 82.) On December 17, 2013, Plaintiffs filed a corrected version of their Response. (Pls.' Resp., ECF No. 86.)
B. Factual Background
1. The Jani-King Franchise
Jani-King offers franchises for commercial cleaning businesses to individuals who wish to own and conduct such businesses under the Jani-King name. (Pls.' Mot. Ex. B.) Currently, Jani-King has roughly 300 franchisees in the Philadelphia area. (Figlioli Dep. 30-40.) To become a Jani-King franchisee, an individual is not required to have any experience in business, cleaning, or sales. (Figlioli Dep. 186.) The only requirements are that the individual form a corporation or a limited liability company, pass a background check, pay Jani-King an initial investment amount ranging from $14, 625-$142, 750, and sign the Jani-King Franchise Agreement. (Figlioli Dep. 110-11; Franchise Disclosure 13-15, Pls.' Mot. Ex C.) In exchange for becoming a franchisee, Jani-King guarantees that it will provide the franchisee with a certain amount of gross sales in cleaning work, within an agreed-upon timeframe. (Franchise Disclosure 13-15.) Generally, a larger initial investment comes with more guaranteed cleaning work and a longer timeframe in which Jani-King has to provide the guaranteed cleaning work. (Franchise Disclosure 13-15.) In addition, Jani-King provides franchisees with licenses to Jani-King trademarks, goodwill, and a proprietary commercial cleaning system, as well as administrative support such as billing, collections, advertising, and sales support. (Figlioli Decl. ¶ 2, ECF No. 70.) The Franchise Agreement specifically states that the franchisee agrees that he or she:
will be at all times an independent contractor.... Nothing in this agreement may be construed to create a[n]... employment or fiduciary relationship of any kind. None of Franchisee's employees will be considered to be Franchisor's employees. Neither Franchisee nor any of Franchisee's employees whose compensation Franchisee pays may in any way, directly or indirectly, expressly or by implication, be construed to be Franchisor's employee for any purpose.
(Franchise Agreement 12.6, Pls.' Mot. Exs. C, I.)
Once an individual becomes a Jani-King franchisee, he or she must meet a number of additional requirements. First, the new franchisee must obtain the requisite equipment and insurance, both of which can be obtained through Jani-King or through outside vendors. (Franchise Agreement 4.4, 4.13.1; Figlioli Dep. 137; Gonzalez Decl. ¶ 18, ECF No. 72; Memedoski Decl. ¶ 12, ECF No. 75; Sinanovski Decl. ¶ 13, ECF No. 77.) Next, the franchisee must attend training provided by Jani-King. (Franchise Agreement 6.4.) The training spans thirteen days and covers Jani-King cleaning methods, systems, programs, procedures, and forms. (Franchise Agreement 6.4; Training Manual 2-5, Pls.' Mot. Ex. E.) The training is conducted through video-presentations, written material, and hands-on demonstrations of specific cleaning methods. (Figlioli Dep. 118.) Following the training, the new franchisee is required to take a quiz and earn a score of eighty percent or higher. ( Id. at 191.) At any time after the training, Jani-King can require a franchisee to repeat or complete additional training, if it feels that the training is reasonably necessary to ensure that the quality of the cleaning services provided meets Jani-King's standards. (Procedures Manual 1.7.)
After a Jani-King franchise is up and running, Jani-King starts giving the new franchise cleaning contracts. The contracts themselves are obtained by Jani-King and are entered into between the customer and Jani-King. (Jani-King Policies & Procedures Manual ("Procedures Manual") 3.34, Pls.' Mot. Ex. F.) Jani-King obtains the contract by having someone from the regional Jani-King sales office meet with a prospective customer. (Figlioli Dep. 60-61.) Then, Jani-King discusses the customer's cleaning needs and gives the customer a quote for the cleaning work, without input from any franchisee. ( Id. at 72-73.) The quote is a monthly rate based on the square footage and density of the areas to be cleaned, floor types, number and size of bathrooms, and the like. ( Id. at 73.) Jani-King does not generally set how many hours it will take for the work to be completed or how many individuals will complete the work. ( Id. at 74.) Once Jani-King secures a cleaning contract with a customer, the Jani-King regional office approaches franchises about whether they would like to service the contract. ( Id. at 93.) Jani-King determines what franchises will be approached for the contract. When a franchisee is approached, he or she can either accept or reject the contract. (Gonzalez Decl. ¶¶ 12, 16.) After a franchisee has accepted a contract, any increase or decrease in a customer's services must be approved by Jani-King. (Procedures Manual 3.35.)
If a franchisee decides to accept a contract, he or she is responsible for providing the cleaning services to that client. (Franchise Agreement 4.19.) A franchisee is not required to personally perform the cleaning work. (Gonzalez Decl. ¶¶ 5-6.) The franchisee can choose to hire employees, and Jani-King is not involved in any hiring, firing, or oversight of a franchisee's employee. ( Id. at ¶¶ 7-8; Jones Decl. ¶¶ 6-7, ECF No. 73 (franchisee has 27 employees); Lanier Decl. ¶ 8, ECF No. 74 (franchisee has 16 employees); Sinanovski Decl. ¶ 3 (franchisee has 35 employees).) Franchisees also set the schedules for their employees. (Gonzalez Decl. ¶ 19.) Jani-King requires that franchisees establish an employment file for each employee that contains a completed employment application with references, a completed W-4, a completed I-9, and signed copies of certain Jani-King policies. (Procedures Manual 2.19.)
Jani-King also requires that franchisees follow other specific procedures. (Procedures Manual 2.9.1.) Jani-King has the right to change the mandatory procedures as it deems necessary to manage the franchise system, and any failure to follow the procedures is cause for Jani-King to suspend a franchisee's authority to service customer accounts. ( Id. at Introduction 2.9.1; Franchise Agreement 4.26.) Franchisees must communicate with customers on a regular basis. Jani-King specifies a minimum amount of weekly and monthly customer communications, (Procedures Manual 2.18, 4.5), as well as a minimum level of performance management on a daily, weekly, and monthly basis ( id. at 4.20). Jani-King also requires that certain forms be filled out and distributed on a monthly basis. (Procedures Manual 4.5, 4.20.) Similarly, Jani-King requires that franchisees inspect cleaned areas a specific number of times per week and month. ( Id. ) Franchisees must at all times be reachable within four hours and inform Jani-King in advance if they will be unavailable for an extended period of time, such as for vacation. (Procedures Manual 2.18(15)-(16).) If a franchisee is not available within a four-hour period, the franchisee must obtain a paging device at his expense. ( Id. ) Jani-King also mandates that all Jani-King representatives wear an approved Jani-King uniform with a name tag when they are on a client's premises. (Franchise Agreement 4.19.1.) In addition, franchisees must abide by a non-competition agreement ( id. at 5.2.3), must maintain a minimum amount of capital (Procedures Manual 3.33), and must keep complete and accurate financial records, which Jani-King can inspect and audit ( id. at 3.15-17).
Jani-King performs quality-control inspections of accounts serviced by a franchisee from time to time to ensure that the cleaning services are performed in accordance with the cleaning schedule and instructions specified in the contract between Jani-King and the customer, and to ensure performance standards are consistent with Jani-King's standards. (Franchise Agreement 4.19.1-2.) Performance checks can be announced or unannounced, and occur about once a month. (Figlioli Dep. 146-47; see Glover Decl. ¶ 9, ECF No. 71.) The actual performance check involves an individual from the Jani-King regional office operations staff inspecting a franchisee's cleaning. (Figlioli Dep. 146.) The individual looks to see whether areas are sufficiently cleaned according to the client's cleaning schedule and requirements, and grades the franchisee based on what he sees. (Figlioli Dep. 146.) If a customer has a complaint about the cleaning work, the customer may first contact the franchisee, or may reach out directly to Jani-King. (Figlioli Dep. 141; Glover Decl. ¶ 10; Gonzalez Decl. ¶ 13.) Jani-King keeps a record of any complaints that it receives and communicates all complaints to the franchisee who services the account. (Figlioli Dep. 141-42.) When a franchisee addresses a customer complaint, he or she must do so in a specific manner. (Procedure Manual 4.9.2.) If a franchisee does not adequately respond to a complaint, Jani-King will respond to the customer complaint and bill the franchisee for the time it spent responding. (Procedure Manual 4.9.8.) Jani-King may transfer a customer's account from one franchisee to another if there are repeated complaints, or if Jani-King independently identifies repeated performance issues on the account. ( See Fliglioli Dep. 142-45.) It is against Jani-King policy to unilaterally transfer an account unrelated to a franchisee's performance. ( Id. at 143.)
After a Jani-King franchisee starts servicing a customer, Jani-King starts invoicing the client for the services, and the customer pays Jani-King. ( Id. at 181.) In fact, Jani-King handles all billing and accounting function for franchisees. (Procedures Manual 3.1.) Each month, Jani-King sends every franchisee a monthly franchisee report listing gross monthly revenues and all fees charged by Jani-King. (Procedures Manual 3.5.) Jani-King subtracts the applicable fees from the franchisee's gross monthly revenue and disburses the remainder to the franchisee. (Figlioli Dep. 182-83.) Specific fees that Jani-King franchisees pay include an accounting fee of five percent of gross revenues, a franchise fee of ten percent of gross revenues, an advertising fee of one percent of gross revenue, and other miscellaneous fees. (Franchise Agreement 4.5.1-2; Procedures Manual 3.1.) In addition, franchisees pay a finder's fee on any contracts that Jani-King provides to franchisees after Jani-King has already satisfied its initial obligation to provide a minimum amount of business. (Franchise Agreement 4.6.) Franchisees are allowed to solicit their own business, within specific limitations (Procedures Manual 4.24), and any advertising or marketing, including business cards, must be approved by Jani-King. ( Id. at 4.26).
2. The Named Plaintiffs
a. Darryl Williams
Darryl Williams purchased a Jani-King franchise on April 3, 2007. (Williams Dep. 19, Defs.' Opp'n Ex. B.) Williams was guaranteed $5, 000 of initial monthly cleaning business pursuant to the franchise package that he purchased. ( Id. at 20.) Williams was offered a number of cleaning accounts by Jani-King. ( Id. at 26-30.) Currently, Williams is servicing one Jani-King account, for which he personally performs the cleaning. ( Id. at 63.) Jani-King does not dictate when ...