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Mujo v. Jani-King International, Inc.

United States District Court, D. Connecticut

March 31, 2018

SIMON MUJO and INDRIT MHARREMI, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
JANI-KING INTERNATIONAL, INC., JANI-KING INC., and JANI-KING OF HARTFORD, INC., Defendants.

          RULING ON DEFENDANT'S MOTION TO DISMISS

          VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE

         Simon Mujo and Indrit Muharremi, on behalf of a putative class of over 100 Jani-King franchisees (collectively “Plaintiffs”), have sued Jani-King International, Inc., Jani-King, Inc., and Jani-King of Hartford, Inc. (collectively “Jani-King”). In this diversity action, Mr. Mujo and Mr. Muharremi allege that Jani-King has unlawfully classified them as independent contractors under Connecticut Wage Laws, Conn. Gen. Stat. § 31-58 et seq., and that the various fees, costs, client sales tax, and charge backs under Jani-King's franchise agreement violate Sections 31-71(e) and 31-73(b) of the Connecticut General Statues.

         Jani King now moves to dismiss Plaintiffs' class-action complaint.

         For the reasons that follow, Jani-King's motion to dismiss is GRANTED in part and DENIED in part.

         Even if the parties' franchisor-franchisee agreement constitutes an employment agreement, any deductions for royalty fees, advertising fees, finder's fees, accounting fees, technology fees, complaint fees, services fees, non-reported business fees, client sales tax, lease deductions, and various other fees do not constitute “wages” within the meaning of Conn. Gen. Stat. § 31-71e and thus, Plaintiffs' claim under Conn. Gen. Stat. § 31-71e must be dismissed.

         Nevertheless, any initial and non-refundable franchise fee down payment made or continuing to be paid by Plaintiffs or any of the various other fees required from Plaintiffs may, if proven to be a condition for Jani-King providing them with initial or continuing employment, constitute an improper payment in violation of § 31-73(b). As a result, Plaintiffs' unjust enrichment claim survives and Jani-King's motion to dismiss this claim is denied.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Factual Allegations

         Jani-King provides commercial cleaning services to its customers.[1] Am. Compl. ¶ 15. Jani-King franchisees, two of whom are Mr. Mujo and Mr. Muharremi, conduct these cleaning services. Id. To carry out their business, Jani-King, under the terms of a franchise agreement (“Agreement”), allegedly enters into independent contractor relationships with individuals who then perform janitorial work for Jani-King customers. Id. Jani-King allegedly required all members of the putative class to sign substantially similar agreements before working for Jani-King. Id. ¶ 16.

         Under the terms of these agreements, Jani-King allegedly required Plaintiffs to pay an initial and non-refundable franchise fee down payment, as a condition for Jani-King providing them with the opportunity to perform cleaning services under Jani-King's cleaning contracts between Jani-King and their customers.[2] Id. ¶ 17. Mr. Mujo and Mr. Muharremi and a subset of the putative class members allegedly paid the down payment to Jani-King as a lump sum at the time of entering into the contract. Id. A second subset of putative class members allegedly paid a portion of the down payment at the time of entering into the contract and paid or are paying the outstanding balance as monthly deductions drawn from the compensation paid to them by Jani-King. Id.

         1. Freedom from Control and Direction Allegations

         Plaintiffs allege that they are not free from Jani-King's control and direction with respect to Plaintiffs performance of services, under the terms of the Agreement. Id. ¶ 20. Plaintiffs also maintain that Jani-King's methods, procedures, and policies with which Jani-King requires Plaintiff to comply “are numerous and detailed and control the manner in which Plaintiffs and the putative class members must perform their tasks.” Id.

         For example, the franchise agreement allegedly requires that Plaintiffs complete a training program including an exam; comply with the Jani-King Manual, which, among other things, requires Plaintiffs to: abide by Jani-King's operating systems, procedures, policies, methods, standards, specifications, and requirements; wear a Jani-King uniform and nametag; obtain a personal digital assistant or smart phone to use when corresponding with Jani-King and its customers; communicate with customers in a certain way and on a schedule Jani-King determines; perform services consistent with a cleaning schedule associated with the contract between Jani-King and its customers; and allow Jani-King to perform quality control inspections to ensure compliance with Jan-King standards. Id. ¶ 20.

         The Agreement allegedly prohibits franchisees from engaging in or having a financial interest in other cleaning services within the territory covered by the Agreement. Id. Indeed, the Agreement allegedly contain a non-compete clause that prohibit Plaintiffs from engaging in any cleaning service-related work during the term of the Agreement and for two years after its termination. Id. ¶ 22.

         Plaintiffs also allegedly do not perform services outside of the usual course of Jani-King's business or outside of all Jani-King's places of business. Id. ¶ 21. Indeed, Plaintiffs are allegedly “entirely dependent” upon Jani-King for their work assignments, and Plaintiffs do not and, under the terms of the Agreement, cannot maintain their own clients or customers. Id.

         2. Wage Deductions

         Plaintiffs also maintain that Jani-King deducts monthly various sums of money from their wages, including royalty fees, advertising fees, finder's fees, accounting fees, technology fees, complaint fees, services fees, non-reported business fees, client sales tax, lease deductions, and various other fees. Id. ¶ 23.

         For example, in September 2016, Mr. Muharemmi allegedly earned a net revenue of $4, 508.72. Id. ¶ 24. From this amount, Jani-King allegedly deducted: (1) a royalty fee of $425.75; (2) an accounting fee of $127.72; (3) a technology fee of $106.44; (4) a finder's fee of $162.42; (5) franchisee supplies costs in the amount of $49.98; (6) an advertising fee of $63.86; (7) a lease cost in the amount of $27.21; (8) a business protection plan (“BPP”) deduction of $276.73; (9) a “BPP” administrative fee of $7.00; (10) client sales tax in the amount of $251.30; and (11) charge backs in the amount of $1, 261.50. Id. In total, Jani-King allegedly deducted $2, 761.90 from Mr. Muharremi's compensation, leaving him with $1, 746.80 in gross income for the month Id.

         During July 2015, Mr. Mujo allegedly earned $1, 403.83 in revenue. Id. ¶ 25. From that amount, Jani-King allegedly deducted: (1) a royalty fee in the amount of $132.00; (2) an accounting fee of $66.00; (3) a finder's fee in the amount of $714; (4) an advertising fee of $13.20; (5) a business protection plan deduction of $77.35; (6) a business protection administration fee of $7; and (7) client sales tax in the amount of $83.83. Id. In total, Jani-King allegedly deducted $1, 093.38 from Mr. Mujo's compensation, leaving him with $310.45 gross income. Id.

         Jani-King allegedly has made these deductions without obtaining a knowing and intelligent authorization for those deductions on a form approved by the Commission of the Department of Labor, as allegedly required under Section 31-71e of the Connecticut General Statutes. Id. ¶ 26. Plaintiffs maintain that the Agreement does not constitute written authorization, as required under Connecticut law, because, at the time of execution, Jani-King represented to Plaintiffs that they were not Jani-King's employees and Jani-King was not their employer within the meaning of the Connecticut Minimum Wage Act (“Minimum Wage Act”). Id. Plaintiffs alleged that these deductions were solely for Jani-King's benefit and did not confer a benefit on Plaintiffs. Id.

         3. Class Allegations

         Plaintiffs allege that the putative class members are similarly situated “individuals in Connecticut who, pursuant to a contract with Jani-King, have performed cleaning services for Jani-King at any time during the two years immediately preceding this lawsuit and continuing until final judgment of the case.” Id. ¶ 29. The putative class is allegedly so numerous that joinder of all parties is impracticable, given that more than fifty individuals in Connecticut meet the class definition. Id. ¶ 32.

         Plaintiffs allege that there are common questions of law and fact, including whether: (1) Jani-King has improperly categorized Plaintiffs as independent contractors; (2) the wage deductions under the Agreement were lawful; (3) the down payment and wage deductions Jani-King required violate Section 31-73 of the Minimum Wage Act; and (4) whether Jani-King was thereby unjustly enriched. Id.

         Plaintiffs' claims are allegedly typical of the class in that the claims are identical and arise from the same course of conduct and practice. Id. ¶ 34. Mr. Mujo and Mr. Muharremi allege that they will fairly and adequately protect the interests of the class and that common questions of law and fact predominate over questions affecting only individual members. Id. ¶ 35-36. Plaintiffs allege that, because Plaintiffs will prove their claims by a common body of evidence, a class action is superior to other available methods for the fair and efficient adjudication of this matter. Id. ¶ 36.

         B. Procedural Background

         Plaintiffs filed this lawsuit on December 5, 2016, and, on February 9, 2017, filed an Amended Complaint alleging two counts: (1) Jani-King has violated the Minimum Wage Act; and (2) Jani-King has been unjustly enriched. ECF Nos. 1, 41.

         Plaintiffs seek: (1) injunctive relief; (2) compensatory damages under the Minimum Wage Act; (3) penalty damages under Section 31-72 of the Connecticut General Statutes; (4) attorney's fees as appropriate under Section 31-72 of the Connecticut General Statutes; (5) common law punitive damages; (6) disgorgement; (7) and interest and costs. Id. at 14. The Court has jurisdiction under 28 U.S.C. § 1332. Defendants move to dismiss the Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Mot. to Dismiss. ECF No. 45.

         II. ...


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