Attorney General Bonta Announces Nearly $2 Million Settlement with Janitorial Franchising Companies Barring Use of Franchising to Misclassify Workers — CA (2025)

Case Details:

Title: Attorney General Bonta Announces Nearly $2 Million Settlement with Janitorial Franchising Companies Barring Use of Franchising to Misclassify Workers
Amount: $2,000,000
Location: CA
Date: August 2025
Type: Employment
Source: California Attorney General
Source URL: https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-nearly-2-million-settlement-janitorial

Opening Summary

California Attorney General Rob Bonta announced a nearly $2 million settlement in August 2025 with janitorial franchising companies that allegedly used franchising arrangements to misclassify workers as independent contractors rather than employees.

Case Background

The settlement involves janitorial franchising companies that operated business models where workers were required to purchase franchise agreements to perform cleaning services. Under these arrangements, workers paid franchise fees and were classified as independent business owners rather than employees, despite performing work that typically would qualify for employee status under California law.

The Attorney General's investigation revealed that these franchising structures were allegedly designed to avoid providing workers with basic employment protections, benefits, and rights that California employees are entitled to receive. The companies involved in the settlement operated in the commercial cleaning industry, where worker misclassification has been identified as a persistent problem affecting thousands of workers across the state.

This case represents part of a broader enforcement effort by California authorities to address worker misclassification schemes that deprive workers of proper wages, benefits, and workplace protections while giving companies an unfair competitive advantage over businesses that properly classify their workers as employees.

Key Allegations / Claims

The primary allegations centered on the companies' use of franchising arrangements as a mechanism to misclassify workers who should have been treated as employees under California law. The Attorney General alleged that despite being labeled as franchisees, these workers lacked the independence and control typically associated with genuine business ownership.

Specific claims included allegations that the companies maintained significant control over how work was performed, set rates and terms of service, and required workers to follow company protocols and procedures. The investigation found that workers were allegedly required to pay franchise fees to obtain work opportunities, creating a barrier to employment that benefited the companies financially.

The case also involved allegations that the misclassification scheme denied workers access to minimum wage protections, overtime pay, workers' compensation coverage, unemployment insurance, and other benefits required under California employment law. Additionally, the arrangement allegedly prevented workers from exercising rights to organize and engage in collective bargaining as employees.

Resolution & Amount

The case was resolved through a settlement agreement totaling nearly $2 million. As part of the settlement terms, the companies agreed to cease using franchising arrangements to misclassify workers and implement compliance measures to ensure proper worker classification going forward.

The settlement includes monetary relief for affected workers who were subjected to the alleged misclassification scheme. The companies also agreed to modify their business practices and implement monitoring systems to prevent future violations of California worker classification laws.

Under the settlement terms, the companies must provide clear disclosure to workers about their employment status and rights, and ensure that any future business arrangements comply with California's strict worker classification standards established under Assembly Bill 5 and related legislation.

Applicable Law / Enforcement

This settlement enforces California's worker classification laws, particularly Assembly Bill 5 (AB 5), which codified the "ABC test" for determining when workers must be classified as employees rather than independent contractors. Under this test, workers are presumed to be employees unless the hiring entity can demonstrate that the worker meets all three criteria of the ABC test.

The case also involves enforcement of California Labor Code provisions that protect workers' rights to proper wages, benefits, and working conditions. The Attorney General's authority to pursue these violations stems from California's Unfair Competition Law, which prohibits business practices that harm workers and create unfair market advantages.

California has been particularly aggressive in enforcing worker classification laws, recognizing that misclassification undermines worker protections and creates an uneven playing field for businesses that properly classify their workers as employees.

Context & Benchmarks

Statewide benchmarks for this case type are not currently available in our database. However, this settlement reflects California's continued focus on combating worker misclassification across various industries, particularly those involving franchise-like arrangements that may be used to circumvent employment law obligations.

Sources

• California Attorney General: https://oag.ca.gov/news/press-releases/attorney-