AG Ferguson files lawsuit against janitorial services company for exploiting mostly immigrant workers
National Maintenance Contractors locks franchisees into misleading contracts that often let them earn less than minimum wage
SEATTLE— Attorney General Bob Ferguson today filed a consumer protection lawsuit against janitorial services company National Maintenance Contractors. National took advantage of immigrants with limited English proficiency and promised them the independence of business ownership. Unfortunately, in reality, National locked its franchisees into contracts that often left them earning less than minimum wage, paying exorbitant fees, and with little ability to defend themselves.
“These hard-working immigrants thought they were stepping up to the American dream,” Ferguson said. “Instead, the national maintenance contractors tricked them into signing contracts that prevented them from realizing this dream. As a people’s law firm, it’s our job to ensure fair treatment for the hard-working Washingtonians who clean up our businesses and keep our economy running.
National provides cleaning service contracts. He then enters into franchise agreements with janitors – largely non-English speaking immigrants – to do the work. Many of these franchisees are native Spanish and Russian speakers.
National tells these franchisees that they will be independent business owners and will earn a certain amount each month based on the amount of money they initially invest. For example, to earn $1,000 per month, franchisees would purchase a $5,000 “business unit”.
The lawsuit, filed today in King County Superior Court, alleges that National violated the law in multiple ways. The following are examples of National’s unlawful conduct:
- National misled franchisees about the amount of revenue franchisees would earn, in violation of Washington’s consumer protection law. National promised – and its franchisees paid – a certain level of revenue. However, in reality, National often failed to provide access to enough accounts to achieve this level, or misled franchisees about the amount of work required to achieve this promised level of revenue. Unrealistic job demands from nationals and gross undersupply of contracts have compounded these problems. National’s conduct has left many workers earning less than minimum wage.
- National unlawfully withheld information from franchisees. For example, National did not disclose to franchisees how much the companies paid National for the services. Additionally, National did not disclose that the company retains up to 30% of that amount. National’s failure to disclose information to franchisees violates the Franchise Investment Protection Act.
- National charged unreasonably excessive fees, in violation of the Consumer Protection Act. For example, National charged a monthly fee of 14% for basic billing services. He also claimed the fee would cover collection services, though he rarely, if ever, provides them.
The lawsuit seeks restitution for National’s approximately 250 franchisees in Washington and civil penalties against National.
Domestic franchisees must file a complaint with the Attorney General’s Office. The complaint form is available in English, Spanish and Russian.
Tricked into working for less than minimum wage
Many franchisees were unaware that the work required to earn the desired gross income would mean that, in many cases, they would earn less than the minimum hourly wage.
For example, National offered franchisees an account to clean a 1,700 square foot office space six times a week. After National took its fee, the franchisee earned approximately $6.59 by cleaning. At that time, Washington’s minimum wage was $9.32 an hour.
Unrealistic work demands
National’s practice of grossly underbidding contracts has created unrealistic demands on franchisees. For example, in some of its contract offers, National has included the following:
General kitchen cleaning:
- Clean and disinfect all counters
- Clean and disinfect the exterior of all cabinets
- Clean and disinfect the exterior of all appliances
- Clean and disinfect the sink and accessories
- Clean and sanitize dining/dining room tables and counters
- Dry mop / wet mop to remove all spills and stains on the floor
In at least one case, National estimated that a total of 3 minutes for the janitor to perform all these tasks. The contract required the franchisee to do this once a week.
Franchisees had no choice but to complete the contract tasks for the same dollar amount, regardless of the actual length of work.
One franchisee wrote to National that although an account allowed them to earn less than minimum wage, “we take the account because our volume is very low and we don’t have [sic] choice.”
National deceived its franchisees
National’s agents persuaded potential franchisees to invest thousands of dollars to sign up for its system. National knew that these franchisees spoke little to no English, had limited formal education and no prior franchise experience. National promised that they would be their own boss and could start their own profitable franchise business. The reality was quite different.
- National argued that franchisees could control their own work and hours. The reality is that many National customers require cleaning jobs to be done at specific times, sometimes within a specific window of two to four hours.
- National requires its franchisees to remain on call and available to National and its customers every day, including their days off and holidays.
- National explained that franchisees make an initial investment based on the level of gross monthly income they want to achieve. However, National did not disclose the number of customer accounts the franchisee would need to manage, or the number of hours the franchisee would need to work, in order to earn the desired level of gross monthly income.
National punished franchisees who refused accounts for any reason
National exerted tremendous pressure on franchisees to accept accounts. If franchisees decline a customer account, National will count the value of that account against the pledged revenue the franchisee has purchased from National. This was true even if National did not pay this amount to the franchisee.
For example, if a franchisee purchases a business unit for $1,000 per month from National and National offers two accounts worth $500 each per month, National will consider its obligation fulfilled. If the franchisee were to decline one of the accounts, National still considered its obligation fulfilled. That would leave the franchisee with just $500 a month, minus National’s fees.
Domestic franchisees penalized even when it would be impossible for the franchisee to complete the work when required due to conflicting contracts or religious obligations. In National’s system, if a franchisee declined a proposed account for any reason, National did not consider itself obligated to offer or provide other replacement accounts.
National has failed to deliver promised revenue to franchisees
National knew it would not be able to meet the monthly revenue levels promised to franchisees. National would recruit new franchisees in the same territory, even if current franchisees earn less than promised.
For example, one franchisee worked with National for nine years. Despite this franchisee’s plea to National that “I desperately need new accounts,” the franchisee only got National’s promised monthly income three times in those nine years. Sometimes that person only earned a fifth of what National had promised.
Despite National’s inability to achieve the revenue levels promised to franchisees, National is not refunding any of the fees paid by franchisees to purchase that level of revenue.
In contrast, on the rare occasions National provides accounts that place a franchisee above promised revenue levels, National requires franchisees to pay an additional fee to maintain that account.
Concealment of customer contract amounts
National conceals from franchisees the amount of money it actually receives from its customers. In fact, National is essentially paying itself twice. He pockets up to 30% of the amount he receives from a client for a contract. Then it deducts the fees and royalties from the portion of the contract that actually accrues to the franchisees.
For example, if a customer paid National $1,500 for cleaning services, National might describe it to a franchisee as a $1,050 account. Then, National would charge its fees on the $1,050 it paid out to franchisees.
It does not disclose this practice to franchisees.
This violates the Franchise Investment Protection Act, which prohibits franchisors from “[o]obtain money, goods, services, anything of value or any other benefit from any other person with whom the franchisee does business in connection with this business, unless such benefit is disclosed to the franchisee. »
Unreasonable and excessive “office expenses”
One of the benefits that National touts and franchisees pay for is National’s billing services. National tells franchisees it will bill customers, collect payments and sue customers who don’t pay. It charges franchisees 14% of their revenue for this service, more than half of franchisees’ monthly fees.
In reality, National rarely, if ever, pursues its collection efforts if a customer does not pay. Instead, National makes franchisees liable for that money. If National has already paid a franchisee and the customer does not pay National, National maintains that it has the right to recover what it paid to the franchisee.
Buried in the fine print of National’s franchise agreement is this admission: “In the event that we are unable to collect amounts owed, you [the franchisee] are responsible for the risk of loss in the event of non-payment. This is despite the fact that franchisees are not parties to contracts with customers.
National also prohibits franchisees from discussing finances directly with customers. In other words, National prohibits its franchisees from learning about the amounts involved, or participating in the contractual process, preventing them from pursuing collections.
Assistant Attorneys General Julia Doyle and Patricio Marquez are leading the case for Washington.
The Attorney General’s Office is Washington State’s primary legal office with attorneys and staff in 27 divisions across the state providing legal services to approximately 200 state agencies, boards, and commissions. Visit www.atg.wa.gov to learn more.
Brionna Aho, director of communications, (360) 753-2727; [email protected]
General contacts: Click here