PHILADELPHIA -- A pair of attorneys believe a recent federal appellate court ruling has misinterpreted case law in certifying a putative class action involving independent contractors of the world’s largest commercial cleaning franchisor, and instead agree with the court's dissenting judge.

Donald Prophete and Jeffrey M. Rosin of labor and employment law firm Constangy Brooks Smith & Prophete recently authored a blog questioning the decision and majority rationale of the U.S. Court of Appeals for the Third Circuit in Williams v. Jani-King of Philadelphia, Inc.

Plaintiffs Daryl Williams and Howards Brooks bought a commercial cleaning business from Jani-King under federal franchise laws, thereby making them franchisees. Filing suit on behalf of a group of fellow franchisees in the Philadelphia area, Williams and Brooks believe Jani-King misclassified them as “independent contractors” instead of “employees.”

Williams and Brooks claimed they seldom or never hired employees to assist with cleaning, and therefore sought unpaid wages under the Pennsylvania Wage Payment and Collection Law (WPCL). The WPCL mandates employers to regularly provide payment and benefits, and limits deductions that can be made.

Last year, a district court granted their motion for class certification.

Jani-King appealed the ruling to the Third Circuit, whose task it was to consider “whether the misclassification claim can be made on a class-wide basis through common evidence, primarily the franchise agreement and manuals.” Jani-King sought to reverse the class certification.

Judge D. Michael Fisher found the aforementioned agreement and manuals were applicable to the putative class members.

“The common evidence identified by the plaintiffs and the District Court are the Jani-King franchise agreement, policies manual, and training manual, and representative testimony about those documents,” Fisher wrote. “The District Court concluded that the plaintiffs’ claims could be proven through this common evidence and that, therefore, the plaintiffs met the predominance requirement.”

Ultimately, Fisher and colleague Michael A. Chagares, the court’s majority, elected to uphold the trial court decision to certify the prospective class.

“We hold that the claims in this case are susceptible to class-wide determination and that the District Court did not abuse its discretion by certifying the class,” Fisher wrote.

However, Judge Robert E. Cowen dissented from his colleagues, terming franchising “a bedrock of the American economy” and feeling the majority result harmed the prospect of that same bedrock.

“I do not believe that such a result is consistent with either basic class action principles, the nature and importance of the franchisor-franchise relationship, or prior franchising case law,” Cowen said.

Cowen also believed the common documents cited did not provide for a class certification.

“In this case, the plaintiffs’ purported common evidence merely sets forth various franchise system controls. Because of the absence of common evidence tending to prove that the franchisees are employees of the franchisor, the District Court abused its discretion by certifying a class of Jani-King franchisees. I therefore must respectfully dissent,” the judge wrote.

Prophete and Rosin concurred with Cowen’s dissent.

“The dissent noted [correctly, in our opinion] that in conducting a misclassification analysis the court should disregard any controls required by franchise law to promote uniformity within the system and manage the end-user’s experience with the franchise brand,” Prophete and Rosin wrote in their blog. “Once the controls required by franchise law were ignored, the dissent recognized, there really were no ‘controls’ left.”

When reached for comment, Rosin, chairman of his firm’s Franchise Industry Practice Group, went on to say franchisors, under the federal franchise disclosure rule, are “required to exert significant controls over their franchisees.”

“If the employment relationship is governed by whether you have rights of control over the employee, that’s fine, but keep in mind the franchisor is supposed to have significant rights of control over the franchisee, under the franchise laws,” Rosin said. 

Rosin rhetorically asked how it was possible for the two legal concepts to be squared without having the Pennsylvania employment law test “obliterate” the federal franchise law.

“The dissent really honed in on that, and recognized that you really have to understand that’s what a franchisor has to do, and then look at the relationship,” he said. “Essentially, you should exclude all of those things a franchisor has to do, before you look at the relationship and determine whether it’s an employment relationship. The majority [in this case] never did that.”

Rosin said the court's majority not analyzing this aspect of franchise law was “disappointing.”

“They decided what the appropriate test was for the employment relationship under Pennsylvania law, and they just simply looked at that test and said, ‘OK, could this test be examined class-wide for this issue?” he said.

Rosin added if that were to be done, it was important for the majority to place “parameters” around the test.

“They didn’t put any parameters around it,” he said. “The whole purpose of a class action mechanism is to say there’s a common issue of law and fact here, that should be resolved on a class-wide basis.

"Whether the franchisees are employees is the common issue that they found, but if you’re going to find that, then say, 'If this can be resolved on a class-wide basis, certain things the franchisor does within the relationship need to be ignored because those are all required by franchise law.' Had the majority analyzed the case this way, that would have been a more reasoned analysis."

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com.

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