July 27, 2018

California Companies Can Be Fined for Hiring the Wrong Janitorial Service

Beyond price and service, should companies care about the janitorial service they hire? With provisions of the California Property Service Workers Protection Act taking effect on July 1, 2018, and the Labor Commissioner recently fining Cheesecake Factory and its janitorial service $4.5 million for wage theft, it’s time to revisit how janitorial services are hired.

A provision of the Property Service Workers Protection Act that took effect on July 1, 2018, requires companies providing janitorial services to annually register with the Division of Labor Standards Enforcement. Registration requires that janitorial services meet certain conditions. Janitorial services that fail to register are subject to stiff civil fines. But it gets worse.

Under California Labor Code section 1432(b), any person or entity that contracts with a janitorial employer lacking a current and valid registration can be fined between $2,000 and $10,000 for the first violation, and between $10,000 and $25,000 for a subsequent violation. That’s a big disincentive to do business with an unregistered janitorial service. The DLSE has posted information about the registration requirements, along with a search tool to find registered janitorial services.  

Beyond these fines for lack of registration, companies can be liable for the wages of janitorial workers. If the company hiring a janitorial service exercises control over its workers, it can be deemed a joint employer of the workers under longstanding court decisions recognizing the joint employer doctrine. Also, as Cheesecake Factory learned, Labor Code section 2810.3 makes a company that contracts for labor within the company’s usual course of business jointly responsible with the labor contractor for the payment of wages and workers’ compensation coverage. Whether a janitorial service is within a company’s usual course of business will be decided on a case by case basis.

Practical Implications

To avoid potential fines, janitorial services should ensure they are properly registered and comply with all of the other requirements of the law. Companies contracting with janitorial services should monitor the registration of their janitorial services at least annually. These companies should also not direct the activities of janitorial workers working on their premises. In addition, contracts with janitorial services should be reviewed for indemnification provisions in the event a janitorial service is not properly registered or underpaying its workers.