Gardere Wins Dismissal for Jani-King in US Department of Labor Suit

15 June 2017 News

Gardere Wynne Sewell LLP, an Am Law 200 firm, won dismissal for its client, Jani-King of Oklahoma, Inc., of a lawsuit brought by the U.S. Department of Labor. Jani-King of Oklahoma, Inc. is a subsidiary of Jani-King International, Inc., the world’s leading commercial cleaning franchise company. The Department of Labor sought an order requiring Jani-King of Oklahoma to comply with the Fair Labor Standards Act and keep records of its franchise owners as if they were employees. The U.S. District Court for the Western District of Oklahoma granted Jani-King of Oklahoma’s motion to dismiss and dismissed the Department’s case with prejudice.

Jani-King licenses its trademarked name and commercial cleaning system to its franchisees, which are often corporate entities. Like all franchisors, the company offers marketing and operational support and the franchisees operate as independent businesses and are responsible for their day to day operations, including managing their employees and maintaining customer relationships. The Department of Labor’s proposed order would have required Jani-King of Oklahoma to keep records for the franchises regarding hours worked, wages, and other employment practices.

Jani-King moved to dismiss the Department of Labor’s lawsuit on two main grounds. First, the department’s suit would effectively serve as an unconstitutional seizure of property because the proposed remedy would necessarily void the franchisees’ franchise agreements. Second, the portion of the FLSA at issue applies plainly to individual persons and not corporate entities.

The court granted Jani-King’s motion to dismiss the Department’s original complaint. The Department then filed an amended complaint which failed to address the deficiencies in the original complaint. Jani-King moved to dismiss again largely on the same grounds and on June 9, the court issued an order granting the motion dismissing the case with prejudice as to re-filing.

The Gardere team representing Jani-King was led by firm partners Peter L. Loh, Carrie B. Hoffman and Randy D. Gordon.

“The court’s decision was gratifying, as it shows the government’s claims were grossly overreaching," said Hoffman, co-chair of the firm’s labor and employment practice group. "We are thrilled for our client and the dismissal of the complaint with prejudice.”

"This is a blow to the government’s overall effort to classify franchisees as employees of their franchisors. The government’s explicit goal was to have this court disregard Jani-King’s actual business model, and this proves the government’s one-size-fits-all statement of its case fails both factually and legally," Hoffman added.

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