Industry Clean-Up

When the California Labor Commissioner’s office in June held Calabasas-based Cheesecake Factory Inc. liable in a $4.57 million wage theft case involving 559 underpaid janitorial workers, the high-profile decision cast a light on the seamy side of the janitorial business. Coinciding with the verdict came a new registry intent on creating protections for non-union janitors. Under the Property Service Workers Protection Act, enacted in 2016 and 2017, janitorial contractors must provide three years of employee records to register with the State Labor Commission. As of July 1, janitorial companies must file their information on the Department of Industrial Labor website. To register, janitorial contractors pay a $500 fee annually. Companies failing to register by Oct. 1 may be fined $100 a day up to a total of $10,000. More importantly, the law extends to companies that hire janitorial contractors. In the case of Cheesecake Factory, for example, the janitors worked for Magic Touch Commercial Cleaning. Going forward, California companies that hire unregistered janitorial contractors could be fined between $2,000 and $10,000, with subsequent violations potentially resulting in fines as high as $25,000. Compliance by education On July 26, California Labor Commissioner Julie Su, in conjunction with Building Owners and Managers Association of Greater Los Angeles and watchdog group Maintenance Cooperation Trust Fund, conducted a webinar to discuss the new janitorial registry. According to Su, 160 participants logged on. Until now, some companies “known to break the law, they can operate with impunity,” Su told the Business Journal. Under the new regulations, “if someone has not paid all the back wages, they will not get a license. (By registering with the state,) they have disclosed this info and meet the basis of the law.” MCTF Executive Director Lilia Garcia-Brower has called the registry “a game changer that we can use to hold companies publicly accountable to basic minimum standards for working people.” UCLA Labor Center Legal and Policy Research Manager Tia Koonse also believes the new registry is codifying the janitorial industry’s loose ends and will have an overall positive impact. Koonse worked on the California Senate bill which led to the janitorial law. She told the Business Journal that the state has given janitorial companies “time and notice to come into compliance.” Michael Mahdesian, board chairman of Culver City-headquartered janitorial company Servicon Systems, agreed that the registry can only improve the industry. “It evens the playing field and it discourages bad actors,” Mahdesian said. “It’s going to be enforceable, too. There’s money for enforcement. That should hopefully scare some players who are not following the law.” Indirect liability The Labor Commission penalized Cheesecake Factory and Americlean Janitorial Services Corp. for exploiting workers at five restaurants in Orange County and San Diego. Cheesecake Factory had used janitorial contractor Americlean, which subcontracted work to Magic Touch. “Magic Touch is the problem,” said MCTF Legal Director Anel Flores. “She was an individual based out of her own (home). She was paying with personal checks. That’s pretty typical. We have some cases right now (like that) that are being investigated.” Both Cheesecake Factory and Americlean were fined, but the companies have yet to compensate workers because the case is on appeal. Mahdesian said he “wasn’t shocked” when he heard that Cheesecake Factory got penalized for its indirect role in the violations. “Companies will try to feign ignorance,’” Mahdesian said. “If they don’t know, they’re not doing their due diligence. This (registry) puts pressure on companies contracting out to do their due diligence.” The registry framework has been applied to other industries, such as carwashes, and Koonse at UCLA, wants to create registries for other informal industries, including domestic workers and warehousing. She sees multiple benefits in the janitorial registry, from making a company’s outstanding judgments transparent to helping wronged workers track down companies. “It’s not a guarantee, it’s another tool,” Koonse said. The goal of the registry is to help companies identify and select law-abiding janitorial contractors. Mahdesian noted that contractors that engage in wage theft and other practices have lower costs, and so can bid lower on jobs. “It’s what’s called a race to the bottom,” he explained. “People will bid extremely lower because they can. Companies that get caught will just change the name of their company. The bill that was passed stops that from happening, too.” “It’s an industry where there are so many unscrupulous actors, so (legitimate janitorial companies) supported this,” Koonse said. “For them, registering is no big deal if they’re legit and they’re pissed off they keep losing money to these shady contracts.” Labor Commissioner Su hopes resources such as the registry, outreach events and webinars will combine to course-correct the custodial industry. “We don’t want to play ‘Gotcha!’” she said. “There are hundreds of honest, legitimate operators out there. Those are the ones being squeezed out by the bad actors. … We want to protect the honest janitor by incentivizing the hirers to choose good honest businesses who play by the rules.”