L-R:Awuah, lawyer Liss-Riordan & others appear before MA lawmakers, 2011

BOSTON – A federal judge ruled last Thursday that Coverall North America must pay triple damages to hundreds of workers classified as franchisees instead of employees, dating back from 2006. Previously, he had ruled that the court would triple damages from 2010. That changes the calculation of damages dramatically, adding the four year period.

In addition to the award on damages, the global janitorial cleaning franchisor will have to pay all the initial franchise fees and additional business fees, as well as recovering insurance deductions. The judge said those fees were unlawful and can be recovered as provided by the Massachusetts Supreme Judicial Court.

Attorney Shannon Liss-Riordan of Lichten & Liss-Riordan, representing the class plaintiffs, said they were excited about the order. “We are very pleased that the workers who did not have arbitration agreements will be getting a judgment, and can finally see a conclusion to their case,” she declared.  

Liss-Riordan said the parties were given 30 days to submit what final calculations are based on from this order. She added, “We are now looking forward to the judge’s further rulings on the workers who had arbitration agreements. That will be the next step.”

The case, Awuah v Coverall North America Inc., has been closely watched by the franchise community since it began in 2007. The original complaint filed by eight purported franchisees alleges that they were misclassified as independent contractors instead of the reality of being employees. They accused Coverall of not providing the promised volume of cleaning contracts to them after they paid $6,000 to $30,000.

As employees, the plaintiffs assert that Coverall is also liable for minimum wage, overtime and wage law violations. In the lawsuit, the employees claim breach of contract, misrepresentation, deceptive and unfair business practices and unjust enrichment.

While there has been much activity with both sides filing various motions in the case for the past three weeks, U.S. District Judge William G. Young’s order took care of several other housekeeping issues. He did not rule on fifteen additional class members who converted their businesses to Coverall franchises without receiving a franchise offering circular containing arbitration clauses. Nor did he rule on other class members who signed releases after August 31, 2011.

DLA Piper, outside counsel to Coverall, did not respond to our request for comment on Thursday’s order.

IFA’s past warning

The International Franchise Association submitted an amicus (friend of the court) brief in the case last June through attorneys Eric Karp and Doris Fournier of Witmer, Karp, Warner & Ryan LLP in Boston. It was filed jointly on behalf of the IFA and two of its franchisor members, Friendly’s Restaurants Franchise and Fantastic Sam’s Franchise Corporation.

The organization warned the litigation could result in franchisors determining that the costs of doing business in Massachusetts are too high in comparison to other states. The brief surmised that it would leave many entrepreneurs without the chance to start their own business and many residents without employment opportunities or access to important products and services.

IFA President & CEO Steve Caldeira stated at that time, “On behalf of the franchise industry, we urge the court to fully take into account the unique attributes of franchising and the federal regulatory oversight of the franchise business model.”

The court disagreed.

Now, after five years of litigation, plaintiff attorney Liss-Riordan exclaimed, “It’s looking like we are finally seeing the end of the road here, at long last.”

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