Constance Mouanda v. Jani-King International

RENDERED: AUGUST 18, 2022
TO BE PUBLISHED

Supreme Court of Kentucky
2021-SC-0089-DG

CONSTANCE MOUANDA APPELLANT

ON REVIEW FROM COURT OF APPEALS
V. NO. 2019-CA-1594
JEFFERSON CIRCUIT COURT NO. 19-CI-000283

JANI-KING INTERNATIONAL; APPELLEES
CARDINAL FRANCHISING, INC.,
D/B/A JANI-KING LOUISVILLE; AND
JANI-KING LEASING CORP.

OPINION OF THE COURT BY JUSTICE HUGHES

REVERSING AND REMANDING

Jani-King International, Inc. (Jani-King) developed and maintains a

proprietary commercial cleaning system that involves selling to master

franchisees the right to operate as a Jani-King sub-franchisor in an exclusive

territory. These master franchisees, like Appellee Cardinal Franchising, Inc.

(Cardinal), in turn sell Jani-King unit franchises to individuals interested in

operating a commercial cleaning franchise in the master franchisee’s territory.

The individuals are generally required to form a limited liability company with

the master franchisee. This type of multi-tiered franchise system has become

relatively common in the janitorial cleaning industry across the United States.
 Appellant Constance Mouanda is the sole member and owner of the

assetless The Matsoumou’s, LLC (the LLC). After Mouanda formed the LLC for

which Cardinal provided all the necessary legal documents, the LLC entered a

Franchise Agreement with Cardinal, purchasing the rights to operate as a unit

franchisee. Having never realized the profits promised under the Franchise

Agreement with Cardinal, Mouanda individually filed suit in Jefferson Circuit

Court for fraud, breach of contract, and unconscionability. In addition, she

sought damages for Cardinal and Jani-King’s failure to comply with Kentucky’s

wage and hour laws. The trial court granted Cardinal’s and Jani-King’s motion

to dismiss based on Mouanda’s failure to bring the suit on behalf of the LLC

and the Court of Appeals affirmed. Having granted discretionary review and

carefully reviewed the record, we reverse the Court of Appeals and remand this

case for further proceedings consistent with this Opinion.

FACTS

Jani-King was founded as a commercial cleaning company in the 1960s.

Since that time, Jani-King has grown into one of the world’s largest commercial

cleaning franchise companies. Jani-King originally hired employees to perform

cleaning services but, beginning in the 1970s, Jani-King shifted its focus to

selling franchises. It sells “master franchises,” which give the master

franchisee the exclusive right to use Jani-King’s brand name, reputation, and

cleaning system within a defined geographic area. Jani-King is not a party to

the franchise agreements between a master franchisee and unit franchisee.

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 Cardinal is a Kentucky corporation and the Jani-King master franchisee

for Louisville/Jefferson County and fifteen surrounding counties in Kentucky

and Indiana. Master franchisees, like Cardinal, are responsible for selling “unit

franchises,” training unit franchisees, and securing cleaning contracts (with

office buildings, hospitals, hotels, manufacturers, etc.) for unit franchisees to

perform. Unit franchisees are the “boots on the ground”—the unit franchisee,

either alone or with his/her employees, cleans commercial buildings using

Jani-King’s prescribed methods, products, and equipment. Master franchisees,

like Cardinal, are responsible for ensuring proper use of Jani-King proprietary

information in their territory, and if they fail to do so, Jani-King reserves the

right to enforce any necessary provisions in Cardinal’s unit franchise

agreements. Unit franchisees can purchase or lease products and equipment

from Jani-King Leasing Corporation, a separate entity from Jani-King

International, but are not required to do so.1

In 2017, Constance Mouanda, a Congolese immigrant residing in

Louisville, Kentucky, inquired about purchasing a unit franchise from

Cardinal. According to Mouanda, Cardinal would not sell a unit franchise to

her individually. Instead, Cardinal required Mouanda to form a limited liability

company to purchase the franchise. Cardinal drafted the paperwork necessary

for Mouanda to form The Matsoumou’s, LLC (the LLC), and Mouanda executed

1 Although named as a party in Mouanda’s complaint, Jani-King Leasing
Corporation is not a party to regional or unit franchise agreements and has not sold or
leased any cleaning equipment in Kentucky in the last three years. It has not sold or
leased any cleaning equipment to Mouanda or the LLC.

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the documents on November 11, 2017. Several months later, in February

2018, the LLC entered into a unit franchise agreement with Cardinal (the

Franchise Agreement). As is typical in the Jani-King system, Jani-King was

not a party to the Franchise Agreement. However, Jani-King’s contract with

Cardinal reserves Jani-King’s right to enforce unit franchise agreements if

Cardinal fails to protect its branding. Mouanda, as president of the LLC, paid

Cardinal a total of $12,000 for the unit franchise.2 According to Mouanda,

Cardinal assured her that the LLC would earn at least $2,000 per month from

the cleaning business referred to her by Cardinal.

In January 2019, Mouanda, individually, sued Cardinal and Jani-King in

Jefferson Circuit Court alleging fraud, breach of contract, and

unconscionability. Mouanda also sought damages for Cardinal’s and Jani-

King’s failure to comply with Kentucky’s wage and hour laws. Specifically,

Mouanda alleged that the companies’ franchise model was an attempt to

circumvent employment law—by labeling janitors as franchisees, Cardinal and

Jani-King freed themselves of the obligation to pay minimum wage and provide

other employee protections.

Cardinal and Jani-King filed motions to dismiss the complaint. In its

motion, Cardinal asserted that Mouanda, individually, lacked standing to bring

any claims against it because the Franchise Agreement was between Cardinal

and the LLC. Cardinal also asserted that because Mouanda owns an

2 The $12,000 payment to Cardinal includes a $6,000 down payment and

$6,000 in franchise fees.

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independent franchise through the LLC, which is not a party, she is not an

employee but rather an independent contractor employed by her own entity.

For its part, Jani-King asserted that it had no contractual or employment

relationship with Mouanda or the LLC. Jani-King, a Texas corporation, also

argued that Kentucky lacks personal jurisdiction over it.

In response to the motions to dismiss, Mouanda asserted that discovery

would likely show that Cardinal is an agent of Jani-King due to the level of

control it exerts over Cardinal. Relatedly, Mouanda contended that Jani-King’s

relationship with Cardinal allowed Kentucky to properly exercise personal

jurisdiction over Jani-King. As to the standing issue, Mouanda argued that the

fraud and wage and hour claims belonged to her, individually. Specifically,

Mouanda claimed that the fraud was perpetrated prior to her required

formation of the LLC. She also argued that she was the proper party to bring a

wage and hour claim because she, not the LLC, was Cardinal’s and Jani-King’s

de facto employee. Finally, Mouanda acknowledged that the Franchise

Agreement was between Cardinal and the LLC. She advised the trial court of

her intent to file an amended complaint adding the LLC as a plaintiff for the

contract claims, but this was never done before the trial court dismissed for

failure to state a claim some five months after the filing of the complaint.

After considering the parties’ arguments, the trial court granted

Cardinal’s and Jani-King’s motions to dismiss. The trial court ruled that

Mouanda lacked standing to assert the claims in her complaint. In support of

that holding, the trial court cited Turner v. Andrew, 413 S.W.3d 272 (Ky. 2013),

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for the proposition that an LLC’s sole member could not assert claims

belonging to the LLC. The trial court found that all the claims raised in

Mouanda’s complaint related to acts that took place after the formation of the

LLC and, consequently, the LLC needed to assert those claims. As to

Mouanda’s assertion that formation of the LLC was part of the fraud, the trial

court concluded that formation of the LLC caused no harm to Mouanda.

Notably, the trial court made no express mention of Mouanda’s wage and hour

claims.

Mouanda appealed the dismissal of her complaint and the Court of

Appeals unanimously affirmed. The Court of Appeals agreed that Mouanda

lacked standing to bring suit and the proper plaintiff was the LLC, the named

franchisee in the Franchise Agreement with Cardinal. Unlike the trial court,

the appellate court addressed Mouanda’s wage and hour claims, but it simply

distinguished cases from other jurisdictions where wage and hour claims

against Jani-King were allowed to proceed by noting that in those cases the

franchisees were individuals as opposed to limited liability companies. Finding

the absence of the LLC fatal to all of the claims, the Court of Appeals concluded

that the trial court properly dismissed Mouanda’s complaint in its entirety.

ANALYSIS

Motions to dismiss pursuant to Kentucky Rule of Civil Procedure (CR)

12.02 for failure to state a claim are reviewed de novo. Marshall v. Montaplast

of N. Am., Inc., 575 S.W.3d 650, 651 (Ky. 2019). In ruling on a motion for

failure to state a claim, the trial court should take all the allegations in the

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complaint as true and not dismiss “unless the pleading party appears not to be

entitled to relief under any set of facts which could be proven in support of his

claim.” Id. (quoting Morgan v. Bird, 289 S.W.3d 222, 226 (Ky. App. 2009)). In

addition, all pleadings should be “liberally construed in the light most favorable

to the plaintiff . . . .” Fox v. Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (quotations

and citations omitted). Notably, the trial court is not required to make any

findings of fact, “rather, the question is purely a matter of law. Stated another

way, the court must ask if the facts alleged in the complaint can be proved,

would the plaintiff be entitled to relief?” Id.

I. Mouanda’s Wage and Hour Claims Generally

We begin with whether Mouanda, not the LLC, is the proper plaintiff for

the wage and hour claims against Cardinal and Jani-King. First, we recognize

the distinction between an LLC and its members. In Turner, 413 S.W.3d at

273, the plaintiff filed a lawsuit in his individual capacity, even though the

trucking business was operated by an LLC. This Court explained that an LLC

and its sole member are not legally interchangeable. Id. at 276. In that case,

the only proper plaintiff to assert lost business damages was the LLC itself. Id.

at 278. As the Court explained, “an LLC is not a legal coat that one slips on to

protect the owner from liability but then discards or ignores altogether when it

is time to pursue a damage claim. The law pertaining to limited liability

companies simply does not work that way.” Id. at 276. However, Mouanda is

not asserting a wage and hour claim that, if applicable, belonged to the LLC.

Rather, she claims that she, as an individual, was the party injured by the

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alleged violation of the wage and hour laws. Her claimed damage is that she

was deprived of the minimum wage and other worker protections and the

existence of the LLC which Cardinal required her to form—indeed formed for

her—cannot deprive her of the law’s protection.

The Kentucky Wage and Hour Act (KWHA) protects employees from the

unlawful wage and hour practices of their employer. Kentucky Revised Statute

(KRS) 337.010-.433. For the KWHA to apply, an employee-employer

relationship must exist, a relationship which requires an employee and

employer and the act or condition of employment. The KWHA adopts the

following definitions:

(d) “Employer” is any person, either individual, corporation,
partnership, agency, or firm who employs an employee and
includes any person, either individual, corporation, partnership,
agency, or firm acting directly or indirectly in the interest of an
employer in relation to an employee[.]

KRS 337.010(1)(d).

(e) “Employee” is any person employed by or suffered or permitted
to work for an employer, except that:

1. Notwithstanding any voluntary agreement entered into
between the United States Department of Labor and a franchisee,
neither a franchisee nor a franchisee’s employee shall be deemed
to be an employee of the franchisor for any purpose under this
chapter; and

2. Notwithstanding any voluntary agreement entered into
between the United States Department of Labor and a franchisor,
neither a franchisor nor a franchisor’s employee shall be deemed to
be an employee of the franchisee for any purpose under this
chapter.

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KRS 337.010(1)(e). Although the KWHA was created over 80 years ago, a 2017

amendment to its definitions resulted in the explicit exclusion of franchisees

and their employees from qualifying as employees of the franchisor.

Jani-King and Cardinal insist that the plain language of KRS

337.010(1)(e)1 precludes Mouanda’s KWHA claim but our application of that

language to these facts causes us to conclude otherwise. The statute provides

that “neither a franchisee nor a franchisee’s employee” can be an employee of

the franchisor, language Jani-King and Cardinal as the franchisor and sub-

franchisor claim protects them from any employment relationship with

Mouanda. The franchisee in this case, however, is not, as Jani-King and

Cardinal have repeatedly pointed out, Constance Mouanda, but rather the LLC

they required and formed for her. Additionally, nothing in the record suggests

that Mouanda is an employee of the LLC rather than its sole

member/owner.3 If Cardinal had contracted with Mouanda individually

(making her the “franchisee”) or if she was the employee of a Jani-King

franchise owned by others (making her a “franchisee’s employee”), the

exclusionary language of KRS 337.010(1)(e)1 would be applicable. As it is, the

language does not place Mouanda beyond the scope of the KWHA but rather

requires consideration of the more commonly encountered issue of her status,

whether she is in fact an employee or an independent contractor.

3 As discussed below, the Franchise Agreement did not recognize Constance

Mouanda as an employee of the LLC but instead deemed her a “principal.”

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 As noted, Cardinal required Mouanda to form a limited liability company

in order to participate in the Jani-King janitorial system and it then provided

the LLC’s Articles of Organization, a corporate resolution authorizing the LLC

to contract with Cardinal, a waiver of notice of a Board of Directors’ meeting

and other legal documents for Mouanda to sign. Cardinal, the “Franchisor,”

and The Matsoumou’s, LLC, the “Franchisee,” then entered a Franchise

Agreement, which expressly states in paragraph 12.6:

The Parties agree and understand that Franchisee will be at
all times an independent contractor under this Agreement and
will not, at any time, directly or indirectly, hold itself out as an
agent, servant, or employee of Franchisor. Nothing in this
Agreement may be construed to create a partnership, joint venture,
agency, employment, or fiduciary relationship of any kind. None
of Franchisee’s employees will be considered to be
Franchisor’s employees. . . .

(Emphasis added.) To the extent Cardinal and Jani-King rely on this

contractual provision as a bar to Constance Mouanda’s attempted KWHA

claims, we note that it requires the same end result as the exclusionary

language in KRS 337.010(1)(e), i.e., it has nothing to say about the individual,

Constance Mouanda. The LLC is the “Franchisee [which] at all times will be an

independent contractor under this Agreement.” As for the last sentence,

“[n]one of Franchisee’s employees will be considered to be Franchisor’s

employees,” once again Mouanda is not an employee of the Franchisee but

rather the sole owner/member of the Franchisee.

The distinction between Mouanda and a “Franchisee employee” as

referenced in paragraph 12.6 is underscored by a review of the Franchise

Agreement which identifies in paragraph 4.2.3 “[a]ll of Franchisee’s owners,
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shareholders, members, managers, officers and directors” as “each a ‘Principal’

and collectively the ‘Principals.’” In other instances (e.g., paragraph 4.2.2) the

Franchise Agreement refers to the Franchisee’s “agents and employees.” In

short, the parties’ agreement explicitly acknowledges that Mouanda, as an LLC

owner, is not an employee of the LLC. Thus, the final sentence in paragraph

12.6 that declares none of the Franchisee’s [LLC’s] employees can be

considered to be the Franchisor’s [Cardinal’s] employees also does not

apply. In short, to the extent the parties’ contract is deemed relevant to

Constance Mouanda’s individual employment status, if any, vis-à-vis Cardinal

or Jani-King, the Franchise Agreement simply does not address that issue.

II. The Classification of an Individual as an Employee Or
Independent Contractor Controls the Availability of Protections
under Wage And Hour Laws

Franchisor and franchisee relationships, particularly the multi-tiered

structure of franchising relationships utilized by Jani-King, create complexities

in employment law. Generally, “franchising is . . . a unique, modern, multitier

marketing device used by independent, but mutually dependent,

businesspeople bound in contractual relationships.”4 A franchisor typically

provides the franchisee with a written license to use the franchisor’s

proprietary marks, business format, and methods.5 Initial training and

4
Dean T. Fournaris, The Inadvertent Employer: Legal and Business Risks of
Employment Determinations to Franchise Systems, 27 Franchise L.J. 224 (2008).

5 Id.

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ongoing advice or field support may also be offered, in exchange for some form

of initial and recurring fees.6

Typically, franchisees maintain a degree of independence, such as

controlling day-to-day operations, hiring and firing their own employees, and

choosing their own customers and pricing.7 The legal aspects of a franchise

relationship are intricate, and ideally all parties to the relationship understand

the potential legal implications of such an arrangement. As a result of the

often-unique franchisor and franchisee relationships (including sub-

franchisors), the workplace has become progressively complex, and positioning

individuals in the context of employment law requirements and protections is

increasingly difficult. One primary distinction is that of an employee from an

independent contractor. Designation as an employee or independent

contractor determines an individual’s entitlement, or lack thereof, to many

statutory employment protections. Many claims involving classification as

either an employee or independent contractor occur in federal court because of

the protections afforded by the Fair Labor Standards Act (FLSA).

a. The Fair Labor Standards Act

To improve the workplace, the FLSA, created in 1938, establishes the

minimum wage, regulates overtime eligibility, requires recordkeeping and sets

other labor standards. 29 United States Code Chapter 8, §§ 201-19.

Kentucky’s wage and hour laws as codified in KRS Chapter 337 are the

6 Id.
7 Id.

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analogue to the FLSA. City of Louisville, Div. of Fire v. Fire Serv. Managers

Ass’n ex rel. Kaelin, 212 S.W.3d 89, 92 (Ky. 2006). In discussing the legislative

history of the FLSA, the United States Supreme Court explained that the Act

shows an intent on the part of Congress to protect certain groups
of the population from substandard wages and excessive hours
which endangered the national health and well-being and the free
flow of goods in interstate commerce. The statute was a
recognition of the fact that due to the unequal bargaining power as
between employer and employee, certain segments of the
population required federal compulsory legislation to prevent
private contracts on their part which endangered national health
and efficiency and as a result the free movement of goods in
interstate commerce. To accomplish this purpose standards of
minimum wages and maximum hours were provided.

Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706-07 (1945). Further, the

legislative debates “indicate that the prime purpose of the legislation was to aid

the unprotected, unorganized and lowest paid of the nation’s working

population; that is, those employees who lacked sufficient bargaining power to

secure for themselves a minimum subsistence wage.” Id. at 707 n.18 (citations

omitted). The comprehensive nature of the protections provided by the FLSA

makes the distinction between independent contractors and employees vitally

important.

Under the FLSA, employees are entitled to overtime and minimum wage

compensation while independent contractors are not. Keller v. Miri

Microsystems, LLC, 781 F.3d. 799, 806 (6th Cir. 2015). From a federal

standpoint, a franchisee is generally classified as an independent contractor,

but “may be entitled to the protections of the FLSA if it is able to allege an

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employer-employee relationship with the franchisor.”8 To determine whether

an individual is an employee or an independent contractor, many courts have

applied the well-established economic realities test, which focuses on the

economic interactions between workers and an employer beyond the plain

terms of a contract.9 The economic realities test was formed in response to the

FLSA’s failure to clearly define the differences between an independent

contractor and an employee.

Federal law lacks a substantive statutory scheme to clarify the difficulties

in distinguishing employees from independent contractors. Additionally, the

United States Supreme Court has not officially recognized a test or rule for

distinguishing between employees and independent contractors. Many states

have addressed the issue by adopting and applying various classification

tests.10 Some federal Courts of Appeals have adopted and applied the

8 Fair Labor Standards Act, 14 Bus. & Com. Litig. Fed. Cts. § 150:60 (5th ed.).
9Stephanie Sullivant, Restoring the Uniformity: An Examination of Possible
Systems to Classify Franchisees for Workers’ Compensation Purposes, 81 UMKC L. Rev.
993, 1006 (2013).

10 Other tests for classifying individuals as employees or independent
contractors are the control test, and the relative nature of the work test. First, the
control test requires employers to prove “that the services at issue are performed (a)
free from control or direction of the employing enterprise; (b) outside of the usual
course of business . . . ; and (c) as part of an independently established trade,
occupation, profession, or business of the worker.” Coverall N. Am., Inc. v. Com’r of
Div. of Unemployment Assistance, 857 N.E.2d 1083, 1087 (2006) (quoting Athol Daily
News v. Bd. of Review of the Div. of Emp’t & Training, 786 N.E.2d 365, 369 (2003)).
Under the relative nature of the work test, the classification of an individual depends
on “the nature of the claimant’s work in relation to the regular business of the
employer.” Hannigan v. Goldfarb, 147 A.2d 56, 64 (N.J. App. Div. 1958). The test
considers “whether the work done is an integral part of the employer’s regular
business; and whether the worker in relation to the employer’s business is in a
business or profession of his own.” Id.

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economic realities test.11 The Sixth Circuit has interpreted the FLSA

framework by recognizing its legislative purpose and concluding that

“employees are those who as a matter of economic reality are dependent upon

the business to which they render service.” Donovan v. Brandel, 736 F.2d

1114, 1116 (6th Cir. 1984) (quoting Dunlop v. Carriage Carpet Co., 548 F.2d

139, 145 (6th Cir. 1977)). Thus, the Sixth Circuit identified six factors to

consider:

1) the permanency of the relationship between the parties;

2) the degree of skill required for the rendering of the services;

3) the worker’s investment in equipment or materials for the task;

4) the worker’s opportunity for profit or loss, depending upon his
skill;

5) the degree of the alleged employer’s right to control the manner
in which the work is performed; and

6) whether the service rendered is an integral part of the alleged
employer’s business.

Keller, 781 F.3d at 807 (quotations and citations omitted). No one factor is

determinative and “a central question is the worker’s economic dependence

upon the business for which he is laboring.” Id.

Although Kentucky has not addressed the employee/independent

contractor distinction under the KWHA, considering economic realities for

11 See, e.g., Acosta v. Jani-King of Oklahoma, Inc., 905 F.3d 1156, 1160 (10th
Cir. 2018); Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376 (3d Cir. 1985); Real v.
Driscoll Strawberry Assoc., 603 F.2d 748 (9th Cir. 1979). The United States Supreme
Court first described what is now known as the economic realities test in Rutherford
Food Corp. v. McComb, 331 U.S. 722 (1947), but the test was explained in dicta.

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employment classification purposes is not entirely new in Kentucky. In

Stewart v. University of Louisville, 65 S.W.3d 536, 539 (Ky. App. 2001), a

graduate student was dismissed from a fellowship program and the Court of

Appeals was tasked with determining whether the student was an “employee”

for purposes of her discrimination claims. The appellate court examined the

economic realities underlying the relationship and ultimately concluded it was

not an employer-employee relationship. Id. at 540.12 In Ratliff v. Redmon, 396

S.W.2d 320 (Ky. 1965), this Court’s predecessor outlined nine factors used to

determine whether an individual is an employee or an independent contractor.

The Ratliff test is consistent with the economic realities test and includes five of

the same factors as the Sixth Circuit test.13

12 See also Burkich v. Com., Cab. for Health and Family Servs., 2005-CA-
000333-MR, 2006 WL 2574024, at *2 (Ky. App. Sept. 8, 2006) (To determine whether
an individual is an “employee” for Title VII purposes, one must examine the economic
realities “to determine whether that individual is likely to be susceptible to the
discriminatory practices which the act was designed to eliminate.”).

13The Ratliff factors for determining whether an individual is an employee or an
independent contractor are:
(a) the extent of control which, by the agreement, the master may
exercise over the details of the work;

(b) whether or not the one employed is engaged in a distinct occupation or
business;

(c) The kind of occupation, with reference to whether, in the locality, the
work is usually done under the direction of the employer or by a
specialist without supervision;

(d) the skill required in the particular occupation;

(e) whether the employer or the workman supplies the instrumentalities,
tools, and the place of work for the person doing the work;

(f) the length of time for which the person is employed;
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 The relationships between Jani-King, Cardinal, the LLC, and Mouanda

bear the potential for misclassification. We note that several cases across the

United States allege that Jani-King and similarly-structured janitorial

companies use franchise models to evade obligations to individuals who qualify

as employees under labor laws. To provide a framework for analyzing whether

Mouanda may be deemed an employee of Jani-King or Cardinal, we turn to

other jurisdictions for guidance.

b. Multi-Tiered Franchising Relationships And Classifications in
Other Jurisdictions

Mouanda is far from the first plaintiff to challenge Jani-King’s business

structure. In Acosta, 905 F.3d at 1158, the United States Secretary of Labor

filed a complaint alleging that Jani-King of Oklahoma violated the FLSA by

failing to keep employee records for the individuals performing janitorial work

as unit franchisees (i.e., people like Mouanda). The Secretary’s complaint

noted that Jani-King had recently begun requiring individuals to form

corporate entities to execute unit franchise agreements with Jani-King. Id.

The complaint further alleged that the “individuals who form corporate entities

(g) the method of payment, whether by the time or by the job;

(h) whether or not the work is a part of the regular business of the
employer;

and

(i) whether or not the parties believe they are creating the relationship of
master and servant.

Ratliff, 396 S.W.2d at 324-25.

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and enter franchise agreements as required by Jani-King nonetheless

personally perform the janitorial work on behalf of Jani-King and, based on the

economic realities of this relationship, are Jani-King’s employees under the

FLSA.”14 Id.

Jani-King moved to dismiss the Secretary’s complaint for failure to state

a claim, “arguing that the Secretary is not free to ignore [the franchisees’]

corporate organization[s].” Id. The district court agreed with Jani-King and

determined that the Secretary’s complaint “failed to state a claim because a

corporate entity can never be an ‘individual,’ which is a statutory prerequisite

to status as an ‘employee.’” Id. at 1159. The Secretary appealed, and the

Tenth Circuit reversed because the district court’s rationale ignored the

economic realities test. Id. The Tenth Circuit noted that the purpose of the

economic realities test, which is used for determining whether an individual is

an employee under the FLSA, is to examine the true nature of an individual’s

working relationship with the purported employer, rather than relying on the

contractual label or structures applied to the relationship. Id. The Court held

that the facts in the Secretary’s complaint identified individuals who might be

employees under the economic realities test. Id. at 1161. Because the district

In fact, that complaint by the Secretary of Labor describes Jani-King of
14

Oklahoma as follows:
Defendant structures its business in a way that attempts to avoid
providing its workers with the protections afforded by the FLSA. Rather
than properly classifying its cleaners as employees, Defendant deems
these workers independent franchise owners, and therefore outside the
scope of federal wage and hour protections.

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court erroneously ruled that it could not look behind the corporate structures

required by Jani-King, the Tenth Circuit reversed and remanded for further

proceedings. Id. at 1162.15

In this case, the Court of Appeals rejected Mouanda’s reliance on Acosta

because “the Acosta Court did not decide whether an individual has standing

to pursue a claim after the formation of an LLC, but merely held that the

Secretary of Labor had survived the motion to dismiss . . . .” While the Tenth

Circuit did not explicitly answer the question of standing, it held that the

complaint (which alleged the same claims or similar to Mouanda’s) survived a

motion to dismiss because the individuals “who personally perform the

janitorial cleaning work” could plausibly be “employees” under the economic

realities test. 905 F.3d at 1161.

In another Jani-King case, the Third Circuit Court of Appeals upheld the

class certification in a claim filed on behalf of nearly 300 Jani-King franchisees

in Philadelphia alleging violations of Pennsylvania wage payment and collection

law. Williams v. Jani-King of Philadelphia Inc., 837 F.3d 314, 319 (3d Cir.

2016). The dispute hinged on whether workers were properly classified as

employees or independent contractors. Id. at 316. Citing its prior decision in

Drexel v. Union Prescription Centers, Inc., 582 F.2d 781, 784 (3d Cir. 1978), the

Third Circuit stated

the mere existence of a franchise relationship does not necessarily
trigger a master-servant relationship, nor does it automatically

15 On remand, the parties proceeded with discovery. As of August 8, 2022, the

case remains pending on cross-motions for summary judgment.

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 insulate the parties from such a relationship. Whether the control
retained by the franchisor is also sufficient to establish a master-
servant relationship depends in each case upon the nature and
extent of such control as defined in the franchise agreement or by
the actual practice of the parties.

Williams, 837 F.3d at 324-25. The Court declined to weigh in on the merits of

the wage claim, reasoning that the class certification stage is not the place for

merit-based decisions. Id. at 322. Ultimately, after the decade-long class

action suit, the parties reached a settlement agreement in which the Jani-King

defendants agreed to pay $3.7 million, compensating the franchisees for their

misclassification as independent contractors.16

In Vazquez v. Jan-Pro Franchising International, Inc., 986 F.3d 1106,

1110 (9th Cir. 2021), the Ninth Circuit referenced cases dating back to 2008

involving Jan-Pro, another major international janitorial cleaning business.

Under its business model, Jan-Pro contracts with “master franchisees”

(regional, third-party entities), who in turn sell business plans to “unit

franchisees.” Id. at 1111. Master franchisees provide their unit franchisees

with initial business, equipment, and cleaning supplies. Id. The franchise

agreements make it clear that unit franchisees are independent contractors.

Id. The Vasquez case involved numerous plaintiffs from various states with a

common cause to pursue, namely that Jan-Pro had developed a sophisticated

“three-tier” franchising model to avoid paying its cleaners minimum wage and

16 The United States District Court for the Eastern District of Pennsylvania
granted plaintiffs’ Unopposed Motion for Preliminary Class Action Settlement. Myers
v. Jani-King of Philadelphia, Inc., No. 09-1738, 2019 WL 2077719, at *4 (E.D. Pa. May
10, 2019).

20
overtime compensation by misclassifying them as “independent contractors.”

Id. at 1110.17

The Vazquez plaintiffs were unit franchisees who filed a class action

alleging that Jan-Pro Franchising International, which entered into franchise

agreements with master franchisees, used its multi-leveled franchise model to

misclassify them as independent contractors, rather than employees, and thus

could avoid paying them minimum wage and overtime. Id. at 1118. The Ninth

Circuit explained the retroactive application of Dynamex Operations West, Inc.

v. Superior Court, 416 P.3d 1 (Cal. 2018), in which the California Supreme

Court adopted the “ABC test” for determining whether workers are independent

contractors or employees under California wage laws.18 Vazquez, 986 F.3d at

1109. Because the lower court had no opportunity to consider whether

17 According to the Court, the National Employment Law Project asserted “a
strong interest in this case because of the impacts of [Jan Pro’s] franchising schemes
and those of similar janitorial companies on low-wage and immigrant workers and
their communities . . . .” Vazquez, 986 F.3d at 1110.
18 Under the ABC test, which is also called the control test, all workers are

presumptively employees, and not independent contractors, unless the hiring entity
satisfies all three of the following:
(a) that the worker is free from the control and direction of the
hirer in connection with the performance of the work, both
under the contract for the performance of the work and in
fact; and

(b) that the worker performs work that is outside the usual course
of the hiring entity’s business; and

(c) that the worker is customarily engaged in an independently
established trade, occupation, or business of the same nature
as that involved in the work performed.

Dynamex, 416 P.3d at 41.

21
plaintiffs were employees or independent contractors under the Dynamex

standard, and neither party had the opportunity to supplement the record

regarding the Dynamex criteria, the Ninth Circuit remanded the case for the

lower court’s consideration. Id. at 1122. In doing so, the Court emphasized

the fact-intensive nature of such inquiry and noted that the lower court should

consider the classification with the benefit of a more developed record. Id.

In another case involving Jan-Pro, Depianti v. Jan-Pro Franchising

International, Inc., 990 N.E.2d 1054, 1058 (Mass. 2013), Depianti, a janitorial

cleaning services franchisee, along with others, filed a class action suit against

Jan-Pro Franchising International, Inc., claiming that Jan-Pro misclassified

them as independent contractors and committed wage law violations. Depianti

contracted with Bradley Marketing Enterprises, a Jan-Pro regional master

franchisee, to purchase a unit franchise. Id. at 1059. The Supreme Judicial

Court of Massachusetts was tasked with determining, among other issues,

whether a contract between Jan-Pro and Depianti was a necessary element for

a claim for misclassification under the Massachusetts independent contractor

statute. Id. at 1065. That statute outlines whether a person providing services

is a statutory employee, and thus entitled to wage and hour protections, or an

independent contractor and therefore exempt from those protections. Mass.

Gen. Laws ch. 149, § 148B.

In considering that question, the Supreme Judicial Court of

Massachusetts reasoned that

22
 [a]ssuming without in any way suggesting that Depianti was
working as an employee of Jan–Pro, and not as an independent
contractor, Jan–Pro’s contractual arrangement with Bradley, if
enforceable, would provide a means for Jan–Pro to escape its
obligation, as an employer, to pay lawful wages under the wage
statute . . . .

Id. at 1068. The court concluded that “the lack of a contract for service

between the putative employer and putative employee does not itself preclude

liability” under the independent contractor statute. Id. at 1069. The court

further explained its reasoning with a hypothetical:

[C]ompany A contracts with company B for services, and company
B enters into arrangements with third parties to perform the work
it undertook under its contract with company A. We agree that
ordinarily, in such circumstances, company A would not be liable
for misclassification of the third-party workers. This is because
ordinarily, in such circumstances, company B would be the agent
of any misclassification. However, here Depianti alleges that Jan–
Pro, and not Bradley, designed and implemented the contractual
framework under which he was misclassified as an independent
contractor. The lack of a contract between Depianti and Jan–Pro
does not itself preclude liability. Where a party is the agent of
misclassification, it may be directly liable under [the independent
contractor statute] even where it utilizes a proxy to make
arrangements with its employees.

Id. at 1068 n.17.

While Vazquez and Depianti did not involve Jani-King International or

any of its master franchisors, the Jan-Pro business model and multi-tiered

structured franchise approach appears very much like the Jani-King model.19

19 Other courts have examined franchising arrangements and what effect those
arrangements have on an individual’s status as an employee or independent
contractor. See Jason Roberts, Inc. v. Adm’r, 15 A.3d 1145, 1150 (Conn. App.
2011) (existence of a franchise agreement did not exempt the employment relationship
from the application of the ABC test or purview of the unemployment compensation
act); Coverall, 857 N.E.2d at 1087 (franchisor could not meet its burden of
establishing that franchisee was an independent contractor); Hayes v. Enmon Enters.,
23
Applying the reasoning in Depianti, the nonexistence of a contract between

Mouanda individually and Jani-King or Cardinal does not automatically

preclude Jani-King or Cardinal from liability for wage and hour claims. These

employment relationships are complex and determining each party’s status

requires more than examination of the documents signed by the parties and, to

reiterate, prepared by Cardinal and Jani-King. As in Vazquez, since the trial

court dismissed Mouanda’s claim less than six months after she filed her

complaint, the record is undeveloped. The trial court should have the benefit

of a more developed record to conduct the fact-intensive inquiry necessary to

determine Mouanda’s true legal status.

III. A Fact-Intensive Examination of Mouanda’s Status Is Required

The foregoing cases illustrate that the distinction between employees and

independent contractors is often blurred, especially in the realm of franchise

agreements. Clearly, a business entity cannot use the labels of “franchisor”

and “franchisee” to avoid employment law and regulation. Instead how the

parties functioned and conducted their businesses must be analyzed and mere

reliance on their contract labels is inappropriate. The Franchise Agreement

alone suggests that Cardinal maintained a significant degree of control over the

LLC, No. 3:10-CV-00382-CWR-LRA, 2011 WL 2491375, at *6 (S.D. Miss. June 22,
2011) (Although the Franchise Agreement between Jani-King and an LLC performing
cleaning services suggested an independent contractor relationship, the degree of
control over the LLC’s physical conduct was too great to pass off as creating an
independent contractor. The existence of this genuine issue of material fact defeated
Jani-King’s motion for summary judgment.).

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day-to-day activities of the LLC (and therefore Constance Mouanda individually

as the “principal”) in performing cleaning services. Some of the notable

provisions are:

Retention and ownership of any improvements to Jani-King
systems or new concepts developed by the LLC. 4.26.

Requiring Franchisee [(the LLC)] to follow established Jani-King
policies, practices and procedures and to not deviate therefrom
without prior written consent of Franchisor [(Cardinal)]. 4.2.2.

Cardinal’s exclusive right to perform all billing and accounting
functions for all services provided by the LLC; for an Accounting
Fee20 of 4% of the LLC’s monthly gross revenue. 4.7.

Franchisor may inspect or examine the accounts, books, records,
and tax returns of Franchisee at any reasonable time. 4.9.2.

If there is a deficiency in Franchisee’s cleaning work which
Franchisor rectifies, there is a $50 per hour Service Fee plus travel
and expenses to send a representative of Franchisor to correct the
work. 4.18.4, 4.23.

Franchisor must approve any office location, furniture, and décor
thereof to protect the image and reputation of Jani-King.
Franchisee must, within a reasonable time as specified by
Franchisor, make all necessary additions, alterations, repairs and
replacements to office as required by Franchisor, but no others
without Franchisor’s prior written consent. 4.11.1.

Franchisor may inspect any premises serviced by Franchisee at
any time to ensure that the quality of service being rendered is in
accordance with Jani-King standards. 4.18.

If a deficiency in performance is discovered which requires action
to meet a customer’s demand in less than four hours and
Franchisor is not able to reach Franchisee or Franchisee is not
available for an immediate visit or performance of services,

20In addition to the Accounting Fee, Cardinal charged an Advertising Fee (2% of
the Franchisee’s Gross Revenue); a Royalty Fee (10% of Gross Monthly Revenue); a
Technology Fee (2% of Franchisee’s Gross Revenue); and other fees over and above the
monthly Franchise Fee.

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 Franchisor can dispatch Franchisor’s own staff to correct all
deficiencies in performance. 4.18.5.

Franchisor reserves the right to take over any job in which it views
Franchisee’s work to be inadequate. Franchisee will not be offered
the right to service an additional account to replace the cancelled
or transferred account. 4.18.

Each of Franchisee’s representatives must be in an approved,
clean uniform at any time they are performing services. 4.18.1.

Franchisor reserves the right to establish company policies and/or
procedures pertaining to the operation of Franchisee’s franchised
business or this Agreement. 4.24.

Franchisee shall be deemed in default, and Franchisor may
terminate the Agreement without affording Franchisee any
opportunity to cure the default upon notice of the occurrence of
seventeen different events. 8.1.

In assessing the true nature of the parties’ relationship, courts must look

at the practical, not just contractual, realities of the relationship between Jani-

King, Cardinal, the LLC, and Mouanda. Mouanda alleges that Cardinal never

offered her enough cleaning contracts to fulfill its obligations to the LLC under

the Franchise Agreement and states:

Defendant’s “franchisees” are in fact laborers due to the virtue of
the extensive control of Defendant over laborers, economic realities
of laborers, relationship of laborers to the enterprise, and other
factors courts consider when investigating pretextual independent
contractor relationships.

These allegations and others in Mouanda’s complaint are sufficient to

survive a motion to dismiss and the trial court erred in dismissing the wage

and hour claims on the erroneous premise that any such claims belonged to

the LLC. On remand, the trial court must apply the economic realities test and

examine the true nature of the individual’s (Constance Mouanda’s) working

26
relationship with the purported employer, rather than relying on the

contractual label or structures applied to the relationship. Acosta, 905 F.3d at

1159-60. The LLC structure which Jani-King and Cardinal mandated and

created for Mouanda is no bar to a Kentucky wage and hour claim if she is

actually an employee.

We recognize

the settled law in Kentucky [is] that one who signs a contract is
presumed to know its contents, and that if he has an opportunity
to read the contract which he signs he is bound by its provisions,
unless he is misled as to the nature of the writing which
he signs or his signature has been obtained by fraud.

Hathaway v. Eckerle, 336 S.W.3d 83, 89–90 (Ky. 2011) (quoting Clark v.

Brewer, 329 S.W.2d 384, 387 (Ky. 1959)). But, as we have explained, nothing

in the Franchise Agreement precludes a wage and hour claim by Constance

Mouanda who is neither the Franchisee nor the Franchisee’s employee.

IV. The Fraud Claim Was Not Dependent on the LLC Being a Party
to the Action

The breach of contract and unconscionability claims asserted by

Mouanda were in fact claims that should have been asserted by the contracting

party, The Matsoumou’s, LLC, so the trial court’s dismissal was legally

correct. The fraud claim, however, is not one that belongs solely, if at all, to

the LLC. Liberally construing the Complaint in the light most favorable to

Mouanda, Fox, 317 S.W.3d at 7, she alleges material misrepresentations from

the inception of her interactions with Jani-King/Cardinal, conduct that

preceded the mandatory formation of the LLC which Cardinal created and the

LLC’s signing of the Franchise Agreement. Consequently, the trial court erred
27
in dismissing the fraud claim without allowing Mouanda to develop facts

relevant to that claim through discovery.

In sum, the Franchise Agreement itself contains nothing that would

preclude a wage and hour claim by Constance Mouanda individually. Even if

the Franchise Agreement could be read to address Constance Mouanda

individually, Kentucky courts should look beyond that agreement and the Jani-

King/Cardinal-mandated limited liability company to the economic reality of

the situation, as have other jurisdictions faced with this particular business

scheme. On remand, discovery will allow the parties to develop the record so

the trial court can determine whether Mouanda has a valid wage and hour

claim and/or fraud claim.

CONCLUSION

Based on the foregoing, we reverse the Court of Appeals, and remand

this case for further proceedings consistent with this Opinion.

All sitting. All concur.

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COUNSEL FOR APPELLANT:

Ryan Fenwick
Amy S. Foster

COUNSEL FOR APPELLEES,
JANI-KING INTERNATIONAL
AND JANI-KING LEASING
CORP.:

Raymond C. Haley
Paul E. Goatley
FISHER & PHILLIPS LLP

COUNSEL FOR APPELLEE,
CARDINAL FRANCHISING, INC.,
D/B/A JANI-KING LOUISVILLE:

Randall S. Strause
Andrew J. Williams
Randall S. Strause, Jr.
STRAUSE LAW GROUP, PLLC

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