Janitorial services are essential to maintaining clean and professional spaces, yet the industry is

rife with legal and ethical pitfalls that could pose a serious risk to commercial real estate and

property management companies that fail to conduct proper due diligence.

The Hidden Liabilities of Noncompliant Janitorial Firms

Many janitorial companies operate outside legal boundaries, violating labor laws, misclassifying

employees, and failing to carry adequate insurance. Hiring such a company can expose

property managers to significant financial and reputational risks.

In 2022, a large cleaning company settled a $15.35 million lawsuit for misclassifying janitors as

independent contractors to avoid taxes, insurance costs, and liability.

Recently in 2024 another large cleaning company was ordered to pay $30 million for exploiting

workers in California.

According to a California Department of Industrial Relations study, only 7% of janitorial firms are

receiving oversight. It is estimated that 10-20% of cleaning companies operate in accordance

with California labor laws.

Compliance Matters: Legal and Financial Risks

California law mandates that all janitorial businesses register with the Department of Industrial

Relations (DIR). Many fail to do so, putting the companies that hire them at risk.

● Fines for hiring an unlicensed janitorial firm start at $10,000 per instance under the

Property Service Workers Protection Act.

● Workplace injuries lead to liability. If an uninsured janitor is injured on-site, property

owners and managers could be responsible for workers’ compensation claims, which

average $44,179 per case.

● Misclassification penalties are steep. In California, misclassifying workers as

independent contractors can result in fines of up to $25,000 per violation. In many cases,

these fines can reach the eight figure range as shown in the above court cases.

Best Practices for Property Managers

To safeguard your business, vet janitorial companies carefully. Here is a great three step

framework to verify that you are protected from liability:

● Are they registered with the Department of Industrial Relations? Request and confirm their license number. The DIR has an easy to use database for this, add it to your compliance checklist.

○ https://www.dir.ca.gov/dlse/Janitorial_Providers_Contractors.html

● Do they carry active workers’ compensation insurance? Require proof of active

coverage and set reminders for renewal. Many businesses let their coverage lapse.

● Are their cleaners classified as employees or independent contractors? Ensure

proper classification to avoid legal exposure. Ask your provider.

Ethical and Smart Business Decisions

Ignoring these issues not only puts businesses at financial and legal risk but also perpetuates

unethical labor practices. Ethical janitorial services promote fairness, compliance, and long-term

sustainability in the industry.

Property managers must take proactive steps to protect their organizations. Conduct due

diligence, demand transparency, and choose legally compliant cleaning partners.

The right decision isn’t just ethical, it’s essential for your business.

Source List

Legal Cases and Settlements

● Jani-King 2022 Settlement - $15.35 Million

○ Source: OS Legal

○ Reference: Misclassification lawsuit settlement involving Jani-King.

○ Link: O&S Achieves $15,350,000 Settlement Against Jani-King California, Inc.

● Jan-Pro 2024 Settlement - $30 Million

○ Source: Bloomberg

○ Reference: Jan-Pro franchise worker misclassification lawsuit.

○ Link: Jan-Pro $30 Million Settlement With Janitors

Industry Compliance & Oversight

● 2017 California Department of Industrial Relations Study

○ Source: California DIR

○ Reference: Only 7% of janitorial firms are unionized and have oversight.

○ Link: California DIR Reports

Legal & Financial Risks

● California Janitorial Registration Law (Property Service Workers Protection Act - AB

1978)

○ Source: California Department of Industrial Relations

○ Reference: Fines start at $10,000 for hiring unlicensed janitorial firms.

○ Link: DIR Janitorial Registration Page

● Workers' Compensation Liability - Average Claim Cost ($44,179 per claim)

○ Source: National Council on Compensation Insurance (NCCI)

○ Reference: The average cost of a workplace injury claim in janitorial services.

○ Link: NCCI Workers' Compensation Data

● Worker Misclassification Penalties - Up to $25,000 per Violation

○ Source: California Labor Code Section 226.8

○ Reference: Civil penalties for misclassifying employees.

○ Link: California Legislative Information

● State Penalties for Noncompliance (Cases Reaching Eight Figures)

○ Source: Legal precedents from CA Labor Commissioner cases.

○ Reference: Past settlements reaching $10M+ due to systematic labor violations.

○ Link: CA Department of Industrial Relations Case Records