The Lowest Bid Is a Liability Waiting to Happen

• By: admin
• On: 07/24/2026 15:08:03
• In: BOMA San Diego Upcoming Events

The Lowest Bid Is a Liability Waiting to Happen

What every property manager should know before awarding a janitorial contract

By Sean Meer, CEO, Cleantech Inc.

When three janitorial bids land on your desk and two of them come in 30 to 40 percent below the third, the instinct is to see savings. In California, the more useful question is where those savings come from, because under state law the answer can become your problem.

California Labor Code Section 2810.3 makes client employers jointly liable for wage and hour violations committed by their labor contractors. If your janitorial vendor fails to pay legal wages or carry workers' compensation, you can share that liability, and the statute does not let you contract the duty away.

This is not theoretical. In 2018, the Cheesecake Factory was cited $4.57 million for wage violations committed by a janitorial subcontractor at eight restaurants in Orange and San Diego Counties. The chain had never directly contracted with that subcontractor, and the janitors were not its employees. Joint liability applied anyway.

The cost floor a compliant bid cannot go below

Compliant janitorial work in California carries a labor cost floor that cannot be engineered away. Take a worker paid $18 an hour. Employer payroll taxes, workers' compensation, paid sick leave, and mandatory training add roughly 32 percent on top, bringing the fully burdened cost to about $23.76 an hour before a single mop, supervisor, or vehicle is accounted for. Labor alone typically runs 45 to 55 percent of contract value.

A bid well below that floor rarely reflects efficiency. It usually means part of that cost structure has been removed, and in janitorial that part is almost always the protections owed to the workforce.

The exposure you cannot see on the spreadsheet

The risk is not always an obviously uninsured vendor. The harder version is layered. A vendor carries workers' compensation and looks compliant on paper, then subcontracts the actual cleaning to a second entity, which in turn treats the person doing the work as an independent business owner exempt from coverage because they own their own business. The insurance exists at the top of the chain and disappears by the time the work is performed. On a certificate of insurance, everything looks in order.

This structure has been litigated. In Vazquez v. Jan-Pro Franchising International, janitors challenged a three-tier franchise model in which the national company held no direct contract with the workers cleaning the buildings. After more than a decade of litigation that reached the Ninth Circuit and the California Supreme Court, a federal court found the franchisees had been misclassified as independent contractors and were, in fact, employees.

The enforcement record backs that up. From January 2022 through November 2025, California's Bureau of Field Enforcement issued more than 2,200 citations and recovered over $49 million in unpaid wages, with janitorial among its most targeted industries.

How to read the bids differently

Protecting your property does not require overhauling procurement. It takes three adjustments to the RFP.

Set a price floor. If you know a building needs 30 hours of labor per week and you know the fully burdened cost of a compliant worker in your market, you can calculate a minimum viable contract price. A bid below that floor is worth a second look, not an automatic win.

Require a labor cost breakdown. Any credible vendor can show how many hours the bid covers, what wage they pay, and what their burden rate is. Ask who actually performs the work and whether they are a W-2 employee of the company you are contracting with. If a bidder cannot answer, the price is not tied to a staffable, accountable scope of work.

Weight compliance alongside price. Score documentation, workforce stability, and operational transparency, not cost alone. A vendor that runs 15 percent higher but carries proper insurance, pays legal wages, and documents its work is not more expensive. It is less risky.

The lowest number in a stack of bids is rarely the best value, and in California it can carry exposure that never shows up on the spreadsheet. Knowing the real cost of compliant labor, and asking who actually performs the work, is the simplest protection a property manager has.