Franchise Memorandum – Number 270 | Lathrop GPM

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Second Circuit confirms rejection of franchisee minimum wage and unfair enrichment claims –

A divided panel of the Second Circuit Court of Appeals concluded that allegations of abusive wage deductions and unjust enrichment against a franchisor were properly dismissed because the plaintiffs had accepted deductions in exchange for valuable franchise rights. Mujo v. Jani-King Int’l, Inc., — F.4th —, 2021 WL 4096577 (2d Cir. June 2, 2021). The applicants were current and former franchisees of Jani-King, a commercial cleaning services franchisor. Jani-King is looking for cleaning clients, who enter into service agreements with franchisees. Customers pay Jani-King, who deducts the agreed franchise fee and passes the rest to franchisees. In the lawsuit, the franchisees alleged that this structure made them employees rather than independent contractors and that the deduction of franchise fees constituted an abusive withholding of wages under the Connecticut Minimum Wage Act and had unfairly enriched Jani- King. After a lower court dismissed the legal claim and rendered summary judgment on the unjust enrichment claim, the franchisees appealed.

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