California Court Won't Send Cleaning Franchisees to Arbitration

The arbitration clause sat on page 26 of a 32-page contract, printed in the same typeface as everything around it. The two women who signed it read little English, asked twice for a Spanish copy, and were told, according to the court record, something like "Don't worry about it, it doesn't say anything important."

On Oct. 20, a California appeals court ruled that the clause cannot be enforced. The Fourth Appellate District affirmed a San Diego trial court's order refusing to send Alma Rossio Zamarripa Solorio and her daughter, Melissa Viviana Covarrubias, to arbitration in their suit against commercial cleaning franchisor SBS Franchising and its subsidiary SBS Services Group. The pair signed a unit franchise agreement in March 2020 and sued in 2024 under California's Private Attorneys General Act, alleging SBS misclassifies its cleaners as independent "unit franchisees" when they are employees.

SBS argued that the strict standard California courts apply to arbitration agreements imposed on employees did not apply here, because the contracting party was the women's business, Melross Maintenance Services, a franchisee. The panel rejected that. What matters, it wrote, "is not the label placed on the parties by the UFA, but the unequal bargaining power between them." The record described a relationship that looked a lot like a job: customers paid SBS directly, and SBS sent the cleaners a portion after deductions.

The trial court had found the clause one-sided in several ways. It capped recovery at "actual damages sustained," which would erase the civil penalties the state law allows. It shielded SBS officers and affiliates while leaving the women personally exposed. It shortened the limitations period to one year and carved out SBS's own claims so the company could still go to court. And it required commercial arbitration fees SBS never disclosed: a $950 filing fee, another fee of at least $825, and half the arbitrator's cost. The appeals court agreed the clause could not be saved by striking the bad terms.

Two limits matter. The opinion is unpublished, so other California courts cannot cite it as precedent. And it decides only where the case is heard, not whether the cleaners were misclassified.

Still, the direction is hard to miss. Last month, a federal court in Oklahoma found that Jani-King franchisees are employees under the FLSA. Both cases involve janitorial franchising, where the franchisor holds the customer contract and the franchisee can be a single worker or family, as it was here. In that model, the franchise agreement is being read less as a deal between two businesses and more as an employment contract with a different name.

For franchisors in labor-heavy categories, the ruling reads like a checklist: translate the agreement for buyers who need it, set the arbitration clause apart, and disclose what arbitration will cost. The bigger question is whether those fixes are enough when the underlying economics look like payroll.