Written for owners of US cleaning businesses: janitorial and custodial contractors for offices, medical buildings, schools and property managers, residential and maid services, and specialty cleaners doing post-construction, move-out, window, carpet and biohazard work.
The short version
- See a state-licensed employment attorney first.Have them assess the relationship and any exemption before you reclassify anyone or change how you work.
- Count everything you may owe back.Ask a CPA about back payroll tax and IRS Voluntary Classification Settlement Program relief. Add unpaid wages, drive time, workers' comp and penalties.
- Fix how you work, not the label.Run cleaners as employees, or change the relationship in substance with counsel. Every test looks at the whole relationship.
Say you run a residential cleaning business in Sacramento and pay your 10 cleaners on Form 1099. A cleaner files a claim, or the state starts asking questions. On those facts, the cleaners probably fail California's test, because cleaning is your usual business.
There is no single test. The IRS uses common-law control for employment tax, the FLSA uses economic reality for wages, and states have their own wage, unemployment and workers' comp tests. Passing one does not settle the others.
California's ABC test
A worker is an employee unless the hirer proves all three: the worker is free from control, the work is outside the usual course of the hirer's business, and the worker is in an independently established trade. A business engaging workers to perform the same cleaning service it sells will ordinarily fail the second prong. The Dynamex decision applies retroactively. Classification remains fact-specific, and exemptions must be checked. Willful misclassification costs $5,000 to $15,000 per violation, and $10,000 to $25,000 for a pattern. As of Oct 2026.
Cal. Lab. Code secs. 2775 and 226.8; Dynamex Operations West v. Superior Court (2018) 4 Cal.5th 903; Vazquez v. Jan-Pro Franchising International (2021) 10 Cal.5th 944
| Employer payroll tax at an assumed 10% blended rate on $280,000 of pay | $28,000 |
| Willful misclassification penalties, where they apply: at least $5,000 x 10 | $50,000 |
| Exposure before back overtime, workers' comp premium and waiting-time penalties | $78,000 |
Assumptions stated: real rates depend on the state accounts and the class code.
Setting prices, schedules and checklists while barring direct customer work can indicate employment, whatever the agreement says.
Franchises and apps carry the same risk
Janitorial franchisees
Massachusetts and New Jersey use ABC tests too, and janitorial franchisees have been held to be employees of the franchisor.
M.G.L. c.149, sec. 148B; Hargrove v. Sleepy's, 220 N.J. 289 (2015); Coverall North America v. Commissioner of the Division of Unemployment Assistance, 447 Mass. 852 (2006); Awuah v. Coverall North America, 707 F. Supp. 2d 80 (D. Mass. 2010)
A marketplace or app that sets prices, assigns jobs and deactivates cleaners while barring direct work creates serious employee-status risk. Texas and Florida use common-law control tests for most purposes, and New York uses a control test for unemployment insurance. A building owner or property manager that sets your cleaners' hours and disciplines them can be a joint employer.
Federally, the DOL's 2024 independent contractor rule remains on the books, but its Wage and Hour Division said in May 2025 that it would not apply that rule in its own enforcement. Private suits can still cite it. As of Oct 2026.
- Stop and get advice.State-licensed employment counsel assesses the relationship and any exemption before you reclassify or change practice.
- Size the back liability.A CPA assesses back payroll tax and whether IRS Voluntary Classification Settlement Program relief is available.
- Count more than tax.Exposure includes unpaid wages and drive time, workers' comp, and waiting-time and wage statement penalties.
- Fix the model.Run the cleaners as employees, or change the relationship in substance with counsel. Each test looks at the complete relationship, not the label.
Classification for payroll tax and classification for wages are separate questions. Passing the IRS control test does not protect you from a California wage claim.
Asked in Greymill
California's ABC test: a worker is an employee unless you prove all three:
A. they're free from your control
B. the work is outside your usual business
C. they have an independently established trade
Cleaners doing the cleaning you sell will ordinarily fail B.
Rough exposure:
Pay: 10 x $700 x 40 weeks = $280,000
Employer payroll tax at an assumed 10%: $28,000
Willful misclassification penalties, where they apply: at least $5,000 (As of Oct 2026) x 10 = $50,000
Total: $78,000, before back overtime, drive time, workers' comp and waiting-time penalties
Assume they are employees until a state-licensed employment attorney says otherwise, and see one before you change anything. A CPA can size back payroll tax and check IRS Voluntary Classification Settlement Program relief.
Shall I list questions for that attorney?
Ask it about your own business
Paste this into Greymill with your own figures, and Staff & HR works it through for your business.
I run a cleaning business in [state], in the US. We pay [number] cleaners on Form 1099 at about [weekly amount]. We [do or do not] set their prices, schedules and checklists, they [can or cannot] work for customers directly, and they use [their own or our] supplies and cars. Assess how they look under our state's test and the federal tests, estimate our back exposure on stated assumptions, and list the questions to take to an employment attorney.
More for cleaning and facilities in the US
- Bidding a janitorial account by the square foot without losing moneyBuild a janitorial bid from cleanable square feet and production rates up to a fully burdened labor cost, overhead and margin, then protect it from the next wage increase.Read the lesson
- Making payroll every week while accounts pay in 45 daysWhy a growing janitorial business runs short of cash, how much working capital the payroll gap needs, and the forecast, terms and funding that close it.Read the lesson
- Does my state charge sales tax on cleaning, and what do I file for subcontractors?Whether janitorial work is taxable depends on the state and the type of building, and the 1099-NEC threshold for paying subcontractors changed for 2026.Read the lesson
- The registrations and OSHA rules a cleaning company actually has to meetMost states do not license cleaning, but registration, hazard communication, bloodborne pathogens, injury reporting and a few state rules apply to janitorial and specialty cleaners, with a HazCom date this fall.Read the lesson
- The janitorial contract clauses that decide whether an account makes moneyEscalation, termination, indemnity, insurance and payment terms decide an account's margin long after the bid, and recurring residential plans carry their own auto-renewal rules.Read the lesson
- Paying cleaners right for drive time, per-house pay and overtimeDrive time between houses, flat per-house pay, state minimums and pay-frequency rules are where cleaning businesses underpay without meaning to.Read the lesson
- Winning janitorial accounts from property managers, public buyers and federal agenciesCommercial buyers choose on readiness, records and a credible start-up plan, public bids add registrations and wage determinations, and taking over an account can bring the previous crew with it.Read the lesson
Open the interactive lesson · Every cleaning and facilities lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- Lab. Code 2775(b)(1)(B), 2776 business-to-business conditions and 226.8; Dynamex (2018) 4 Cal.5th 903; Vazquez (2021) 10 Cal.5th 944 (Worker classification, the misclassification penalty and janitorial franchises)
- c.149 sec. 148B; 220 N.J. 289; 447 Mass. 852; 707 F. Supp. 2d 80 (Worker classification, the misclassification penalty and janitorial franchises)
- Field Assistance Bulletin 2025-1 (Worker classification, the misclassification penalty and janitorial franchises)
- NPRM announced February 26, 2026, comments closed April 28, 2026 (Worker classification, the misclassification penalty and janitorial franchises)
- Chamber of Commerce v. NLRB (E.D. Tex. 2024) (Worker classification, the misclassification penalty and janitorial franchises)
- VCSP (Worker classification, the misclassification penalty and janitorial franchises)
- 778.111; 785.38; 29 U.S.C. 255(a) (Hard cases: pay, tax and safety)
- Tex. Lab. Code 406.122(a)-(b), 406.123(a)-(b), 406.127 show why subcontractor coverage is not automatic (Hard cases: pay, tax and safety)
- Filing dates and Form 1099-NEC specific instructions; IRC 3406 and 7503; Sunday January 31 shifts to Monday February 1, 2027 (Hard cases: pay, tax and safety)
- 1910.1030(f)(3); 1904.8 (Hard cases: pay, tax and safety)
- 29 CFR 1910.1200(j)(2)(ii) and (j)(3)(ii), alternative workplace labeling (Hard cases: pay, tax and safety)
- EO 14236 sec. 2 revokes EO 14026 (Pitfalls that embarrass the product)
- 785.35, 785.38 (Pitfalls that embarrass the product)
- Coverall North America v. Commissioner, 447 Mass. 852 (2006) (Pitfalls that embarrass the product)
- 1904.39(a) (Who must sign off: time-critical steps first)
- 1910.1030(f)(3) (Who must sign off: time-critical steps first)
- 8 C.F.R. 274a.2(b)(1)(i) to (iii) (Who must sign off: time-critical steps first)
- Fla. Stat. 448.095(2)(a), (b)2 (Who must sign off: time-critical steps first)
- 15 U.S.C. 8403(1), (2) (Who must sign off: time-critical steps first)