State drops suit against library district

State officials have dropped a lawsuit against a controversial janitorial company, the Spokane County Library District and a bewildered Spokane Valley janitor.

State officials now say the Russian-speaking janitor, Vyacheslav Annenkov, simply got caught up in an action aimed partly at preventing exploitation of immigrants.

The lawsuit by the state Department of Labor and Industries sought to collect a one-year, $14,075 shortage in wages that should have been paid under Washington’s “prevailing wage” law.

The suit was dismissed last month when the library district released $35,142 it had withheld from Minneapolis-based National Maintenance Contractors Inc. under a $102,282 contract to clean the district’s 10 libraries.

The contract, which took effect in April 2007, was canceled in October 2007.

Library district Director Michael Wirt said the district stopped paying National Maintenance when it was unable to obtain proof that union-like “prevailing wages” were being paid.

Labor and Industries officials said there was no point in continuing their lawsuit, which was filed in support of a lien against part of the money the library district was holding.

The agency continues to pursue a $17,000 administrative fine against National Maintenance for alleged failure to provide certified payroll records.

NMC’s Spokane attorney, Pat Kirby, said a hearing before an administrative judge has been postponed at least until January while the state and company try to negotiate an agreement.

Wirt said library district officials “had advice from our attorney that led us to pay what was owed for the work that was completed.”

Kirby had threatened to sue the district for breach of contract.

On the other hand, Wirt said the library district’s contract with National Maintenance made the company responsible for paying prevailing wages and filing certified payroll reports as proof.

Wirt noted that bid specifications said “the use of subcontractors is strictly prohibited.” He said district officials knew nothing about franchisees when they signed the contract.

Kirby said the franchise system is legal, and NMC has no duty to provide payroll reports to the state.

“They’re not our employees and we’re not responsible for their compliance with the prevailing wage laws,” Kirby said.

He said the franchisees receive lump payments large enough to cover state-mandated costs, including prevailing wages.

The arrangement bypasses some prevailing-wage requirements. Business owners aren’t required to pay prevailing wages to themselves or their spouses.

However, that exemption doesn’t apply to children or other relatives.

In Spokane, government agencies and their janitorial contractors are required to pay prevailing wages that Labor and Industries has set at $11.90 an hour for basic janitorial work, $12.38 for shampooers and waxers, and $14.18 for window washers.

L&I spokeswoman Elaine Fischer said enforcement of the rules helps maintain a level playing field.

NMC’s $102,282 bid for the library district contract in spring 2007 was $24,684-a-year lower than the second-best, $126,966 bid by American Building Maintenance.

Five other bids ranged up to $282,189.

American Building Maintenance, which uses its own employees, got the contract after NMC was fired.

Wirt said he and library trustees unwittingly stepped into a long-simmering controversy over whether National Maintenance and similar companies improperly circumvent state labor laws and prey on immigrants.

Janitorial franchising companies have generated complaints in a number of other states, including Oregon, California and Massachusetts.

A group of 13 Seattle-area janitors won a federal court settlement against NMC in 2003 when it was under different ownership, according to Seattle attorney Sam Chung.

“I don’t even know if they got paid minimum wage in certain circumstances,” much less the prevailing wage, Chung said.

Payments were based on the amount of time NMC said it should take to clean a building, not actual hours worked.

Many of the plaintiffs were immigrants from Asia, and the inability to speak English “was a very significant factor,” Chung said.

He contended franchise agreements, written in English, were “a sham” because the company didn’t have enough work for all the franchises it sold.

“There was always an empty chair,” he said.

“It was tragic,” Chung said, how some of the franchisees lost their savings to a system that saddled them with loan payments as well as fees that took 20 percent of their income.

Also, Chung said, the company controlled it’s franchisees as though they were employees, allowing them no direct financial relationship with customers.

Spokane County Library District officials thought they had a financial relationship with NMC alone.

Wirt said he believed the janitorial work was being done by National Maintenance employees when the contract took effect on April 1, 2007. The company disclosed nothing about franchisees, he said.

Soon, though, the district’s maintenance supervisor became concerned that something was amiss.

Janitors were required to sign a log to enter and leave libraries, and they spent more time on the job than National Maintenance listed in a report, Wirt said.

When district officials discovered the franchise arrangement in July 2007, “we really didn’t know what to do,” Wirt said.

If workers are paid less than the prevailing wage under a contract with a government agency, the agency can be forced to pay the difference. So library officials turned to the Department of Labor and Industries for advice.

It was an inquiry, not a complaint, but L&I apparently “took the inquiry and ran with it,” Wirt said. State officials launched an investigation they say is still in progress.

The department sued on June 6 to collect a $14,075 balance on prevailing wages it said were owed to 16 employees of Spokane Valley resident Vyacheslav Annenkov, who did business as Crystal Services.

Kirby said Annenkov was one of seven franchisees with a piece of the library district contract, and he didn’t employ 16 people.

No other franchisees were named in the lawsuit, though. Just Annenkov, NMC and the library district.

Although a Labor and Industries spokesman said last summer that someone had complained against Annenkov, a public disclosure request revealed no such complaint.

Speaking through his niece, Tatyana Popova, Annenkov expressed bewilderment shortly after he was sued.

Popova said Annenkov had only a small family operation, not a company that employed 16 people.

Annenkov’s telephone has been disconnected and efforts to reach him or Popova for additional comment were unsuccessful.

Last summer, Popova said Annenkov felt he was unfairly “fired” by NMC when the library district broke its contract. He felt doubly victimized when state officials named him in their lawsuit.

Details remain murky, but state officials now concede Annenkov was named on the basis of information that was incomplete at best.

“There was no particular reason that Mr. Annenkov was singled out,” said Diana Cartwright, the assistant attorney general who filed the lawsuit.

However, Fischer said an interview with Annenkov’s daughter indicated he was a truck driver and didn’t clean the Spokane Valley Library by himself as he stated in an affidavit. Also, library district sign-in sheets showed other janitors were working there.

An agent is checking whether there were similar discrepancies at other libraries, “but we haven’t crossed that bridge yet,” Fischer said.

Cartwright declined to comment on the possibility of new action against Annenkov or the other library contract franchisees.

“At this point, I believe our effort is aimed at National Maintenance Contractors,” Fischer said.

Meanwhile, Labor and Industries is pressing a claim against NMC for $87,000 in unpaid worker compensation insurance premiums for about 100 workers in King County. With penalties, the assessment comes to $144,000.

Fischer said department officials haven’t ruled yet on NMC’s request for reconsideration.