The janitorial services industry plays an essential role in keeping workplaces, schools, and public buildings clean, healthy, and productive. Yet beneath the surface of this trusted industry, unethical practices have taken hold — and one of the most damaging is illegal subcontracting.
This problem doesn’t just hurt honest cleaning companies; it also puts clients, employees, and even entire organizations at risk of fines, liability, and poor-quality work. In Arkansas and across the country, understanding how illegal subcontracting happens — and how to avoid it — is critical for any business hiring a janitorial service.
In this article, we’ll break down what illegal subcontracting looks like, why it’s harmful, what red flags to watch for, and how to ensure you’re working with a licensed, bonded, and fully compliant commercial cleaning provider like ServiceMaster Twin Cities.
What Is Illegal Subcontracting in the Cleaning Industry?
In legitimate business operations, subcontracting allows a company to bring in additional help for large projects or specialized services. However, illegal subcontracting occurs when companies exploit loopholes in labor and tax laws to cut corners.
Instead of hiring properly trained and insured employees, these companies rely on unlicensed or misclassified workers — often paying them under the table, skipping tax withholdings, or avoiding workers’ compensation coverage.
While it may seem like a harmless cost-saving tactic, it’s a serious violation of labor law. It undermines fair competition, puts employees at risk, and leaves clients exposed to liability if something goes wrong on their property.
For a full explanation of subcontracting laws and worker classification, see the U.S. Department of Labor’s guide on misclassification.
Why It’s a Growing Problem
Illegal subcontracting has quietly spread throughout the janitorial services industry over the past decade. Several factors have contributed to this trend:
High Competition:
The cleaning industry is highly competitive. To win bids, some companies slash prices by cutting corners — including using unlicensed labor.
Low Oversight:
Many contracts are awarded based on the lowest quote, with little verification of who’s actually performing the work.
Complex Subcontract Layers:
Some dishonest providers create multiple layers of subcontracting, making it difficult to trace responsibility or verify licensing and insurance at every level.
Pressure to Reduce Costs:
As labor and insurance costs rise, unethical operators look for ways to increase profit margins by bypassing legal employment practices.
The result? Honest, law-abiding companies are undercut by those who operate illegally — and clients unknowingly become part of a serious legal and financial risk chain.
Understanding the Two Most Common Illegal Methods
1. Unauthorized Subcontractors
Unauthorized subcontracting occurs when a company hires individuals or small crews who don’t have the proper licenses, insurance, or bonds required for the job.
Dishonest contractors often disguise this practice by keeping a few properly licensed employees on record but sending out unlicensed or uninsured workers to perform the work. In some cases, they may even use the credentials of their legitimate employees to give clients the illusion of compliance.
This creates a false sense of security for clients — who believe they’ve hired a legitimate cleaning team — when, in reality, they’re dealing with workers who lack basic protections.
2. Worker Misclassification
Worker misclassification happens when companies label employees as independent contractors to avoid paying payroll taxes, overtime, and benefits.
If a worker is told when to arrive, what uniform to wear, and how to perform their job — yet is paid as an independent contractor — that’s misclassification. The company may avoid paying into Social Security, unemployment insurance, or workers’ compensation funds.
While this setup benefits the employer financially, it strips the worker of legal protections and leaves clients exposed. If a misclassified worker is injured on the job or damages property, the client can be held liable because the company may have no valid insurance coverage.
The Internal Revenue Service (IRS) provides a clear breakdown of what distinguishes an employee from an independent contractor — a resource every business owner should review before signing a service contract.
The Hidden Risks for Businesses That Hire These Companies
Many business owners assume that liability ends when they sign a cleaning contract. Unfortunately, when illegal subcontracting is involved, that’s not the case.
If a janitorial provider uses unlicensed or misclassified workers, the hiring company may share responsibility for any resulting violations.
Here’s how it can affect your business:
Legal Penalties:
If the contractor fails to pay employment taxes or violates labor laws, the IRS or state labor department may hold you partially responsible, especially if you didn’t verify licensing and insurance.
Financial Fines:
Companies caught using illegal subcontractors can face fines exceeding $11,000 per worker, plus additional penalties for unpaid wages or back taxes.
Civil and Criminal Charges:
In severe cases — particularly when tax evasion is involved — violators may face up to five years in jail and fines of up to $500,000.
Increased Liability Exposure:
If an unlicensed or uninsured cleaner is injured or causes property damage, your business could be sued. Without verified insurance coverage, there’s no safety net.
Business Disruption:
When illegal operations are shut down by authorities, cleaning services often halt overnight, leaving clients scrambling for replacements and risking operational downtime.
The short-term savings promised by low-cost providers are never worth the potential financial and reputational damage.
How to Spot Illegal Subcontracting Red Flags
Protecting your business starts with awareness. Before hiring a janitorial service, look for these warning signs:
Unusually Low Quotes:
If a bid seems far below the competition, that’s a red flag. Legitimate companies must cover wages, insurance, taxes, and overhead.
No Proof of Insurance or Bonding:
A reputable company will readily provide copies of liability insurance, bonding certificates, and workers’ compensation documents.
Frequent Crew Turnover:
If the cleaning staff seems to change constantly, the company may be using temporary or off-the-books labor.
Unclear Chain of Command:
Ask who actually employs the workers cleaning your facility. If the answer is vague, multiple companies are involved, or the name on the invoice doesn’t match the cleaning team’s uniforms, that’s a serious concern.
Missing Tax Identification or Business License:
Verify that the company has a valid EIN (Employer Identification Number) and is registered with the state of Arkansas. You can check licensing status through the Arkansas Secretary of State Business Search.
No Written Contract or Vague Terms:
Always insist on a detailed written agreement outlining services, payment structure, liability coverage, and staff background requirements.
The Broader Impact on the Cleaning Industry
Illegal subcontracting doesn’t just harm clients — it damages the entire janitorial services industry. Honest cleaning professionals who follow the rules lose bids to those who cheat the system, driving down wages and lowering service standards across the board.
It also puts strain on public resources. When employers skip taxes, they deprive state and federal programs of necessary funding for unemployment insurance, healthcare, and worker protections. Over time, this erodes trust in the industry and hurts local economies.
By choosing licensed, ethical providers, businesses can help raise the standards of professionalism and fairness in the janitorial sector. For more on ethical cleaning standards, the International Sanitary Supply Association (ISSA) provides excellent industry guidelines and training resources.
How to Protect Your Business
The good news: avoiding illegal subcontracting is easy when you know what to look for and take a few proactive steps.
1. Verify Credentials
Always confirm that your cleaning provider is licensed, bonded, and insured. Ask for documentation — and don’t hesitate to verify it with state or local agencies. In Arkansas, you can check business licenses through the Arkansas Secretary of State website.
2. Request a Clear Contract
Reputable cleaning companies provide detailed service agreements outlining scope of work, payment schedules, staff oversight, and proof of insurance.
3. Ask About Hiring Practices
Inquire whether the company uses subcontractors and, if so, how they are vetted. Ethical companies are transparent about subcontracting relationships and ensure all workers meet legal requirements.
4. Review Safety and Compliance Policies
Make sure your provider follows OSHA safety standards and maintains safety training for all employees. This protects both your property and the people working in it.
5. Choose a Trusted Partner
Partnering with a well-established, reputable provider eliminates uncertainty. ServiceMaster Twin Cities operates under strict compliance and ethical guidelines, ensuring every employee sent to your site is trained, insured, and properly classified.
Why Choosing a Licensed Cleaning Company Matters
When you hire a licensed, bonded, and insured janitorial company, you gain more than just peace of mind — you gain protection, reliability, and accountability.
Here’s what that means for your business:
Consistent Quality:
Licensed providers must meet industry standards and undergo training and inspections that guarantee consistent, high-quality results.
Financial Protection:
Proper insurance protects you against property damage, theft, or worker injuries.
Professional Accountability:
Licensed companies can’t afford to risk their reputation or certification, which means they prioritize transparency and compliance.
Ethical Employment Practices:
By hiring legitimate employees, companies like ServiceMaster Twin Cities support fair wages, safe working conditions, and community growth.
For more information on safe and sanitary work environments, refer to the Centers for Disease Control and Prevention (CDC) Workplace Health Resource Center.
Partnering with a Trusted Janitorial Service in Arkansas
The best way to protect your facility and your reputation is to partner with a cleaning company that operates with integrity.
ServiceMaster Twin Cities has built its reputation on ethical business practices, full transparency, and reliable service. Every member of their cleaning staff is properly trained, background-checked, licensed, and insured.
Their team handles everything from routine office cleaning to high-touch disinfection — all while maintaining full compliance with state and federal labor laws. That means you get dependable results, no legal risks, and a spotless facility every time.
The Bottom Line
Illegal subcontracting in the janitorial services industry is a serious issue — but it’s one you can avoid with knowledge and vigilance. By understanding how these unethical practices work and partnering with trustworthy professionals, you can protect your business, your employees, and your bottom line.
For honest, fully licensed janitorial services in Arkansas, turn to the experts at ServiceMaster Twin Cities.
📞 Call 877-461-1774 today to schedule service or learn more about how our team ensures every cleaning job is completed by the book — safely, legally, and professionally.
