A janitorial company that last year faced accusations of wage theft from its employees, prompting Palo Alto to firm up its labor standards, secured this month a new five-year deal to clean up local parks, garages and public buildings.

The council voted on Nov. 6 to retain SWA Services Group, a Santa Clara-based company, for another five years. The company has been cleaning public facilities since 2017, first under a five-year contract and later under a series of short-term extensions. The most recent extension expired on Nov. 15, according to a report from the Department of Public Works.

The new deal with SWA is the long-term janitorial contract that requires a collective bargaining agreement between the contractor and the employees with hourly pay that is no less than prevailing wage and benefits established by the state Department of Industrial Relations. The City Council voted in January to institute this requirement after hearing accusations from local janitors and their advocates that SWA had failed to pay them what they are owed.

The dispute between SWA and its workers primarily focused on the 3% salary increase that workers were supposed to receive every year as part of their 2017 contract but that they did not get. The topic surfaced in 2022, when several janitors and their advocates spoke out at public meetings to complain about the lack of raises.

Labor conditions in the janitorial industry were also highlighted in a critical report that the Maintenance Cooperation Trust Fund, a statewide watchdog group that advocates for janitors, released in 2021. The report, which was based on surveys and site visits, highlighted the fact that janitors are a particularly vulnerable population because their work often takes place at night and out of public sight and because the workforce is predominantly composed of Latinos and other "predominantly marginalized demographic groups." The janitorial industry, the report found, is rife with "illegal employment practices and insufficient enforcement."

Cassie Peabody, legal director for the MCTF, said in an interview earlier this year her organization learned about the problems experienced by Palo Alto janitors when it toured local facilities as part of its field research.

"As a result, we met janitors who work at SWA who told us they thought they're not getting paid the amount they thought they were getting paid. They were anticipating raises but they didn't get raises," she said.

The city followed up with its own investigation and confirmed that SWA had failed to grant its workers the 3% annual increase that was required by the contract, according to a memo that City Manager Ed Shikada submitted to the City Council in June 2022.

SWA attributed its failure to give raises to its belief that the 3% increase referred to in the contract pertains to all costs, not just labor. The company's CEO Solomon Wong argued in an April 2022 letter to the city that the company believes that it has been, and remains, in compliance with the contract.

He acknowledged, however, that subsequent conversations with the city had allowed it to "to see the city's perspective and how (the language in the contract) appears to read that the increase was to labor (wages) specifically."

SWA ultimately agreed to raise its wages in April 2022, though it did not address the back wages that it owed to its employees for prior years, according to the city. To address this, the City Council approved last December the spending of $97,112 — half the total amount owed — toward back wages.

The new contract aims to avoid a similar dispute by clearly linking the pay that SWA employees will receive to union wages. It also establishes tiers with different pay levels based on the type of work being done (a custodian who is cleaning parks or parking garages would get 11.4% in additional pay, for example, while one that is cleaning utility facilities gets an additional 22.9%).

The contract, which the City Council approved 6-1, with Greg Tanaka dissenting, is Palo Alto's first janitorial contract that complies with the stricter labor standards that the council approved on Jan. 30. The rule changes followed a memo that council members Pat Burt and Greer Stone issued in November 2022, which cited public concerns over the janitorial contract.

"As a city, we have an interest in ensuring we have uninterrupted operations, high quality services, and that contracted workers performing services for the city are treated fairly," the memo stated.

The new deal also reflects the growing costs of keeping the city clean. When Palo Alto approved its first contract with SWA in 2017, it agreed to pay the company $10.6 million for the five-year term, with the annual cost gradually escalating between the first year and the last. The initial payment of $1.8 million was more than double what the city had paid its prior contractor for janitorial services.

Since that time, the costs have nearly doubled again. A small part of the increase can be attributed to the contract's wider scope. SWA will now be required to increase cleaning of facilities at Arastradero Preserve and Foothills Park from three to five days per week. The contract also adds Palo Alto's new public safety building, five park restrooms and modular buildings at the Palo Alto Airport and at the Water Quality Control Plant.

A much larger reason for the cost increase is the new labor standards, according to city staff. The new wage rules fueled a roughly 39% increase between the last short-term contract with SWA and the new deal, according to the staff report.

The city's prior dispute with SWA did not dissuade the council majority, which approved the deal on its "consent calendar" as part of a list of items generally deemed to be non-controversial. Tanaka, who earlier this year had opposed raising the labor standards for janitorial contracts, voted against the new deal, citing the past issues.

"I don't understand why we still went with the company that had all these issues," Tanaka said.

City staff, for its part, concluded that SWA scored far higher than the other three bidders based on the city's criteria, which considers prior record of performance, cost, experience, timely performance and other factors. As a result, City Manager Ed Shikada recommended moving ahead with the new contract.

"SWA's proposal was clearly superior for quality, performance, effectiveness of the solution, and goods and services," the Public Works report states.