In 7-Eleven case, Mass. top court says franchisees can be employees

A 7-Eleven storefront in Toronto, Ontario, Canada. REUTERS/Carlos Osorio

(Reuters) – Massachusetts’ top court on Thursday mentioned franchisees could be regarded companies’ employees less than point out law in some situations, rejecting 7-Eleven Inc’s warning that this sort of a ruling could deliver on an “apocalyptic stop” to franchising in the condition.

The 7-member Massachusetts Supreme Judicial Court unanimously held that a condition law governing the classification of employees can use to franchise interactions due to the fact it does not conflict with a U.S. Federal Trade Commission rule governing franchising.

The FTC rule calls for franchisors to exert handle over sure elements of franchise functions. The point out law considers manage around performing disorders to be the key component in deciding no matter whether workers are staff members and are entitled to the minimum amount wage, extra time shell out and other protections.

“Though a franchisor may dictate that a franchisee involve certain food items products on its menu, that does not imply that a franchisor must dictate the franchisee’s using the services of conclusions, the layout of its kitchen area, or the wages it pays its personnel,” Justice Dalila Wendlandt wrote for the court.

The ruling arrived in a bid by 7-Eleven franchisees to revive a proposed class motion professing they are actually glorified retail outlet professionals and ought to be paid the minimum amount wage and acquire other protections afforded to workers under Massachusetts legislation.

7-Eleven, backed by business groups such as the U.S. Chamber of Commerce, claimed that less than Massachusetts law, its franchisees would constantly be considered staff members because the FTC rule necessitates the company to exert manage over them.

7-Eleven did not promptly answer to a ask for for remark.

Courts in other states have applied worker classification legal guidelines to franchisees, but Thursday’s ruling was the initial by an appeals court docket to explicitly reject promises that all those regulations conflict with the FTC rule, according to Shannon Liss-Riordan of Lichten & Liss-Riordan, who represents the plaintiffs.

“The total franchise business has been making an attempt to get a broad carveout from these guidelines, and it is significant that our greatest courtroom has turned down it,” Liss-Riordan said in an job interview.

The 1st U.S. Circuit Courtroom of Appeals past year questioned the point out court to choose no matter whether Massachusetts’ 3-pronged “ABC take a look at” for classifying staff applies to franchise relationships or is preempted by the FTC rule.

The Supreme Judicial Court docket on Thursday mentioned complying with condition wage legislation does not make it not possible for franchisors to also comply with the federal rule.

And the regulate around a franchise’s strategy of procedure referenced in the FTC rule is not the same as the “command and direction” of staff that determines their classification, the court claimed.

Wendtlandt wrote that 7-Eleven’s “predicted apocalyptic close” to franchising in the condition experienced not transpired in other spots where by courts have applied worker classification checks to franchise associations, these types of as California and New Jersey.

The courtroom sent the case again to the 1st Circuit to implement its final decision.

The situation is Patel v. 7-Eleven Inc, Massachusetts Supreme Judicial Court docket, No. SJC-13166.

For the plaintiffs: Shannon Liss-Riordan of Lichten & Liss-Riordan

For 7-Eleven: Norman Leon of DLA Piper

(Be aware: This write-up has been corrected. A past edition quoted plaintiffs’ attorney Shannon Liss-Riordan as expressing that the choice was the first of its kind by any courtroom. She claimed it was the initial of its variety by an appeals court docket.)

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