A federal court recently ruled that 7-Eleven franchise owners are not employees of the franchisor, the latest development in a long-running legal saga challenging their status as independent contractors. However, this September 28 ruling follows an earlier decision from the Massachusetts Supreme Judicial Court in the same case, holding that some franchise owners might be employees under state wage and hour law – so the outcome could be different depending on the specific circumstances. What does your franchised business need to know about these recent rulings?

Now I Know My A-B-Cs

In 2017, a group of 7-Eleven franchise owners sued 7-Eleven alleging their franchise agreements misclassified them as independent contractors in violation of the Massachusetts independent contractor law.

Massachusetts law differs from federal rules by using a three-pronged “ABC” test to determine whether someone is an employee or an independent contractor. The law presumes employment status if an individual performs services for a business. However, the business entity can counter that presumption by establishing all three of the following factors:

1. the individual is free from control and discretion in performing services;
2. the service is performed outside of the hiring entity’s usual course of business; and
3. the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

If an employer...

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