The Massachusetts Supreme Judicial Court (SJC) just delivered a win for franchisor-franchisee relationships. Specifically, the court held that 7-Eleven franchisees are not performing a “service” for their franchisor, meaning the state’s strict “ABC” test for determining an independent contractor relationship does not even apply to the franchisee-franchisor relationship. This important ruling is the latest development in what has been a lengthy legal battle dating back to 2017, when a group of 7-Eleven franchisees sued the corporate franchisor alleging they were impermissibly classified as independent contractors rather than employees. Here’s what your franchised business needs to know and five tips to help ensure compliance with Massachusetts law.
Background
The initial lawsuit: Back in 2017, a group of franchisees sued 7-Eleven, alleging they were misclassified as independent contractors in violation of the Massachusetts independent contractor statute, which is known as the ABC test. In 2020, a federal judge sided with 7-Eleven, holding that the Federal Trade Commission’s Franchise Rule preempted the Massachusetts ABC test.
Question for the SJC: When the franchisees appealed, the First Circuit asked for the SJC’s opinion on whether the state’s ABC test conflicted with the FTC’s rule. As we’ve previously discussed, in March 2022 the SJC held that the Franchise Law did not conflict with the state law, opening the door for franchisees to be deemed employees under...
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