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(Reuters) - Massachusetts' top court on Thursday said franchisees could be considered companies' employees under state law in some circumstances, rejecting 7-Eleven Inc's warning that such a ruling could bring on an "apocalyptic end" to franchising in the state.
The seven-member Massachusetts Supreme Judicial Court unanimously held that a state law governing the classification of workers can apply to franchise relationships because it does not conflict with a U.S. Federal Trade Commission rule governing franchising.
The FTC rule requires franchisors to exert control over certain aspects of franchise operations. The state law considers control over working conditions to be the key factor in determining whether workers are employees and are entitled to the minimum wage, overtime pay and other protections.
"While a franchisor may dictate that a franchisee include certain food items on its menu, that does not mean that a franchisor must dictate the franchisee's hiring decisions, the layout of its kitchen, or the wages it pays its employees," Justice Dalila Wendlandt wrote for the court.
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