The Massachusetts Supreme Judicial Court just held that 7-Eleven franchisees may be employees of 7-Eleven under Massachusetts wage and hour law. The March 24 decision in Dhananjay Patel v. 7-Eleven, Inc. will have significant implications for businesses operating within franchise models. What does your franchised business need to know?
Background
In 2018, 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, M.G.L. c. 149, §148B. Among other things, the franchisees alleged agreements with 7-Eleven required them to turn over a substantial amount of their profits to the franchisor as franchise fees and they were required to follow myriad other rules, including operating their stores around the clock, using 7-Eleven’s payroll system, stocking inventory sold by 7-Eleven’s preferred vendors, and more.
In 2020, a federal court judge granted 7-Eleven summary judgment on the franchisees’ claims, holding the Federal Trade Commission’s (FTC) Franchise Rule conflicted with the Massachusetts independent contractor statute, and therefore the independent contractor statute did not apply. The franchisees appealed to the First Circuit Court of Appeals, which acknowledged that the question of whether the FTC regulation actually conflicted with the independent contractor law had yet to be decided by the Massachusetts Supreme Judicial Court. Rather...
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