7-Eleven Litigation Could Have Damaging Effects on Franchisee Laws, State Economy
On Wednesday, the Supreme Judicial Court of Massachusetts heard oral arguments in an ongoing case which could have lasting effects on the future of franchises in the Bay State. The case, Patel v. 7-Eleven, was brought by franchisees of 7-Eleven alleging that, under Massachusetts law, they are employees of 7-Eleven rather than owners of their own individual franchise. The franchise owners allege that the provisions of their franchise agreement with 7-Eleven mean that they function as store managers, not business owners.
The franchisees allege they are employees based on the degree of control 7-Eleven exercises over them, including requirements to keep their franchises open 24 hours a day and stock their shelves with certain products. In determining whether one is an employee or independent contractor, Massachusetts relies on what is known as the “ABC” test. Ultimately, the difference between the two boils down to one simple question: does the corporation have the right to control the individual’s work? If yes, they are typically an employee. If not, they are almost always an independent contractor.
A ruling in favor of the franchisees could have devastating affects not only on the future of franchises in the Commonwealth, but on the well-being of the state’s economy. Currently, there are 159 7-Eleven stores in Massachusetts. Franchises, such as Dunkin Donuts, Burger King, and McDonald’s to name a few, account for a total economic output of $12 billion. These corporations, and many other franchises, may leave the state if forced to treat franchisees as employees. If classified as such, the parent corporation would be required to pay them [franchisees] sick time, unemployment insurance, and offer sick leave. In addition, it would be illegal for franchisees to pay franchise fees out of their wages. As of now, franchisees operate as independent businesspeople and are accountable for payroll and other employer-related costs.
If you have questions about employment law, or any other general employment issues, please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.
