Royal

7-Eleven Litigation Could Have Damaging Effects on Franchisee Laws, State Economy

Dec 10, 2021

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.

28 Mar, 2024
By: Trevor Brice, Esq. For many Americans, the possible leave that can be taken under state and federal leave has been expanded and extended so that many employees are covered by state and federal leave laws. However, this coverage has not extended to all full-time U.S. employees. A new bill in Congress seeks to change this. On March 20, 2024, several House Democrats announced the introduction of the Protected Time Off (“PTO) Act to guarantee 10 paid days off from work each year for full-time workers. The proposal ensures that all full-time employees will earn no less than two weeks of annual paid leave per year, in addition to any employer-provided or legal required paid sick or family leave, to be used for any reason at the employees’ standard pay rate. Employers must not interfere with or discriminate against workers who seek to take annual paid time off. Possible Implications for Employers under the PTO Act The PTO Act offers two weeks of paid time off to any full-time employee for any reason. This means that employers will have to offer this time off as long as employees provide two weeks’ notice, which is required under the law. Employers with surge seasons will be particularly affected by this act, because, as long as notice is provided, employers cannot deny the time off, unless the surge season qualifies as an emergency under the Act. An employer may place limited, reasonable restrictions regarding the scheduling of paid annual leave and may reject a scheduling request for such leave for a bona fide business reason, so long as the employer provides other reasonable alternative times for the employee to schedule such leave. However, the definition of reasonable alternative times would have to be tested in court, as it is not defined in the pending legislation. Employees would begin to accrue paid leave as soon as their employment begins and employers must provide each employee with no less no less than 1 hour of paid annual leave for every 25 hours worked, for up to 80 total hours. Employees can start using PTO Act leave on the 60 th day of their employment. Employers will need to compensate employees at the same rate that they would have been paid had the employees not used leave. Further, employees are allowed to carry over up to 40 hours of leave year to year and can cash out any unused paid annual leave at the separation of employment. If employers violate the PTO Act, employers may be responsible for lost wages, interest, liquidated (double) damages, and reasonable attorney’s fees and costs. While an individual bringing a claim under the PTO Act may not scare employers, as it could be on the hook for up to four weeks of pay plus attorney’s fees and costs at maximum, a class action on behalf of multiple employees could certainly be something that employers fear. Takeaways The PTO Act, while introduced in the House, is not likely to advance and become law with bipartisan support. However, it is of note that legislators feel comfortable advancing legislation that would give paid leave to all full-time employees. In this sense, it is more likely that a lesser version of the PTO Act could be passed in the coming months and years, which could burden employers with more regulation related to paid leave. As always, if an employer has questions or concerns about the utilization of paid leave and the application of new potential laws like the PTO Act, it is prudent to seek legal counsel. Trevor Brice is an attorney who specializes in labor and employment-law matters at the Royal Law Firm LLP, a woman-owned, women-managed corporate law firm that is certified as a women’s business enterprise with the Massachusetts Supplier Diversity Office, the National Assoc. of Minority and Women Owned Law Firms, and the Women’s Business Enterprise National Council.
06 Mar, 2024
Royal attorneys successfully obtained a dismissal at the Massachusetts Commission Against Discrimination (MCAD) in a case against our client, a large not-for-profit organization. Royal attorneys argued that the Complainant's complaint failed to establish a prima facie case of whistleblower retaliation and that it should be dismissed in its entirety. The MCAD agreed with our argument, and dismissed the case against our client.
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