Top Court in Massachusetts Reaffirms “ABC” Test to Determine Independent Contractor Status
As discussed earlier, the Plaintiffs in Patel v. 7-Eleven, franchise owners of the national corporation, allege they are employees of the national corporation, rather than independent contractor owners, based upon the provisions of their franchise agreement.
Pursuant to Massachusetts law, a Court has the ability to look into the actual duties performed by a person to determine whether they are an employee or independent contractor regardless of the language contained in the contract. A court will look at issues such as control, whether the service is performed outside the usual course of business for the employer, and whether the individual is customarily engaged in an independently established trade. Ultimately, the determination boils down to control. If the parent corporation controls the individuals work, they are an employee. If not, they are an independent contractor.
The Supreme Judicial Court’s (“SJC”) ruling is based upon a request by the First Circuit Court of Appeals to interpret state law. The First Circuit was hearing the case because, as part of that appeal, the First Circuit asked the SJC for its opinion on whether the Massachusetts ABC test even applies to a franchisor-franchisee relationship, or, whether the case should be analyzed using the Federal standing set forth in the FTC Franchise Rule.
The SJC stated that the Massachusetts ABC test should apply, and not the FTC Franchise Rule.
As a reminder, worker misclassification can have serious financial impacts to an employer. If franchise owners are employees of the parent corporation, there could be many employment laws implicated, including the Massachusetts Wage Act, earned sick time, tax issues, unemployment insurance, and Massachusetts Paid Family Medical Leave, among other protections granted to employees under state and federal law. Corporations should be mindful in how they classify their workers.
If you have any questions regarding worker classification, please contact the attorneys at The Royal Law Firm, LLP; (413) 586-2288.
