Are Franchises In Massachusetts Bound By Classification Law

The Massachusetts Supreme Court is poised to hear arguments about an important question in employment law that could result in consequences to franchise owners in the state — and eventually all over the country. Right now, franchise owners don’t enjoy legal protections afforded to everyone else. These range from minimum wage to workers compensation. Are 7-Eleven employees store managers? That’s the question.

Employees enjoy many protections according to employment law. They cannot be paid below the minimum wage. They must be paid overtime when the hours in a standardized workweek have been exceeded. Any work-related expenses must be reimbursed by the employer. For example, an employer might be required to pay for an employee’s gas expenses if asked to travel to another store farther away. 

The question may be a legal one, but franchise owners expect that the consequences could destroy the business model completely.

Justice Scott Kafker said, “I’m very sympathetic to the little guy who is working in all these stores. But I have very little sympathy for your argument that would convert entrepreneurs into employees.”

There’s an obvious reason for this reply, even though it seems harsh: entrepreneurs are taking a risk when establishing a new business. That risk represents an investment. And investments often don’t work out for the best. That’s the nature of the game.

But the ruling might also allow other businesses to use the franchise model in an effort to evade protections granted to employees under employment law. 

The plaintiffs say they are 7-Eleven employees and would like the law to recognize that status. But 7-Eleven spokespeople argued that those classification laws weren’t applicable because there are other laws that already regulate how they must operate — under the United States Federal Trade Commission. The question remains unanswered for now. Appeals courts will soon have their say.

The Massachusetts Supreme Court eventually provided a “joint employment” test in response to a separate lawsuit against the companies Credico and DFW. Four points must be met to achieve a standard of employment. Who had the power to hire or fire an employee? Who supervised the employee on a regular basis and provided the employee’s work schedule? Who determined the employee’s pay? Who maintained records for the employment of the worker?

According to the four points, Credico was found not to be a joint employer after the suit was filed. Businesses are mostly in favor of the new standards because the new law rejects broader definitions of what joint employment is (which has opened these businesses to frivolous lawsuits). It also makes state and federal law one and the same. Finally, it leaves companies that aren’t responsible for violations free and clear of the consequences for those violations.

An anonymous lawyer for sederlaw said, “We find our clients are happy about the new ruling. Laws aren’t exactly known for simplifying business relationships. Quite the opposite, actually. So this has been a breath of fresh air for the business community. And of course it also makes our job easier too.”

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