Workforce Bulletin

In a win for businesses, the Massachusetts Supreme Judicial Court (“SJC”) has ruled that individuals in true franchisor-franchisee relationships are independent contractors. In Patel v. 7-Eleven, Inc., the SJC found that defendant franchisor 7-Eleven, Inc. (“7-Eleven”) did not misclassify certain franchisees in violation of the Commonwealth’s independent contractor statute, M.G.L. c. 149, § 148B, which presumptively considers an individual “performing any service” for a putative employer to be an employee of said putative employer, rather than an independent contractor, unless: (1) the individual is free from control and direction in connection with the performance of the service; (2) the service is performed outside the usual course of the business of the employer; and (3) the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature at that involved in the service performed.

In a long saga to determine whether 7-Eleven properly classified certain franchisees as independent contractors, the United States Court of Appeals for the First Circuit (“First Circuit”) certified two questions to the SJC. On the first question back in 2022, the SJC ruled that where a franchisee is an “individual performing any service” for a franchisor, the independent contractor statute applies to the relationship between the franchisor and the franchisee. The decision here involved a second question that the First Circuit certified to the SJC related to the threshold determination of the independent contractor statute:

Do the plaintiffs perform any service for 7-Eleven within the meaning of the independent contractor statute, where, as here, they perform various contractual obligations under the Franchise Agreement and 7-Eleven receives a percentage of the franchise’s gross profits?

Summer in the Ocean State brings with it familiar novelties: the beach, clam cakes, and the end of the General Assembly’s legislative session. In this Insight, we summarize three employment-related bills that Rhode Island Governor Daniel McKee signed into law late last month, note bills that garnered attention but ultimately did not pass, and explain what employers should do now to remain in compliance.

New Laws

On July 13, 2022, the Massachusetts Appeals Court signaled a victory for Massachusetts employers who rely upon independent contractors.  In Tiger Home Inspection, Inc. v. Dir. of the Dep’t of Unemployment, the Appeals Court reversed decisions from the Department of Unemployment (“DUA”) and trial court, concluding that the inspectors were independent contractors under Massachusetts’s Unemployment Insurance statute (“Unemployment Law”) and, thus, ineligible for unemployment benefits.  Focusing on Prongs A and C of the Unemployment Law’s “ABC” test for classifying independent contractors, the Appeals Court provided employers with excellent precedent and concrete guidance for navigating those elements of the test.  Notably, the Unemployment Law’s ABC language largely tracks the Massachusetts Wage Act’s “ABC” test, with Prongs A and C using identical language.  As a result, Tiger Home Inspection arguably provides employers with much-needed clarity for navigating both statutes.

By:  John F. Fullerton III

On May 16, I co-hosted a small roundtable discussion here at the firm entitled “Employee Misclassification Issues in the Financial Services Industry:  Preventive Maintenance and Proactive Strategies.”  The topics included proper application of the administrative exemption from federal and state overtime laws; the nettlesome employee v. independent contractor question; and contingent workforce issues.  In attendance was a healthy mix of in-house employment counsel, human resources professionals, management consultants and outside counsel.  ...