Since 2004, Massachusetts has defined the employment relationship more broadly than any other state in the country. Under Massachusetts General Laws chapter 149, § 148B, every individual performing “any services” is classified as an “employee” unless each of the following is true:the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; andthe service is performed outside the usual course of the business of the employer; andthe individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.Mass. Gen. Laws ch. 149 § 148B.

The SJC held that the independent contractor statue applies to the franchisor-franchisee relationship and is not in conflict with the franchisor’s disclosure obligations set forth in the FTC Franchise Rule. Therefore, the SCJ determined, a franchisee providing services to a franchisor under the terms of a franchise agreement may, in fact, be classified as an “employee” of the franchisor under state wage-and-hour law.Massachusetts and FTC RulesThe court’s reference to the “independent contractor statute” refers to Massachusetts G. L. c. 149, § 148B. Under this law, “an individual performing any service” for a putative employer “shall be” considered an “employee” for purposes of the wage statutes.

Recently, the review board revisited this issue in Camargo’s Case, 479 Mass. 492 (2018). The claimant argued that the review board should apply the definition of employee under M.G.L. c. 149 § 148B(a). However, the review board affirmed the hearing judge’s opinion and found that for the purposes of the Workers’ Compensation Act, the independent contractor statute under § 148B(a) is not applicable and does not determine whether a claimant is an employee for the purposes of benefits under the Worker’s Compensation Act.

Massachusetts presumes that a worker is an “ employee” unless the employing entity can satisfy each prong of a three-prong, independent contractor test. The test is found in M.G.L. c. 149, § 148B, which provides: (a)For the purpose of this chapter and chapter 151, an individual performing any service, except as authorized under this chapter, shall be considered to be an employee under those chapters unless: (1)the individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and (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 as that involved in the service performed. Subsection (d) also provides for potential civil and criminal penalties for a failure to properly classify an employee.

The SJC ruling aligns with the First Circuit’s decision in Schwann v. FedEx Ground Package Sys., Inc.Massachusetts Independent Contractor Test The independent contractor test used in applying Massachusetts wage statutes is arguably the most difficult such test in the nation. Massachusetts General Laws chapter 149, section 148B creates a presumption that an individual performing a service for an employer is an employee. To rebut the presumption of employee status, the employer must satisfy all three prongs of the following test: (1) The individual must be free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; (2) the service must be performed outside the usual course of the business of the employer; and (3) the individual must be customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.

tractor Law. At an earlier phase, the District Court granted 7-Eleven’s motion for summary judgment, resulting in an appeal and certification to the Massachusetts Supreme Court the question: “Whether the three-prong test for independent contractor status set forth inMass. Gen. Laws ch. 149 § 148Bapplies to the relationship between a franchisor and its franchisee, where the franchisor must also comply with the FTC Franchise Rule.” After the Massachusetts Supreme Court held that it did apply to the franchise relationship, the federal district court held on remand that the three-prong Massachusetts Independent Contractor Law test did not apply because franchisees “are not paid for any services performed for 7-Eleven” and that it is franchisees who “pay franchise fees to 7-Eleven in exchange for a variety of services to support the franchisee.”Upon a second appeal, the First Circuit has now certified the question: “Do Plaintiffs ‘perform[ ] any service’ for 7-Eleven, within the meaning of Mass. Gen. Laws ch. 149, § 148B, where, as here, they perform various contractual obligations under the Franchise Agreement and 7-Eleven receives a percentage of the franchise's gross profits?” 7-Eleven argued that franchisees pay it “for the rights and tools . . . needed to operate [their] own [franchises],” and it “does not pay Plaintiffs for the performance of any obligation.” Franchisees argued that their efforts reflect an employment relationship as the revenue flowing to 7-Eleven necessarily “fluctuates depending on how well each store performs from month to month.” Certifying the question, the First Circuit explained that it thought it “prudent to give the supreme court the first opportunity to provide the answer to this question of state law.”[View source.]

e general public, for their skill.It is critical for all venues to understand their obligations and the restrictions under the FLSA and state-specific laws. While every venue wants to put on a good show, the exposure for venues to misclassify performers should create pause before scheduling such acts. With the IRS expanding their enforcement in the coming decade, venues should have increased diligence in determining their relationship with the performers.https://www.congress.gov/bill/117th-congress/house-bill/5376Bowerman v. Field Asset Services, Inc. 39 F4th 652 (Ct. Appeals, 9th Cir. 2002).https://www.dir.ca.gov/dlse/FAQ_IndependentContractor.htm The Federal law, the “Fair Labor Standards Act” and the Fifth Circuit follow the “economic realities test” to determine whether a worker is an employee or an independent contractor, which expands the ABC Test to consider additional non-exhaustive factors. Kibodeaux v. A&D Interests, Inc. 579 F.Supp.3d 896 (Dist. Ct. S.D. Texas, 2022). Under Massachusetts General Laws, c. 149 sec. 148B, the Attorney General may impose fines up to $25,000 or imprisonment for up to one year for a first offense on the president, treasurer or officer of an organization for willful misclassification and up to $10,000 or imprisonment for up to six months for non-willful misclassification.https://www.nytimes.com/2010/02/18/business/18workers.htmlhttps://www.rfcuny.org/rfwebsite/principal-investigators/manage-an-award/misclassification-of-workers/ N.Y. Lav. Law secs. 650-665.https://dol.ny.gov/performing-artists-ia-31817 Id.https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB5https://variety.com/2020/music/news/california-gig-economy-assembly-bill-5-ab5-musicians-1234583320/ California Labor Code, sec. 226.8. RCW 30.04.148.Community for Creative Non-Violence, et al. v. Reid., 480 U.S. 730, 109 S.Ct. 2166 (1989).https://gigwise.com/news/86366/[View source.]

An additional 12 weeks may be provided under certain conditions.MASSACHUSETTSThe Massachusetts Supreme Judicial Court has ruled that the three-part test for establishing a worker’s status as an independent contractor (Mass. Gen. Laws ch. 149 § 148B) also applies to franchisor-franchisee relationships. Specifically, the test applies to the relationship between a franchisor and an individual franchisee performing a service for the franchisor.

PATEL, ET AL. V. 7-ELEVEN INC., ET AL.In a decision issued March 24, 2022,Patel, et al. v. 7-Eleven Inc., et al.,theSJC held that the three-prong “ABC test” for determining whether an individual is an employee or an independent contractor for purposes of Massachusetts wage and hour laws applies to the relationship between franchisees and franchisors. The certified question before the SJC was whether the independent contractor statute, MGL c. 149 § 148B, which sets forth the ABC test, also applies to determine whether a franchisee is an employee or an independent contractor, where the franchisor must also comply with the Federal Trade Commission (FTC) Franchise Rule (a series of franchise-related regulations), 16 CFR § 436.1, et seq.The independent contractor statute sets a baseline presumption that “an individual performing any service” for someone they claim is their employer is an employee. To rebut this presumption, a putative employer must establish each of the three prongs of the ABC test: (1) the individual is free from control and direction in connection with the performance of the service, both under the individual’s contract for the performance of service and in fact; (2) the service is performed outside the usual course of the business of the putative employer; and (3) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the

The March 24 decision in Dhananjay Patel v. 7-Eleven, Inc. will have significant implications for businesses operating within franchise models. What does your franchised business need to know?BackgroundIn 2018, a group of 7-Eleven franchise owners sued 7-Eleven, alleging their franchise agreements misclassified them as independent contractors in violation of the Massachusetts independent contractor law, M.G.L. c. 149, §148B. Among other things, the franchisees alleged agreements with 7-Eleven required them to turn over a substantial amount of their profits to the franchisor as franchise fees and they were required to follow myriad other rules, including operating their stores around the clock, using 7-Eleven’s payroll system, stocking inventory sold by 7-Eleven’s preferred vendors, and more.In 2020, a federal court judge granted 7-Eleven summary judgment on the franchisees’ claims, holding the Federal Trade Commission’s (FTC) Franchise Rule conflicted with the Massachusetts independent contractor statute, and therefore the independent contractor statute did not apply.