8 F.4th 26
1st Cir.2021Background:
- Five Massachusetts 7‑Eleven franchisees operating stores under franchise agreements (classified as independent contractors) sued 7‑Eleven for misclassification under the Massachusetts Independent Contractor Law (ICL), the Wage Act, and the Minimum Wage Law.
- Franchise agreements required continuous store operation, stocking specified vendors, use of 7‑Eleven payroll, and payment to franchisees from store gross profits after fees to 7‑Eleven.
- The ICL presumes a service provider is an employee unless the putative employer proves three prongs: (1) freedom from control, (2) service performed outside the employer's usual course of business, and (3) provider is in an independently established business.
- The FTC Franchise Rule defines a franchise (in part) as a relationship where the franchisor exerts or has authority to exert a significant degree of control over the franchisee’s method of operation.
- Potential conflict: the FTC Rule’s control/authority language appears to require franchisor control that the ICL’s first prong would disallow, making it difficult for a franchisor to comply with both.
- The district court accepted 7‑Eleven’s argument that the conflict renders the ICL inapplicable as a matter of law to its franchise relationships; the First Circuit certified to the Massachusetts Supreme Judicial Court whether the ICL’s three‑prong test applies when the franchisor must also comply with the FTC Franchise Rule.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ICL three‑prong independent‑contractor test applies to franchisor‑franchisee relationships when the franchisor must comply with the FTC Franchise Rule | Franchisees: 7‑Eleven must meet the ICL burden like any employer; ICL applies and 7‑Eleven has not shown independent‑contractor status | 7‑Eleven: FTC Franchise Rule requires franchisor control, creating an irreconcilable conflict with the ICL so the ICL cannot apply as a matter of law | The First Circuit declined to decide and certified the question to the Massachusetts SJC for authoritative interpretation; retained jurisdiction pending SJC's answer |
Key Cases Cited
- Fortin v. Titcomb, 671 F.3d 63 (1st Cir. 2012) (discussing certification practice to state supreme courts)
- Monell v. Boston Pads, LLC, 31 N.E.3d 60 (Mass. 2015) (SJC held ICL did not apply where another statute made satisfying an ICL prong impossible)
- In re Engage, Inc., 544 F.3d 50 (1st Cir. 2008) (discussing when certification to state court is appropriate)
- Ropes & Gray LLP v. Jalbert, 910 N.E.2d 330 (Mass. 2009) (example of certified question answered by the Massachusetts SJC)
- Boston Gas Co. v. Century Indem., 529 F.3d 8 (1st Cir. 2008) (discussing suitability of certification where state policy considerations are implicated)