81 F.4th 73
1st Cir.2023Background
- Plaintiffs are Massachusetts 7‑Eleven franchise owners/operators who signed uniform Franchise Agreements imposing operational obligations (training, uniforms, inventory sourcing, store hours, payroll systems).
- Franchisees pay various costs and a variable "7‑Eleven Charge" (about 50% of gross profits) withheld by 7‑Eleven from a franchisor‑maintained bank account; franchisees receive the remainder as a weekly draw.
- Plaintiffs sued 7‑Eleven under the Massachusetts Independent Contractor Law (ICL), the Wage Act, and the Minimum Wage Law, claiming misclassification as independent contractors.
- The First Circuit previously certified a question to the Massachusetts SJC about whether the ICL applies to franchisor‑franchisee relationships subject to the FTC Franchise Rule; the SJC answered that the ICL applies and does not conflict with the Franchise Rule.
- On remand the district court granted summary judgment for 7‑Eleven, holding plaintiffs failed the ICL threshold inquiry because they did not "perform any service" for 7‑Eleven and instead pay fees for services 7‑Eleven provides.
- The First Circuit, concluding the threshold question requires Massachusetts law clarification, certified to the SJC whether franchisees "perform[] any service" for 7‑Eleven when they perform contractual obligations and 7‑Eleven receives a percentage of gross profits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether franchisees "perform[] any service" for 7‑Eleven under Mass. Gen. Laws ch. 149 § 148B when they perform contractual duties and 7‑Eleven receives a share of gross profits | Patel: franchisees' store operations directly affect revenue to 7‑Eleven; analogous to radio associations in Sebago; threshold is modest | 7‑Eleven: relationship is like medallion lessor‑lessee in Sebago; franchisees pay for rights/tools and are not paid by 7‑Eleven to perform services | First Circuit did not decide merits; certified the question to the Massachusetts SJC for authoritative interpretation and retained jurisdiction |
Key Cases Cited
- Sebago v. Boston Cab Dispatch, Inc., 471 Mass. 321 (SJC) (distinguishes lessor‑lessee from service relationships; held some driver relationships did not "perform any service," while others did)
- Patel v. 7‑Eleven, Inc., 489 Mass. 356 (SJC) (held ICL applies to franchisor‑franchisee relationships and does not conflict with FTC Franchise Rule)
- Patel v. 7‑Eleven, Inc., 8 F.4th 26 (1st Cir.) (First Circuit certified conflict with FTC rule to SJC)
- Genereux v. Raytheon, Co., 754 F.3d 51 (1st Cir.) (state supreme court is final arbiter of state law)
- Jinks v. Credico (USA) LLC, 488 Mass. 691 (SJC) (Massachusetts precedent addressing application of ICL)