Court: Franchisees Not Employees of National Chain

They might share a name, hours, and overarching rules, but according to the U.S. District Court for the Central District of California,employment attorneys  7-Eleven franchisees are not direct employees of 7-Eleven. In the original employment lawsuit complaint, filed by a group of four franchisees, plaintiffs pointed to 7-Eleven’s restrictive rules, alleging they were unable to run a truly independent franchise and therefore qualified them as employees of the parent company. But the court ruled plaintiffs did not sufficiently demonstrate an employee-employer relationship. Our employment attorneys experienced in wage and hour lawsuits know this could set a significant precedent for current and future cases involving franchises.

According to National Law Review, plaintiffs attempted to make a case based on a few factors:

  • The requirement that franchisees remain open 364 days a year for 24 hours a day.
  • 7-Eleven distributes payments to all employees.
  • 7-Eleven sets rules for pay practices, discipline, terminations, and performance appraisals.

The ruling countered each of these points, assessing that the franchisee owners themselves did not have to work every day of the year, and these hours were not prohibitive of them hiring and scheduling a staff at their own discretion. While 7-Eleven did have certain rules in place to establish a foundation for employee standards, it was still up to the franchisees to determine all wages and decide who was hired and fired. The court determined 7-Eleven sending the checks was not evidence that the company determined the dollar figure on the checks or who received them.

As our Los Angeles employment attorneys can explain, if plaintiffs had won the lawsuit, it would have established that 7-Eleven was responsible for overtime and expense reimbursements, in violation of Fair Labor Standards Act and California Labor Code. The company’s tight franchise agreement and limited direct control saved them in this case, but the same outcome is not guaranteed for businesses that don’t have as clear of an agreement or that try to meddle more in day-to-day operations of their franchisees.

It is unclear what effect, if any, this ruling will have on a broader conversation currently taking place with the National Labor Relations Board. The board has been in a bit of turmoil over its stance on whether companies can be held accountable for the actions of franchisees and contractors. An Obama-era ruling by the board said yes they could. A decision in December 2017 rolled back that decision and said no. But a recent move by the board vacated that decision citing a conflict of interest of one of the voting members. This puts us back to the outcome of the 2015 decision, holding companies accountable, though the matter is far from settled with some calling on Congress to intervene.

These matters can appear overwhelming and complex, particularly for someone just trying to work every day to make ends meet and provide the best life for their family. You might sense something is wrong with how you are being treated by your employer, but you’re unclear on what exactly it is or if anything can be done about it. That is where our years of experience and knowledge come in to play. Our team of trusted attorneys are devoted to protecting the rights of employees and making sure employers are not taking advantage of you not knowing the ins and outs of the law.

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

Haitayan, et al v. 7-Eleven, Inc., March 14, 2018, U.S, District Court, Central District of California

More Blog Entries:

Board Vacates Franchise Labor Law Decision, March 4, 2018, Los Angeles Employment Lawyers Blog