Massachusetts Lawmakers Considering Law That Would Classify Franchisees As Owners

Lawmakers in Massachusetts this week are considering a bill that would (hopefully) resolve some of the troubling issues that were raised in the Massachusetts federal court decision Massachusetts federal court decision in Awuah v. Coverall North America, Inc.  For background on the Awuah case, please read my previous blog posts, Are Your Franchisees Really Your Employees? Giving Further Consideration To Awuah v. Coverall; and Awuah v. Coverall: Is The Franchising Model Really At Risk? As discussed in those posts, the Awuah case, if followed by other courts in Massachusetts, poses a threat to many franchisors who risk being classified "employers" of their franchisees, instead of having those franchisees treated as an independent contractors. 

According to The Boston Globe, legislators in Massachusetts are debating a bill that would resolve the issue by clarifying that franchisees are, in fact, independent contractors of their franchisors — which is the understanding that most companies and individuals in the franchise industry currently have.  If passed, the bill would protect franchisors from having to pay their franchisees for overtime and for other benefits that an employer must ordinarily provide for an employee under state law.  Of course, while the bill, if passed, would ostensibly resolve the issue in Massachusetts, nothing would prevent a court in another state from using the same or similar analysis in other franchise cases.

The article discusses another bill currently being considered by the Massachusetts legislature that would create a franchise relationship law in the state.  If passed, this law (like franchise relationship laws that are currently on the books in other states) would define the circumstances under which a franchisor could terminate its franchisee or refuse to renew them and would create additional state law claims that franchisees may be able to bring against their franchisors.  Given the broad sweeping scope of the law (as reported in the article), it seems doubtful that this bill will pass in its current state. 

I will continue to monitor these bills and provide updates as I receive them.