A move by the NLRB could make misclassifying workers an NLRA violation; Massachusetts’ ABC test would determine whether franchise owners are employees of the franchisors.

NLRB. The National Labor Relations Board is taking another look at independent contractor misclassification. Richard Reibstein of law firm Locke Lord LLP writes in JD Supra that the NLRB issued a complaint and notice of hearing that, if successful, could make misclassifying workers a violation of the National Labor Relations Act.

Franchisees. Massachusetts’ ABC independent contractor test applies to the franchisee-franchisor relationship and is not preempted by the Federal Trade Commission’s Franchise Rule, according to a March 24 ruling by the state’s Supreme Judicial Court.

In Patel v. 7-Eleven Inc., the court found that franchise owners, or franchisees, can be considered employees of the franchisor, entitling them to coverage under the state’s wage and hour laws and other laws relevant to employees.

7-Eleven argued that the Federal Trade Commission’s Franchise Rule, which requires certain disclosures in franchisor-franchisee relationships, preempts application of the Massachusetts independent contractor test.

Massachusetts uses the three-pronged “ABC” test to determine proper independent contractor classification:

  • 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
  • The service is performed outside the usual course of the business of the employer; and
  • 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.

The court did not apply the ABC test in the 7-Eleven case, however. The case returns to the US District Court, District of Massachusetts for worker classification determination.