Franchise Alert: Massachusetts Supreme Judicial Court Affirms Lower Court Ruling in Favor of Employees Misclassified as Franchisees/Independent Contractors
9/13/2011
Employers and franchisors should take note that misclassifying employees can be costly. The Massachusetts Supreme Judicial Court recently affirmed a lower court ruling in favor of the plaintiffs who were employees misclassified as independent contractors, allowing them to recover fees and other deductions. The plaintiffs entered into “janitorial franchise agreements” to provide services to third-party customers, and the plaintiffs were required to pay a franchise fee and monthly royalty fees to cover certain insurances as well as to purchase their own supplies and equipment. While the courts did not address other significant liabilities that can arise from misclassification, the rulings in this case should be looked at carefully by franchisors and other employers that follow the same or similar models.
