From JDSupra, Richard Reibstein discusses a case in which the court said that a specific rule for franchises by the Federal Trade Commission (FTC) governed over a general rule relating to independent contractor classification. Richard writes:
FRANCHISOR PROTECTED FROM MASSACHUSETTS INDEPENDENT CONTRACTOR LAW UNDER UNIQUE STATE COURT “PREEMPTION” DECISION. In a proposed class action brought under the highly restrictive Massachusetts independent contractor law, franchisees of 7-Eleven have claimed they have been misclassified as independent contractors and should instead be reclassified as employees because of the high degree of control 7-Eleven exerts over them as set forth in their 7-Eleven franchise agreements. 7-Eleven filed a motion for summary judgment asserting the state’s independent contractor law was preempted by the Federal Trade Commission’s franchise regulations. Its motion relied on a decision issued by the highest court in Massachusetts involving the real estate industry, where the court had held that the state’s independent contractor law was completely preempted by a state law requiring real estate companies to supervise real estate agents. 7-Eleven conceded that it exercises some level of control over its franchisees, but argued it did so consistent with the FTC franchise regulations. Under the FTC franchise rules, “The franchisor will exert or has authority to exert a significant degree of control over the franchisee’s method of operation, or provide significant assistance in the franchisee’s method of operation.” A federal district court in Massachusetts agreed, finding that the state court’s real estate decision applied as well to franchisors that exercise control over franchisees. The court concluded that “[w]here there is a conflict between the Massachusetts [Independent Contractor Law] and a regulatory scheme, the specific [FTC Rule] trumps the general [ICL].” Patel v. 7-Eleven, Inc., No. 17-11414 (D. Mass. Sept. 10, 2020). The district court decision will undoubtedly be appealed, but even if upheld, it may be limited to Massachusetts because it is based on a decision unique to that jurisdiction.