From The National Law Review, Christopher M. Pardo and Alexis Zavala Romero discuss the recent California case in which the court said that 7-Eleven franchisees were independent contractors. Christopher and Alexis write:
A critical ruling in the world of franchising, in Haitayan v. 7-Eleven, Inc., 2021 WL 4078727 (C.D. Cal. Sept. 8, 2021), the U.S. District Court for the Central District of California applied the so-called Borello test to find that franchisees were independent contractors, instead of employees, for purposes of their claims for unpaid business expense reimbursements under California’s Labor Code section 2802.
The Court determined in a previous order that the Borello test applied to claims under California Labor Code section 2802, despite the California Supreme Court’s adoption of the ABC test in Dynamex Operations W. v. Superior Ct., 4 Cal. 5th 903 (2018). The lawsuit was brought in 2017, before the Dynamex decision and adoption of California Labor Code 2775 (codified ABC/Dynamex test).
Under Borello, the primary factor is whether the alleged employer has the right to control the manner and means of the work at issue. S. G. Borello & Sons, Inc. v. Dep’t of Indus. Rels., 48 Cal. 3d 341, 350 (1989). Although the right to control is the most important consideration, the Borello test also considers a number of secondary factors, which include:
- whether the one performing services is engaged in a distinct occupation or business;
- the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
- the skill required in the particular occupation;
- whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
- the length of time for which the services are to be performed;
- the method of payment, whether by the time or by the job;
- whether or not the work is a part of the regular business of the principal; and
- whether or not the parties believe they are creating the relationship of employer-employee. Borello, 48 Cal. 3d. at 350-351.
Judge Dale S. Fischer held the franchisees exercised their own judgment and control in determining “what products they would carry, how to price the products, how to organize the store, what promotions to take part in, whom to hire or fire, the scheduling of employees, how often and when [franchisees] would be present at their stores, and what draws to take from the stores and when.” Haitayan, at 13.