Franchisees = Employees; “Franchise Fees,” and Pay-to-work

It’s nearly impossible to be a correctly classified, lawful, Independent Contractor here in Massachusetts (See this recent post).  As a further illustration, in a complex, and sweeping decision, the First Circuit has found Franchisees (individuals who purchase a franchise from a franchisor) to be employeesin certain circumstances — despite their carefully crafted contracts to the contrary.

The  Coverall Case, Awuah v. Coverall N. Am., Inc., 460 Mass. 484, 498 (2011), is extensive, but the basic point is that the franchisees were deemed employees of the franchisor; as such, the fees paid to purchase the franchise were unlawful payments to an employer for the right to work.  In the context of the Wage Act, these fees are a prohibited assignment of an employee’s future wages.  Franchise fees, insurance premiums, and attorney’s fees associated with pursuing the rights of the franchisee all were potentially recoverable.