Franchisees of the popular 7-Eleven gas station and convenience store have two big reasons to celebrate. The U.S. Court of Appeals for the Ninth Circuit recently vacated two decisions made against them in lower court in a consolidated appeal.
In the first case, filed in October of 2017, 7-Eleven franchisees claimed that the pervasive control the franchisor exercised over every aspect of their operation meant that they should be classified as franchisee employees rather than independent contractors. (Read our original blog post about this case – 7-Eleven Franchisees Accuse Franchisor of Having “Total Dominion”)
U.S. District Judge John F. Walter of the Central District of California heard the case and dismissed all the claims by the franchisees. The plaintiffs then appealed to the Ninth Circuit Court.
In the second case, franchisees sought to stop 7-Eleven, Inc. from forcing them to sign releases of claim as a condition of renewing their franchise agreement. The franchisees argued that these releases of claim are illegal under California law.
U.S. District Judge Dale S. Fischer heard the application and denied the injunction. The plaintiffs again appealed to the Ninth Circuit Court, which consolidated the two cases and made its decision on February 27th.
Of note is that a third case, known as Dynamex, could impact the question of when a franchisee can be classified as an employee of a franchisor. In Dynamex, the California Supreme Court adopted new criteria to determine if someone should be classified as an employee or as an independent contractor. This new standard was not applied in the first 7-Eleven case, because Judge Walter did not wait for the Dynamex case to be decided.
Both 7-Eleven cases have been sent back to District Court where they will likely be combined and heard by a single judge.
Learn more about this case from this detailed write-up by Janet Sparks in Forbes.
At the AAFD, we will continue to monitor these important cases and provide updates when they become available!