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Employee Misclassification Lawsuit: Franchisees Found to Be Employees Not Independent Contractors

May 21, 2010

A recent court case that our Anaheim, California-based Employment Lawyers have been following has reportedly alarmed the franchising industry across the country, as the case is challenging the industry understanding that franchisees are considered to be independent contractors and not employees--a topic our lawyers recently discussed in a blog.

According to the case, Coverall North America, Inc., the commercial-cleaning franchise located in Boca Raton, Florida, was sued by franchisees in 2007--who claimed that Coverall committed deceptive and unfair business practices, as well as employee misclassification in Massachusetts as well as other states. The franchisees accused Coverall of misclassifying them as "independent contractors" instead of "employees" and claim that under law, they are entitled to minimum wage rights, overtime pay, and other benefits, like unemployment and workers' compensation.

In March, a judge in a district in Boston reportedly ruled that Coverall's franchisees were essentially employees who paid a franchise fee to clean buildings--the main business of the company. The judge wrote in the his opinion that Coverall failed to establish that the franchisees were independent contractors--which violates Massachusetts state employment law.

Last week, the court reportedly issued a memorandum and order granting the workers' motion for a partial summary judgment, stating that under Massachusetts law, the franchisees were found to be employees. The implications of this decision could mean that franchises could be legally liable to for unpaid wages and benefits, including health insurance, workers' compensation, overtime payment, as well as other rights given to employees who have been misclassified as independent contractors under law.

As California Employment and Labor Lawyers, we are experienced in understanding the legal complexity surrounding employee misclassification in the workplace. If you or someone you know have experienced employee misclassification or other violations of California Labor Codes in Los Angeles County, Orange County and throughout Southern California, contact our labor and employment attorneys today, for a free consultation about your rights.

Franchisees: We're Employees, Not Contractors, The Wall Street Journal, May 10, 2010

United States: Massachusetts District Court Finds Janitorial Franchisees are Employees, Jones Day, May 17, 2010

Franchisees Found to Be Employees as Opposed to Independent Contractors in Massachusetts, Lexology, May 12, 2010

Related Web Resources:

Fair Labor Standards Act Advisor: Exemptions, United States Department of Labor