Sept 5 (Reuters) - Massachusetts' top state court on

Thursday said franchisees who operate 7-Eleven

convenience stores are not the company's employees under state

wage law, a ruling that business groups said was necessary to

preserve the franchise model.

The Massachusetts Supreme Judicial Court in a unanimous

decision said that 7-Eleven franchisees do not "perform any

service" for the company, the key factor in determining who

qualifies as an employee under state law.

"The franchisees have chosen to operate their independent

businesses using the 7-Eleven business format franchise, to pay

7-Eleven for that use, and to abide by conditions that maintain

the integrity of the 7-Eleven brand," Justice Dalila Wendlandt

wrote for the court. "These circumstances do not indicate that

the plaintiffs are, in fact, employees of 7-Eleven."

The ruling answered a certified question from the

Boston-based 1st U.S. Circuit Court of Appeals, which is

considering whether to revive a 2017 proposed class action

claiming 7-Eleven owes franchisees in Massachusetts the minimum

wage and other legal protections afforded to employees.

7-Eleven did not immediately respond to a request for

comment.

Shannon Liss-Riordan, who represents the plaintiffs, said

she was disappointed with the ruling.

"My hope is that this decision does not allow unscrupulous

employers to adopt a 'franchise' label so as to exploit their

workers, as we have unfortunately seen happen in a number of

industries," Liss-Riordan said in an email.

In addition to the minimum wage, employees must be paid

overtime and reimbursed for work-related expenses, among other

costly legal requirements. Business groups say treating

franchisees as employees would devastate franchise businesses

and limit opportunities for small business owners.

7-Eleven was backed by major business groups, including the

U.S. Chamber of Commerce, the country's largest business lobby,

which said in an amicus brief last year that a ruling for the

plaintiffs would upend franchising in Massachusetts and cause

harm to workers and the broader economy.

The plaintiffs claim they are essentially glorified store

managers and should be considered 7-Eleven's employees under

state law because of the degree of control the company exercises

over them, including requirements that stores remain open 24

hours a day and carry specific products.

U.S. District Judge Nathaniel Gorton in Boston dismissed the

case in 2020, agreeing with 7-Eleven that a state worker

classification law did not apply to franchisors at all because

they are governed by a U.S. Federal Trade Commission rule

regulating franchise relationships.

The plaintiffs appealed that ruling and the 1st Circuit

asked the Massachusetts Supreme Judicial Court to decide the

novel issue. The court in 2022 sided with the plaintiffs, saying

state law did not conflict with the FTC rule, which led the 1st

Circuit to revive the case.

Gorton tossed out the lawsuit again later that year, finding

that 7-Eleven franchisees do not "perform any service" for the

company, but rather provide a service to their customers, and so

could not be considered its employees under state law.

The Massachusetts Supreme Judicial Court on Thursday agreed.

The state worker classification law was designed to ensure that

workers are not improperly deemed independent contractors, and

not to turn independent business owners into employees,

Wendlandt wrote.

The court sent the case back to the 1st Circuit to apply the

ruling.

The case is Patel v. 7-Eleven Inc, Massachusetts Supreme

Judicial Court, No. SJC-13485.

For the plaintiffs: Shannon Liss-Riordan of Lichten &

Liss-Riordan

For 7-Eleven: Norman Leon of DLA Piper

Read more:

In 7-Eleven case, Mass. top court says franchisees can be

employees

Mass. judges hesitant to apply employment laws to 7-Eleven

franchisees

Question of whether 7-Eleven franchise operators are

employees sent back to Mass. top court