Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Seven & i Holdings Co., Ltd.    3382   JP3422950000

SEVEN & I HOLDINGS CO., LTD.

(3382)
  Report
SummaryChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Seven & i : Slurpees For Everyone! 7-Eleven Beats Franchisee Misclassification Suit In Massachusetts

share with twitter share with LinkedIn share with facebook
09/24/2020 | 12:15pm EDT

Boston, Mass. (September 23, 2020) - In August 2017, five individual convenience store franchisees filed suit in federal court for violations of the Massachusetts Independent Contractor Law (Massachusetts ICL), the Massachusetts Wage Act, and the Massachusetts Minimum Wage Law against their franchisor, 7-Eleven, Inc. The franchisees alleged that they, and all other franchisees in the Commonwealth of Massachusetts, were employees of 7-Eleven under state law.

On September 11, 2020, after years of discovery, United States District Judge Nathaniel M. Gorton rejected the franchisees' arguments and dismissed their claims in Patel, et al v. 7-Eleven, Inc., et al, No. 17-cv-11414 (NMG) (JCB) (D. Mass), noting the "inherent conflict" between the franchise business model, federal law, and the Massachusetts ICL's ABC test.

The Massachusetts Independent Contractor Law

Under Massachusetts law, "an individual performing any service" for another is presumed to be an employee. In order to rebut the labor-friendly definition of employee, purported employers in the State of Massachusetts are required to meet the requirements of the ABC test, widely used across numerous other states.

Specifically, they are required to demonstrate (A) the individual is, in contract and in fact, free from control and direction in performance of the service; (B) the service is performed outside the usual course of business of the employer; and (C) the individual is customarily engaged in an independently established business of the same nature as that involved in the service performed.

The Federal Trade Commission's Franchise Rule

The Federal Trade Commission (FTC) has promulgated a series of regulations collectively called the "FTC Franchise Rule," 16 C.F.R. §§ 436.1, et seq., in order to prevent unfair practices in the sale of franchises and related business opportunities. Notably, the FTC Franchise Rule defines a franchise as:

[A]ny continuing commercial relationship or arrangement, whatever it may be called, in which the terms of the offer or contract specify, or the franchise seller promises or represents, orally or in writing, that:

(1) The franchisee will obtain the right to operate a business that is identified or associated with the franchisor's trademark, or to offer, sell, or distribute goods, services, or commodities that are identified or associated with the franchisor's trademark;

(2) The franchisor will exert or has authority to exert a significant degree of control over the franchisee's method of operation, or provide significant assistance in the franchisee's method of operation; and

(3) As a condition of obtaining or commencing operation of the franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate.

(Emphasis added.)

The Parties' Arguments

As a fundamental part of its defense, 7-Eleven argued that the Massachusetts ICL did not apply because (1) 7-Eleven provides services to its franchisees, not the other way around, and (2) federal regulations made it impossible for 7-Eleven to comply with the Massachusetts ICL.

In response, the franchisees argued (1) the Massachusetts ICL applied because they did provide services integral to 7-Eleven's business model, (2) the FTC Franchise Rule did not preempt the Massachusetts ICL, and (3) 7-Eleven could not make the required showing under the ABC test.

The Decision

As a preliminary matter, the court declined to determine as a matter of law whether the franchisees provided "services" as construed under the Massachusetts ICL despite the liberal construction of the term.

Notwithstanding its refusal to rule on the services issue, the court ultimately sided with 7-Eleven, granting its motion for summary judgment and denying the franchisees' motions for summary judgment and class certification. The decision was based on the conflict between the Massachusetts ICL and the FTC Franchise Rule.

Citing state court precedent, the court found that where there is a conflict between the Massachusetts ICL and any regulatory scheme (i.e. the FTC Franchise Rule), "the specific trumps the general." And in order to comply with the FTC Franchise Rule, which obligates franchisors to exercise "significant" control over their franchisees, compliance with the Massachusetts ICL's ABC test was not possible lest the company violate federal law.

In closing, the court encapsulated its decision by noting that a finding in favor of the franchisees "would eviscerate the franchise business model, rendering those who are regulated by the FTC Franchise Rule criminally liable for failing to classify their franchisees as employees."

Conclusion

The federal court's decision is a welcome one for franchisors who have been facing increasingly hostile courts and legislatures. The increased scrutiny has subjected franchisors to significant financial exposure for joint employer liability and/or wage and hour liability claims, and threats of unionization and increased labor costs, all concerns that the franchise business model was designed to avoid.

In light of this decision, when faced with misclassification suits, franchisors should endeavor to show the court that, as a matter of federal law and practice, the franchise model itself requires them to exercise a certain level of control over their franchisees. So long as the level of control exercised is geared towards protecting the franchise's trademarks, system, and goodwill, rather than controlling the wages and day-to-day operations of the local franchise business, franchisors may be able to use their control as a sword in misclassification litigation.

As the number of states applying some version of the ABC test continues to grow, the argument successfully advanced by 7-Eleven in Massachusetts should prove useful to franchisors throughout the country.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Elior Shiloh
Lewis Brisbois Bisgaard & Smith LLP
633 West Fifth Street
Suite 4000
Los Angeles
California 90071
UNITED STATES
Tel: 2122501800
Fax: 2122507900
E-mail: media@lewisbrisbois.com
URL: www.lewisbrisbois.com

© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing


share with twitter share with LinkedIn share with facebook
All news about SEVEN & I HOLDINGS CO., LTD.
10/09Japan stocks post biggest weekly gain in 2 months on U.S. stimulus hopes
RE
10/08Japan stocks head for weekly gain on U.S. stimulus hopes
RE
10/08SEVEN & I : Japan's Seven & i sees signs of recovery from pandemic
RE
10/05SEVEN & I HOLDINGS CO., LTD. : half-yearly earnings release
09/29Marathon Petroleum, top U.S. refiner, begins widespread job cuts
RE
09/28SoftBank brings food service robot to labour-strapped Japan
RE
09/24SEVEN & I : Slurpees For Everyone! 7-Eleven Beats Franchisee Misclassification S..
AQ
09/02LAWSON : Japan regulator tells convenience stores to stop forcing 24-hr rule on ..
RE
08/28SEVEN & I HOLDINGS CO., LTD. : Ex-dividend day for interim dividend
FA
08/25Japan's Itochu boosts FamilyMart stake despite criticism over offer
RE
More news
Financials
Sales 2021 5 891 B 56 251 M 56 251 M
Net income 2021 142 B 1 360 M 1 360 M
Net cash 2021 523 B 4 991 M 4 991 M
P/E ratio 2021 21,3x
Yield 2021 2,88%
Capitalization 3 029 B 28 904 M 28 917 M
EV / Sales 2021 0,43x
EV / Sales 2022 0,42x
Nbr of Employees 57 270
Free-Float 83,2%
Chart SEVEN & I HOLDINGS CO., LTD.
Duration : Period :
Seven & i Holdings Co., Ltd. Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends SEVEN & I HOLDINGS CO., LTD.
Short TermMid-TermLong Term
TrendsBullishNeutralBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 13
Average target price 4 407,69 JPY
Last Close Price 3 430,00 JPY
Spread / Highest target 74,9%
Spread / Average Target 28,5%
Spread / Lowest Target 4,96%
EPS Revisions
Managers
NameTitle
Ryuichi Isaka President & Representative Director
Yoshimichi Maruyama General Manager-Finance & Accounting
Katsuhiro Goto Representative Director & Executive Vice President
Junro Ito Director & Managing Executive Officer
Kimiyoshi Yamaguchi Director & General Manager-Corporate Communication
Sector and Competitors
1st jan.Capitalization (M$)
SEVEN & I HOLDINGS CO., LTD.-14.31%28 904
WALMART INC.21.05%407 635
ALIMENTATION COUCHE-TARD INC.4.46%36 481
SM INVESTMENTS CORPORATION-7.00%24 133
AVENUE SUPERMARTS LIMITED15.13%18 572
COLES GROUP LIMITED15.84%16 308