Coverall Case Pending in the First Circuit Could Have Major Impact on the Future of the Franchise Industry in Massachusetts

Law360

Barry Guryan, a Member in the Health Care and Life Sciences and Labor and Employment practices and Managing Shareholder of the firm's Boston office, and Jeff Ruzal, Senior Counsel in the Labor and Employment practice in the New York office, wrote an article titled "Coverall Case Pending in the First Circuit Could Have Major Impact on the Future of the Franchise Industry in Massachusetts." (Read the full version – subscription required.)

Following is an excerpt:

In a highly publicized March 23, 2010 decision, Awuah v. Coverall N. Am., Inc., 707 F.Supp.2d 80 (D. Mass. 2010), U.S. District Judge William Young for the District of Massachusetts rocked the Massachusetts business community by ruling that a group of janitorial franchisees were improperly classified as independent contractors, and that they were instead "employees" of commercial cleaning franchisor Coverall who are entitled to statutory protection under Massachusetts' Wage laws including, among others, minimum wage, overtime pay, meal breaks and workers' compensation.

Massachusetts law is known to have one of the most stringent employment classification tests in the country. Commonly referred to as the "ABC Test," G.L. c. 149, § 148B(a), putative employers must satisfy the following three conditions to establish an independent relationship with individuals who perform services for them: (a) the individual is free from control and direction in connection with the performance of service; (b) the service is performed "outside the usual course of the 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.