7-Eleven Franchisees Ask for Ninth Circuit’s Ruling on Employee Misclassification Suit

Foley & Lardner LLP

Foley & Lardner LLP

On Wednesday, February 10, California 7-Eleven franchise owners asked U.S. District Court Judge Dale Fischer to allow the Ninth Circuit Court of Appeals to rule on the district court’s previous denial of the franchisees’ application for class certification. The franchise owners filed a class action against 7-Eleven, claiming they are actually employees of the franchisor and not independent contractors. The impetus for the franchisees’ motion is a previous ruling from Judge Fischer, that the court should evaluate the franchisees’ claims of California labor code violations under the eleven-factor test set forth in the 1989 holding in S.G. Borello & Sons Inc. v. Department of Industrial Relations, while claims for violation of California’s wage orders would be subject to decision under the so-called “ABC test.” The California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County established the much-discussed ABC test. This space has extensively covered the Dynamex litigation and the potential impacts of the ABC test.

The 7-Eleven franchisees unsurprisingly argue that the ABC test, which makes it harder for companies to classify workers as independent contractors, should apply to their case. The franchisees point to a once stayed, now pending, case before the Ninth Circuit involving a GrubHub driver, Raef Lawson, in which the court will decide whether Dynamex should apply retroactively to Lawson’s claims of misclassification. In January 2021, the California Supreme Court held that its Dynamex ruling indeed applied retroactively, and in response the Ninth Circuit lifted a stay in Lawson’s case presumably to proceed in light of the California court’s action. The 7-Eleven franchisees now seek to seize whatever advantage might come from the Ninth Circuit’s action, as it relates to Lawson’s claims against GrubHub.

The 7-Eleven franchisees originally brought suit in October 2017, alleging they were employees of the franchisor due to the level of control 7-Eleven exercised over their individual store operations. In March 2018, U.S. District Court Judge John Walter ruled the controls 7-Eleven imposed did not make the franchisees employees. The franchisees appealed to the Ninth Circuit, and in the interim the California Supreme Court issued its decision in Dynamex. The Ninth Circuit then vacated the judgment in favor of 7-Eleven and remanded the case to the district court. In 2019, the Ninth Circuit certified the question of Dynamex’s retroactivity to the California Supreme Court, leading to its recent ruling on that question. 

This litigation remains ongoing but represents a preliminary victory for 7-Eleven to the extent plaintiffs’ efforts to certify a class have been unsuccessful. This litigation is also another example of the far-reaching impact of Dynamex.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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