Jeffrey Rosin's profile

How Employee Classification Laws Impact Franchises

Jeffrey Rosin is a Boston, Massachusetts-based attorney who brings over three decades of experience to his role as the managing partner at the Boston office of O'Hagan Meyer. Attorney Jeffrey "Jeff" Rosin possesses experience representing business franchises. As a lawyer, he defends against claims of franchisee misclassification.

Rules affecting the affairs of franchises have evolved with no sign of abatement since new markets appear with trailblazing ideas that necessitate legislative adjustments. To visualize how business legislation can impact franchising, consider the AB-5 rule, which took effect in California in January 2020.

The AB-5 rule came from the ruling in Dynamex Operations West, Inc. v. the Superior Court of Los Angeles County and distinguishes an independent contractor from an employee. According to the rule, an individual in a relationship with a hiring entity is an independent contractor if their business operations are outside of the control of the hiring entity and their services help the hiring entity accomplish tasks that are not part of the entity's regular business activity. Under the rule, an individual is an independent contractor if they have an independently established occupation or trade for the service they perform for a hiring entity.

AB-5 categorizes many franchisees as employees rather than independent contractors. For example, franchisors have a level of control over how franchisees operate their businesses, and the roles of franchisees are connected to the business operations of franchisors. As a consequence, a franchisee may be mistakenly viewed as a traditional employee under AB-5, and this misunderstanding would bring additional obligations to the relationship. These include paid time off, overtime pay, family leave, discrimination rules, and reimbursement of expenses.

How Employee Classification Laws Impact Franchises
Published:

How Employee Classification Laws Impact Franchises

Published: