Massachusetts High Court Deals Blow to Franchisors Seeking Judicial Exemption from Strict Independent Contractor Test, But All Is Not Lost

[...]while the franchise industry argued that such as decision will be the death-knell of franchising in Massachusetts and other states for individuals who wish to own and operate a franchise, the decision will not likely have the doomsday effect that the franchising industry predicted. Because with the proper structuring, documentation, and implementation of the franchise relationship, franchisors should be able to classify individual franchisees as independent contractors, even in Massachusetts, as discussed below. "1 The decision was appealed to the First Circuit. Because the issue involved a key state law, the First Circuit chose to ask the Massachusetts Supreme Judicial Court, the highest court in that state, to provide its opinion on the question of whether the FTC Rule preempts the state's independent contractor law. [...]the court observed that the FTC Rule is merely "a pre-sale disclosure rule" and "does not regulate the substantive terms of the franchisor-franchisee relationship." [...]the court then noted that where the franchisor elects to exercise a "significant degree of control over the franchisee's method of operation," the FTC Rule requires such disclosure. [...]the court concluded that there really is no "conflict" between the FTC Franchise Rule and the Massachusetts independent contractor law because the FTC Rule simply requires timely disclosures where the franchisor chooses to control or significantly assist the franchisee's method of operation.