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Appellate Court in Georgia Reverses Ruling That Franchisee Was Franchisor's Employee
Posted in Employment

A Georgia appellate court recently ruled that there was no employer-employee relationship between a Massachusetts unit franchisee and a commercial cleaning franchisor—reversing the trial court’s grant of summary judgment to the unit franchisee. In Jan-Pro Franchising Int’l, Inc. v. Depianti, 2011 Ga. App. LEXIS 543 (Ga. Ct. App. June 23, 2011), the franchisor, Jan-Pro, brought a declaratory judgment action seeking to clarify the employment status of a Massachusetts franchisee. The trial court granted the franchisee’s motion for summary judgment, determining that he was an employee under the Massachusetts Independent Contractor Statute. Jan-Pro appealed, claiming that the statute did not apply and that the franchisee was not its employee. The appellate court reversed, first noting that Jan-Pro licensed its business model to regional franchisees, who then marketed the business model and customer accounts to unit franchisees, such as the defendant. Next, the appellate court analyzed the Massachusetts statute, noting that there is a presumption than an individual is providing services to an employer. The court determined that all three factors of the applicable test showed that the unit franchisee was not an employee.

In going through the three-part test, the court found that as to the first element, the unit franchisee was free from Jan-Pro’s control and direction. The contract was entered into between the unit franchisee and the regional franchisee. Jan-Pro, although a third-party beneficiary of that contract, did not participate in any of the unit franchisee’s activities. As to the second element, the court noted that services provided by the unit franchisee were not the same as those provided by Jan-Pro. Jan-Pro established a trademarked cleaning service, which it licenses to regional franchisees. The unit franchisee is in the business of offering cleaning services directly to customers. On the third element, the court determined that Jan-Pro does not control the unit franchisee’s business and is not a party to its contract with the regional franchisee.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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