Facts

Plaintiffs, including Serge Haitayan, entered into a "business format" franchising relationship with defendants, 7- Eleven. Under this type of franchising model, individuals who choose to purchase 7-Eleven franchises enter into franchise agreements that govern their relationships with 7-Eleven and under which 7-Eleven usually leases property and equipment to a franchisee. Most franchise agreements are for a 15 year term with 7-Eleven having the option to not renew under certain conditions whereas plaintiffs can choose not to renew for any reason. Also, under this type of business format, the franchisee pays royalties and fees (including the 7-Eleven charge which is approximately 50% of the store's gross profits) for the right to sell products or services (of which for the most part were determined by plaintiffs) under the franchisor's name and trademark. The franchisees also prepare a business plan for their stores, may assign their interest in their franchises to others, and sell their stores (with 7-Eleven's approval) prior to the expiration of their agreement. Plaintiffs, before and after trial, admitted that they identified themselves as business owners, not employees, on their tax returns and controlled their own schedules, deciding when to work in their stores and taking vacations when they chose. And regarding employment decisions for the individual franchise, plaintiffs had sole control and authority over hiring, firing, wages, staffing, scheduling and discipline. Payroll was processed through 7-Eleven. As to being able to terminate the relationship with plaintiff, 7-Eleven could only do so for good cause and material breach.

PLAINTIFFS' CONTENTIONS: Plaintiffs allege that, under both federal and California laws, they are employees--even though they agreed they were independent contractors in their franchise agreements. Underlying plaintiffs' claims is that 7-Eleven's restrictive policies and practices created an employment relationship between the parties.

DEFENDANT'S CONTENTIONS: Defendant contended that, as per their franchise agreements, plaintiffs are, and at all times conducted themselves as, independent contractors, exercising substantial independence and control over both their own schedules and activities and the operations of their franchises.

Result

Following a bench trial, the court found in defendant's favor on all of plaintiffs' claims.