March 30, 2026|Franchise Frontlines
March 30, 2026 | U.S. District Court for the District of Massachusetts | Judge Allison D. Burroughs | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Allison D. Burroughs of the District of Massachusetts denied summary judgment in a wage-and-hour misclassification case involving a franchise-style distribution system used by Lepage Bakeries and its affiliated entities. Plaintiffs, who operated distribution territories through a corporate entity, alleged they were misclassified as independent contractors and denied wages and overtime under Massachusetts law. Defendants argued that Plaintiffs were independent business owners operating pursuant to franchise distribution agreements. The court rejected that argument at the summary judgment stage, concluding that a reasonable jury could find that Plaintiffs performed services for Defendants and therefore qualified as employees under Massachusetts’ independent contractor statute. The decision applies and distinguishes Patel v. 7-Eleven, Inc. and reflects continued uncertainty in how franchise models intersect with wage-and-hour laws.
Relevant Background
Defendants operate a baked goods distribution system through a direct-store-delivery model in which distributors purchase rights to defined geographic territories and deliver products to retail stores. To participate in the system, distributors must acquire franchise distribution rights and operate under agreements that impose uniform operational and quality standards.
The plaintiffs initially worked within the system before forming a corporate entity through which they acquired multiple distribution territories. Through that entity, they purchased products from Defendants, delivered those products to retail stores, and earned revenue based on the spread between purchase and resale prices. They also hired employees, managed payroll, and exercised control over certain aspects of their operations.
Despite this structure, Plaintiffs personally performed the core delivery work, working substantial hours each week delivering products and servicing accounts. They brought suit alleging that Defendants misclassified them as independent contractors and violated Massachusetts wage laws by failing to pay wages, minimum wage, and overtime.
Defendants moved for summary judgment, arguing that Plaintiffs were independent business owners operating through a separate corporate entity and therefore could not, as a matter of law, be considered employees.
Decision
The court focused on the threshold issue under Massachusetts law: whether Plaintiffs “performed any service” for Defendants, which triggers a presumption of employee status under the state’s independent contractor statute.
Applying the framework articulated in Patel II, the court emphasized that the analysis is fact-specific and not controlled by labels such as “franchisee” or “independent contractor.” The inquiry instead turns on whether the individuals carried out labor in the interest of the putative employer.
The court declined to find, as a matter of law, that Plaintiffs did not perform services for Defendants. Several aspects of the record supported a contrary conclusion. Plaintiffs personally delivered Defendants’ products to retail outlets that Defendants publicly identified as their customers, and their compensation was tied to those delivery activities. The court noted that this arrangement could be viewed as analogous to situations where workers perform services that directly advance the putative employer’s business, even where payment flows through an intermediary structure.
The court also rejected the argument that the existence of a separate corporate entity resolved the analysis. Massachusetts law does not limit wage protections to individuals who contract directly with a putative employer, and courts have recognized that individuals may perform services through a corporate form without losing statutory protections. The fact that Plaintiffs owned and operated their own entity therefore did not preclude a finding that they performed services for Defendants.
In distinguishing Patel II, the court highlighted key factual differences. Unlike the franchisees in Patel, who operated retail stores serving the general public, Plaintiffs here primarily serviced existing customer accounts associated with Defendants’ distribution system. In addition, Plaintiffs’ work—physically delivering products—could be viewed as directly advancing Defendants’ business rather than operating an independent retail enterprise built on the franchisor’s brand.
The court further found that Defendants had not carried their burden at summary judgment because they did not attempt to satisfy the full “ABC test” required to establish independent contractor status. Even if Defendants ultimately may prevail at trial, the record contained sufficient evidence to allow a jury to find that Plaintiffs were employees.
The court reached similar conclusions with respect to Plaintiffs’ wage, minimum wage, and overtime claims. It found that a reasonable factfinder could conclude that the payments Plaintiffs received were wages tied to their labor, that deductions taken from those payments may have been improper, and that the applicability of overtime exemptions could not be resolved as a matter of law.
Looking Forward
This decision highlights the continuing complexity of applying traditional employment tests to franchise and franchise-adjacent distribution models. While the court did not determine that the relationship at issue constituted employment as a matter of law, it declined to resolve the issue in Defendants’ favor despite the presence of many features typically associated with independent business ownership.
For franchisors, the opinion underscores that structural elements commonly used in franchise systems—such as territorial rights, corporate ownership by operators, and the ability to hire employees—may not, standing alone, foreclose misclassification claims. Courts may look beyond those features and focus on the practical realities of how the system operates, including whether individuals are performing core functions that advance the brand’s business.
The decision also reflects the ongoing influence of Patel II while demonstrating that its application may vary depending on the underlying business model. Franchise systems that resemble traditional retail operations may be viewed differently from distribution or route-based systems in which individuals perform recurring, labor-intensive tasks tied closely to the delivery of the franchisor’s products.
At the same time, the court’s analysis is carefully framed as a summary judgment determination based on a disputed factual record. The opinion does not establish a categorical rule regarding franchise distribution models or misclassification, and it leaves open the possibility that a different record could support a different outcome.
For franchisors evaluating their systems, the case illustrates the importance of aligning contractual structure with operational reality. Where system participants are engaged in activities that could be characterized as directly advancing the franchisor’s business, courts may be more inclined to allow employment-based claims to proceed. Careful consideration of how roles, responsibilities, and compensation structures are defined and implemented remains critical in managing that risk.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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