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Franchisor Is Employer for Unemployment Compensation Insurance When "Substantial Control" Exercised
Description Labor Commissioner's decision that franchisor was employer, and that franchisees were employees, was upheld because employer exercised substantial control over the supposed franchisees or independent contractors.
Topic Agency
Key Words Independent Contractor, Franchise
C A S E   S U M M A R Y
Facts SW Legal franchises washroom sanitation services and products. Francis entered into a franchise agreement, that identified him as an independent contractor, and performed sanitation services for five years before claiming unemployment compensation. Labor commissioner investigated and ruled that Francis was an employee, not a franchisee. SW Legal appealed.
Court of Appeals Decision Affirmed. "The question of whether there was an employer/employee relationship between claimant and SW Legal depends upon whether SW Legal exercised control over the results produced or the means to achieve the results." Since the commissioner found that SW Legal had "substantial control" over claimant's activities, it could hold Francis to be an employee and SW Legal an employer who must pay unemployment insurance contributions.
Citation In re Francis, 668 NYS2d 55 (App. Div., 3 Dept., N.Y., 1998)

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