CHICAGO — A 7-Eleven store owner failed to convince a federal judge that he and his fellow franchisees should be classified as employees and 7-Eleven should pay them wages.
Niral Patel, who bought a 7-Eleven in 2010, filed a class action complaint in October 2018 alleging the retail chain violated the Illinois Wage Payment and Collection Act. He said the company’s franchise agreement calls for splitting store profits between the owner and corporation at roughly 50-50.
According to Patel, franchisees have to deposit daily revenue into an account 7-Eleven controls. The company then deducts fees and its share of profits before paying the franchise owner their portion. The company does not allow franchisees discretion to use or withdraw funds from their store accounts. Patel also said the company controls many aspects of store operations, including operating hours, employee training, uniforms and payroll, customer payment processing and thermostat programing.
U.S. District Judge Mary Rowland dismissed Patel’s lawsuit in August 2019. Patel then amended his complaint.
Rowland issued a second dismissal opinion June 18.
In arguing for dismissal, 7-Eleven said Patel failed to offer evidence of any agreement the company made to pay him wages. Patel insisted the system in which 7-Eleven distributes his share of profits after deducting franchise fees operates as a payment of wages, making the fees improper deductions under the state law.
Rowland said her 2019 dismissal relied on the U.S. Seventh Circuit Court of Appeals’ 2016 opinion in Enger v. Chicago Carriage Cab Corp. In that decision, the appeals judges ruled fares paid by credit card, which the company processed before remitting shares to drivers, weren’t legally wages because “the fact that payment sometimes flows through defendants does not alter the reality that the obligation to pay the driver arises from the passenger, and not the taxi company.”
Similarly, she said, the money 7-Eleven eventually disburses to store owners comes from those stores’ customers, not corporate accounts.
In his amended complaint, Patel said Rowland misapplied Enger in that the issue isn’t the “origin point” of the payment but who is obligated to pay the store owners. He argued 7-Eleven controls revenues and is the only entity paying franchisees, whereas cab customers can pay drivers directly in cash.
“It is Patel who conflates the concepts of origin and obligation,” Rowland wrote. “Patel is correct that under the franchise agreement 7-Eleven is obligated to pay him. Certainly, even the cab company in Enger had an obligation to pay back credit card taxi fares to its drivers. But, as this court previously observed, in both instances, the company’s obligation to pay the plaintiff arose from — i.e. originated from — the passengers or customers. Just as the amount of money the cab company had to remit to taxi drivers was determined by the amount a passenger spent on a ride, the amount of profit 7-Eleven is obliged to pay Patel is determined by the amount customers spend at his store.”
Rowland agreed that Patel made convincing allegations about the control 7-Eleven exerts over individual store operations as compared to the cab company over its drivers. But she said that distinction doesn’t change the underlying fact that 7-Eleven doesn’t have to pay him anything if customers don’t spend money at Patel’s store.
“In consideration for being allowed to own and operate a store under 7-Eleven’s brand, Patel agreed to share profits with 7-Eleven, which are dependent on the amount of customer sales,” Rowland wrote. “That is not a wage-payment arrangement.”
Rowland dismissed the complaint with prejudice, meaning Patel can't refile it later on the same issues.
Patel has been represented in the action by attorney Bradley S, Manewith and Marc S. Siegel, of the firm of Siegel & Dolan Ltd., of Chicago, and attorneys with the firm of Lichten & Liss-Riordan P.C., of Boston.
7-Eleven was defended by attorneys Norman M. Leon and Amy M. Rubenstein, of DLA Piper LLP (US), of Chicago.