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Workers' Compensation

Are Franchisee’s Entitled to Workers’ Compensation Benefits?



  1. Who is entitled to Workers’ Compensation Benefits?

The Workers’ Compensation Act provides an exclusive remedy for an employee against his employer or co-employee where the terms of the statute are met. The compromise allows the injured employee to recover benefits pursuant to the statute, but the employer (and/or co-employee) will be immune from civil tort lawsuits, except for those involving intentional acts.  The Act provides remedy to employees for compensable injuries arising out of the employment. La. Rev. Stat. § 23:1032 et. seq.

A person rendering services for another is classified as either: an employee, a borrowed employee, or an independent contractor.

Both employees and borrowed employees are encompassed under the Workers’ Compensation Act. Independent contractors “are expressly excluded from the provisions of this Chapter unless a substantial part of the work time of an independent contractor is spent in manual labor by him carrying out the terms of the contract.”  Guillory v. Overland Exp. Co., 796 So. 2d 887 (La. App. 3 Cir. 10/03/01).

There is a presumption that a person rendering service for another in any trade, business, or occupation is an employee. La. Rev. Stat. § 23:1044.  The employer bears the burden of proving that a person is in fact not an employee, applying the control test.  Wilfred v. A. Service Cab Co., Inc., 171 So. 3d 1007, 1010 (La. App. 4 Cir. 05/27/15).

The existence of an employment relationship is typically measured by the control test. This test can determine whether the person is an employee or an independent contractor, as an employer-employee relationship exists based upon the “right to control.”  Below is a list of the four factors evidencing control and questions that should be asked to evaluate whether a franchisee would be entitled to workers’ compensation benefits.


Four Factors Evidencing Control:

(1)  Selection and Engagement
(2)  Payment of Wages
  • What process did franchisee go through prior to receiving approval to run a franchise?
  • What authority did franchisor have in selection process of franchisee becoming a franchisee?
  • How is franchisee paid? Directly from franchisor or through sales/profits of their own franchise?
  • Who controls price of goods/services provided?
  • Who controls franchisee’s work schedule?
(3)  Power of Dismissal
(4)  Power of Control
  • Can the work undertaken be terminated/ discontinued by either party without corresponding liability for the breach?
  • Who has the power to terminate the relationship?
  • What implications/consequences will result from termination of the relationship?
  • How much supervision does franchisor have over franchisee?
  • Who provides the equipment used by franchisee?
  • Who hires employees to work for the franchisee? Franchisor or franchisee?
  • Does franchisee have to comply with rules or regulations set forth by franchisor?
  • How much freedom does franchisee have to perform their work?[1]


If an employer is able to show based on a totality of the circumstances that the person was not under his control, then the person is deemed not to be an employee, and is therefore not entitled to benefits under the Workers’ Compensation Act. Accordingly, the more control a franchisor has over the franchisee the stronger the argument becomes for a franchisee’s entitlement to workers’ compensation benefits.


  1. Is a Franchisee an Employee?

Each franchisee relationship will need to be evaluated individually to determine whether an employment relationship exists.

However, generally a franchisee is defined as “any person who participates in a franchise relationship as a franchisee, partner, shareholder with at least a ten percent interest in the franchise, executive officer of the franchisee, or a person to whom an interest in a franchise is sold, as defined in 16 CFR 436.1(h), provided that no person shall be included in this definition unless he has signed an agreement expressly binding him to the provisions thereof.”  La. Rev. Stat. 23:921 (F)(4)(b).

Additionally, the franchise relationship has been defined by some scholars as “a continuing commercial relationship where one party, the franchisor, provides quality standards, advertising, and trademarks to and exercises significant control over the business affairs of the other party, the franchisee. In a franchise relationship, the franchisor usually provides instruction manuals, advice, and assistance but does not set the franchisee’s prices, or control the franchisee’s day-to-day operations.  The franchisee also has the right to hire its own employees.”  Rick J. Norman, La. Practice Series, La. Employment Law § 1:7.

While both definitions above indicate that the franchisor does have some control over the franchisee, neither of them seem to suggest the level of control required to meet the control test and trigger an employment relationship.

Thus, it is likely that most, if not all, franchisees would be considered independent contractors under the Workers’ Compensation Act. The lack of an employment relationship between a franchisor and franchisee would therefore preclude any recovery of workers’ compensation benefits by a franchisee, without a further showing of control by the franchisor.

For example: in Wilfred v. A. Service Cab. Co., Inc., the court found that there was no employment relationship between the cab company and one of its drivers.  The court mentioned that the drivers paid a weekly fee to the cab company in order to access its radio dispatch system and goodwill or brand of the company.  The drivers set their own hours, and obtained payment for services directly from the customers.  The court in finding no employment relationship stated the cab company “did not exercise the necessary control over the [driver’s] work so as to constitute an employment relationship.”

Also, in Sentilles v. Kwik-Kopy Corp., the court evaluated the relationship between a franchisee and franchisor to determine first if an employment relationship exists, and second whether the corresponding employment non-competition agreement provisions should apply.  The court here held that there ultimately was no employment relationship between the franchisee and franchisor. The court went on to state that “although [the franchisor] provided instruction manuals, advice and assistance, it did not have the right to control the day-to-day operations of [the franchisee’s] business.” Additionally, the only rights of control retained by the franchisor were those designed to ensure the uniformity and quality of services offered to the public under the franchisor’s name. As is typical in most franchise relationship, the franchisee was found to have “set his own prices; hired, fired and supervised his own employees and bore the payroll expenses; set his own business hours; leased his own store space; purchased his own supplies and equipment (other than startup supplies); maintained his own insurance and workers compensation coverage; kept his own books; set his own policies on the extension of credit to customers; and bore the risk of non-payment by customers.” Thus the court concluded that there was a “lack of meaningful control on the part of [the franchisor], which is a strong indicator that no employment relationship existed.”  The court also found the fact that the franchisee “had a substantial financial investment in the business, a substantial risk, and primary control in the determination of his revenues, operating expenses, and ultimate profit” to be telling regarding his position in relation to the franchisor.

Finally, many franchise agreements contain common language to the effect of “it is agreed and understood that Franchisee will act at all times as an independent contractor and will not, at any time, directly or indirectly, hold itself out as an agent, servant or employee of the Franchisor. Nothing in this agreement may be construed to create a partnership, joint venture, agency, employment or fiduciary relationship, of any kind.”

This type of language makes it very clear that both parties are entering into the franchise agreement with an understanding that no employment relationship is to exist. However, if a franchise agreement is lacking such language, then the specific nature of the relationship between the franchisee and franchisor will need to be evaluated under the control test.


  1. What benefits is a Franchisee entitled to?

What benefits a franchisee is entitled to, if any, will be determined by the existence of an employment relationship, or lack thereof. If a franchisee can be considered an employee of the franchisor based on the above information, then the franchisee will be entitled to all benefits afforded under the Workers’ Compensation Act.

However, if no employment relationship is found to exist, then the franchisee will not be entitled to any benefits under the Act, and will be treated more akin to a self-employed individual with no employer.

In conclusion, it is unlikely that any court would find there to be an employment relationship between a franchisee and franchisor engaging in the typical franchise relationship. Unless a franchisee is able to show significant control by the franchisor over his every day activities, payment, and dismissal, then the control test is likely to favor a lack of an employment relationship.  Without these additional control elements of the franchisor, the franchisee is not likely to be deemed an employee for Workers’ Compensation purposes.




[1] The questions provided in this chart were collectively taken from the following Louisiana cases, which primarily addressed employee-employer relationship in the context of independent contractors.  However, the same analysis shines light on how franchisee-franchisor relationships should be evaluated. Wilfred v. A. Serv. Cab Co., Inc., 171 So. 3d 1007, 1012 (La. App. 4th Cir. 2015), writ denied, 178 So. 3d 570 (La. 2015); Hillman v. Comm-Care, Inc., 805 So. 2d 1157, 1159 (La. 2002); Boswell v. Kurthwood Manor Nursing Home, 647 So. 2d 630, 631 (La. App. 3d Cir. 1994), writ denied, 651 So. 2d 267 (La. 1995); Jordan v. C. Mgt. Co., 745 So. 2d 116, 120 (La. App. 3d Cir. 1999), writ denied, 753 So. 2d 220 (La. 2000); Rush v. Employers Nat. Ins. Co., 598 So. 2d 603, 606 (La. App. 4th Cir. 1992), writ denied, 605 So. 2d 1364 (La. 1992).


Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.