A federal district court shouldn’t have dismissed two suits by 7-Eleven franchisees that were based on claims they’re employees instead of independent contractors, the Ninth Circuit said.

In one suit, the franchisees claimed their classifications violate the Fair Labor Standards Act. In the second, they sought to enjoin implementation of 7-Eleven’s franchise renewal agreement requiring them to release their claims in the first suit.

The district court granted 7-Eleven judgment on the pleadings.

As to the first suit, the district court erred because it didn’t consider the plausibility of the franchisees’ claims, the unpublished appeals court opinion said.

The lower court erred in the second suit by not considering whether California’s prohibition against waivers of wage and hour claims by contract applied, the court said.

7-Eleven’s argument the franchisees were contractually obligated to sign the general release the agreements they signed in 2004 said a release would be required for renewal was rejected.

The franchisees may also suffer irreparable harm if the waiver isn’t enjoined, the court said.

If the franchisees are ultimately deemed to be independent contractors, 7-Eleven may attempt to hold them in breach by participating in the first suit. If they sign the waiver, they will forego their right to participate in the first suit or have to choose between participating and risking liability for breach of contract, it said.

Judges Raymond C. Fisher, Consuelo M. Callahan, and John B. Owens were on the panel.

Lichten & Liss-Riordan PC represented the franchisees. DLA Piper LLP (US) represented 7-Eleven.

The case is Haitayan v. 7-Eleven, Inc., 2019 BL 65327, 9th Cir., No. 18-55462, 2/27/19.