Taylor Patterson, an employee at a Domino's franchise in southern California, sued her employer (called "Sui Juris LLC") and her former manager for sexual harassment. She also sued Domino's Pizza, LLC, the franchisor.
The trial court granted Domino's' summary judgment motion, finding Domino's was not the plaintiff's employer, or that the franchisee was not Domino's' "agent." The court of appeal, though, reversed.
On review, the California Supreme Court agreed with the trial court, and dismissed the case against Domino's, the franchisor.
The opinion goes into a long discussion of franchisor history and law, which I'm sparing you. Here is the money quote:
franchisees are owner-operators who hold a personal and financial stake in the business. A major incentive is the franchisee‘s right to hire the people who work for him, and to oversee their performance each day. A franchisor enters this arena, and becomes potentially liable for actions of the franchisee‘s employees, only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee‘s employees. Any other guiding principle would disrupt the franchise relationship.
The Fair Employment and Housing Act holds "employers" liable for workplace discrimination, harassment, and retaliation. The franchisor, although exercising control over branding and the products and services offered, did not impose control over the day to day employment relationship.
The Supreme Court went on to explain what the nature of an "employer" is in the context of FEHA:
There are few California cases defining an employer under the FEHA provisions invoked here. But, it appears, traditional common law principles of agency and respondeat superior supply the proper analytical framework under FEHA, as they do for franchising generally. Courts in FEHA cases have emphasized "the control exercised by the employer over the employee‘s performance of employment duties." (Bradley v. Department of Corrections & Rehabilitation (2008) 158 Cal.App.4th 1612, 1626, citing Vernon, supra, 116 Cal.App.4th 114, 124-125; accord, McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 301-302.) This standard requires "a comprehensive and immediate level of 'day-to-day‘ authority" over matters such as hiring, firing, direction, supervision, and discipline of the employee. (Vernon, supra, 116 Cal.App.4th at pp. 127-128.)
As discussed above, Domino‘s lacked the general control of an employer or principal over relevant day-to-day aspects of the employment and workplace behavior of Sui Juris‘s employees. Application of the FEHA test for determining an employment relationship produces no different result in this franchising case than the one we have already reached. Plaintiff is mistaken to the extent she implies that the contrary is true.
So, this case should guide franchisors, as well as affiliated companies.
Turning to the case at bar, the Supreme Court examined a number of facts to determine Domino's did not exercise the requisite control. These included
- the language of the franchise agreement. Critically, the agreement provided Domino's had no say in day-to-day employment issues involving the franchisee's employees.
- the franchisee in practice exclusively controlled hiring, firing, and other employment decisions. He did not involve Domino's in any such decisions.
- the franchisor did provide certain training to employees on methods and the like. But the franchisee had exclusive control over sexual harassment training and "how employees treat each other" in the workplace.
- Domino's had no complaint procedure for franchisee employees to report harassment; only the franchisee had such procedures in place.
It should be noted this decision was 4-3. Justice Baxter penned the majority opinion. He's retiring. I'm going to miss him. CJ Cantil-Sakauye and Justices Chin and Corrigan joined the majority.
Justice Werdegar, joined by Justice Liu and Justice Chaney (sitting by designation from the court of appeal), would have held that the franchisor should be held liable. However, even the dissenters agreed
That a franchisor is not automatically the employer of its franchisee‘s employees, irrespective of the details of the parties‘ relationship, necessarily follows. So, too, does it follow that a franchisor may under the circumstances of the parties‘ relationship in fact be an employer. The outcome depends on the factual inquiry.
Therefore, all seven justices agreed on the basic principle. The dissenters believed there was enough to hold Domino's LLC liable. So, there is no bright line rule re franchisor liability. There will be litigation to decide in each case whether a franchisor exercises the requisite control to qualify as an "employer." Franchisors and franchisees will have to ensure their agreements are consistent with their intent in this area. And franchisors seeking to avoid responsibility for employment law claims will have to cede control over day-to-day employment issues.
This case is Patterson v. Domino's LLC and the opinion is here.
