California Supreme Court: Franchisor MAY Be Liable for Franchisee's Employee's Sexual Harassment Claim*

*But not in this case.

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.

Staffing Agency Not Liable for Employee Who Poisoned Co-Worker

Yes, you read that right.

Nursefinders is a placement company.  It provides nurses and other employees to hospitals and other health care facilities.  Nursefinders assigned Theresa Drummond to work at a Kaiser facility as a medical assistant.  Drummond had a few work related disagreements with another medical assistant at Kaiser, whose name is Montague.  Montague did not consider these squabbles to be important.  

Drummond, though, apparently took the disputes more seriously.*  Because one day, when Montague left a water bottle lying around, Drummond spiked it with carbolic acid, a rather dangerous substance to drink with water.  Montague became quite ill.

* Perhaps Drummond's fictional ancestors were Capulets.  

Montague and her husband sued Drummond and Nursefinders for intentional infliction of emotional distress.  But the trial court granted summary judgment to Nursefinders, finding that Drummond was Kaiser's special employee, and that Drummond's actions were beyond the course and scope of her employment. Therefore, Nursefinders could not be held vicariously liable for Montague's injuries (or her husband's loss of consortium).  The court also dismissed Montague's claim for negligent retention, supervision and hiring, holding there was a lack of causation between Nursefinder's hiring and Drummond's decision to spike Montague's water.

With respect to the IIED / vicarious liability claim, the court rejected Nursefinders' liability for two reasons.  First, the court of appeal held that there was no evidence the poisoning arose out of a work-related dispute, as opposed to personal animosity that Drummond developed for Montague.  Second, the Court held that Nursefinders, a staffing placement agency, could not be liable for an incident between two employees who were working at Kaiser. 

Montague's attempt to establish respondeat superior liability for Nursefinders simply because she and Drummond worked together at Kaiser is misguided. "The nexus required for respondeat superior liability—that the tort be engendered by or arise from the work—is to be distinguished from 'but for' causation. That the employment brought tortfeasor and victim together in time and place is not enough." (Lisa M., supra, 12 Cal.4th at p. 298, fn. omitted.) The facts, construed most favorably for Montague, do not support liability against Nursefinders because Drummond's poisoning of Montague was highly unusual and startling.

The Court also rejected the negligent training claim.  The plaintiff argued that Nursefinders had a duty to train Drummond not to handle workplace disputes by poisoning her co-worker?  Really?  

Well, the Court did not reject that argument. Rather it simply assumed, without deciding, that there is such a duty:

Montague alleged that Nursefinders had a duty to train Drummond regarding the proper handling of work-related disputes and that its negligence in this regard caused her harm. As a preliminary matter, we will assume without deciding, that Nursefinders had a duty to train its employees regarding the avoidance of workplace violence. (Phillips v. TLC Plumbing, Inc. (2009) 172 Cal.App.4th 1133, 1140 [Liability for negligent hiring, training, and supervision " 'is limited by basic principles of tort law, including requirements of causation and duty.' "].)

What about suing Drummond's kindergarten, parents, college, etc.?  "It's nice to share."  "Wash your hands." "Don't poison people you don't agree with."

Anyway, having assumed such a duty exists, without deciding, the court held that Montague did not establish that Nursefinders failed to conduct workplace violence training:

Drummond and the Nursefinders's branch director signed a document verifying that Drummond participated in Nursefinders's orientation which explained certain topics including "Workplace Violence." Nursefinders also admitted it trained Drummond on Kaiser's policies and procedures regarding "Violence in the Workplace" and "Management of Threats and Aggressive Behavior." Montague cites to Drummond's deposition testimony and her response to an interrogatory to show Drummond did not receive the specified training. Review of this evidence does not support her contention.

After rejecting Montague's argument that Drummond was not trained, she tried a different argument, which the Court also rejected.

Montague's argument appears to be that because Nursefinders trained Drummond on avoiding workplace violence and the incident occurred, this evidence supports an inference that Nursefinders must have breached its duty to train Drummond in avoiding workplace violence and this breach caused her injuries. We reject this contention as the suggested inferences are based on speculation and not reasonably deducible from the evidence. Montague "cannot survive summary judgment simply because it is possible"

So, the takeaway is that employers should conduct workplace violence training to avoid the argument that lack of training could result in an employee's not knowing it's wrong to poison a co-worker's water.   Good news for management trainers like us.

This case is Montague v. AMN Healthcare and the opinion is here. 

Court of Appeal: No Employer Liability for Employee's Car Accident in Company Truck

We posted about the Court of Appeal's previous opinion in Moradi v. Marsh here.  That case caused quite a stir, when it held that an employer could be vicariously liable for an employee's car accident when she took a detour for yoga and frozen yogurt during her commute home.  The premise was that the employer required the employee to use her personal vehicle for work. Therefore, the  "going and coming" rule exonerating employers did not apply.  The employer was held vicariously liable for accidents occurring during foreseeable detours from the commute as well as the commute itself.

Now, just a few days later, a different court decided that an employer was NOT liable for an employee's accident when he was using a company-owned vehicle.   Why? Because he took a long detour away from work, over 100 miles.  Here is the Court's analysis.

The undisputed facts presented by Halliburton’s motion for summary judgment demonstrated that Martinez’s purpose in traveling to and from Bakersfield on September 13, 2009, was entirely personal. He finished his shift and drove the company truck 140 miles to Bakersfield; he intended to meet his wife at a car dealership and sign the papers to purchase a vehicle for her. Martinez was not performing any services or running any errands for Halliburton. His supervisor was unaware of the trip until after the accident. The trip was not made in the furtherance of any business activity of the employer. The
risk of a traffic accident during this personal trip was not a risk inherent in, or “‘“typical of or broadly incidental to,”’” Halliburton’s enterprise. (Bailey, supra, 48 Cal.App.4th at pp. 1558-1559.)

The Court here read Moradi before issuing the opinion, but held that the plaintiff's trip for yogurt and yoga was way more closely related to her commute than the plaintiff in the Haliburton case.

The plaintiffs in this opinion were the injured persons who sued Martinez, Halliburton's employee. Halliburton argued that it was not liable for Martinez's accident because he was acting outside the course and scope of his employment by driving the company owned truck on a personal errand taking him miles away from his home and work. 

The Court rejected the plaintiff's argument that the 100 mile detour was part of his commute or that it was foreseeable:

The Plaintiffs argue Martinez was returning to work at the time of the accident, so the trip, or at least the return from Bakersfield, was part of Martinez’s commute back to work. We do not believe the purpose or destination of the return leg of the journey can be separated from the purpose of the trip as a whole in this manner. Under plaintiffs’ theory, the return leg of any personal trip in the company vehicle, regardless of the length of time spent, the distance traveled, and the complete lack of connection between the trip and the enterprise of the employer or the work of the employee, would give rise to respondeat superior liability, as long as the employee’s ultimate destination on return was the workplace. We reject such an expansion of the incidental benefit exception to the going and coming rule.

The purpose of Martinez’s trip as a whole was entirely personal. The trip to Bakersfield was such a complete and material departure from his employment duties that it could not reasonably be considered to be an activity in pursuit of the employer’s business or a minor deviation from the strict course of the employee’s duties. It was such a marked turning aside from the employer’s business as to be inconsistent with its pursuit: driving to a location 140 miles from his assigned worksite, a trip that would take more than six hours to complete, without asking his employer’s permission or informing his supervisor that he would be gone, when, according to plaintiffs, Martinez was on call 24 hours, seven days a week, and might be called at any time to proceed to a new location. This activity would be entirely inconsistent with serving the employer’s purposes. Consequently, the trip to Bakersfield was, as a matter of law, outside the scope of Martinez’s employment.

Plaintiffs attempt to characterize the trip to Bakersfield as part of Martinez’s commute between the oil rig in Seal Beach and his home in Caliente. But the evidence presented indicated Martinez did not go home, because it was too far out of the way. Martinez met his wife and daughter at a car dealership in Bakersfield, 45 to 50 miles from his home, in order to sign the documents necessary to purchase a vehicle for his wife. The undisputed evidence does not support a contention that Martinez was
commuting between his home in Caliente and the oil rig at the time of the accident.

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So, Moradi is not going to expand liability as far as some imagine, apparently.  

This case is Halliburton Energy Services, Inc. v. Department of Transportation and the opinion is here.

Court of Appeal: Employer Liable for Employee's "Off Duty" Car Accident

Here are the facts as told by the Court of Appeal:

An employee of an insurance broker was required each workday to drive to and from the office in her personal vehicle. During the workday, the employee had to use her vehicle to visit prospective clients, make presentations, provide educational seminars, follow leads, and transport company materials and coemployees to work-related destinations.

On April 15, 2010, the employee left the office at the end of the workday and began driving in the direction of her home. She had decided that, on the way, she would stop for some frozen yogurt and take a yoga class. As the employee made a left turn at the yogurt shop, she collided with a motorcyclist.

Motorcyclist sues driver of course. But motorcyclist also sues the employer.  Employer moves the trial court for summary judgment and wins.  After all, she's commuting and then she did not go home, but rather for a snack and some exercise. So, her accident is her responsibility.  End of post, right?

Nope.  Here's how the court summarized its lengthy decision:

Because the employer required the employee to use her personal vehicle to travel to and from the office and make other work-related trips during the day, the employee was acting within the scope of her employment when she was commuting to and from work. The planned stops for frozen yogurt and a yoga class on the way home did not change the incidental benefit to the employer of having the employee use her personal vehicle to travel to and from the office and other destinations. On the day of the accident, the employee had used her vehicle to transport herself and some coemployees to an employer-sponsored program, and the employee had planned to use her vehicle the next day to drive to a prospective client‘s place of business. Nor did the planned stops constitute an unforeseeable, substantial departure from the employee‘s commute. Rather, they were a foreseeable, minor deviation. Finally, the planned stops were not so unusual or startling that it would be unfair to include the resulting loss among the other costs of the employer‘s business. Thus, under the required vehicle exception to the going and coming rule, the employee was acting within the scope of her employment at the time of the accident, and the doctrine of respondeat superior applies. Accordingly, the trial court erred in granting the employer‘s summary judgment motion

Here's how it breaks down:

1. The doctrine of "respondeat superior" requires an employer to answer for the torts of the employee, if those torts are committed within the "scope of employment."  This is also called "vicarious" liability.  Good so far?

2.  Under the "going and coming" rule, employers are not liable for the torts of employees committed during the regular commute to and from work / home.  Right, so that's why the employer should have  won! Not so fast, grasshopper.

3.  The "required vehicle exception" to the going and coming rule means that when an employer requires an employee to use a personal vehicle as part of her duties, the "going and coming rule" does not apply, and accidents that occur on the way to or from work may be the employer's responsibility.  In this case, the court held that the "required vehicle" exception applied because the employer required the employee to use her personal car for work-related trips, including on the day she had the accident.

4.  Even under the required vehicle exception, the employer is not liable for everything that an employee does in her personal vehicle.  The employer may not be liable if the employee's side trip is not "foreseeable."  But not "foreseeable" is way more than just a short side-trip for yogurt and yoga.   It is "foreseeable," the court noted, that employees using their own cars would do personal errands for their own comfort and convenience.  Had she visited a friend in another town, committed an intentional act or a crime, I believe this would have come down a different way.

5.  If driving is not part of the job, or if the employer does not require employees to use their cars as part of their jobs, then the going and coming rule still applies and there is no liability for accidents that occur during the commute.  In this case, the employee used her personal car two to five times a week for work-related business. How much work-related driving is enough to trigger the required vehicle exception?  There will be litigation. 

The court went over several different prior decisions and provided detailed analysis.  So, if you would like to know how courts draw the line, you can read the full opinion at the link below.

This decision is an important reminder that employers who require employees to use their personal cars for business will take on additional liabilities.  Therefore, employers imposing such requirements should ensure employees are properly licensed and ensure business insurance is sufficient to cover these types of accidents.  

Employers thinking of imposing restrictions on employees' activities during the "going and coming" to minimize liability for traffic accidents could cause a wage-hour problem.  So, as WW says, "tread lightly" or get some advice first.

The opinion in Moradi v. Marsh USA is here.

Greg