In Patterson v. Domino’s Pizza (Patterson v. Pizza, 2014 Cal. LEXIS 6251 (Cal. Aug. 28, 2014)), the California Supreme Court ruled in favor of the franchisor, and reversed the Court of Appeal’s decision in favor of the Plaintiff, in this sexual harassment action. The Supreme Court found that the franchisor failed to exhibit the traditional characteristics of an “employer” and did not possess sufficient control over the day-to-day aspects of the workplace behavior of the franchisee’s employees to impose vicarious liability on the franchisor for the torts of the franchisee’s employees.
Plaintiff, an employee at a Domino’s pizza franchise in Southern California, brought an action against her supervisor (the harasser), the franchisee, and the franchisor, Domino’s Pizza, based on the alleged sexual harassment she experienced at the hands of her supervisor while they worked together at the franchisee’s Domino’s pizza store. The plaintiff pursued an agency theory arguing the franchisor was the “employer” of persons working for the franchisee, and since the franchisee was the “agent” of the franchisor, the franchisor should be held vicariously liable for the supervisor’s harassment. The trial court granted summary judgment in favor of the franchisor on the ground the requisite employment and agency relationships did not exist. The Court of Appeal reversed.
In an effort to clarify the often cloudy and contradictory opinions of the Courts of Appeal regarding whether a franchisor should be liable for torts committed by a franchisee or its employees, the Supreme Court granted review and addressed the following issue: “Does a franchisor stand in an employment or agency relationship with the franchisee and its employees for purposes of holding it vicariously liable for workplace injuries allegedly inflicted by one employee of a franchisee while supervising another employee of the franchisee?” Like many legal answers, the Court found, “it depends.” Specifically, the answer depends on the inherent nature of the franchise relationship itself.
In its analysis, the Court acknowledged the recent growth of franchising, and recognized that while the franchisor usually controls the enterprise on a broader level, imposing standards for marketing the brand and uniform operation of the franchises, it is generally the franchisee who institutes operational standards for the individual franchise, hires and fires employees, and regulates its employees’ workplace behavior.
The Supreme Court found that in cases such as this, potential liability “requires that the franchisor exhibit the traditionally understood characteristics of an ’employer’ or ‘principal;’ i.e., 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.” The Court held that here, the franchisor prescribed and vigorously enforced “standards and procedures involving pizza-making and delivery, general store operations, and brand image.” However, the overwhelming evidence showed that “the franchisee made day-to-day decisions involving the hiring, supervision, and disciplining of his employees.” Specifically, the “Plaintiff herself testified that after the franchisee hired her, she followed his policy, and reported the alleged sexual harassment to him. The franchisee suspended the offender. Nothing contractually required or allowed the franchisor to intrude on this process.” The evidence showed, “the franchisee imposed discipline [on the supervisor] consistent with his own personnel policies, declined to follow the ad hoc advice of the franchisor’s representative, and neither expected nor sustained any sanction for doing so.” As a result, the Court found the franchisor could not be vicariously liable for the supervisor’s sexual harassment of the franchisee’s employee.
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