California Supreme Court Says Franchisor Not Liable For Harassment By Franchisee's Employee

Although Domino's Pizza exercises some control over the conditions at its franchisees' pizza stores, it does not exercise enough control to qualify as the employer of those who work in the stores. So the California Supreme Court has ruled in a case alleging sexual harassment at a franchisee's store. Patterson v. Domino's Pizza, LLC, Case No. S204543 (Aug. 28, 2014).

In a 4-3 decision, the Court explained that its ruling turned on the common law principles of agency and respondeat superior. Those principles look to the degree of control exercised over the employee's performance of employment duties. To be an employer, the entity must have day-to-day authority over such matters as hiring, firing, direction, supervision and discipline. In the case before it, the agreement between Domino's and its franchisee left such matters in the hands of the franchisee. The fact that a Domino's representative had told the franchisee that the alleged harasser should be fired did not establish control over the discipline process.

The Court recognized that each case would have to be considered on its facts, and that there may be circumstances in which a franchisor has exercised sufficient control to render itself a joint employer with its franchisees. But, the mere existence of a franchise agreement specifying standards, procedures and requirements to ensure product quality and customer service, and to protect trade names, public reputation and commercial image will not be sufficient.

The opinion asserts that the result is consistent with the rulings in an "apparent majority" of decisions in other states. See, for example, Kennedy v. Western Sizzlin Corp. (Ala. 2003) 857 So.2d 71.