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California Supreme Court: Franchisor Not Liable for Sexual Harassment

In an important decision for franchisors, the California Supreme Court ruled last week Domino’s could not be held liable in sexual harassment lawsuit filed by a franchisee’s former employee.

In Patterson v. Domino’s Pizza (August 28, 2014) S204543, the Court reversed the appellate court’s finding that the franchisee was acting an independent contractor and, therefore, subjecting Domino’s to responsibility for the employment claims.

The underlying case involved a minor’s claim that she had been sexually harassed by a manager. The franchisee allegedly failed to respond appropriately to her complaints, forcing her to quit.  The franchisee had provided testimony that he felt compelled to follow the Domino’s area leader’s guidance or instruction on handling certain employment issues. The testimony inferred that Domino’s exercised some control over employment actions. 

Domino’s argued that the franchisee was an independent franchisee and the only employer of Patterson. Moreover, Domino’s (like other franchisors) only had control over branding, advertising and business models.  Domino’s further argued it had no control over managerial and employment issues.

The Court agreed with Domino’s holding the franchisee acted with the “obvious understanding” that its decision as to what discipline should be taken against the alleged harasser was the franchisee’s sole decision to make.  The Court further stated there could be “no reasonable inference” that Domino’s retained or assumed any rights of control that an employer would have over hiring/firing, supervision, discipline, or day-to-day aspects of the workplace.

The Court made it clear, however, that a franchisor will be held accountable for employment claims at a franchised location where the franchisor assumes general control over the franchisee’s day to day operations. 

ABOUT THE AUTHOR: Ms. Silva is a graduate of University of the Pacific.  She is the head of the firm’s Employment Practices Group.  She is a former prosecutor and has considerable trial experience.  Contact her at rsilva@tysonmendes.com

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