CalChamber in Court: Court Issues Employer-Friendly Ruling on Sexual Harassment/Franchisor Liability

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The California Supreme Court ruled on August 28 that a franchisor can’t be held vicariously liable for unlawful conduct by a franchisee’s employee, where the franchisor exercises no control over the franchisee’s relevant day-to-day operations, such as hiring, supervising and disciplining employees.

The case was Patterson v. Domino’s Pizza, LLC. The California Chamber of Commerce filed a joint friend-of-the-court brief with the Employers Group and the California Employment Law Council in support of Domino’s Pizza.

In reaching its conclusion, the court found that no employment or agency relationship existed between the franchisor and its franchisee to support the plaintiff’s claim that the franchisor should be vicariously liable for the acts of the franchisee’s supervisor/employee.

Background

This case arises out of a sexual harassment claim filed by a former employee of a Domino’s Pizza franchise. The former employee alleged that her supervisor sexually harassed her, and she filed suit against the supervisor, the franchisee and Domino’s Pizza (the franchisor).

The key issue in the case centered on whether the plaintiff could establish that Domino’s Pizza, the franchisor, should be liable for the sexually harassing conduct committed by the franchisee’s supervisor/employee.

‘Day-to-Day Decisions’

The court focused on the fact that the franchisee, not Domino’s Pizza (the franchisor), retained control over the “day-to-day decisions involving the hiring, supervision, and disciplining of his employees.”

The franchisee established its own personnel policies and controlled any training the employees received about how to treat each other at work and how to avoid sexual harassment.

In addition, the franchisee agreement that governed the franchisor/franchisee relationship gave no authority to Domino’s Pizza over the management of the franchisee’s employees.

Based on the facts presented in the case, the court concluded that a “franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations that we have described, and cannot escape liability in such a case merely because it failed or declined to establish a policy with regard to that particular conduct.”

However, the court cautioned that its ruling does not mean that franchisors can never be held accountable for sexual harassment occurring at a franchised location.

More Details

For CalChamber members, the case will be covered in more detail in an upcoming issue of the HRCalifornia Extra e-newsletter.

Staff Contact: Erika Frank

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Erika Frank
About Erika Frank
Erika Frank, vice president, legal affairs, and general counsel, joined CalChamber in April 2004 as a policy advocate and general counsel, leveraging her 10 years of legal, governmental and legislative experience. Named vice president of legal affairs in 2009, she is CalChamber's subject matter expert on California and federal employment law. She oversees and contributes to CalChamber's labor law and human resources compliance publications; co-produces and presents webinars and seminars; and heads the Labor Law Helpline. She holds a B.A. in political science from the University of California, Santa Barbara, and earned her J.D. from the McGeorge School of Law, University of the Pacific.