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CA Supreme Court: Franchisor Not Liable for Sexual Harassment of Franchisee’s Employee

Posted by Eric Kingsley | Sep 24, 2014 | 0 Comments

Franchisor Not Liable for Sexual Harassment of Franchisee's Employee under FEHA

Dominos pizza

In Patterson v. Domino's Pizza, LLC., the California Supreme Court addressed the issue of whether a franchisor, such as Domino's Pizza, LLC., can be held vicariously liable for claims of alleged sexual harassment by an employee of a franchisee, such as an individually owned Domino's Pizza store.  Under the California Fair Employment and Housing Act (FEHA), an “employer” is strictly liable for all acts of sexual harassment by a supervisor.  The Court held, in a 4-3 decision, that Domino's Pizza, LLC was not liable for the actions of a shift manager employed by one of its franchisees because Domino's did not exercise the requisite level of control over the franchisee.

Patterson v. Domino's Pizza, LLC, No. S204543, 2014 WL 4236175 (Cal. Aug. 28, 2014).

Background

The plaintiff, Taylor Paterson, filed suit against Domino's Pizza, LLC., the franchisee, and the employee of the franchisee who allegedly sexually harassed her. Paterson alleged violations of FEHA, which prohibits workplace sexual harassment and requires employers to take reasonable steps to prevent sexual harassment from occurring in the workplace.  Paterson alleged Domino's Pizza, LLC., was liable as an alleged “employer” of her and of the alleged harasser and alleged that Domino's Pizza, LLC., was liable on the additional ground the franchisee was the agent of Domino's Pizza, LLC.

In the trial court, Domino's sought summary judgment, stating that it was not an employer or principal of the manager, and that it could not be held vicariously liable as a result. The trial court agreed, but then the Court of Appeal reversed, holding that there was a triable issue of fact as to whether Domino's was an employer or principal for vicarious liability purposes.

The Supreme Court's Opinion

The California Supreme Court granted certiorari to review the question dividing the lower courts: Did Domino's as 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?

The Supreme Court reversed the decision of the Court of Appeal and held, consistent with the decision of the trial court, that Domino's Pizza was entitled to summary judgment in its favor because the undisputed facts showed that the franchisee, and not Domino's Pizza, LLC., “made day-to-day decisions involving the hiring, supervision, and discipline of his employees.” The Court explained, “[t]he contract-based operational division that otherwise exists between the franchisor and the franchisee would be violated by holding the franchisor accountable for misdeeds committed by employees who are under the direct supervision of the franchisee, and over whom the franchisor has no contractual or operational control.” The Court further explained, “It follows that potential liability [for alleged FEHA violations] 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.”

Conclusion

The CA Supreme Court's decision does not mean that franchisors are always immune from liability for sexual harassment occurring at a franchised location.  Whether potential liability exists will depend upon whether the franchisor has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations, such as hiring, performance standards, supervision, discipline, and discharge.  Thus, the degree of control and participation in employment decisions, both as delineated by the franchise agreement and as practiced during day-to-day business operations, will determine whether a franchisor has liability as an employer.

If you have questions about FEHA, don't hesitate to contact leading California employment lawyers from Kingsley & Kingsley. To discuss your situation or concerns call us toll-free at (888) 500-8469 or click here to contact us.

About the Author

Eric Kingsley

In practice since 1996, the firm's lawyer and co-founder, Eric B. Kingsley, has litigated complex cases and written numerous appeals in state and federal courts on behalf of the California law firm Kingsley & Kingsley, including More than 150 collective actions. Mr. Kingsley focuses his practice ...

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