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Domino's not liable in franchisee's employment liability case: Calif. high court

Domino's not liable in franchisee's employment liability case: Calif. high court

A franchisor cannot be held vicariously liable for the employment-related actions of its franchisee, says the California Supreme Court in a divided ruling.

Taylor Patterson v. Domino's Pizza L.L.C. et al. involved a former employee of a Domino's Pizza franchisee, who sued the franchisor, a unit of Ann Arbor Charter Township, Michigan-based Domino's Pizza, along with the alleged harasser and the franchisee, for the sexual harassment she allegedly suffered from the harasser, who was a manager of the franchise where she worked.

Ms. Patterson had claimed that because Domino's was the “employer” of persons working for the franchisee and the franchisee was a Domino's agent, Domino's could be held vicariously liable for the harasser's actions.

The Ventura County, California, Superior Court trial court granted Domino's summary judgment dismissing the case, holding that Domino's did not control the franchisee's day-to-day operations.

However, applying the same basic principles, the state appeals court in Ventura, California, reversed that ruling, holding that a “reasonable inference could be drawn” from the franchisee's contract with Domino's and its manager's reference guide, that the franchisee, Thousand Oaks California-based Sui Juris L.L.C., “lacked managerial independence.”

In reversing the appellate court ruling, the state Supreme Court in San Francisco held in last week's 4-3 ruling that nothing in the franchisor-franchisee contract “granted Domino's any of the functions commonly performed by employers. All such rights and duties were allocated to Sui Juris,” including recruiting, hiring, training, scheduling for work, supervising, and paying employees.”

Thus, “Domino's had no right or duty to control employment or personnel matters for Sui Juris,” said the majority opinion, in reversing the state appellate court ruling.

The minority opinion held that “the majority places too much emphasis on the terms of the franchise agreement and not enough on the parties' real-world interaction.”

The issue of the franchisor-franchisee relationship has recently attracted attention in light of a determination by the National Labor Relations Board's general counsel that McDonald's Corp. subsidiary Warrenville, Illinois-based McDonald's USA L.L.C., should be considered a “joint employer” with its franchisees, which could dramatically increase franchisors' potential liabilities should it become law.

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