VENTURA, Calif.—A franchisor may be liable for a franchisee supervisor's sexual harassment depending upon the amount of control it exercises upon the operation, said a California state appellate court in overturning a lower court ruling and allowing a plaintiff's lawsuit to proceed.

According to the June 27 decision by the state appellate court in Ventura, Calif., in Taylor Patterson vs. Domino's Pizza et al., Ms. Taylor, a then-16-year-old employee of a Domino Pizza L.L.C. franchise, had been allegedly sexually harassed and assaulted by her supervisor.

She filed suit against the Ann Arbor, Mich.-based Domino's, charging sexual harassment, infliction of emotional distress, assault and wrongful termination, among other charges. The franchisee, Sui Juris L.L.C., filed for bankruptcy.

Domino's filed a motion for summary judgment, claiming in part that Sui Juris was an independent contractor. A trial court granted the motion, stating the franchise agreement stated Sui Juris was responsible for supervising and paying store workers.

However, the appellate court disagreed.

“Whether a franchisor is vicariously liable for injuries to a franchisee's employee depends on the nature of the franchise relationship,” said the appellate court in its ruling.

“If the franchisor has substantial control over the local operations of the franchisee, it may potentially face liability for the actions of the franchisee's employees.”

The franchise agreement provided that the franchisee was solely responsible for recruiting, hiring and training said the ruling. However, the Domino's Manager's Reference Guide sets standards for employee grooming, and provisions of its franchise agreement “substantially limit franchisee independence in areas that go beyond food preparation standards,” including its bookkeeping and record keeping methods, the ruling said.

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The franchise owner's testimony “suggests that Domino's oversight of this franchise was extensive,” said the ruling.

“Patterson met her burden to show triable issue of fact involving the extent of Domino's control over Sui Juris,” said the unanimous three-judge panel.

Commenting on the ruling Jeffrey D. Polsky, a partner with Fox Rothschild L.L.P., who was not involved in the case, said, “I get the sense” that the control exercised by Domino's on its franchisee is “pretty typical,” particularly for food service companies, where “the franchisor wants the outlets to have a consistent look and feel and product, so that even if it's not a company-owned facility,” there is still consistency.

Mr. Polsky said, “An important lesson here is, if you have language that says the franchisee controls its own employees, you have to respect that language, and you can't go in and dictate employment decisions to the franchisee unless you're prepared to be considered an employer in these types of situations.”