United States: A Glimmer Of Hope For Franchisors Fearing Joint Employer Liability

In a recent article published by the Franchise Law Journal1, authors Mary-Christine Sungaila and Martin M. Ellison survey the current status of joint employer liability in the franchise context and the pervasive influence of Patterson v. Domino's2 in this area of the law. In the wake of the National Labor Relations Board's (NLRB)  majority decision in Browning-Ferris Industries3, franchisors have been forced to grapple with defining what controls may not be considered those "customarily exercised by a franchisor for the purpose of protecting the franchisor's trademark and brand." Controls outside those parameters may expose franchisors to liability for actions of their franchisees and franchisees' employees.

Prior to the NLRB's groundbreaking decision, courts across jurisdictions applied either the "means and manner" test or the "instrumentality" test to determine whether franchisors exercised sufficient control over their franchisees to be held vicariously liable as a joint employer. Under the "means and manner" test, the relevant inquiry is whether the franchisor exercised control, or had the right to exercise control, over the means and manner in which the franchisee conducted its day-to-day operations.4 Contrastingly, under the "instrumentality" test the relevant inquiry is whether the franchisor controls the actual aspect of the franchisee's business that caused an alleged harm.5

In 2014, the California Supreme Court directly addressed the issue of joint employer liability in the franchise context in Patterson v. Domino's, and many other jurisdictions have adopted the new test endorsed by California's highest court. In Patterson, Sui Juris, LLC owned and operated a Domino's pizza franchise in California. The parties to the franchise agreement were Sui Juris and Domino's Pizza Franchising, LLC.

The Plaintiff, Taylor Patterson, was an hourly employee who alleged the assistant store manager made lewd comments and gestures to her and inappropriately touched her. She reported this behavior to Sui Juris's owner, and her father reported the behavior to the police and Domino's corporate human resources department. Patterson believed that her hours were then reduced for reporting the assistant manager's behavior. When the owner of Sui Juris informed a regional leader for Domino's about the allegations the regional leader said, "You've got [to] get rid of this guy." Patterson sued Sui Juris, the assistant manager, and Domino's, alleging sexual harassment, failure to take reasonable steps to avoid harassment, and retaliation for reporting harassment. She alleged that she and the assistant manager were both employees of Domino's, and that Sui Juris and Domino's had an agency relationship such that Domino's was responsible for Sui Juris's conduct. Domino's moved for summary judgment, arguing that it had neither an agency relationship with Sui Juris nor an employment relationship with the assistant manager.

The trial court granted summary judgment for Domino's, finding that, because Domino's did not control the day-to-day operations or employment practices of Sui Juris, no agency or employment relationship existed that could subject Domino's to any liability for the assistant manager's misconduct. The appellate court reversed the trial court's decision. The appellate court held that the operational standards and procedures imposed by Domino's exerted the type of day-to-day control that could subject Domino's to vicarious liability for the acts of Sui Juris's assistant manager. Furthermore, the appellate court cited the comment of the Domino's regional leader as evidence that raised a triable issue of fact as to whether the assistant manager was an employee of Domino's and whether Sui Juris was an agent of Domino's.

The California Supreme Court reversed the appellate court decision and ruled that the trial court properly granted summary judgment in favor of Domino's. The court determined that "Domino's lacked the general control of an 'employer' or 'principal' over relevant day-to-day aspects of the employment and workplace behavior of Sui Juris's employees." The California Supreme Court held that uniform marketing and operational plans cannot automatically impose liability on the franchisor for the actions of a franchisee's employees. Rather, to be potentially liable, the franchisor must retain or assume "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."6

Since the Patterson decision, at least six different courts have applied its holding in the franchise context.7 These cases illustrate that the aspects of a business format franchise system including, but not limited to those listed below, amount to nothing more than the comprehensive and meticulous standards by which business format franchisors ensure uniformity among their franchises.8

General Franchise Aspects

  1. Detailed franchise agreements containing specifications, standards, operating procedures and rules.
  2. Standardized computer system software for use in all franchises.
  3. Regional developers to recruit potential franchisees and assist in opening new franchises.
  4. Franchise inspections to ensure compliance; employee uniforms.
  5. Restrictions on the types of services offered and products sold.
  6. Scripts for interaction with customers or clients.

The post-Patterson cases further demonstrate:

  1. the test announced in Patterson extends to claims beyond the California Fair Employment and Housing Act;
  2. a franchisor's status as a joint employer may be decided via a motion to dismiss or motion for summary judgment; and
  3. brand-maintenance controls should not factor into the joint employer liability determination unless those controls are directly related to the conduct that allegedly caused the harm.

The Patterson test, which very closely resembles the "instrumentality" test, focuses on allocating liability to the entity or persons who are in a position to control the tortfeasor's behavior. Thus, the Patterson analysis and its wide-ranging acceptance gives franchisor's greater assurance that exercising general control such as specifying quality, marketing and operational requirements will not be sufficient to expose franchisors to liability for the acts and omissions of their franchisees under the theory of joint employer liability.

Footnotes

1 Mary-Christine Sungaila and Martin M. Ellison, Joint Employer Liability in the Franchise Context: One Year After Patterson v. Dominos', 35:3 FRANCHISE L.J. 339 (2016).

2 Patterson v. Domino's Pizza, LLC, 60 Cal. 4th 474 (Cal. 2014).

3  BFI Newby Island Recyclery, 2015 NLRB LEXIS 672 (N.L.R.B. Aug. 27, 2015).

4 See Pizza K, Inc. v. Santagata, 249 Ga. App. 36 (Ga. Ct. App. 2001); Schlotzsky's, Inc. v. Hyde, 245 Ga. App. 888 (Ga. Ct. App. 2000); Hart v. Marriott Int'l, Inc., 304 A.D.2d 1057 (N.Y. App. Div. 3d Dep't 2003).

5 Kerl v. Rasmussen, 682 N.W.2d 328, 342 (Wis. 2004); see also Ketterling v. Burger King Corp., 152 Idaho 555 (Idaho 2012); Hong Wu v. Dunkin' Donuts, Inc., 105 F. Supp. 2d 83 (E.D.N.Y. 2000); Fitz v. Days Inns Worldwide, Inc., 147 S.W.3d 467 (Tex. App. San Antonio 2004).

6 Patterson, 60 Cal. 4th 474 at 503.

7 See Vann v. Massage Envy Franchising LLC, 2015 U.S. Dist. LEXIS 1002 (S.D. Cal. Jan. 5, 2015); Hahn v. Massage Envy Franchising LLC, 2015 U.S. Dist. LEXIS 62963 (S.D. Cal. Mar. 6, 2015); Brunner v. Liautaud, 2015 U.S. Dist. LEXIS 46018 (N.D. Ill. Apr. 8, 2015); Henning v. Narconon Fresh Start, 2015 U.S. Dist. LEXIS 99160 (S.D. Cal. July 28, 2015); Keller v. Narconon Fresh Start, 2015 U.S. Dist. LEXIS 53596 (S.D. Cal. Apr. 22, 2015); Ochoa v. McDonald's Corp., 2015 U.S. Dist. LEXIS 129539 (N.D. Cal. Sept. 24, 2015).

8 Vann, 2015 U.S. Dist. LEXIS 1002 at *3-6, 16.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.