A federal court recently denied a franchisor's motion to dismiss a workplace-abuse lawsuit filed by its franchisee's employee because the employee stated a claim upon which relief could be granted under Federal Rule of Civil Procedure Rule 12.
In C.S. v. Subway Worldwide, Inc. et al., C.S. worked at a Subway restaurant in Jamestown, North Dakota. While working at the Jamestown Subway as a minor, C.S. was repeatedly drugged and sexually assaulted by her supervisor, a convicted child sex offender. C.S. brought a civil suit in federal court against the franchisee and four franchisor-related entities (collectively, “Subway Worldwide”), for the abuse. C.S. alleged two theories of liability against Subway Worldwide: agency, or alternatively, joint employment.
Subway Worldwide moved to dismiss all eight of C.S.'s claims arguing the complaint contained no factual allegations establishing agency or joint employment. The franchise agreement also contained a disclaimer of agency.
C.S.'s complaint, however, alleged that Subway Worldwide operated, directed, and controlled the franchisee. Specifically, Subway Worldwide's human resources consultants were involved with the employment practices, policies, and procedures for the store. Additionally, C.S. believed she was employed by Subway Worldwide.
The Court Denied Subway Worldwide's Motion to Dismiss
On February 12, 2025, the Court denied the Motion to Dismiss.
- The level of Subway Worldwide's control over the franchisee is a question of fact. Because C.S. alleged sufficient facts to support a plausible agency and/or joint employer relationship, the Court denied the motion to dismiss.
- Similarly, the Court denied the motion to dismiss the claim for violation of the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (the “TVPRA”) because she pled sufficient facts of Subway Worldwide's involvement in the employment and day-to-day practices of the store.
Takeaway:
- An agency relationship is created when a franchisor authorizes a franchisee to act for the franchisor in dealings with third parties. This occurs when (1) the franchisee is the franchisor's actual agent, or (2) the franchisor gives a third party a plausible reason to believe the franchisee is the franchisor's agent.
- A franchise agreement's agency disclaimer does not preclude a finding of an agency relationship.
- To avoid a claim of principal-agent or joint employment, the franchisor should limit its direct and perceived involvement in the franchisee's daily operations and employment practices.
Special thanks to Brooke Conklin, a summer associate in Foley's Dallas office, for her contributions to this article.
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