California has finally made a decision on if franchisors are employers – at least, in one specific case.
On Thursday, the California Supreme Court ruled that Domino's could not be held liable as a franchisor in a former employee's sexual harassment lawsuit.
The case deals with an incident in 2008, when a teenaged Domino's employee named Taylor Patterson was allegedly sexually harassed by a manager named Renee Miranda. She claims that after she brought the harassment to the attention of the franchisee, Sui Juris, LLC, of the Domino's franchise where she worked. Sui Juris's owner Daniel Poff failed to respond appropriately, forcing Patterson to quit. In 2009, Patterson filed an action against her harasser, the franchisee and Domino's corporate.
The decision reverses a lower court's pervious judgment on Patterson v. Domino's that the franchisee Sui Juris, LLC, was not acting as an independent contractor, and therefore Domino's could be held responsible in court.
In the last five years, the debate has gone back-and-forth on whether or not Domino's was responsible for Patterson's treatment. Poff claims that he felt he had to comply with the instructions of Claudia Lee, his Domino's area leader, on the case, meaning that Domino's was essentially controlling the reaction to Patterson's claims of sexual harassment.
However, Domino's argued that Poff and his company, Sui Juris, was an independent franchisee and the singular employer of Patterson. As other franchisors have argued in similar cases, Domino's claimed that franchisors control big-picture issues such as branding, advertising and business models, while franchisees are solely responsible for managerial and employment issues.
In the end, the court sided with Domino's.
"Poff acted with the obvious understanding that the decision whether and how to discipline Miranda was his alone to make," reads the court's decision. "No reasonable inference can be drawn that Domino‘s, through Lee, retained or assumed the traditional right of general control an 'employer' or 'principal' has over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee‘s employees."
However, those celebrating the reinforcement of franchisees as sole employees should probably put away the confetti.
"Nothing we say herein is intended to minimize the seriousness of sexual harassment in the workplace… Nor do we mean to imply that franchisors, including those of immense size, can never be held accountable for sexual harassment at a franchised location," read the decision.
The court goes on to say that a franchisor can be held liable only if it assumes general control over a franchised location's day-to-day operations.
While a franchisor micromanaging its franchisee's decisions in regards to hiring, firing and otherwise managing employees seems to go against the franchise model, allegations of such behavior have been making headlines in recent months. Also in California, 7-Eleven franchisees have filed a lawsuit claiming that the franchisor's excess of control have essentially rendered them employees and FexEx Ground drivers have successfully argued that they had been misclassified as independent contractors instead of employees.
These disagreements make the line between employer and franchisor hotly contested from all sides of the franchise contract. And, the consequences remain unpredictable. While in this case Domino's was cleared from employer's responsibility, in July, the National Labor Relations Board named McDonald's as a joint employer in 43 lawsuits from former employees.