This week, the California Supreme Court held that Domino’s Pizza was not liable for the torts of an employee of a franchise because Domino’s had no contractual or operational control over the employee. The Court based its decision on evidence that it was the franchisee, not Domino’s, that made the day-to-day decisions regarding hiring, supervision, and discipline of its employees. (Patterson v. Domino’s Pizza, LLC, et al., August 28, 2014, S204543.)
Taylor Patterson (“Patterson”), is a former employee of a Domino’s Pizza franchise. Patterson alleged that a male supervisor subjected her to sexual harassment while they worked together at the franchise. Patterson reported the alleged sexual harassment to the owner of the franchise, Daniel Poff (“Poff”), and resigned from her employment shortly thereafter.
In June 2009, Patterson filed a complaint against her former supervisor, Poff’s franchise company (Sui Juris, LLC), and Domino’s Pizza, Inc. and Domino’s Pizza, LLC (collectively, “Domino’s”). Patterson maintained that Domino’s was the employer of both herself and her supervisor, and that the other defendants were merely its “agent[s], employee[s], servant[s] and joint venturer[s].” In November 2010, Domino’s sought summary judgment against Patterson based on its contention that it was not an “employer” or “principal,” and could not be held vicariously liable for the misconduct of the employees of the franchise.
The trial court granted summary judgment for Domino’s on the ground the requisite employment and agency relationships did not exist. The Court of Appeal for the Second District of California disagreed, and reversed. The California Supreme Court granted review on the issue of whether a franchisor such as Domino’s stands in “an employment or agency relationship with the franchisee and its employees for purposes of holding it vicariously liable for workplace injuries allegedly inflicted by one employee of franchisee while supervising another employee of the franchise[.]”
Supreme Court Decision
The California Supreme Court held that “the answer lies in the inherent nature of the franchise relationship itself.” Explaining that while a franchisor may control the enterprise to the extent of imposing comprehensive standards for marketing its trademarked brand and operating its franchises in a uniform way, “[i]t is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior.” The Court explained that a franchisor’s imposition and enforcement of a uniform marketing and operational plan cannot automatically place responsibility on the franchisor for the conduct of the franchisee’s employees. Particularly, the “contract-based operational division that otherwise exists between the franchisor and the franchisee would be violated by holding the franchisor accountable for misdeeds committed by employees who are under the direct supervision of the franchisee, and over whom the franchisor has no contractual or operational control.”
Domino’s mandated standards and procedures involving pizza-making and delivery, general store operations, and brand image. The owner of the franchise, Poff, made all day-to-day decisions and retained a right of control over factors such as hiring, direction, supervision, discipline, and discharge. Poff also implemented and enforced his own personnel policies, including a sexual harassment policy. Thus, because Domino’s “lacked the general control of an ‘employer’ or ‘principal’ over relevant day-today-aspects of the employment and workplace behavior of [the franchisee’s] employees,” the Court ruled that Domino’s could not be held liable for the torts of the franchisee’s employees, reversing the Court of Appeal.
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