Court Watch

The recent and long-awaited opinion from the California Supreme Court in Patterson v. Domino's Pizza, LLC, 2014 Cal. LEXIS 6251 (Cal. Aug. 28, 2014), clarifies the circumstances under which a franchisor may be liable for the employment practices of its franchisees under California law, helping to calm the nerves of franchisors in the wake of the National Labor Relations Board (NLRB) General Counsel's July 2014 determination that the NLRB will pursue claims against McDonald's under joint-employer liability theory. See, 'NLRB: McDonald's Is Joint Employer With Franchisees,' Franchising Business & Law Alert, Sept. 2014. Unlike the NLRB's recent determination, the California Supreme Court, in a sharply divided decision, determined that a franchisor's exercise of control over its franchisees to ensure system uniformity is not alone sufficient control that would be necessary to hold a franchisor vicariously liable for the acts of its franchisees. Since the Patterson decision comes from the highest court in California, its holding may resonate to other forums outside of the state. However, the divided 4-3 opinion in Patterson, coupled with the clear unrest in this area of law in recent months, means franchisors would be premature to breathe a sigh of relief in the wake of this opinion.

In Patterson, a male supervisor employed by a Domino's Pizza' franchisee subjected a female subordinate employee to repeated sexual harassment. The victim plaintiff sued the individual harasser, the franchisee, and the franchisor, Domino's Pizza, LLC, Domino's Pizza Franchising, LLC, and Domino's Pizza, Inc. (collectively Domino's or the franchisor) claiming that the franchisor was the 'employer' of the persons working for the franchisee and because the franchisee was the 'agent' of the franchisor. The trial court granted summary judgment in favor of the franchisor and the Court of Appeal reversed. The California Supreme Court granted review to 'address the novel question dividing the lower courts in this case: Does a franchisor stand 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 a franchisee while supervising another employee of the franchisee?' The court held that under most contemporary franchise models, it does not.