Patterson v. Domino's Pizza, LLC

Opinion

 [**725]  BAXTER, J.—Franchising, especially in the fast-food industry, has become a ubiquitous, lucrative, and thriving business model. This contractual arrangement benefits both parties. The franchisor, which sells the right to use its trademark and comprehensive business plan, can expand its enterprise while avoiding the risk [****1113]  and cost of running its own stores. The other party, the franchisee, independently owns, runs, and staffs the retail outlet that sells goods under the franchisor's name. By following the standards used by all stores in the same chain, the self-motivated franchisee profits from the expertise, goodwill, and reputation of the franchisor.

In the present case, a male supervisor employed by a franchisee allegedly subjected a female   subordinate to sexual harassment while they worked together at the franchisee's pizza store. The victim, who is the plaintiff herein, sued the franchisor, along with the harasser and franchisee. The plaintiff claimed that because the franchisor was the “employer” of persons working for the franchisee, and because the franchisee was the “agent” of the franchisor, the latter could be held vicariously liable for the harasser's alleged breach of statutory and tort law.

The trial court granted summary judgment for the franchisor on the ground the requisite employment and agency relationships did not exist. The Court of Appeal disagreed, and reversed the judgment of the trial court.

We granted review to address the novel question dividing the lower courts in this case: Does a franchisor stand in an employment or agency relationship [*478]  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 answer lies in the inherent nature of the franchise relationship itself.

Over the past 50 years, the Courts of Appeal, using traditional “agency” terminology,   have reached various results on whether a franchisor should be held liable for torts committed by a franchisee or its employees in the course of the franchisee's business. In analyzing these questions, the appellate courts have focused on the degree to which a particular franchisor exercised general “control” over the “means and manner” of the franchisee's operations.

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