Patterson v. Domino's Pizza, LLC - 60 Cal. 4th 474, 177 Cal. Rptr. 3d 539, 333 P.3d 723 (2014)

Rule:

In general, the Fair Employment and Housing Act (FEHA), Gov. Code, § 12900 et seq., is designed to prevent and deter unlawful employment practices, and to redress their adverse effects. Gov. Code, § 12920.5. Essential to an employee's statutory claims is the existence of an employment relationship. There are few California cases defining an employer under the FEHA provisions. But, it appears, traditional common law principles of agency and respondeat superior supply the proper analytical framework under FEHA, as they do for franchising generally. Courts in FEHA cases have emphasized the control exercised by the employer over the employee's performance of employment duties. This standard requires a comprehensive and immediate level of day-to-day authority over matters such as hiring, firing, direction, supervision, and discipline of the employee. 

Facts:

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 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.

Issue:

Does a franchisor stand in an employment 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?

Answer:

No.

Conclusion:

The court held that even if a franchisor's area leader who advised franchisees on training and other matters told a franchisee that a supervisor accused of sexual harassment should be terminated, neither that statement nor the existence of a comprehensive operating system could give rise to a reasonable inference that the franchisor had an employer's traditional right of general control over the franchisee's day-to-day operations, contrary to the terms of a franchise contract that allocated local personnel issues almost exclusively to the franchisee. Accordingly, there was no employment relationship within the contemplation of Gov. Code, § 12920.5, to support an employee's Gov. Code, § 12940, subd. (j)(1), sexual harassment claim against the franchisor, nor could the franchisor be held liable for the supervisor's alleged misconduct under the common-law respondeat superior rule.