Daily Blast August 28, 2014

The California Supreme Court issued an opinion in Patterson v. Domino’s Pizza, LLC (Aug. 28, 2014, S204543) __ Cal.4th __, analyzing California franchisor/franchisee liability, namely, whether a franchisor stands in an employment or agency relationship with the franchisee and its employees for purposes of vicarious liability for workplace injuries inflicted by one employee of a franchisee while supervising another employee of the franchisee. (Slip opn., p. 2.) The Supreme Court held liability depends on the inherent nature of the franchise itself. (Ibid.)

This case arises from a supervising employee, Renee Miranda (“Miranda”), subjecting a subordinate employee, Taylor Patterson (“Patterson”), to sexual harassment while they worked together at a franchise pizza store. (Slip opn., p. 1.) Both employees worked at a Domino’s pizza franchise that was owned by a company named Sui Juris, LLC (“franchisee”). (Id. at p. 4.) Patterson sued Miranda, Sui Juri and Domino’s alleging that Domino’s was Patterson’s and Miranda’s employer. The trial court granted Domino’s summary judgment motion because Domino’s was not an employer or principal and could not be held vicariously liable. (Id. at pp. 6, 16.) The Court of Appeal reversed. The Court of Appeal stated reasonable inferences could be drawn from the franchise contract that Sui Juris lacked managerial independence. (Ibid.)

The Supreme Court granted review and reversed the Court of Appeal. The Court noted that potential liability pleaded here requires “the franchisor exhibit the traditionally understood characteristics of an ‘employer’ or ‘principal.’” (Slip opn., p. 3.) The franchisor must have “retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.” (Ibid. citing to Vernon v. State of California (2004) 116 Cal.App.4th 114, 124 (Vernon) [considering “the ‘totality of circumstances’ that reflect upon the nature of the work relationship of the parties”].) “Here, the franchisor prescribed standards and procedures involving pizza-making and delivery, general store operations, and brand image. These standards were vigorously enforced through representatives of the franchisor who inspected franchised stores.” (Slip opn., p. 3.) However, none of these standards or procedures covered sexual harassment. (Id. at p. 36.) “[There] was considerable, essentially uncontradicted evidence that the franchisee made day-to-day decisions involving the hiring, supervision, and disciplining of his employees.” (Id. at p. 3, italics in original.) Patterson herself testified that after the franchisee hired her, she followed the franchisee’s policy, and reported the alleged sexual harassment to him. The franchisee suspended the offender. Nothing contractually required or allowed the franchisor to intrude on this process. (Id. at pp. 36-38.) “The uncontradicted evidence showed that the franchisee imposed discipline consistent with his own personnel policies, declined to follow the ad hoc advice of the franchisor’s representative, and neither expected nor sustained any sanction for doing so.” (Id. at pp. 3-4.) Thus, there was no basis on which to find that an employment or agency relationship existed between Domino’s and Sui Juris and its employees. (Id. at p. 38.)

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