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CA Supreme Court Opinion Clarifies Scope of Franchisor Liability

To determine whether a franchiser may be held liable for sexual harassment by a franchisee employee, courts must decide if the franchisor has retained the requisite level of control over the franchisee's "relevant day-to-day operations at its franchised locations." In Patterson v. Domino's Pizza, LLC, this issue of law was expounded in the California Supreme Court's opinion. Here, Sui Juris, LLC became a franchisee of Domino's Pizza. The plaintiff in this case, hired by Sui Juris to work at its Southern California Domino's location, claimed she was harassed by a store manager during her employment.

The complaint here was based on the legal theory that, as a franchisor, Domino's is vicariously liable for the torts of franchisee employees. Here, though Sui Juris sold Domino's products according to Domino's standard business policies, the franchise agreement provided that Sui Juris was not an agent entitled to act behalf of Domino's Pizza. Additionally, Sui Juris retained control over its hiring, training and other administrative processes.

Under the franchise agreement, Domino's Pizza forfeited its authority over the general management and operations of the franchise. Despite plaintiff's argument that Domino's became vicariously liable by exercising control over the franchise by recommending the alleged harasser's termination, the court rejected this argument given that the franchisee retained ultimate authority in deciding whether to terminate the employee. Based on these facts, the California Court declined to hold Domino's vicariously liable, reasoning that a franchiser "becomes potentially liable for actions of the franchisee's employees…only if it has 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 employee's."