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CA Supreme Court Delivers Victory for Franchisors in Patterson v. Domino’s

In a long-awaited decision that came down last Thursday, the Supreme Court of California in Patterson v. Domino’s ruled that a franchisor is not the agent or employer of a franchisee’s employees for purposes of holding it vicariously liable for the workplace conduct of those employees if it did not control the employment policies of the franchisee.

The facts are as follows: In September of 2008, Sui Juris, LLC (“Sui Juris”) acquired a Domino’s Pizza (“Domino’s”) franchise in Southern California, employing Renee Miranda (“Miranda”) as assistant manager and Taylor Patterson (“Patterson”) as a server. Long story short, Miranda sexually harassed Patterson (allegedly), and Patterson sued both Sui Juris and Domino’s, claiming Domino’s was their employer and a joint venturer of Sui Juris.

Domino’s moved for summary judgment on the employer/joint venturer issue. The trial court granted Domino’s motion on all counts, determining the franchisor did not control the day-to-day operations or employment practices necessary to find that Sui Juris was its agent or Miranda its employee. The Court of Appeal reversed, finding that reasonable inferences could be drawn that Sui Juris lacked managerial independence based on the standards and procedures imposed by Domino’s.

The Supreme Court granted Domino’s petition for review. At the outset, the Court rejected Patterson’s argument that “the degree of control exercised by franchisors like Domino’s makes each franchisee the agent of the franchisor for all business purposes, and renders each employee of the franchisee an employee of the franchisor in vicarious liability terms.” Such a rule would, in the Court’s view, “turn business format franchising ‘on its head.’”

While ruling in Domino’s favor, the Court tempered the victory for franchisors by noting that a franchisor could, and would, face potential liability if it retained or assumed a general right of control over factors like hiring, direction, supervision, discipline, or discharge.