Domino's Franchisor may be an Employer in California

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By now, employers seem to understand their obligation to keep their employees from committing sexual harassment. A California appellate court decision handed down this week emphasizes that it isn't enough to just worry about your employees.

In Patterson v. Domino's Pizza, LLC, an employee working for a Domino's franchisee alleged that her supervisor sexually harassed and assaulted her. When the franchisee filed bankruptcy, the employee focused her attention on Domino's.

Domino's argued that it was not the plaintiff's employer and pointed to language in the franchise agreement stating that the franchisee was an independent contractor, that the individuals working for the franchisee were not Domino's employees, and that the franchisee was solely responsible for hiring, training, scheduling, and supervising its employees.

The employee countered this with evidence that Domino's establishes hiring requirements and appearance standards for employees of its franchisees. Domino's also had access to the franchisees computer data, tax returns, and financial statements. It determined store hours, pricing, advertising, and what manner of payment was acceptable.

There was even evidence that it told the franchisee on two occasions to fire employees (one of whom was the alleged harasser).

The court ruled that there was enough evidence of Domino's control of the franchisee's business to raise a question as to whether the franchisee was legitimately an independent contractor. Instead of relying on the terms of a contract, the court looked at "the totality of the circumstances" to determine who actually exercises control. Here, it concluded that there was enough evidence of Domino's control over the franchisee that the issue would need to be decided by the jury.

The lesson here is that companies can't rely entirely on contract language to protect them from claims by an independent contractor's employees. While the language is a start, courts will also look at the realities of the relationship.

If a company exercises a great deal of control over an entity that it seeks to characterize as an independent contractor, the court may simply disregard that characterization.

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1 Comment

The issue of control and how an independent operator remains independent is one of the vexing questions in franchising.

The franchisor can be sued for maintaining too much control or too little - turning a blind eye to obvious infractions of employment law by its franchisees.

This is why I personally favor the HR component of franchisor oversight to be contracted out to a third party supplier or vendor, without any rebates or other type of renumeration going to the franchisor.

A group of concerned franchisees should be able to put this together with educational support from their franchisor.

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This page contains a single entry by Jeffrey D. Polsky published on July 10, 2012 11:02 AM.

First Circuit's New Ruling on Class Arbitration for Franchisees was the previous entry in this blog.

What You Need to Know about Franchisee Releases in Ontario is the next entry in this blog.

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