CA Supreme Court Limits Franchisor Vicarious Liability

In a blow to the rights of franchise employees, the California Supreme Court issued a ruling last week in Patterson v. Domino’s Pizza, LLC that significantly limits franchisor liability in employment and tort matters.  Specifically, the Court ruled 4-3 that a franchisor is not vicariously liable for sexual harassment perpetrated by an employee of a franchisee unless the franchisor exercises control over the manner and means by which their franchisees hire, fire, discipline and manage workers.

In the case of Patterson, the plaintiff was an employee of Dominos pizza who suffered sexual harassment at work.  She sued the franchisee (the owner of the Dominos at which she worked) and the franchisor (Dominos Pizza, LLC) on a theory of vicarious liability.  However, the Court determined on a motion for summary judgment that while Dominos controlled marketing and production standards, individual franchisees still retained discretion to implement Domino’s operational standards on a day-to-day basis, hire and fire store employees, and regulate workplace behavior.  Given this autonomy, franchisees were independent contractors and, thus, the requisite element of agency was lacking in any claim for vicarious liability.

The Court’s ruling in Patterson has implications that extend beyond the realm of employment.  The same principles of agency necessary to establish liability for sexual harassment also apply to tort claims such as premises liability.  So, in the event a consumer is inured by a dangerous condition on the property of a franchise location, they are probably going to be limited to recovering a judgment from the assets and insurance policies of the franchisee.  The deeper pockets of the franchisor will in most cases be off limits.