California Appellate Court Overturns Entry of Summary Judgment for Franchisor

In Patterson v. Domino’s Pizza, a California appellate court reversed the entry of summary judgment for Domino’s Pizza in a sexual harassment lawsuit.  Patterson, a teenage employee of Sui Juris, a Domino’s Pizza franchisee, alleged that the assistant manager of the restaurant she worked at sexually harassed her.  Patterson filed an action against Sui Juris, her supervisor, and Domino’s, the franchisor.  The trial court granted summary judgment in Domino’s favor based on a franchise agreement between Sui Juris and Domino’s which provided that Sui Juris (and not Domino’s) was responsible for supervising and paying restaurant employees.

Upon review, the Court reversed the trial court’s entry of summary judgment in Domino’s favor and held that the franchise agreement, in addition to other evidence concerning the relationship between Sui Juris and Domino’s, created a triable issue of fact as to whether Domino’s (as franchisor) could be held liable for acts undertaken by Sui Juris (the franchisee).  The Court summarized the applicable legal standard:

Whether a franchisor is vicariously liable for injuries to a franchisee’s employee depends on the nature of the franchise relationship . . . a franchisee may be found to be an agent of the franchisor even where the franchise agreement states it is an independent contractor.  If the franchisor has substantial control over the local operations of the franchisee, it may potentially face liability for the actions of the franchisee’s employees.  Consequently . . . the franchisor may be subject to vicarious liability where it assumes substantial control over the franchisee’s local operation, its management-employee relations or employee discipline.

The Court also overturned the trial court’s ruling that Domino’s could not be held liable for the sexual harassment complained of because it did not have notice of the conduct.  The Court held that the trial court failed to consider that an employer should be held strictly liable for a supervisor’s sexual harassment of a child employee.  Moreover, the Court reiterated the notion that, although a single sexually offensive act committed by a co-worker against another employee may not give rise to employer liability, “a sexual assault by a supervisor, even on a single occasion, may well be sufficiently severe so as to alter the conditions of employment and give rise to a hostile work environment claim.”