Like most courts to consider the issue, the California Supreme Court in a case involving Domino’s Pizza has held that a franchisor generally cannot be held liable for the independently made employment decisions of one of its franchisees. Who would disagree with that commonsense view? Well, the Obama National Labor Relations Board (NLRB), as well as three liberal dissenters on the seven-member California court, who would have left it up to case-by-case jury factual balancing, an arrangement likely to coax settlement offers from risk-averse franchisor defendants. [Daniel Fisher, Forbes, also; Shaw Valenza; Fox Rothschild; Gordon Rees; related, Epoch Times last week quoting me; earlier here, here, and here]
Aaron Schepler, Quarles & Brady;
In the supreme court’s view, the fact that Domino’s exercised extensive control over the manner in which the franchisee operates its business was merely a way to ensure the uniformity of the customer experience at its franchised outlets. As the court explained, this uniformity actually benefits both parties to the franchise relationship because “chain-wide variations … can affect product quality, customer service, trade name, business methods, public reputation, and commercial image” and, thus, the value of the brand. And because “comprehensive operating system[s]” are present in nearly every franchise relationship, those systems standing alone could not reasonably “constitute[] the ‘control’ needed to support vicarious liability claims like those raised here.”
3 Comments
This is wrong. Dominos is Dominos. FedEx is FedEx. McDonalds is McDonalds. While these distinctions may make sense as a franchiser/franchisee, they make no sense at all to employees or consumers.
This is simply a way to shield large corporations from pesky lawsuits. People with meritorious claims win, and then they get nothing because the franchisees can simply declare bankruptcy.
In like wise, everything in the State of California is subject to the rulings of the State of California, so the State must be held responsible for every tortious action within its bounds, or, indeed, wherever the effects of its laws causes repercussions.
Bob
Allan, Allan, Allan. You make the court’s point in your argument, an Own Goal. It’s probably true that employees and customers can’t tell the difference. And the court said that benefits both parties to the contract. And by the way, these franchise systems are enforced with almost the same rigor as trademark law. The franchisor has control over the system.
But beyond minimum staffing levels, they don’t have control over terms of hiring and employment. There’s no franchise system for that. Hey look, a business opportunity – labor contractor to the fast food industry. I bet it would work better than unions.