Pepperoni PizzaIn Patterson v. Domino’s Pizza, ___ Cal.4th ___  (August 28, 2014), the California Supreme Court upheld the order of the Ventura County Superior Court (Judge Lane) granting summary judgment on plaintiff’s claim of sexual harassment, and reversed its subsequent reversal by the California Court of Appeal.

Plaintiff was employed by a franchisee of defendant franchisor.  She claimed that she was sexually harassed by a male manager while they worked together at the franchisee’s pizza store. Thereafter, plaintiff sued both the franchisee and defendant for sexual harassment, claiming that defendant was liable to him both because it was the “employer” of persons working for the franchisee, and because the franchisee was the “agent” of the franchisor and, thus, could be held vicariously liable for the harassing supervisor’s conduct. The trial court granted summary judgment for defendant on the ground that the requisite employment and agency relationships did not exist and therefore deemed the franchisor not liable for sexual harassment.  The Court of Appeal disagreed, and reversed the judgment of the trial court.

The California Supreme Court agreed with the trial court, however, that defendant did not have the employment and agency relationships with the franchisee necessary to hold it liable.  First, the court noted that in analyzing these issues, “the appellate courts have focused on the degree to which a particular franchisor exercised general ‘control’ over the ‘means and manner’ of the franchisee’s operations.”  Although the court acknowledged that by imposing “comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way,” a franchisor controls the enterprise, “the franchisee retains autonomy as a manager and employer.  It is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior.”  Moreover, “t]he imposition and enforcement of a uniform marketing and operational plan cannot automatically saddle the franchisor with responsibility for employees of the franchisee who injure each other on the job.  The contract-based operational division that otherwise exists between the franchisor and the franchisee would be violated by holding the franchisor accountable for misdeeds committed by employees who are under the direct supervision of the franchisee, and over whom the franchisor has no contractual or operational control.”

In this case,  defendant “prescribed standards and procedures involving pizza-making and delivery, general store operations, and brand image,” but “the franchisee made day-to-day decisions involving the hiring, supervision, and disciplining of his employees.”  Thus, defendant “lacked contractual authority to manage the behavior of [the franchisee]’s employees while performing their jobs, including any acts that might involve sexual harassment.”  Indeed, “[w]ith respect to training employees on how to treat each other at work, and how to avoid sexual harassment, it appears that [the franchisee], not [Defendant], was in control.”