The hallmark of a franchise relationship is that the franchisor allows independent businesspeople to share in the good will represented by the trademarks in the distribution of goods or services. Franchisees historically have been considered independent contractors that own their own businesses allowed to operate consistent with the franchisor’s format and business methods. Traditionally, if the franchisor exercised sufficient control over the franchisee’s operation, such excessive control could trigger vicarious liability for the franchisor for torts committed by the franchisee. This vicarious liability exposure would only exist where the efforts of control could have limited the risk of the tort occurring. Labeling a franchisee an "employee," however, rarely occurred until recently.
Courts in the states of California, Massachusetts, Oregon, Connecticut, Pennsylvania and Florida have held that a franchisor may be deemed a franchisee’s "employer" and liable for employment discrimination when it exercises too much control over the day-to-day operations of its franchisees. In Patterson v. Domino’s Pizza, 207 Cal.App.4th 385 (2012), the California Court of Appeals, Second Appellate Division, reversed summary judgment for Domino’s and remanded for trial the issue of whether Domino’s exercised sufficient control over a franchisee to make it liable as an "employer" for alleged sexual harassment.
