Domino’s Corporate Faces Sexual Harassment Suit

An appellate court in California has ruled that Domino’s Pizza can be held responsible as a corporation for sexual harassment perpetuated by franchise owners. A lower court had previously held that the food service giant could not be sued in relation to a recent case.

A Domino’s manager had allegedly sexually harassed a 16-year-old during her time as an employee. She said she was harassed and assaulted, and she filed a complaint under the Fair Employment and Housing Act. She has sued the franchise for failing to prevent discrimination, retaliation for exercise of rights, battery, wrongful termination, and assault, according to court documents.

The appellate court ruled that since franchise owners report directly to their corporate overseers, they are necessarily connected in an agency relationship. That means that the corporation, in addition to protecting its trademark and branding measures, should also be held responsible in actions of the franchise. Even if the franchisee is declared as an independent entity, the strength of the owner’s relationship with the corporation can cause a transfer of liability.

A review of the franchise agreement shows that Domino’s has significant control over qualifications for employees and standards for their conduct. If franchises violate the provisions of their corporate agreement, they can be terminated from the franchise program. In addition, the corporate entity enforces stringent rules regarding employee activities such as timecard submission, appearance and demeanor.

The appellate court has thus decided that the larger entity, Domino’s, is responsible for the conduct of its franchisees because of its intense involvement in everyday operations at retail locations throughout the United States. That means that sexual harassment lawsuits, such as the one brought by the young woman, have access to significantly more resources for punitive damages. Clients are able to sue the parent company, not just the independent franchise.

This decision opens up franchisees of many larger corporations to larger liability in sexual harassment, retaliation and wrongful termination suits. It is likely to have a lasting impact on the legal landscape in employment law for years to come.

Source: Blue Mau Mau, “Dominos liable in franchisee sexual harassment case,” Janet Sparks, July 17, 2012