Domino’s Pizza Possibly Liable for Wrongful Termination by Franchisee

Domino’s Pizza, like many companies, offers franchise opportunities for potential purchasers.  Domino’s allows the franchisee to use Domino’s name, trademarks, secret sauces, etc., in exchange for a royalty or license fee.  The Franchise Agreement grants the franchisee  the freedom to conduct its own independent business, and specifically states the franchisee “shall be solely responsible for recruiting, hiring, training, scheduling for work, supervising and paying the persons who work in the Store and those persons shall be your employees, and not [Domino’s] agents or employees.”

When Taylor Patterson, a teenage restaurant employee, was allegedly sexually harassed and assaulted by the assistant manager at the local Domino’s owned by Sui Juris, LLC.  She also alleged that Domino’s Pizza, LLC, Domino’s Pizza, Inc., and Domino’s Pizza Franchising, LLC (the franchisor) were the assistant manager’s employers and therefore were vicariously liable for his actions under the doctrine of respondeat superior. The trial court disagreed and granted Domino’s motion for summary judgment.

The appellate court overturned the trial court’s decision finding  reasonable inferences that there was a lack of local franchisee management independence. The court focused on several factors where the franchisor exercised control over the franchisees.  Sui Juris owner testified a Domino’s “area leader,”  told him to fire Taylor and one other employee. He said he had no choice; he had to follow the area leader’s instructions.

Domino’s provided its franchisees with a “manager’s reference guide” describing the specific employment hiring requirements for all “personnel involved in product delivery.” It also described the documents that had to be included in employee personnel files, required all employees to submit “[t]ime cards and daily time report,” and specified explicit grooming standards for employees. The franchise agreement itself substantially limited franchisee independence in areas beyond food preparation standards. It limited the franchisee’s ability to relocate and dictated many of the internal programs and hours of operation and advertising requirements.

Based on all these factors, the court concluded the assistant manager was not an independent contractor, or at least that there was sufficient evidence for a jury to conclude that the franchisor could be liable for the franchisee’s actions.

I expect this case will be used by the plaintiff’s bar as a way to bring in franchisors in typical employment disputes.  This would not only increase the number of defendants and the breadth of discovery, it could also create conflict between the franchisee and the franchisor.  Companies or individuals considering a franchise agreement should seek the advice of competent legal counsel before signing the franchise agreement.