Domino’s Case Shields Franchise Parents, Boosts Industry

August 28, 2014 – In The News

David F. Faustman was quoted in the Law360 article, “Domino's Case Shields Franchise Parents, Boosts Industry.” Full text can be found in the August 28, 2014, issue, but a synopsis is below.

A ruling by the California Supreme Court clearing Domino’s Pizza from a sexual harassment case by a franchisee’s ex-worker strengthens a popular franchise business model, in which the franchisor handles the marketing plan while the franchisee oversees day-to-day operations, by making it tougher for franchisee workers to sue corporate parents in employment disputes, attorneys say.

According to David Faustman, the majority determined that summary judgment was appropriate where, as in this case, the plaintiff didn’t provide evidence that the franchisor had control over employment matters at the franchisee.

“The decision gives some comfort to the franchisor world that the walls are not tumbling around it,” Faustman said. “If there is always a jury question, then there is very little predictability and then the franchisor has one foot in the grave and the other on a banana peel waiting on the vagaries of a jury.”

The National Labor Relations Board announced last month that it has authorized more than 40 unfair labor practices complaints from workers at another fast food chain to move forward, treating the corporate parent as a “joint employer” with its franchisees in some of those cases.

The ruling in California is unlikely to have any effect on NLRB activities, according to Faustman.

“The NLRB is on a rogue mission right now,” he said. “It’s trying to use tactics to get the franchisor into litigation as a bigger, deeper pocket. … It’s about the plaintiffs bar and the unions trying to get their hands on more employees and money. Just because you’re a franchisor doesn’t mean you’re the employer of a franchisee. These people are pushing for a brave new world of liability that is very misguided.”