In September 2008, a company named Sui Juris, LLC (Sui Juris, or the franchisee), acquired an existing Domino’s Pizza franchise in Southern California. The franchise agreement was signed for Sui Juris by its sole owner, Daniel Poff (Poff). The other contracting party was Domino’s Pizza Franchising, LLC, which was related to both Domino’s Pizza, Inc., and Domino’s Pizza, LLC (collectively, Domino’s, or the franchisor).
When operations began, Sui Juris retained, as its employees, the 17 or 18 people who already staffed the store. One of them was Renee Miranda (Miranda), an adult male who held the title of assistant manager.
In November 2008, a young woman named Taylor Patterson (Patterson) was hired to serve customers at the Sui Juris store. Her job soon ended under circumstances set forth in the pleadings.
In June 2009, Patterson filed this action against Miranda, Sui Juris, and Domino’s. She alleged the following facts: Miranda worked as a manager at the Sui Juris store. He sexually harassed her whenever they shared the same shift. He made lewd comments and gestures and grabbed her breasts and buttocks. After Miranda refused to stop, Patterson reported the problem to her father and to Poff.
The complaint alleged that Patterson’s father contacted the police. He also called Domino’s “corporate office” and told someone in the human resources department about the sexual harassment his daughter had endured at the Sui Juris store. Patterson stayed away from work for one week and then returned. She soon resigned. She perceived that her hours had been reduced because she had reported Miranda’s misconduct to others.
The complaint stated several causes of action—alleged sexual harassment, failure to take reasonable steps to avoid harassment, and retaliation for reporting harassment.
Critical here is Patterson’s portrayal of the legal relationship between Domino’s and the employees of Sui Juris. As to all causes of action, the complaint maintained that Domino’s was the “employer” of both Patterson and Miranda and that they were the “employee[s]” of Domino’s. Domino’s argued that it was not an “employer” or “principal” and could not be held vicariously liable for Miranda’s misconduct as a result. Domino’s maintained that Sui Juris was a separate business run by Poff and that he selected, managed, and disciplined his employees. Hence, Domino’s claimed, the internal day-to-day control needed for an employment or agency relationship was lacking.
JUDGES CANTIL-SAKAUYE In reviewing a grant of summary judgment, we independently evaluate the record, liberally construing the evidence supporting the party opposing the motion, and resolving any doubts in his or her favor. As the moving party, the defendant must show that the plaintiff has not established, and reasonably cannot be expected to establish, one or more elements of the cause of action in question. Here, the Court of Appeal erred in finding a triable issue of fact on whether an employment or agency relationship existed as a prerequisite to holding Domino’s strictly or vicariously liable for Miranda’s alleged sexual harassment of Patterson.
We start with the contract itself. Under its literal terms, Sui Juris paid for the right to sell Domino’s products using the company’s business format system. The contract said there was no principal-agent relationship between Domino’s and Sui Juris. The latter also had no authority to act on the former’s behalf.
Notwithstanding any training, support, or oversight on Domino’s part, Sui Juris agreed to act as an “independent contractor.”
Likewise, the contract stated that persons who worked in the Sui Juris store were the employees of Sui Juris, and that no employment or agency relationship existed between them and Domino’s. Domino’s disclaimed any rights or responsibilities as to Sui Juris’s employees. Hence, nothing in the contract granted Domino’s any of the functions commonly performed by employers. All such rights and duties were allocated to Sui Juris. They included, but were not expressly limited to, “recruiting, hiring, training, scheduling for work, supervising and paying” persons employed by Sui Juris.
The contract also stated that Domino’s had no duty to operate the Sui Juris store. Nor did Domino’s have the right to direct Sui Juris’s employees in store operations. Rather, the contract made Sui Juris solely responsible for managing its employees with respect to the proper performance of their tasks. Poff agreed to provide close, full-time supervision in this regard. Domino’s disclaimed liability under the contract for any damages arising out of the operation of the store.
Consistent with the exclusive control vested in Sui Juris over its own employees, neither the contract nor the MRG empowered Domino’s to establish a sexual harassment policy or training program for Sui Juris’s employees. Nor was there any procedure by which Sui Juris’s employees could report such complaints to Domino’s. In fact, the topic did not appear in the franchise documents at all.
Thus, under the foregoing terms, Domino’s had no right or duty to control employment or personnel matters for Sui Juris. In other words, Domino’s lacked contractual authority to manage the behavior of Sui Juris’s employees while performing their jobs, including any acts that might involve sexual harassment.
Of course, the parties’ characterization of their relationship in the franchise contract is not dispositive. We must also consider those evidentiary facts set forth in the summary judgment materials.
According to the testimonial evidence, Poff exercised sole control over selecting the individuals who worked in his store. He did not include Domino’s in the application, interview, or hiring process. Nor did anyone attempt to intervene on Domino’s behalf. It was Poff’s decision to hire Patterson as a new employee and to otherwise retain the existing staff when he bought the franchise.
Evidence about the training of Sui Juris’s employees is more nuanced, but did not indicate control over relevant day-to-day aspects of employment and employee conduct. It appears the parties did not follow the literal language of the contract placing sole responsibility on Sui Juris for handling all training programs for its employees. Domino’s provided new employees with orientation materials in both electronic and handbook form. Such programs supplemented the training that Poff was required to conduct.
However, with respect to training employees on how to treat each other at work, and how to avoid sexual harassment, it appears that Sui Juris, not Domino’s, was in control. As best Poff could recall, only pizza-making, store operations, safety and security, and driving instructions were involved. Also, nothing indicates the extent, if any, to which Poff borrowed from his mandatory Domino’s training as a franchisee to craft a sexual harassment policy for his store. Poff could not recall what, if anything, he learned from Domino’s on this score.
What is clear is that Poff implemented his own sexual harassment policy and training program for his employees. He adopted a zero tolerance approach, among other things. Poff held meetings in which he personally and vigorously trained his managers about sexual harassment. He also installed his policy on the PULSE computer system for other employees to view.
No Domino’s representative, including Lee, trained Sui Juris employees on sexual harassment. Nothing in the record indicates that any Domino’s representative reviewed Poff’s sexual harassment policy, discussed its substance with Poff or his employees, or observed any training sessions at the store.
Of particular relevance is that Poff’s sexual harassment policy and training program came with the authority to impose discipline for any violations. The record shows that Poff, not Domino’s, wielded such significant control.
First, Poff encouraged the reporting of sexual harassment complaints directly to him. In training sessions, Poff told his managers to contact him if any issue or question about sexual harassment arose. Poff also told Patterson at the start of her job to advise him of any such problem—a step she soon took. The apparent purpose of Poff’s admonitions was to give him the chance to respond by taking appropriate disciplinary action against the offending employee.
Second, Domino’s had no procedure for monitoring or reporting sexual harassment complaints between the employees of franchisees. Devereaux, Domino’s franchise director, confirmed that the company was not involved in such issues at the local level unless the franchisee himself was implicated or otherwise required training. Consistent with the general “hands-off” approach of area leaders on sexual harassment, there is no evidence that Lee and Poff discussed the topic before Patterson reported Miranda’s misconduct to Poff, or before her father contacted Domino’s. As noted, Patterson’s father used the 1-800 number established for Domino’s customers complaining about their meal or service.
Third, Poff acted on Patterson’s complaint by taking unilateral disciplinary action. He first suspended Miranda. Poff then started an investigation. However, he could not reach a conclusive result. Miranda subsequently lost his job when he failed to report to work. In doing so, Miranda apparently triggered the “selftermination”
clause in Poff’s personnel policies. Poff refused to rehire Miranda. There is no evidence that Poff solicited Domino’s advice or consent on any of these decisions, or that he was required to do so.
As noted above, Poff acted with the obvious understanding that the decision whether and how to discipline Miranda was his alone to make. He chose to proceed in a prudent and methodical way by investigating the complaint before a final decision was made. He did not act rashly or as though only one outcome were permissible—i.e., summary termination on sexual harassment grounds.
Nothing we say herein is intended to minimize the seriousness of sexual harassment in the workplace, particularly by a supervisor. Nor do we mean to imply that franchisors, including those of immense size, can never be held accountable for sexual harassment at a franchised location. A franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations that we have described, and cannot escape liability in such a case merely because it failed or declined to establish a policy with regard to that particular conduct. Our holding is limited to determining the circumstances under which an employment or agency relationship exists as a prerequisite to pursuing statutory and tort theories like those alleged against the franchisor here.
CRITICAL THINKING:
It is common for reports of what a court said to exaggerate the scope of the findings of the court. How would you critically evaluate a news report about Patterson v. Domino’s Pizza that said “Firms that grant franchises to another firm are not liable for the actions of employees of that firm”?
ETHICAL DECISION MAKING:
There are certain values that are being emphasized when we have laws against sexual harassment. There are also certain values being emphasized by the allocation of liability in cases like Patterson. Are those two sets of values in conflict, or are they compatible with each other?