Calif. Court Upholds Franchise Model As New Challenges Loom

The franchising industry has won support from the California Supreme Court in ruling that says local franchise owners are responsible for their employment practices, not the franchisor chain. At the same time, the National Labor Relations Board continues to weigh “joint employer” status for McDonald’s in other disputes, and union organizers plan fast-food strikes this week in an effort to raise wages.

The International Franchise Association praised the California ruling. “The California Supreme Court allowed reason to reign when it reversed an appeals court decision that would have allowed a jury to hold Domino’s responsible for an alleged infraction by the manager of one of its franchisees,” said IFA president Steve Caldeira. ” Franchisees are independent, small-business owners who have complete control over who they hire and how they manage their employees.”

Here’s a roundup of developments:

  • In a ruling that confirms the business relationship between franchisee and franchisor, the California Supreme Court said the Domino’s Pizza chain is not  responsible for the alleged sexual harassment of a 16-year-old female employee of one of its stores, because the franchise agreement left all personnel decisions up to the now-bankrupt store owner. The court was closely divided, however – Full story at San Francisco Gate
  • Just a month after the NLRB d said it might consider McDonald’s to be a “joint employer” with shared responsibility for franchisees’ hiring practices, the regulators are considering another action that could assign joint-employer status for contract workers.  – Read more in the Wall Street Journal 
  • A Forbes columnist charactized the developments as an “attack” on the franchise system by the Obama administration and trial lawyers, and Business Insurance said the NLRB issue with McDonald’s could take years to resolve in the courts. That’s a reminder that the NLRB opinion about “joint employer” status was a warning about possible outcomes if McDonald’s did not settle 43 separate cases under review.
  • Meanwhile, fast-food workers in as many as 150 U.S. cities may strike this Thursday, Sept. 4, in an effort to raise wages, labor organizers say. Similar protests occurred in about 50 cities last year. Organizers seek $15 an hour pay, up from the current $9.08  – Read more at Bloomberg and Inc.



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