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Discrimination & harassment suits: Franchisors too protected?

For decades, the franchise system has dominated American business culture, especially fast food and certain retail establishments. For consumers, the appeal of the franchise was familiarly and predictability wherever they went. Burgers from a McDonald's anywhere in the United States taste nearly exactly the same as they do here in California.

But the franchise model doesn't work well for everyone, particularly low-level employees who face workplace discrimination or sexual harassment. This is because the legal structure of franchising generally allows franchisors to exercise considerable top-down control over franchisees while shielding franchisors from bottom-up liability.

This means that if an employee suffered discrimination or harassment at a particular franchise location, they would find in very difficult or even impossible to hold the franchisor liable. This is sometimes true even if the franchisor has considerable control over hiring practices, training and workplace policies.

A good example is a sexual harassment lawsuit that was brought against Domino's Pizza, LLC. A woman who worked for a Domino's franchise in California brought a sexual harassment lawsuit against the franchise, and also sought hold the larger corporation liable as well. Last summer, however, the California Supreme Court ruled that the franchisor would not be held jointly liable because it did not have a "general right of control" over practices like hiring, firing and discipline of employees at local franchises.

Despite setbacks like this, there does seem to be some progress in holding franchisors liable for the mistreatment employees receive at the franchise level. Last fall, for instance, the National Labor Relations Board issued a ruling that essentially allowed McDonald's to be held liable for wage and labor violations that occur at the franchise level.

Because of changing consumer tastes, the franchise model seems to be waning in popularity, which could ultimately weaken the legal protections that franchisors currently hold. Hopefully, as these changes take place, low-level employees will be able to hold franchisors liable for the employment law violations that occur locally.

Source: Forbes, "As The NLRB Attacks Franchisors Like McDonald's, Is `Quasi-Franchising' The Answer?" Debra Scribner, May 1, 2015

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