What should franchisors be concerned with in light of the recent Peterson v. Domino’s case?

Minneapolis franchise law attorney Kirk Reilly explains how a recent case has impacted the doctrine of vicarious liability for franchisors.

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Peterson v. Domino’s is a very recent case out of the California Supreme Court that deals with the issue of franchisor vicarious liability. The franchise world is very concerned how would it come out. And vicarious liability is simply a doctrine of law that the franchisor can be held liable for the actions of its franchisee if the court determines that there’s a principal agency relationship, and all franchise agreements do not, and they specifically say you are not a principal agent relationship, but courts look at elements of control to determine whether they really are.

Well, in Peterson v. Domino’s, a court four to three decision, very close, the majority of the justices in California determined that in this – it’s a sad case. It’s about a sexual harassment of young worker at Domino’s by her manager, and they held that the franchisor was not liable for that due to the fact that Domino’s, the franchisor, did not control the day-to-day activities that caused this woman harm, and the harm being the sexual harassment by her manager. Domino’s didn’t have anything to do with the hiring of the manager or the employee, or the firing or discipline. It just wasn’t involved, and the court said that that absolved Domino’s of vicarious liability.

Only problem is, it was a four to three decision, very close, and at least three of the justices would have allowed the case to go to trial because they felt, well, that’s a legal doctrine, but the facts were murky, and we would have liked to have seen a jury determine what were the elements of control.