A Maryland federal district court denied a restaurant franchisor’s motion to dismiss, concluding that a restaurant manager at a franchised location alleged sufficient facts to support a finding that the franchisor is a joint employer with its franchisee.
Plaintiff, a former district manager of a Checkers Drive-in Restaurant franchise, sued the franchisee for employment discrimination, hostile work environment and wrongful termination, among other claims, after the franchisee terminated plaintiff’s employment while on medical leave. Plaintiff also named franchisor, Checkers Drive-In Restaurants, Inc. as a defendant, alleging joint employment. Checkers filed a motion to dismiss on grounds that plaintiff failed to state sufficient facts to establish Checkers as a joint employer.
The court applied a multi-factor test to determine whether plaintiff sufficiently alleged Checkers was a joint employer, noting that no one factor is determinative. The three most important factors are the authority to hire and fire; day-to-day supervision, including employee discipline; and whether the putative employer provides the equipment used.
The court determined the fact allegations, if taken as true, were sufficient to support the three factors identified. Plaintiff plausibly alleged facts supporting an inference that Checkers had the authority to hire and fire him since Checkers allegedly had the authority to approve and disapprove the hiring of manager-level employees. Plaintiff asserted sufficient facts that Checkers exercised control over his day-to-day responsibilities by pointing to Checkers’ training of manager-level employees and Checkers’ oversight of franchisee’s customer and employee complaints’ hotline. Checkers also allegedly had the authority to set guidelines and working conditions for franchisee’s employees.
Finally, the court held plaintiff sufficiently alleged Checkers furnished equipment used by franchisee employees pursuant to the franchise agreement and “Team Member Handbook,” and that Checkers allegedly controlled plaintiff's expected compliance with Checkers’ mandatory standards, including standards related to equipment at the franchised location.
In denying Checkers’ motion to dismiss, the court noted that cases evaluating franchise relationships for joint employment routinely concluded that a franchisor's expansive control over a franchisee does not create a joint employment relationship on its own, but the plaintiff in this case alleged sufficient facts that if proven, establish essential control factors that would justify joint employer.
Franchisors should evaluate franchise agreement terms, operational standards, and their actual oversight of franchisees that could be viewed as exceeding a franchisor’s “expected” control. While the law surrounding joint employer in the franchise relationship remains in flux, if the franchisor’s exertion of control over the franchisee appears more than necessary to protect trademarks and trade secrets, an employee will likely be able to plead joint employer, precluding dismissal at the pleadings stage.
Whitfield v. R&R Enter., LLC, No. GLS-22-2957, 2024 U.S. Dist. LEXIS 54574 (D. Md. Mar. 27, 2024)
