A federal district court in New York dismissed workplace harassment and retaliation claims against corporate affiliates of the Golden Krust Caribbean Bakery & Grill franchisor for damages as a result of workplace harassment and retaliation under Title VII of the Civil Rights Act of 1964 and other New York laws. The court held that the joint employer doctrine did not apply because the plaintiff did not allege that the franchisor controlled the plaintiff’s daily employment activities.
Previously the plaintiff dismissed the franchisor with prejudice, and the franchisee defendants failed to appear and were found to be in default. Rather than seek default judgment, the plaintiff proceeded with claims against the franchisor’s affiliates, alleging these defendants were joint employers because they required approval over the franchisee’s decisions. Such oversight included the location of the franchise, appointment of all management level employees, the lease or purchase terms of restaurant equipment, offering of advice on restaurant design, support services, and optional training programs.
The district court identified a list of factors to be analyzed, including control over an employee’s hiring, firing, training, promotion, discipline, supervision, and handling of records, insurance, and payroll. The guiding factor is whether an entity other than the employee’s formal employer has power to pay the employee’s salary, hire, fire, or otherwise control the employee’s daily employment activities.
The plaintiff failed to allege that the defendants shared control over the terms and conditions of her employment. The allegations failed to articulate how the alleged day-to-day control or influence that the defendants had over the Golden Krust franchise allowed them to control plaintiff’s daily employment activities, such that one could properly conclude that a putative employer-employee relationship existed.
The plaintiff also did not show a level of involvement by the franchisor in the franchisee’s decision-making to sustain a joint employment allegation. The plaintiff alleged that the franchisor set and enforced requirements on all franchises in areas such as monitoring employee performance and specifying procedures that employees must follow. This allegation was not sufficient to show that the franchisor controlled the plaintiff’s daily employment activities.
The defendants sought an attorney fees award because it was obvious that they were not parties to the franchise agreement between the dismissed franchisor and the defaulting franchisee. The district court declined because the joint employer doctrine turns on whether the parties shared significant control of the same employee, rather than any formal written agreement.
Most franchise agreements require franchisees to defend and indemnify the franchisor and its affiliates against claims premised on a co-employment relationship. With no franchisee or franchisor in this case to do either, the franchisor’s affiliates handled their own defense and were unable to recover attorney fees that the franchisee would otherwise be obligated to pay. Even if a “deeper pocket” defendant is more likely to be pursued in a joint employer case, franchisees should not assume that going into default will suspend their indemnity obligation.
Doe v. Golden Krust Caribbean Bakery & Grill Inc., No. 18-cv-05734 HG-TAM (E.D.N.Y Mar. 27, 2023)
