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Apr292016

Joint Employer Liability: Wins, Losses, Lessons; and Understanding Merger/Integration Clauses

Franchise 101 News

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April 2016

 

Franchise Lawyers

FRANCHISOR 101:
Wins, Losses & Lessons in Joint Employer Liability

As joint employer liability continues to develop, plaintiffs seeking deep pockets continue to claim, with some success, that franchisors are joint employers, responsible for actions of their franchisees' employees. In April, a jury found Domino's Pizza (DP) liable for $10.1 million for a delivery driver's car accident that caused a man's death.

In the accident a franchisee's employee drove in front of an oncoming truck. The truck swerved, crashing into a median to avoid the DP driver. The truck driver was left quadriplegic and later died. The jury found that the delivery driver caused the accident, and that DP controlled the franchisee's operation enough to be liable. DP's attorney argued that DP did not control hiring or firing of the franchisee's employees.

But the plaintiff's attorney focused on overall control by DP, noting that it extended even to particular conduct of delivery drivers, like requiring them not to use radar detectors or carry more than $20 cash. The attorney persuaded the jury that the franchise agreement's description of the franchisee as an "independent contractor" was just an effort by DP to avoid this kind of liability, and did not describe the actual relationship, in which the franchisee was actually DP's agent.

Click to read: Wiederhold v. Domino’s Pizza, 2-11-CA-001589

By contrast, when an employee of a landscape service franchise sued the franchisee and franchisor for discrimination, harassment, and retaliation, the court found that the franchisor was not her employer and could not be liable. The court explained that the franchisor, Mountain View Lawn Care, did not exert control over the plaintiff's employment, since the franchisor did not:

1. Have the ability to hire or fire the plaintiff;
2. Supervise or discipline the plaintiff;
3. Provide the equipment or uniform used by the plaintiff;
4. Possess employment records for the plaintiff;
5. Train the plaintiff or any of the franchisee's employees;
6. Employ anyone with similar duties to the plaintiff's;
7. Receive the sole benefit of the plaintiff's work;
8. Do anything to show that it intended to be the plaintiff's employer.

Click: Wright v. Mountain View Lawn Care, LLC

Juries are less predictable, as shown by the Domino's Pizza case, but a franchisor can improve its prospects of avoiding joint employer liability by following the factors outlined in Mountain View.

FRANCHISEE 101:
Understanding Merger/Integration Clauses

Before a final agreement is signed there are often oral discussions, negotiations, and representations. There may be written memorandums of understanding or letters of intent. But, when the final agreement has a "merger" or "integration" clause, in many states it is as if anything that came before never happened.

After various disputes between Chrysler Group and its distributor in Greece, the parties entered into a settlement agreement. The agreement said the distributor would now sell only Chrysler's "Lancia" branded vehicles. Before they signed the agreement, Chrysler represented to the distributor that it planned to expand the Lancia line over the next few years. When that expansion didn't happen, the distributor sued Chrysler for fraud.

The settlement agreement did not mention expansion of the Lancia line but did have a "merger/integration clause." That clause said the agreement superseded all other agreements between the parties. As a result, regardless of any representations allegedly made by Chrysler, the court denied the distributor's claim.

A merger clause may resemble the following:

Entire Understanding: This Agreement contains all of the terms and conditions agreed on by the parties with reference to its subject matter. This Agreement supersedes and replaces all prior agreements, arrangements, negotiations, representations and understandings among the parties, whether written or oral, concerning its subject matter.

An agreement with a clause like this will be the last, and only, word on the subject in those states that give force to these clauses. Before signing an agreement that contains such a clause, be certain that the agreement also contains every part of the final deal as you understand it.

Details: Lancia Jeep Hellas S.A. v. Chrysler Group Int'l LLC, Mich. Ct. App.

This communication published by Lewitt Hackman is intended as general information and may not be relied upon as legal advice, which can only be given by a lawyer based upon all the relevant facts and circumstances of a particular situation. Copyright Lewitt Hackman 2016. All Rights Reserved.

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