Race Discrimination Lawsuit Asks Court to Hold Restaurant Franchise Owner Liable for Acts of Franchisee

Many well-known businesses, particularly restaurant chains, use the franchise model to operate national, or even international, chains of locations. Under this model, the franchise owner enters into agreements with other businesses to operate locations using the franchise’s brand name. These businesses, known as franchisees, must abide by a wide range of requirements under the franchise agreement. Employees of individual franchise locations are considered employees of the franchisee, but multiple complaints and lawsuits in recent years have sought to hold a franchisor liable for acts of a franchisee, based on the theory that the franchise agreement gives the franchisor substantial control over the franchisee’s business. A recent lawsuit against the McDonald’s franchisor asserts that it is liable for race discrimination by a franchisee. Betts, et al v. McDonald’s Corp., et al., No. 4:15-cv-00002, complaint (W.D. Va., Jan. 22, 2015).

The plaintiffs are African-American former employees of a company that operates three McDonald’s restaurants in Clarkesville and South Boston, Virginia. They describe a lengthy sequence of events involving alleged racial and sexual harassment and discrimination by managers employed by the franchisee, culminating in an allegedly overt decision to “reduce the number of African-American employees.” Betts, complaint at 28. All but one of the plaintiffs state that they were terminated on May 12, 2014. The other plaintiff alleges that the company constructively discharged her on July 5, 2014, after “months of racial abuse.” Id. at 32.

The plaintiffs filed suit against the franchisee, several individual managers, and the franchisors. They are asserting seven causes of action, including claims for wrongful termination, constructive discharge, and racial harassment under both Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1), and 42 U.S.C. § 1981; and sexual harassment under Title VII.

In order to hold the franchisor liable for these claims, they must show that it exercised substantial authority over the franchisee’s business. This has proven difficult in the past. Many employees trying to make claims under various employment statutes have found themselves limited to claims against the franchisee, even when the franchisor appears responsible for the acts giving rise to their complaints. This has become known as the “fissured workplace.”

Last year, the National Labor Relations Board (NLRB), which deals with complaints related to labor organizing, decided that employees may assert claims against McDonald’s USA, LLC, the franchisor, and individual franchisees. It described the franchisor as a “joint employer.” The plaintiffs in Betts are arguing for a similar outcome under employment discrimination law.

In their complaint, the plaintiffs allege a pattern of control by the McDonald’s franchisor over their direct employer that, they claim, makes it liable under § 1981 and Title VII:
– The franchise agreement gives the franchisor “the right to control all operations at franchised restaurants,” Betts, complaint at 8;
– The franchisor’s business manuals “impose[] comprehensive policies on franchisees,” id. at 10;
– It routinely sends corporate representatives to “ensure[] compliance with its policies,” id. at 13;
– It uses “mandatory computer systems” to control franchisee employees’ work hours and job duties, id. at 16;
– “Mandatory training for all managers” allows it to exercise control over franchisees, id. at 17;
– Mandatory “employee surveys” allow it to “monitor[] employee relations,” id. at 19; and – It mandates the use of a standard “online assessment tool” to screen job applicants, id. at 20.

If you need to speak to an employment discrimination attorney in New Jersey or New York, contact the Resnick Law Group online, at 973-781-1204, or at (646) 867-7997.

More Blog Posts:

New York State Attorney General Sues Pizza Franchisee for Alleged Wage Violations, The New Jersey Employment Law Firm Blog, December 18, 2014
NLRB Allows McDonald’s Employees to File Complaints Against McDonald’s and Individual Franchisees as “Joint Employers”, The New Jersey Employment Law Firm Blog, November 3, 2014
Department of Labor Data Identify Employers with Most Wage Law Violations, Demonstrate Difficulties of Enforcement in “Fissured Workplaces”, The New Jersey Employment Law Firm Blog, September 9, 2014

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