The Franchise Memorandum

Wendy’s could be liable as a joint employer under Title VII, a federal court recently held, allowing the plaintiff to proceed with her hostile work environment claims against Wendy’s and one of its franchisees. A.H. v. Wendy’s Co., 2018 WL 4002856 (M.D. Pa. Aug. 22, 2018). The plaintiff, a former employee of the franchisee, filed suit alleging that she was sexually harassed by a supervisor and that Wendy’s was jointly liable for the hostile work environment under either a joint employer or agency theory. Wendy’s moved to dismiss, arguing that the plaintiff failed to plead facts to show that it exercised sufficient control over the franchisee to establish liability under either theory.

In analyzing the joint employer theory, the court first examined whether the plaintiff sufficiently alleged that Wendy’s had authority over the conditions of her employment. The plaintiff alleged that she was required to sign a conduct policy that identified activities that Wendy’s considered to be “a business abuse or contrary to acceptable business practice.” She also had to sign several additional policies identified as Wendy’s rules and regulations. According to the court, language in the applicable franchise agreement requiring the franchisee to operate its restaurant in strict conformity with methods prescribed by Wendy’s in its manual further supported the plaintiff’s allegations that Wendy’s had authority over certain employment conditions. While these allegations did not establish that Wendy’s had control over hiring and firing decisions, they were sufficient to show Wendy’s had authority to set conditions of employment and workplace rules.

The court then turned to the second factor, finding that the plaintiff plausibly alleged Wendy’s had control over day‐to‐day supervision. Specifically, the plaintiff alleged that at the start of her employment, she was required to undergo a series of computerized training courses authored by Wendy’s. Moreover, Wendy’s provided continual in‐service employee training. As with the first factor, the court also found support in the franchise agreement, which authorized Wendy’s to conduct periodic inspections and to provide “as it deems advisable, periodic and continuing advisory assistance to Franchisee as to the operation, merchandising, and promotion of the Restaurant.” Finally, the court determined that the plaintiff had sufficiently alleged that Wendy’s exercised control over employee records given that the franchise agreement required Wendy’s to provide the franchisee with certain reporting forms and Wendy’s had the right to examine the franchisee’s “books, records, and tax returns.” The plaintiff’s claims against Wendy’s under an agency theory of liability also survived the motion to dismiss for similar reasons.