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The Franchise Memorandum

Federal Court in California Applies Patterson to Find Franchisor Not Employer of Franchisee Employees

In Vann v. Massage Envy Franchising, LLC, 2015 U.S. Dist. LEXIS 1002 (S.D. Cal. Jan. 6, 2015), the United States District Court for the Southern District of California found that Massage Envy Franchising was not the employer or a joint employer of its franchisees' employees, and therefore was not liable for any alleged wage and hour law violations. Vann, a former employee of two franchised spas, alleged Massage Envy exercised control over hiring and firing because it: (a) provided franchisees with operations manual containing suggested personnel policies; (b) hired district managers to monitor franchisee compliance; (c) required personnel to follow scripts when interacting with customers; and (d) required franchisees to conduct background checks. Vann further alleged that Massage Envy must have instigated the alleged wage law violations because all franchisees in the region had adopted nearly identical wage policies.

Applying the test for employer liability established by the California Supreme Court in Patterson v. Domino's Pizza, on which we reported in Issue 184 of The GPMemorandum, the court found that Massage Envy could not be held liable for alleged wage and hour law violations committed by franchisees because it did not have the authority to hire, fire, or train franchisees' employees, or to dictate their schedules or wages. The court cited franchise agreement and operations manual provisions stating that Massage Envy was not the joint employer of its franchisees' employees, that any personnel policies made available to the franchisees by Massage Envy were optional, and that Massage Envy would refrain from controlling the franchisees' employment practices. Accordingly, the court granted Massage Envy's motion for summary judgment dismissing Vann's joint employer liability claims. This outcome stands in contrast to case on which we reported in Issue 187 of The GPMemorandum, Hahn v. Massage Envy Franchising, LLC, 2014 U.S. Dist. LEXIS 147899 (S.D. Cal. Sept. 25, 2014), in which the court determined that the same franchisor could be liable for violations of California's Unfair Competition Law based upon the content of membership agreements used by franchisees but originated by Massage Envy.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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