The Franchise Memorandum

A federal court in New York recently dismissed a franchisee’s employee’s discrimination claim against a franchisor because the franchisor was not her joint employer. Rivers v. Int’l House of Pancakes, 2021 WL 860590 (S.D.N.Y. Mar. 8, 2021). The employee — a server at an IHOP franchise in Manhattan — sued the franchisee and IHOP for pregnancy discrimination. IHOP moved to dismiss and argued that the franchisee, not IHOP, was Rivers’ employer. Rivers argued that while the franchisee was her direct employer, IHOP was also considered her employer based on the control it exercised over the franchisee.

The court agreed with IHOP and held that Rivers failed to plead that IHOP exercised formal or functional control over the franchisee sufficient to make it a joint employer. As to formal control, the court reasoned that Rivers did not allege that IHOP played a role in the franchisee’s hiring and firing decisions, or that it controlled the franchisee’s work schedules or supervised the franchisee’s work conditions beyond semiannual inspections. The court further reasoned that there were no allegations suggesting that IHOP influenced the franchisee’s compensation policies or maintained the franchisee’s employment records. As to functional control, the court reasoned that Rivers failed to allege that she used IHOP’s — as opposed to the franchisee’s — premises or equipment, or that the material aspects of her work environment would remain unchanged were she to gain employment with a different IHOP franchisee. The court further reasoned that Rivers only alleged marginal supervision on behalf of IHOP, which was plainly insufficient to plead IHOP’s functional control over the franchisee’s employees.