The Franchise Memorandum

Meanwhile, a federal court in Pennsylvania dismissed an auto repair services franchisor from a sexual harassment and discrimination case brought by a franchisee’s former employee. In Harris v. Midas, 2017 WL 3440693 (W.D. Pa. Aug. 10, 2017), the plaintiff employee of a Midas Auto Service franchisee was allegedly repeatedly sexually, physically, and emotionally harassed, assaulted, and tortured by some of the franchisee’s other employees. In addition to suing the franchisee, the employee sued Midas, alleging joint employer, agency, and vicarious liability.

In moving to dismiss the plaintiff’s claims, Midas argued that the plaintiff failed to demonstrate a plausible basis for joint employer liability, which requires that both parties exercise significant control over the same employee. The court agreed, holding that the plaintiff failed to allege that Midas had any authority to hire or fire her, promulgate work assignments, control her compensation, benefits, or hours, supervise her day-to-day work, discipline her, pay her salary, or manage her employee records. The court further held that the plaintiff failed to plead a plausible basis for agency or vicarious liability against Midas. The decisive issue in such claims is whether the franchisor exercises control over the franchisee’s business operations. The court held that the plaintiff’s allegations that Midas set guidelines and requirements regarding appearance, inventory, advertising, pricing, record-keeping, operating hours, uniforms, and quality standards, are common to almost all franchise agreements, and represent the kind of controls inherent in a franchise relationship, seeking to address “the result of the work and not the manner in which it is conducted.” The court held that absent more allegations of actual day-to-day control, the plaintiff failed to allege a claim for agency or vicarious liability.