California Employment Law Update

October 2014


In recent months, State and Federal Courts handed down a number of
important decisions concerning unsettled aspects of California
employment law. We highlight three such decisions.

Patterson v. Domino’s Pizza, __ CA 4th __ (8/28/14) – Franchisor

With the continuing growth of franchising coupled with the
never-ending search for “deeper pockets,” franchisors are increasingly
becoming defendants in lawsuits brought by franchisee employees that
are based on the actions of a franchisee. The legal theories utilized
to draw in the franchisor include “joint employer” and “vicarious
liability.” Obviously, this trend is troublesome to franchisors
given that one of the many advantages of franchising is the shifting of
legal and operational risk to the franchisee.

In Patterson, the California Supreme Court took up the issue of
franchisor liability for the for the employment practices of a
franchisee operating in California. The specific facts dealt with
an allegation by a female employee of sexual harassment against a male
supervisor at an independently owned and run Domino’s Pizza franchise
in Southern California. In the complaint, the plaintiff sought to
hold Domino’s vicariously liable for the conduct of the
franchisee. Domino’s filed for summary judgment, and won in
Superior Court. The Plaintiff appealed, and the Court of Appeal

The California Supreme Court thus sought to answer the question
“Does a franchisor stand in an employment or agency relationship with
the franchisee and its employees for purposes of holding it vicariously
liable for workplace injuries allegedly inflicted by one employee of a
franchisee while supervising another employee of the franchisee?”
Perhaps unsurprisingly, the Court’s response was “The answer lies in
the inherent nature of the franchise relationship itself.”

While the Court noted that Domino’s “prescribed standards and
procedures involving pizza-making and delivery, general store
operations, and brand image” to the franchisee, it also pointed out the
“uncontradicted evidence that the franchisee made day-to-day decisions
involving the hiring, supervision, and disciplining of his
employees.” Based on the reasoning that the effective control
over the employment relationship requires control over “hiring,
direction, supervision, discipline, discharge, and relevant day-to-day
aspects of the workplace behavior,” the Court reversed the decision of
the Court of Appeal, holding that Domino’s could not be held liable for
the conduct of its franchisee.

However, the Court did add the caveat that this does not mean that
every franchise contract will protect the franchisor from joint
employer liability. If the evidence shows the franchisor did in
fact maintain day to day control over hiring and the employment
relationships of the franchisee, the franchisor can be held liable.

Alexander v. FedEx,_ F. 3d. _ (9th Cir. 8/27/14) – Misclassification
of Independent Contractors

For employers, classifying workers as independent contractors is a
high stakes game. Potential liabilities and penalties for this
type of misclassification are significant, so it is important that each
working relationship be researched and analyzed carefully before
classifying an individual as an independent contractor and not as an
employee. As the 9th Circuit’s decision in Alexander v. FedEx
demonstrates, it is a dangerous game to classify employees as
independent contractors in order to avoid paying payroll taxes,
complying with employee protection legislation and paying for employee

In Alexander, the 9th Circuit examined California’s employment laws
regarding the classification of employees versus independent
contractors. The case, brought as a class action, is virtually
identical to another decision handed down simultaneously by the 9th
Circuit, Slayman v. FedEx, except that Slayman examines the issue in
the context of Oregon law.

In both Alexander and Slayman, the plaintiffs sought to challenge
FedEx’s practice to classify some of its drivers as independent
contractors. The standard contract FedEx had with those drivers
specifically characterized the drivers as independent contractors, and
a provision of it states that FedEx officers do not have the authority
to “prescribe hours of work, whether or when the [driver] is to take
breaks, what route the [driver] is to follow, or other details of
performance.” The Multidistrict Litigation Court looked at this
in granting FedEx’s motion for summary judgment, finding “the right to
control, though a primary consideration, isn’t dispositive; what is
dispositive here is the drivers’ class-wide ability to own and operate
distinct businesses, own multiple routes, and profit accordingly.”

The 9th Circuit reversed on appeal, relying heavily on at
California’s “right to control” test established by the California
Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Industrial
(1989) 48 Cal.3d 341. Noting that FedEx does not dispute that
its agreements with the drivers as well as its policy documents apply
to the working relationship with the “independent contractors,” “the
Court closely examined the independent contractor agreements to
determine the extent to which those documents give FedEx the right to
control its drivers.” It points to criteria such as FedEx’s control
over the appearance of the driver’s uniform and vehicle, the number of
hours drivers are expected to work, how and when packages can be
delivered, and that FedEx officers have the authority to reconfigure
drivers’ routes and schedules at their discretion. Furthermore,
FedEx imposes certain restraints on drivers’ abilities to assign their
contractual rights (i.e., hire substitute drivers).

In sum, the 9th Circuit in Alexander (as well as in Slayman),
does not create a new test for “right to control”, but rather affirms
that that the Borello test requires a close reading of the actual
relationship between the company and the worker, and that simply
characterizing a worker as an independent contractor in an engagement
agreement is not sufficient to create such a relationship.

Weaving v. City of Hillsboro, ,_ F. 3d. _ (9th Cir. 8/15/14) –
Definition of Disability under the ADA

The first issue in almost all cases arising under the
Americans with Disabilities Act (ADA), or the disability discrimination
provisions in the California Fair Employment and Housing
Act, is whether the plaintiff has a “disability.” Numerous
court cases have been dismissed based upon a finding that the
individual filing suit did not have a disability as defined under the
ADA. The line between what is and is not a disability has shifted
a number of times due to legislation and court rulings, and is still
something unclear but of great importance to employers.

In Weaving, the 9th Circuit did not change the definition of
disability under the federal Americans with Disabilities Act.
But, in effect, it may have begun to draw a threshold. Since
2008, when the ADA Amendments Act was passed, federal courts have
largely sided with plaintiffs in close cases where classification of a
condition as a disability was in dispute.

The plaintiff, a police officer in Oregon, claimed that he was
discriminated against based on his ADHD. The defendant disputed
that the plaintiff’s ADHD constituted a disability under the ADA, even
with the 2008 amendments broadening its definition. The ADA
defines a disability as an impairment that “substantially limits one or
more of his/her major life activities.” The plaintiff claimed
that ADHD substantially limited and affected his ability to interact
with others, as the inability to interact with others has already been
recognized as a disability by the 9th Circuit. The evidence the
plaintiff presented amounted to letters and performance reviews
describing him variously as having an “overly aggressive style,” being
“arrogant,” and “demeaning” in his interactions with peers and

Even though at the trial level, the jury found plaintiff established
sufficient evidence of a disability, the 9th Circuit disagreed, finding
that no reasonable jury could make that determination.
Essentially, it found that being a “cantankerous person who has mere
trouble getting along with coworkers,” is not sufficient to prove

While the 9th Circuit’s decision is notable, its impact on
California employers is unclear. California’s definition of
disability, in the Fair Employment and Housing Act, has been construed
more broadly than the federal ADA. However, the 2008 ADA
amendments brought federal law more in line with California law.
It is hard to predict whether a state or federal court applying the
California Fair Employment and Housing Act would come to the same
conclusion as the 9th Circuit in Weaving.

The Rose Group, APLC was founded in June 2006 by San Diego,
California-based employment law specialist Ken Rose. The Rose Group is
a boutique firm dedicated to providing cost-effective, practical advice
and counsel on domestic and international employment law matters and in
related litigation. The Rose Group represents employers and executive
level employees, and is a go-to Firm for independent workplace investigations.
Ken Rose is listed in the 2014 Who’s Who Legal: Management, Labour & Employment,
as well as the 2015 San Diego Super Lawyers. The Rose Group recently added attorney
Robert Rose to the practice, and moved its San Diego offices to 10021
Willow Creek Road, Suite 200, San Diego, CA 92131.