Franchisor Not Liable For Sexual Harassment Of Franchisee's Employee

Author:Mr Mark Alexander
Profession:Holland & Knight LLP
 
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Restaurant owners can be liable for the bad acts of their customers, but the

franchisor of a restaurant has some level of protection for the unlawful

employment practices of its franchisees. In a recent case from the Tenth Circuit

in Lockard v. Pizza Hut, Inc. (10th Cir. 1998), a female waitress of a

franchisee-owned pizza restaurant suffered sexual harassment by two male

customers of the restaurant. The employee sued her employer, the franchisee, for

sexual harassment, and also sued the franchisor, Pizza Hut, Inc. In this case

the court considered two questions. First, is an employer liable for the sexual

harassment by customers of its employees? Second, is the franchisor liable for

the sexual harassment of the employees of its franchisee?

The waitress claimed that she was required by the restaurant manager to wait

on two crude and rowdy male customers who grabbed her hair, grabbed her breast,

and put his mouth on her breast. The jury returned a verdict in favor of the

employee against both the franchisee and the franchisor and awarded $200,000 in

compensatory damages. The trial court and the jury considered the franchisee and

the franchisor to be a single employer for purposes of employment practices and

held them both liable.

On appeal, the court held that an employer can be held liable for the

customer's sexual harassment of its employees. The court commented that customer

harassment is very similar to harassment by co-workers and should be evaluated

under similar standards. In this case, the facts supported a finding that the

employer should be liable for the sexual harassment committed by the customers.

However, the court held that the franchisor, Pizza Hut, was not liable for

the sexual harassment because the franchisor was not the employer of the

waitress. The court rejected the employee's argument that the franchisee and the

franchisor were a single employer for purposes of unlawful employment practices.

For this reason, the jury verdict was reversed as to the franchisor, but was

affirmed as to the franchisee.

The court held that the critical question in deciding whether the franchisor

(or parent company), is liable for the unlawful employment practice of the

franchisee (or subsidiary company), is which company made the final decisions

regarding the employment matter...

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