Employment Law Daily IHOP not employer of sub-franchisee’s worker for purposes of ADEA claim
Monday, January 22, 2018

IHOP not employer of sub-franchisee’s worker for purposes of ADEA claim

By Nicole D. Prysby, J.D.

A restaurant employee could not show that restaurant franchisor IHOP, or its regional licensee, Sunshine Partners, were her employers for purposes of liability under the ADEA, a federal district court in Georgia has decided. Neither IHOP nor Sunshine Partners exercised any control over employment-related matters at the specific IHOP restaurant, which was operated by a third entity, Clark Foods, which was a sub-franchisee of IHOP. Because the only relationship between the sub-franchisee of the individual restaurant to IHOP and Sunshine Partners was that of a franchisee/sub-franchisee, only the individual restaurant operator could be considered the “employer,” and a defendant in her age discrimination suit (Boone v. Clark Foods, Inc., December 28, 2017, Lawson, H.).

A server at an IHOP restaurant alleged discrimination on the basis of age as well as retaliation for reporting age discrimination. She filed a lawsuit against her direct employer, Clark Foods. She also named Sunshine Partners and IHOP. Sunshine Partners had an agreement with IHOP giving it the exclusive rights to develop IHOP restaurants in parts of Florida and Georgia. Under that authority, Sunshine Partners had a licensing agreement with Clark Foods that permitted Clark Foods to operate two IHOP restaurants in Sunshine Partners’ area. The licensing agreement stated that Clark Foods is an independent contractor.

Sunshine Partners and IHOP requested summary judgment on the claims, arguing that they were not the plaintiff’s “employer” for the purposes of the ADEA. The court looked to various interpretations of “employer” and concluded that there was no evidence that Sunshine Foods or IHOP were statutory employers. The courts also considered whether the entities should be treated as a single, integrated enterprise and concluded they should not.

The employee did not receive compensation from Sunshine Foods or IHOP. Neither entity exerted any control over employment decisions made by Clark Foods in the operations of the particular IHOP restaurant where the employee worked. At all times, Clark Foods maintained exclusive responsibility for the day-to-day business operations at its two locations, including all payroll processing and employee benefits. Clark Foods paid all employee costs such as unemployment and workers compensation taxes and developed and implemented its own employment policies.

Although IHOP contracted with a third party to conduct inspections to ensure franchisees and sub-franchisees were in compliance with IHOP branding, menu, and other contract specifications, those inspections did not address employment-related matters. Sunshine Partners also conducted inspections, but again, they did not pertain to employment matters.

Because a franchisee/franchisor relationship does not create an employment relationship, summary judgment was granted for Sunshine Partners and IHOP.

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