Joint employer allegations advance FLSA, ADEA claims against pizza franchisor, owners
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Wednesday, August 2, 2017

Joint employer allegations advance FLSA, ADEA claims against pizza franchisor, owners

By Tulay Turan, J.D.

FLSA and ADEA retaliation claims brought by a general manager of a pizza restaurant against both the franchisor and owners of the restaurant can proceed, a federal district court in Maryland ruled, finding the manager adequately pleaded a joint employer relationship. The franchisor’s corporate employee specifically, and the franchisor generally, had at least some power to control and supervise workers and to hire and fire at the owners’ restaurant. Although the manager’s defamation claim also survived a motion to dismiss, the court dismissed his abusive discharge claim (Lora v. Ledo Pizza System, Inc., July 27, 2017, Chasanow, D.).

Pizza problems. In March 2016, Annapurna Incorporated, which is owned by individual defendants PV Shah and Trupti Prakash Shah and operates a Ledo’s Pizza franchise in Owings Mills, Maryland, hired the plaintiff as the restaurant’s general manager. Soon after the manager was hired, he hired 64-year-old woman as a bartender for the same store. A corporate Ledo employee allegedly told the manager that the bartender was “too old” and “grandma like” and to fire her. When the manager told the corporate employee that he could not fire her because of her age, the corporate representative told the manager he would “regret it” if he did not fire her.

Around the same time, the manager began processing payroll and noticed several issues that he claimed included employees being paid less than minimum wage and one employee who was an undocumented worker being paid outside of Annapurna’s normal payroll. He raised concerns with the owners and the corporate employee, who told him to “do the best you can,” and they continued to pay the undocumented worker. After his payroll responsibilities were eliminated and he complained again about the wage issues, the manager was told he was being fired because of the store’s poor performance. After his termination, the owners and the corporate employee allegedly told third parties that the manager was a “bad manager,” that he “did not care about the store,” and that he had been stealing from the restaurant.

After filing EEOC charges of discrimination, the manager sued for retaliation under the FLSA and ADEA; defamation; and abusive discharge. Ledo corporate filed a motion to dismiss all of the claims against it, and the owners and franchisee (Owings Mills defendants) filed a partial motion to dismiss as to the owners for the age-related claims, and as to all three Owings Mills defendants for the tort claims.

Joint employer status. Denying Ledo’s motion to dismiss the FLSA claims, the court found the manager had adequately pleaded a joint employer relationship between Annapurna and Ledo due to allegations of significant ties between the two. The corporate employee specifically, and Ledo generally, had at least some power to control and supervise workers and to hire, fire, or modify employment conditions at the Owings Mills store. The franchisor-franchisee affiliation also suggested a long-lasting relationship between Ledo and Annapurna and at least some degree of control over Annapurna. At least the first four factors of the six-factor joint employer inquiry newly set forth by the Fourth Circuit in Salinas v. Commercial Interiors, Inc., could possibly weigh in plaintiff’s favor.

The court also denied Ledo’s motion to dismiss the ADEA claims, finding the manager adequately pleaded that Ledo qualified as a joint employer for ADEA purposes pursuant to the nine-factor test established by the Fourth Circuit in 2015’s Butler v. Drive Automotive Industries of America, Inc. dba Magna Drive Automotive, which established a hybrid joint employer test under Title VII. The allegations suggested that Ledo, acting through its corporate employee, might have had control over hiring and firing decisions, day-to-day supervision, and formal or informal training, the first two factors having significant weight here.

Direct evidence of discrimination. The court also rejected Ledo’s argument that, even if it qualified as the manager’s employer, he had failed to allege facts demonstrating a causal link between his protected activity and his termination. But there was direct evidence of discrimination here: the corporate employee’s statement could be considered a threat that he would retaliate against the manager if he did not fire the bartender. Such a threat constitutes direct evidence of discrimination, and the manager need not rely on the timing of the protected activity and the adverse action to draw an inference of discrimination.

Defamation claim. The court also would not dismiss the defamation claim, rejecting Ledo’s argument that the manager failed to allege necessary details under Maryland’s four-element pleading standard for a defamation claim. He alleged the Shahs and the corporate employee told third parties he was a “bad manager,” that he “did not care about the store,” and that he had been stealing from the restaurant, and that they knew their statements were false and the statements caused him reputational and other damages.

Also rejected was Ledo’s argument that any defamatory statements made by the Shahs or the corporate employee cannot be imputed to it. The complaint’s allegations suggested that the corporate employee represented Ledo in many ways at the Owings Mills store and even that he may have made the alleged defamatory statements within the scope of his employment. The corporate employee “may well have been acting to further the interests of Ledo, perhaps in an effort to protect Ledo’s reputation, when he made the allegedly defamatory statements,” the court wrote. Plus, the manager sufficiently pleaded actual malice to overcome the argument that his claim should be barred due to qualified privilege.

No viable abusive discharge claim. However, the court dismissed the abusive discharge claim because the manager’s allegation that his discharge violated a public policy improperly relied on a statute that itself provides for civil remedies.

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