When a worker at a fast food franchise acts like an a-hole, it’s obviously his boss’s immediate responsibility to investigate and discipline that employee if necessary. But does the corporate office share any liability when things go wrong at the franchisee level? What about when people from company HQ are involved in the decision of whether or not to dismiss an employee? According to California’s highest court, the buck stops at the franchisee’s door.

Last week, a divided California Supreme Court ruled that Domino’s HQ can’t be held responsible for the alleged sexual harassment of a former teenage employee by a co-worker, explaining that the company’s franchise agreement puts all staffing decisions in the hands of the franchisee.

The plaintiff in the case was 16 when she began working at a Domino’s in Ventura County, CA, in Nov. 2008. She claims she an assistant manager harassed her by groping her and making lewd comments. After two weeks of being hassled, she complained to the franchisee.

The franchisee began an investigation and suspended the assistant manager, but says he didn’t need to fire the alleged harasser because he just stopped showing up to work.

Meanwhile, the plaintiff alleges that her hours were cut after she complained to the franchisee about the assistant manager. She subsequently quit, and the franchisee ultimately went bankrupt.

Her lawyers had argued that Domino’s HQ should be treated as a joint employer with the franchisee, as correspondence between a corporate “area manager” and the franchisee showed they had discussed the situation. The plaintiff claims that the the corporate rep directed the franchisee to dismiss the assistant manager.

In legal proceedings, that corporate rep said she was only making a non-binding suggestion to the franchisee. But the franchisee said he followed instructions from corporate out of fear of losing his business.

An appeals court had ruled that the plaintiff could bring her claim against Domino’s corporate office, but a majority of the California Supremes disagreed.

In writing for the majority, Justice Marvin Baxter states that while the franchise agreement allows franchisees to use the company’s name and products, and gives the corporate office the ability to occasionally check in on the franchise, it ultimately leaves all personnel matters in the hands of the business owner.

“There are sound and legitimate reasons for business format contracts like the present one to allocate local personnel issues almost exclusively to the franchisee,” wrote Baxter.

But not all of the justices saw it that way. In a dissenting opinion, Justice Kathryn Mickle Werdegar contends that a jury should have been given the chance to decide whether or not Domino’s was a joint employer along with the franchisee. She says the court should be more concerned with maintaining “a workplace free of the pernicious influence of sexism” than it is with reinforcing the franchisor/franchisee business model.

Not surprisingly, Domino’s lawyer labeled the decision “a great victory for the franchise industry.”

This decision comes during an ongoing legal debate over the long-established buffer between franchisees and their corporate overlords. Earlier this summer, the National Labor Relations Board’s General Counsel held that McDonald’s could be considered a joint employer in labor complaints involving franchisees. The fast food chain and industry groups have said they will fight this decision.

Court: Domino’s not responsible for harassment at franchise [SFgate.com]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.