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Kentucky Supreme Court delivers victory for employers and franchisers

03.01.2008

The Kentucky Supreme Court recently announced a new rule for a franchiser's liability for the acts of its franchisee. It also adopted a new, more objective rule for considering an employer's liability for an employee's intentional bad acts. Read on to learn how the court reached its conclusions. 

Facts 

Gary McCoy owns a scrap metal recycling company in Prestonsburg. While he was working late on the evening of February 18, 2000, his wife called to ask him to have two Papa John's pizzas delivered, one to their home and the other to their housekeeper. McCoy ordered the pizzas from a newly opened Papa John's store that he had never tried. During the call, he asked that the delivery driver stop by his business for payment. 

According to the delivery driver, Wendell Burke, when he arrived at the business to collect payment, McCoy detained him at gunpoint for nearly two hours. McCoy, however, insisted that Burke remained at his business voluntarily and denied brandishing a weapon. 

In any event, when Burke returned to the Papa John's franchise, which was owned by RWT, Inc., he appeared upset and told his coworkers that McCoy had detained him against his will. Upon hearing the story, another RWT employee called the police. Once the police officers had taken Burke's statement and statements from two other RWT employees, they obtained a warrant and arrested McCoy at his home for unlawful imprisonment. The local newspaper ran a story about the arrest a few days later. 

Following the dismissal of the criminal claim, McCoy sued Papa John's International, Inc., RWT, and Burke under a variety of theories. The trial court dismissed the claims against RWT and Papa John's before trial. The Kentucky Court of Appeals reversed that decision, however, and Papa John's and RWT appealed to the Kentucky Supreme Court.

Supreme court's opinion 

The court began by addressing the vicarious liability theory with regard to Burke's employer, RWT. Under that doctrine, an employer can be held liable for an employee's actions that are within the scope of his employment. In determining whether an employee was acting within the scope of his employment, a court will focus on his objective purpose or motive. 

The court explained that RWT's business was making and delivering pizzas. In turn, it hired Burke to deliver the two pizzas to McCoy, collect payment, and return to the store to pick up more pizzas for delivery. The court found that making a false statement to the police about a customer was in no way connected to RWT's business: "Indeed, there seems no more certain way to send customers to another pizza place than to accuse them falsely of imprisoning delivery drivers when they are delivering pizza." 

The court then turned to McCoy's claims against Papa John's. First, it noted that Kentucky courts hadn't yet examined franchiser vicarious liability, an arrangement that doesn't fit neatly within the traditional master-servant relationship. Given the practicalities of a franchise arrangement, the court found "that a franchiser may be held vicariously liable for the [wrongful] conduct of its franchisee only if the franchiser has control or a right of control over the daily operation of the specific aspect of the franchisee's business that is alleged to have caused the harm." Applying the rule to this case, the court absolved Papa John's of any liability for Burke's intentional acts because as a franchiser, it had no control over the franchisee employee's isolated and allegedly intentional conduct. Papa John's Intern., Inc. v. McCoy, ___ S.W.3d ___, 2008 WL 199716 (Ky., 2008). 

Bottom line 

This case is significant for franchisers because it clearly establishes that they won't be held liable for the acts of their franchisees unless they have control over the specific aspect that caused the harm. The case also clarifies that a court will look beyond an employee's subjective motives to more of an objective test when determining whether he was acting within the scope of his employment.


If you have any questions or need help, please contact any member of the Greenebaum Doll & McDonald Labor and Employment Department.

Copyright 2008 M. Lee Smith Publishers LLC 
KENTUCKY EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Kentucky employment law.  Questions about individual problems should be addressed to the employment law attorney of your choice.

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