Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—C.D. Cal.: Car rental operator not considered franchisee in labor dispute, (Dec 11, 2014)

By Linda O’Brien, J.D., LL.M.

An individual who entered into an independent operator agreement to be an agent operator for a car rental company will not be treated as franchisee for purposes of determining whether she was an employee or independent contractor in her labor dispute with the rental company, the federal district court in Los Angeles has decided. Thus, the parties’ cross motions for summary judgment were denied (Ambrose v. Avis Rent A Car Systems, Inc., December 8, Snyder, C.).

In 2006, Tammy Dodson entered into Independent Operator Agreement (OA) with Budget Rent A Car System and became one of its agency operators. The OA expressly provided that the operator was an independent contractor and not a franchise, and no fee was paid for the right to enter into the agreement. Dodson hired at least 23 employees to staff the agency location between November 2006 and January 2011, when Budget terminated the OA.

Dodson joined other individuals and corporations in filing suit against Budget and its parent company, Avis Budget Group, alleging violations of the California Labor Code. The plaintiff and defendants filed cross motions for summary judgment.

The court found that the plaintiff will not be treated as a franchisee for purposes of determining whether she was an employee or an independent contractor of the car rental company. The defendants contended that operating agents such as Dodson were functionally indistinguishable from franchisees and should be treated as such, and that the presumption of employment did not apply in the franchise context. The defendants noted the decision of Patterson v. Domino’s Pizza, 60 Cal. 4th 474 (2014), in which the state supreme court held that the imposition and enforcement of a uniform marketing and operational plan did not automatically impose responsibility on a franchisor for employees of the franchisee who injure one another on the job. The defendants also directed the court to Juarez v. Jani-King of California, Inc., (ND Cal. 2012), where a circuit court found that a franchisor’s common policies and practices did not control a franchisee’s actions as to create an employer-employee relationship.

The court determined that, in many respects, Dodson’s relationship with Budget resembled that of a franchisee under California’s Franchise Investment Law. With the exception of the requirement of a franchise fee, the arrangement created pursuant to the OA would have been categorized as a franchise under California law. However, the court declined to adopt the franchise-centered test in both Patterson and Juarez, even though the California Supreme Court may extend the reasoning of those cases to quasi-franchise relationships, such as the arrangement between Dodson and Budget.

The court found persuasive the plaintiff’s argument that she should not be treated as a franchisee, since she did not have the rights and remedies of a franchisee. While the payment of a franchise fee appears to be a mere formality, it implicates the substantive rights of the parties to the agreement. Thus, the plaintiff will not be treated as a franchisee in this case, the court concluded.

The case is No. 2:11-cv-09992-CAS.

Attorneys: Christina Humphrey and Stanley Saltzman (Marlin and Saltzman LLP) for Luigi Ambrose. Julie Patterson, Glenn J. Plattner, and Jonathan Solish (Bryan Cave LLP) for Avis Rent A Car Systems Inc., Budget Rent A Car System Inc., and Avis Budget Group Inc.

Companies: Avis Rent A Car Systems Inc.; Budget Rent A Car System Inc.; Avis Budget Group Inc.

Cases: FranchisingDistribution CaliforniaNews