Public Nuisance Theory: A New Nuisance for Franchisors

By Kent Franchise Law Group

As a franchisor you may not have thought to worry about your business becoming a public nuisance. Legally, a “public nuisance” is generally an activity that affects the health, safety or morals of a community. For business owners, other than those operating a factory using toxic substances, it may seem far-fetched to be faced with a lawsuit alleging your business is creating a public nuisance. However, because 2020 is the year that keeps on giving, there have been several lawsuits filed claiming that franchise systems and individual franchises have become public nuisances due to their lack of strict policies for COVID-19 prevention. If brought by an employee against an employer in the past, this type of employee complaint has generally been reserved for federal, state and regulatory bodies.

For example, McDonald’s employees in Oakland, California, filed a case against their employer (a McDonald’s franchisee) claiming that the franchisee failed to take proper precautions against the spread of COVID-19 after the plaintiffs and their family all contracted the virus. (Hernandez v. VES McDonald’s, Cal. Super. Ct., No. RG20064825 (June 22, 2020)). In this case, the California Superior Court granted a temporary restraining order against the franchisee due to its failure to protect the community from COVID-19 through its restaurant’s lack of safety measures. The plaintiff in this case alleged a public nuisance theory against the restaurant as well as unfair and unlawful business practices and violations of local regulatory rules.

On the other side, in response to a different employee alleging a claim involving its employer creating a public nuisance for lack of safety measures, McDonald’s corporation and two of its franchisees are suing their insurance company to receive coverage to defend the public nuisance lawsuit. (McDonald’s Corporation, et al. v. Austin Mutual Insurance Company, No. 20-05057, N.D. Ill.). In the underlying public nuisance case, the McDonald’s employees alleged, in Illinois state court, that their employer caused unsafe working conditions and created a public nuisance by allegedly requiring workers to work closely together, reusing masks and gloves, and prohibiting them from speaking about co-workers who may have contracted the virus. (Taynarvis Massey et al. v. McDonald’s Corp. et al., No. 2020-CH-04247 (Ill. Cir. Ct. 2020)). In June, the judge denied McDonald’s motion to dismiss, rejecting the argument that regulatory agencies have primary jurisdiction over these types of employee issues because the judge decided that an injunction could provide an adequate remedy for the plaintiffs in a public nuisance case. For fear that the public nuisance lawsuit will require steep legal fees, McDonald’s and its franchisees are seeking a declaratory judgment that their insurance company will cover the expense of the lawsuit. This case has not yet been decided.

As litigation involving COVID-19 safety measures increases in the coming months, it is only a matter of time before one case breaks through to the franchisor level and a judge decides that a franchisor created a public nuisance because its franchise system failed to provide and enforce proper procedures.

If you have further questions about the obligations as an employer or franchisor in enforcing COVID-19 preventative measures in your franchise system, please contact us.