STATE-DECISION, FRANCHISE-GUIDE ¶10,851, Matter of Charles Jones, Complainant, and Zooid Ltd, Respondent, (Apr. 26, 1996)

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Illinois Human Rights Commission. Charge No. 1991CF1288; ALS No. 5398. Dated April 26, 1996.

Civil Rights Law--Illinois--Racial Discrimination--Vicarious Liability of Franchisor--Integrated Enterprise.--A sandwich shop franchisor was not liable, under Illinois law, for a franchisee’s alleged discriminatory employment practices. The franchisor’s control over the leasing and location of the franchise, right to dictate the type of business operated by the franchise, and retention of the right to terminate the franchise agreement for noncompliance with the franchisor’s operating manual did not rise to a level of control sufficient to indicate that the franchisor and franchisee were an "integrated enterprise" for purposes of establishing liability. Back reference: ¶120.

Civil Rights Law--Illinois--Racial Discrimination--Employment Practices of Franchisee--Addition of Franchisor as Defendant--Lack of Notice.--A sandwich shop franchisor could not be added as a defendant in an employment discrimination action brought against a franchisee before the Illinois Human Rights Commission. The franchisor was not given notice of the action at the time it was filed, did not have any knowledge of the alleged events that gave rise to the action, and did not know that the alleged civil rights violations grew out of a transaction or event involving the franchisor. Back reference: ¶120.

Civil Rights Law--Illinois--Racial Discrimination--Employment Practices of Franchisee--Franchisee as "Employer."--A sandwich shop franchisee that did not have more than 15 employees and was not a party to any public contracts was not an "employer" within the meaning of the Illinois Human Rights Act. Consequently, an employment discrimination action brought against the franchisee under the statute was dismissed. Back reference: ¶120.

Gunnarsson, A.L.J.: This matter is before me on Respondent’s Motion to Dismiss the Complaint and Complainant’s Motion to Amend his Complaint of civil rights violation to add Doctor’s Associates, Inc. as a party Respondent in this matter. The parties and Doctor’s Associates, Inc. have briefed the issues, and the matter is ready for decision.

As in his charge of unlawful discrimination, in his original complaint, which Complainant timely filed on his own behalf, Complainant named as the sole Respondent "Subway Sandwich and Salad." Subsequently, Zooid Ltd. appeared, stated that it, not "Subway Sandwich and Salad," was the correctly named Respondent, and filed a Motion to Dismiss.

As part of his response to the Motion to Dismiss, Complainant has filed a Motion to Amend the Complaint, alleging in part that "Subway Sandwich and Salad" was a mere misnomer for both Zooid Ltd. and Doctor’s Associates, Inc. By order entered September 30, 1994, Complainant’s Motion to Amend was granted to the extent that it made that allegation, since the record made clear that there was no dispute as to whether Zooid Ltd. was the properly named party Respondent. The Motion to Dismiss was held in abeyance pending the complete resolution of the Motion to Amend.

Remaining at issue, with regard to the Motion to Amend the complaint, is Complainant’s contention that "Subway Sandwich and Salad" is also a mere misnomer for Doctor’s Associates, Inc., "which operates all such Subway stores." Complainant argues that amendment of the pleadings is not only allowed but mandatory in such circumstances under the Commission’s Procedural Rules, 56 Ill.Admin.Code ch. XI, Part 5300. Doctor’s Associates contends that Complainant’s motion fails to meet the terms of §5300.660, the applicable section of those Rules, and that the motion must, therefore, be denied.

Respondent’s Motion to Dismiss also remains at issue. In it, Respondent argues that this matter must be dismissed, with prejudice, because the Commission lacks jurisdiction over it. In support of its argument, Respondent has filed competent evidence to show that it neither employed fifteen or more employees during the relevant time period nor held any public contracts. Complainant has not addressed these arguments, nor has he filed any evidence to counter Respondent’s evidence.

Complainant’s Motion to Amend the Complaint fails to meet the terms and conditions of 56 Ill.Admin.Code ch. XI, §5300.660 regarding the addition of parties as to Doctor’s Associates, Inc. Therefore, the portion of that motion which remains at issue must be denied. As to the Motion to Dismiss, Respondent’s pleadings and competent evidence show that the Commission does not have jurisdiction over it because it lacked sufficient employees and had no public contracts at the time of the alleged civil rights violation. Complainant has filed nothing to contradict Respondent’s position, nor, apart from his arguments in his Motion to Amend his Complaint, has he filed anything to show that the Commission otherwise has jurisdiction over Respondent. Therefore, the Motion to Dismiss should be granted, and the Complaint dismissed, with prejudice.

1. Zooid Ltd. is the properly named party Respondent in this matter.

2. Zooid Ltd. is a close corporation which was incorporated in the State of Illinois on June 26, 1990. At all relevant times, Zooid Ltd. owned and operated the Subway restaurant located at 1762 North Clybourn, Chicago, IL. This restaurant commenced operation on August 8, 1990.

3. Zooid Ltd. neither owns nor operates any other business at any other location.

4. Zooid Ltd. did not employ as many as fifteen employees at any time during 1990. Zooid Ltd. did not exist prior to 1990.

5. Complainant has provided neither argument nor evidence to suggest that Zooid Ltd. may hold any public contracts.

Subway Sandwich & Salad is not a misnomer for Doctor’s Associates.

In his motion to amend, Complainant asserts that "Subway Sandwich and Salad", the Respondent named in the original Complaint, is a misnomer for both Doctor’s Associates, which "operates all such Subway stores" and Zooid Ltd., its franchisee at that address. Complainant’s Motion to Amend Complaint, ¶4. Complainant maintains that since his failure to name Doctor’s Associates was only due to misnomer, amendment of his pleadings is permitted under the rules at any time. Complainant’s Motion to Amend Complaint, ¶5.

Complainant is correct that mere misnomer of a party may be corrected at any time, whether the matter is before the Commission or still before the Department. 56 Ill.Admin.Code ch. II, ¶2520.360(c); 56 Ill.Admin.Code ch. XI, 5300.660(a). A misnomer occurs where the plaintiff brings an action and serves summons upon the party intended to be made the defendant, thus giving actual notice of the lawsuit to the real party in interest, but the process and complaint do not refer to the person by his correct name. Borg v. Chicago Zoological Society, 256 Ill.App.3d 931, 628 N.E.2d 306, 194 Ill.Dec. 809 (1st Dist. 1993); Perry v. Public Building Commission, 232 Ill.App.3d 402, 597 N.E.2d 723, 173 Ill.Dec 749 (1st Dist. 1992); Ellis v. Borisek, 220 Ill.App.3d 48, 580 N.E.2d 899, 162 Ill.Dec. 716 (3rd Dist. 1991). ¹

The courts recognize, however, that misnomer is not the same as mistaken identity. Mistaken identity occurs when the wrong party is named and served. Borg, 256 Ill.App.3d at 934, 628 N.E.2d at 307, 194 Ill.Dec. at 810; Thielke v. Osman Construction Corp., 129 Ill.App.3d 948, 473 N.E.2d 574, 85 Ill.Dec. 206 (1st Dist. 1985).

In this matter, the record shows that a case of mistaken identity, and not misnomer, has occurred. Complainant did not serve Doctor’s Associates until at least sixteen months after the complaint was filed at the Commission. The party originally served was Zooid Ltd. Service on Zooid would only be effective as service on Doctor’s Associates if Zooid was authorized to accept service on behalf of Doctor’s Associates or if the two corporations were somehow an integrated enterprise. Complainant does not contend, nor has he filed any evidence to suggest, that Zooid has ever been authorized to accept service on behalf of Doctor’s Associates. He has also failed to show that Doctor’s Associates and Zooid Ltd. are an integrated enterprise.

The factors that would lead to a finding of an integrated enterprise are not present.

In earlier pleadings, Complainant has argued that Doctor’s Associates and Zooid Ltd. are a single employer for purposes of the Human Rights act. Complainant’s Response to Zooid Ltd.’s Motion to Dismiss. The effect of finding that they are in reality a single employer would be both to impose liability on Doctor’s Associates for any wrongdoing by Zooid and to make service on Zooid effective against Doctor’s Associates.

The Commission has considered and discussed the concept of an "integrated enterprise" in at least one case, Saunders and Evanston Court Club, 33 Ill.HRC Rep. 508 (1987). As the Commission did in Saunders, I look to the ample federal precedent on that issue in the case law interpreting Title VII. ^{2 The leading federal case on the issue of franchisor liability under Title VII is Evans v. McDonald’s Corp., 936 F.2d 1087 (10th Cir. 1991). In Evans, the plaintiff alleged that she had been sexually harassed by a co-worker. She filed suit against both the local franchisee and the national corporation, arguing that "the two entities’ activities, operations, ownership and management are sufficiently interrelated to be perceived as a single employer for purposes of Title VII." 936 F.2d at 1089.}

The Evans court applied to the facts before it the same test for the existence of an integrated enterprise that the Commission did in Saunders. Specifically, the court stated that the following factors should be considered:

(1) interrelation of operations,

(2) centralized control of labor relations,

(3) common management, and

(4) common ownership.

936 F.2d at 1089. In affirming summary judgment for the corporation, the Evans court noted: "Even were we to assume the existence of an interrelation of operations, given the common goals and interaction of McDonald’s and its independent franchises, the record before us indicates no common management, no centralized control of labor relations, and no common ownership or financial control." 936 F.2d at 1090. ³

As in Evans, the record in this matter establishes that Doctor’s Associates did not exercise the requisite control over Zooid to create an employer/employee relationship between Doctor’s Associates and Complainant. Even accepting as true all Complainant’s factual allegations, he has done no more than establish that there was an interrelation of operations between Doctor’s Associates and Zooid, which the Evans court found insufficient by itself to establish the existence of an integrated enterprise. For example, Complainant has alleged that Doctor’s Associates as franchisor controls the leasing and location of the store, retains approval of the products sold at the franchise and the business which may be conducted at the franchise, requires the franchisee to maintain certain insurance policies, and retains the right to cancel the contract between the parties if the franchisee does not operate in accordance with its operating manual. Complainant’s Response to Zooid Ltd.’s Motion to Dismiss, at pp. 6-9. If true, such provisions only evidence a corporate concern with having all of its franchisees maintain conformance with certain standards. Such broad concerns do not rise to the level of control necessary to find an integrated enterprise. See Evans, 936 F.2d at 1091; Neff v. American Dairy Queen Corporation, 58 F.3d 1063, 10661069 (5th Cir. 1995) (discussing issue in the context of a claim under the Americans with Disabilities Act).

That Doctor’s Associates possesses the right to cancel the contract does not assist the Complainant’s cause. In the context of personal injury cases, Illinois courts have established the rule that a right to rescind a contract or call off the work is generally insufficient to establish control and impose liability on a franchisor. Coty v. U.S. Slicing Machine Co., 58 Ill.App.3d 237, 242, 373 N.E.2d 1371, 1376, 15 Ill.Dec. 687, 692 (2nd Dist. 1978); Lavazzi v. McDonald’s Corp., 239 Ill.App.3d 403, 413, 606 N.E.2d 845, 852, 179 Ill.Dec. 1013, 1020 (2nd Dist. 1992). Complainant has proffered no reason for applying a different, lesser standard in a case involving an employment dispute, nor is any such reason apparent from the record.

Complainant has failed to show compliance with the terms of 56 Ill. Admin.Code ch. XI, §5300.660.

Motions to amend complaints to add parties Respondent are governed by 56 Ill.Admin.Code ch. XI, §5300.660, which makes compliance with the terms of that section absolute. "No person shall be added as a party Respondent except as provided in this Section." 56 Ill.Admin.Code ch. XI, §5300.660(c). Subsection (a) of §5300.660 sets forth six terms, all of which must be met before addition of the new party Respondent is permitted. ⁴

Here, Complainant has failed to show that Doctor’s Associates was given notice of the filing of the charge at the time the original charge was filed. §5300.660(a)(3). In fact, he has admitted in his pleadings that Doctor’s Associates had no notice of this Complaint until at least January 11, 1993, over two years after the filing of the charge. Similarly, Complainant has failed to show that the nature of the Charge was such that Doctor’s Associates knew, within a 180 day period after the date of the alleged civil rights violation, that the Charge grew out of a transaction or occurrence involving Doctor’s Associates. §5300.660(a)(4). As discussed above, Doctor’s Associates is merely a franchisor who does not possess day-to-day control over the operation of this franchise. There is no evidence in the record to indicate Doctor’s Associates either had knowledge or should have had knowledge of the events which led to this Complaint.

The terms of the Code are clear and absolute. "No person shall be added as a Party Respondent except as provided in this Section." 56 Ill.Admin.Code ch. XI, §5300.660(c). Complainant has failed to meet at least two of the six terms of this section. Because compliance with all six is required, Complainant’s Motion to Amend must be denied.

Because the Commission lacks jurisdiction over the properly named Respondent, Zooid Ltd., the Motion to Dismiss must be granted.

The Complaint alleges race discrimination in employment under ¶2-102(A) of the Act. 775 ILCS 5/2-101(B)(1) defines an "employer" as

(a) Any person employing 15 or more employees within Illinois during 20 or more calendar weeks within the calendar year of or preceding the alleged violation;

(b) Any person employing one or more employees when a complainant alleges civil rights violation due to unlawful discrimination based upon his or her physical or mental handicap unrelated to ability or sexual harassment;

(c) The State and any political subdivision, municipal corporation or other governmental unit or agency, without regard to the number of employees;

(d) Any party to a public contract without regard to the number of employees;

(e) A joint apprenticeship or training committee without regard to the number of employees.

Complainant has stated no claim for handicap discrimination or sexual harassment. Respondent is obviously not a governmental entity, nor is there any allegation that it is a joint apprenticeship or training committee. The remaining issue, therefore, is whether jurisdiction has been conferred under the remaining subsections of this paragraph of the Act, subsections (a) and (d).

Respondent has adequately addressed the applicability of subsection (a) by filing competent, admissible evidence, including the affidavit of its owner, that it did not employed as many as fifteen employees during the applicable time period. It also states, as to subsection (d), that it was not a party to any public contracts. Complainant has not addressed any argument to these issues, nor, although he has had ample opportunity to do so, has he filed any evidence either to contradict Respondent’s competent evidence that it did not employ a sufficient number to fall under ¶2-101(B)(1)(a) or to show that Zooid Ltd. held any public contracts so as to confer jurisdiction under ¶2-101(1)(d). Where a motion to dismiss is supported by an affidavit and the responding party files no counteraffidavit, the facts stated in the affidavit are deemed admitted. Stewart and Color Image, Inc., --Ill.HRCRep.-- (1989CF3851, 5/27/94) (ALJ slip recommended order and decision, at 4), citing Denton Enterprises, Inc. v. Illinois State Toll Highway Authority, 77 Ill.App.3d 495, 396 N.E.2d 34, 32 Ill.Dec. 921 (1st Dist. 1979); Myers v. Centralia Cartage Co., 94 Ill.App.3d 1139, 419 N.E.2d 465, 50 Ill.Dec. 357 (5th Dist. 1981). All of the pleadings and evidence in the record, then, show that Respondent is not an "employer" within the meaning of the Illinois Human Rights Act for purposes of this action. For this reason, the Commission lacks jurisdiction over it, and this case must be dismissed.

I recommend that this matter be dismissed, with prejudice.

¹ While research discloses no Commission case law considering the concept of misnomer, there is ample authority of the Illinois Appellate Court as to that concept. Because the Commission often finds the Illinois Code of Civil Procedure, the Supreme Court Rules, and case law interpreting those provisions to be helpful in construing procedure under the Human Rights Act, see Strunin and Marshall Field & Company, 8 Ill.HRC Rep. 199 (1983) and Brasic and Heinemann’s and Lemus, --Ill.HRC Rep.-- (1989CN3927, 1989CF3928, 6/14/94) (order on certified question), I look to the authority of the Appellate Court for guidance.

² The Commission has repeatedly affirmed that federal case law interpreting analogous provisions of federal anti-discrimination statutes provide helpful, though not binding guidance. City of Cairo v. Fair Employment Practices Commission, 21 Ill.App.3d 358, 315 N.E.2d 344 (5th Dist. 1974); Kirstein and Cook Spring Company, --Ill.HRC Rep.-- (1984CF2613, 10/13/90).

³ It should be noted that the "integrated enterprise" test is not the only test used for finding employer liability under Title VII. Courts have recognized both a "common law control" test and an "economic realities" test. As the Evans Court recognized, it would be very difficult to find a franchisor liable under either of these tests. Evans, 936 F.2d at 1089. The "integrated enterprise" test, therefore, is the test most amenable to the complainant’s case.

Under the "common law control" test, the court’s determination of an employer’s status takes into account: (1) the kind of occupation, with reference to whether the work usually is done under the direction of a supervisor or is done by a specialist without supervision; (2) the skill required in the particular occupation; (3) whether the "employer" or the individual in question furnishes the equipment used and place of work; (4) the length of time during which the individual has worked; (5) the method of payment, whether by time or by the job; (6) the manner in which the work relationship is terminated; (7) whether annual leave is afforded; (8) whether the work is an integral part of the business of the "employer"; (9) whether the worker accumulates retirement benefits; (10) whether the "employer" pays social security taxes; and (11) the intention of the parties. Wheeler v. Hurdman, 825 F.2d 257, 270 (10th Cir. 1987), cert. denied, 484 U.S. 986, 108 S.Ct. 503, 98 L.Ed.2d 501 (1987); Spirides v. Reinhardt, 613 F.2d 826, 832 (D.C.Cir. 1979).

Under the "economic realities" test, the court focuses on "whether the individual is economically dependent on the business to which he renders service." Five factors are considered: (1) the degree of control exerted by the alleged employer over the worker; (2) the worker’s opportunity for profit or loss; (3) the worker’s investment in the business; (4) the permanence of thee working relationship; and (5) the degree of skill required to perform the work. Wheeler, 825 F.2d at 271.