April 18, 2025|Franchise Frontlines
April 18, 2025 | California Court of Appeal, Second District | Unpublished Opinion
Executive Summary
In Logan v. ADP, Inc., 2025 WL 1144051 (Cal. Ct. App. Apr. 18, 2025), the California Court of Appeal affirmed dismissal of FEHA claims brought against ADP as a third-party HR vendor. Plaintiffs alleged disability discrimination and argued ADP was liable either as their employer’s “agent” under Raines v. U.S. Healthworks Medical Group, 15 Cal. 5th 268 (2023), or as an aider and abettor under Government Code section 12940(i). The court rejected both theories, holding that plaintiffs failed to allege that ADP “carried out” any FEHA-regulated activity or exercised authority over hiring, firing, or accommodations, and failed to allege that ADP had “actual knowledge” its advice to the employer violated FEHA. The court emphasized that providing HR guidance—even if relied upon—is insufficient to create FEHA liability. These rulings have significant implications for franchisors, multi-unit operators, and employers using third-party HR vendors, as plaintiffs increasingly pursue “joint employer” and “aiding and abetting” theories to expand the scope of potential FEHA defendants.
Relevant Background
The two plaintiffs worked for a dermatology practice that retained ADP, Inc. to provide outsourced human resources support. According to the allegations, each plaintiff sought medical leave for health conditions and was later terminated while on leave. In both cases, the employer communicated with ADP about how to manage the leave requests, and ADP provided HR guidance. Plaintiffs alleged ADP advised the employer that they could be terminated after the expiration of paid time off or when they purportedly failed to return to work. Plaintiffs further alleged that ADP supplied template termination letters, recommended specific language for employer communications, and advised when a termination should occur.
Based on these allegations, plaintiffs asserted FEHA claims against both their employer and ADP, alleging disability discrimination, retaliation, failure to accommodate, and failure to engage in the interactive process. Against ADP specifically, plaintiffs sought to impose liability under two theories: (1) ADP was an “agent” of the employer within the meaning of FEHA’s definition of “employer” following the California Supreme Court’s decision in Raines, and (2) ADP “aided and abetted” the employer’s alleged FEHA violations by providing advice the employer relied upon. Plaintiffs argued that ADP’s involvement was so significant that the employer “acted solely and exclusively on the basis of [ADP’s] advice,” and contended this made ADP both an agent and an aider-abettor.
ADP demurred, arguing plaintiffs failed to plead facts showing ADP exercised authority over termination decisions or any FEHA-regulated activity, and failed to allege that ADP knowingly encouraged unlawful conduct. The trial courts in both cases sustained demurrers without leave to amend. Plaintiffs appealed, arguing that the complaints either stated causes of action or could be amended to do so. The Court of Appeal consolidated the cases and affirmed.
Decision
The Court of Appeal first addressed plaintiffs’ FEHA “agent” theory. Under Raines, a business-entity agent may be liable under FEHA if it “carr[ies] out FEHA-regulated activities on behalf of an employer.” Raines, 15 Cal. 5th at 288. The appellate court emphasized that Raines “did not identify the specific scenarios in which a business-entity agent will be subject to liability” but made clear that mere advice or administrative assistance is not enough; the alleged agent must itself perform the termination, hiring, accommodation, or other FEHA-governed actions. Logan, 2025 WL 1144051, at *6.
Applying that standard, the court found the complaints inadequate because plaintiffs alleged only that ADP “advised,” “instructed,” and provided “guidance” regarding termination, while the employer itself carried out all material steps. The court emphasized that plaintiffs “do not suggest that they could allege ADP had the authority to engage in the interactive process with, reasonably accommodate, or hire and fire Madkan’s employees, or that ADP terminated their employment.” Id. at *6. Plaintiffs’ proposed amendments—asserting that the employer relied heavily on ADP’s advice—were insufficient because reliance does not convert a vendor into an agent. As the court explained, nothing in Raines suggests liability where a vendor “advises an employer on FEHA compliance, and the employer acts on that advice.” Id.
The court then rejected plaintiffs’ aiding-and-abetting theory. Under FEHA, a third party may be liable only if it “knows the employer’s conduct violated FEHA” and gives “substantial assistance or encouragement.” Id. at *7 (quoting Fiol v. Doellstedt, 50 Cal. App. 4th 1318, 1325–26 (1996)). Plaintiffs acknowledged they could not allege ADP knew the employer’s actions violated the law, and instead argued that disability discrimination should require only that ADP “knew or should have known” the conduct was unlawful. The appellate court rejected this argument, holding that disability discrimination under FEHA is an intentional tort requiring actual knowledge that the conduct was unlawful. Id. at *8 (citing Wallace v. County of Stanislaus, 245 Cal. App. 4th 109, 129 (2016)). The court further emphasized that encouraging an employer to terminate an employee for unexcused absences is “a facially legitimate reason to terminate an employee,” becoming unlawful only in specific factual circumstances not known to ADP at the time. Id. at *4. Because plaintiffs could not plead that ADP had actual knowledge of wrongdoing or substantially assisted in unlawful conduct, their aiding-and-abetting theory failed.
The court also affirmed the denial of leave to amend, finding plaintiffs’ proposed amendments speculative and conclusory. Assertions that ADP “was familiar with FEHA” or that the employer relied heavily on ADP’s advice did not cure the defect, because they did not establish knowledge of illegality or the exercise of FEHA-regulated authority. The court further noted that plaintiffs had already amended multiple times, and additional amendments would not change the legal effect of the pleadings. Id. at *5.
Looking Forward
This decision offers significant guidance for franchisors, multi-unit operators, and employers who rely on third-party HR platforms, payroll providers, staffing vendors, or compliance advisors. The court’s interpretation of Raines clarifies that FEHA liability requires that the vendor itself carry out the hiring, firing, accommodation, or other FEHA-governed action, rather than merely advising on strategy or providing templates. This distinction is especially important for franchisors who supply operational guidance, HR support materials, or suggested practices to franchisees; under this decision, providing guidance does not transform a franchisor or external HR provider into a FEHA “agent” absent actual control over personnel decisions. The court’s discussion of aiding-and-abetting liability is similarly instructive. Plaintiffs increasingly attempt to extend FEHA liability to franchisors, staffing companies, and payroll providers by alleging that their input “influenced” or “encouraged” an adverse employment action. This opinion reaffirms that such theories require actual knowledge of unlawful conduct and substantial assistance in committing it. Advice that later turns out to be incorrect, or advice provided without knowledge of underlying facts, does not create liability. Employers and franchisors may also take note of the court’s refusal to allow further amendment; conclusory assertions that a vendor was “involved,” “relied upon,” or “instrumental” are insufficient to impose FEHA liability. Finally, the case provides a strong reminder to maintain clear documentation of who makes employment decisions and who executes FEHA-regulated tasks. When franchisors, franchisees, and HR vendors clearly delineate roles and responsibilities, and when employment decisions are carried out by the actual employer, the risk of expansive joint-employer or aiding-and-abetting claims may be reduced.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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