March 12, 2026|Franchise Frontlines
March 12, 2026 | United States District Court for the Eastern District of Tennessee
Executive Summary
In a recent decision, Judge Crytzer of the Eastern District of Tennessee granted in part and denied in part a motion to dismiss in an employment discrimination case involving a subcontractor relationship. The plaintiff alleged that a prime contractor and a subcontractor jointly functioned as her employer and unlawfully discriminated against her. The defendant argued that it was not the plaintiff’s employer and therefore could not be liable under the ADEA or state law. The court rejected that argument at the pleading stage, concluding that the complaint plausibly alleged a joint employer relationship based on control over the plaintiff’s work, while dismissing several related contract and tort claims for failure to state a claim.
Relevant Background
The plaintiff was employed by RSI Entech, LLC, a subcontractor performing work on projects for United Cleanup Oak Ridge, LLC (“UCOR”), the prime contractor. Over a period of several years, the plaintiff worked full time on UCOR projects, reporting to UCOR personnel while remaining on RSI’s payroll.
According to the complaint, UCOR’s leadership recruited the plaintiff to serve as “Key Personnel” on a significant government contract, requiring her to commit to a multi-year role. The plaintiff accepted that position, with the understanding that she would continue to be paid through RSI but would report to and work under UCOR’s direction.
The complaint further alleged that UCOR exercised substantial control over the plaintiff’s role, including assigning her duties, altering her job responsibilities, changing her title, and ultimately removing her from the project. Over time, those responsibilities were allegedly reassigned to a younger UCOR employee. Although RSI formally employed the plaintiff, the complaint alleged that UCOR personnel supervised her work, controlled her reporting structure, and made the decision to remove her from the project.
The plaintiff alleged that her removal from the project directly led to her termination by RSI. She further alleged that she was told her termination resulted from not supporting UCOR leadership’s “vision.” Based on these events, she asserted claims for age discrimination under federal and state law, along with several contract and tort-based claims.
Decision
The court held that the plaintiff plausibly alleged that UCOR could be considered her employer under a joint employer theory, allowing her discrimination claims to proceed.
The court explained that under the joint employer doctrine, an entity that is not the formal employer may still be treated as an employer where it shares or co-determines the essential terms and conditions of employment. The analysis focuses on factors such as the ability to hire, fire, or discipline the employee, influence compensation and benefits, and direct or supervise the employee’s work.
Applying that framework, the court concluded that the complaint contained sufficient factual allegations to support a reasonable inference that UCOR exercised meaningful control over the plaintiff’s employment. Although RSI formally hired, paid, and terminated the plaintiff, the complaint alleged that UCOR supervised her work, controlled her reporting structure, altered her duties and title, and made the decision to remove her from the project, which in turn led to her termination.
At the pleading stage, the court found these allegations sufficient to support a joint employer theory. The court emphasized that the existence of a subcontractor relationship and the fact that RSI was the formal employer did not preclude the possibility that UCOR could also be liable as a joint employer.
In contrast, the court dismissed the plaintiff’s breach of contract, promissory estoppel, fraud, and tortious interference claims. The court found that the alleged contract was unenforceable under the statute of frauds, that the plaintiff failed to plead detrimental reliance sufficient to support promissory estoppel, and that the fraud and interference claims were based on conclusory allegations rather than specific facts.
Looking Forward
This decision provides a useful reminder that joint employer exposure remains driven by functional control rather than formal structure. While the case arises in a subcontractor context, the court’s analysis translates directly to franchise systems, where franchisors and franchisees often operate within layered operational relationships.
The court’s focus on supervision, reporting structure, control over duties, and influence on termination decisions mirrors the types of allegations frequently asserted against franchisors. Plaintiffs continue to argue that brand standards, operational requirements, and system-wide oversight amount to control over the essential terms and conditions of employment. This case illustrates how relatively ordinary operational involvement—such as directing work, changing responsibilities, or influencing staffing decisions—may be framed as evidence supporting a joint employer theory.
At the same time, the decision reinforces that joint employer findings remain fact-specific and do not arise from contractual labels alone. The existence of a subcontractor or franchise structure does not, by itself, insulate a party from potential liability, but neither does it automatically create it. The outcome will depend on the degree of actual control exercised in practice.
For franchisors, the case highlights the importance of maintaining clear boundaries between system standards and day-to-day employment decisions. While franchisors may establish brand requirements and performance expectations, involvement in hiring, firing, discipline, or individualized supervision may increase the risk that a plaintiff can plausibly allege joint employer status at the pleading stage.
More broadly, this decision fits within the continued trend of courts allowing joint employer claims to proceed past early dismissal where plaintiffs allege overlapping control between entities. Even where such claims may ultimately fail on a developed factual record, the cost and burden of litigation may be significant. As a result, franchisors may wish to evaluate how operational practices are implemented in the field, particularly in relationships involving layered management or subcontracted labor, to ensure alignment with their intended legal structure.
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 Partner at Buchalter LLP 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.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
