October 16, 2025|Franchise Frontlines
October 16, 2025 | U.S. District Court for the District of Maryland | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Adam B. Abelson of the District of Maryland dismissed all claims against Arthur Murray International Inc. (“AMII”), the franchisor of Arthur Murray dance studios, in a suit alleging discrimination, retaliation, and wrongful termination. The plaintiff filed claims under Title VII, the ADA, the Maryland Fair Employment Practices Act (MFEPA), and Maryland wrongful termination law, naming both the franchisor and two franchisee-owned studios. AMII moved to dismiss, arguing that it was not the plaintiff’s employer under any applicable legal theory. The court agreed. After analyzing direct employment, joint employment, and the integrated-enterprise doctrine, the court held that the complaint did not allege facts showing AMII controlled any aspect of the plaintiff’s employment. The court also found that neither franchisee studio met the employee-numerosity requirements for the discrimination and retaliation statutes, though a hostile work environment claim under MFEPA could proceed because that statute lowers the employee threshold for harassment claims. The ruling offers franchisors an instructive reminder that courts do not treat brand-level standards or system-wide policies as evidence of employer status absent allegations of day-to-day operational control.
Relevant Background
According to the complaint, the plaintiff began employment in May 2023 as a dance trainer at Arthur Murray Dance Studio of Columbia, a franchisee-owned location. She alleged that management pressured her to secure childcare as a condition of employment, that she endured racially derogatory remarks from coworkers and her manager, and that her request for a disability accommodation related to dyslexia resulted in her being called “stupid.” She claimed that after complaining about this treatment, she was terminated later the same day. The complaint contained allegations of racist remarks, condescending statements, and disparate treatment, each taken as true for purposes of the motion.
The plaintiff then alleged that she began working for a second franchisee, Arthur Murray Dance Studio Baltimore. There, she claimed she was subjected to additional racially charged comments, including remarks involving fried chicken and a comparison of her dance movements to “hanging during a lynching.” She further alleged she was injured during training, filed a workers’ compensation claim, and was terminated thereafter. These allegations form the basis of her hostile work environment and retaliation claims against the franchisee studios.
The complaint named AMII as a defendant but provided only two factual references to the franchisor: an assertion that AMII “employed the Plaintiff,” and a general allegation that AMII engaged in discriminatory and retaliatory actions. The plaintiff did not allege that AMII hired her, supervised her, maintained her employment records, trained her, paid her, or participated in any disciplinary decisions. She also offered no facts showing that AMII had knowledge of the workers’ compensation claim or the alleged incidents at either studio. AMII moved to dismiss the complaint, arguing that it was not her employer under any recognized legal test.
Decision
The court began by emphasizing that claims under Title VII, the ADA, MFEPA, and Maryland wrongful termination law can be brought only against an “employer.” The plaintiff advanced several theories to support employer liability: direct employment, joint employment under the Fourth Circuit’s Butler factors, and the integrated-enterprise doctrine. While the court accepted well-pleaded factual allegations as true, it declined to credit bare labels or conclusory assertions, including the plaintiff’s statement that AMII “employed” her.
Under the joint-employment framework, the court assessed nine factors, focusing on whether AMII hired or fired the plaintiff, supervised her day-to-day duties, furnished her workspace or equipment, maintained her personnel records, provided formal training, controlled scheduling or discipline, or intended to enter an employment relationship with her. The court found no allegations supporting any of these factors. The plaintiff pointed to her movement between the Columbia and Baltimore studios, but the court noted that the complaint did not specify who made that decision or whether she was rehired by the second studio after being fired by the first. Without facts showing franchisor involvement, the court concluded that this theory could not support joint-employer liability.
The integrated-enterprise doctrine was also unavailing. The court explained that this doctrine applies only in rare cases where two corporate entities are so interrelated that they function as a single employer. The plaintiff alleged no facts showing shared management, integrated human resources departments, intermingled payroll systems, or consolidated decision-making. The court cited well-established precedent holding that franchisor oversight—even extensive oversight—does not establish integrated-enterprise status. Because neither the joint-employer nor integrated-enterprise framework was satisfied, the court held that AMII was not the plaintiff’s employer under any theory and dismissed all claims against the franchisor without prejudice.
The court then considered whether the two franchisee studios qualified as “employers” under the discrimination and retaliation statutes. Title VII, the ADA, and MFEPA require a defendant to employ at least fifteen employees. Using allegations in the complaint and payroll records submitted by the Baltimore studio, the court found that neither studio employed fifteen employees during the relevant period. The MFEPA’s harassment provision, however, requires only one employee for a hostile work environment claim, allowing Count 3 to proceed against the franchisee defendants. The court reserved decision as to whether to retain supplemental jurisdiction over remaining state-law claims, depending on whether the plaintiff successfully amends her complaint to reassert federal claims.
Finally, the court rejected AMII’s request for attorney’s fees, noting that while the claims against AMII were dismissed, the record did not demonstrate bad faith or vexatious conduct by the plaintiff or her counsel.
Looking Forward
This decision provides important guidance for franchisors navigating employment claims arising from franchisee operations. The court reaffirmed that franchisors are not liable for franchisee employment decisions absent factual allegations showing day-to-day supervision, direct involvement in hiring or firing, or control over the conditions of employment. The plaintiff’s attempt to establish franchisor liability through collective labeling of all defendants as “Arthur Murray” and generalized assertions of oversight was insufficient. The ruling reinforces that brand standards, training materials, or system-wide policies do not convert franchisors into employers under Title VII, the ADA, or state analogues.
The decision also highlights the importance of documenting the independence of franchisees. When plaintiffs attempt to treat franchisors and franchisees as a unified corporate entity, courts look for concrete evidence of integrated operations or shared management, not simply common branding or coordinated marketing. Maintaining separate personnel files, ensuring franchisees manage local human resources decisions, and clearly delineating roles in franchise agreements may help strengthen defenses in similar suits. The court’s analysis underscores that fact-specific allegations of control—not broad or speculative assertions—drive employer-status determinations.
Finally, the numerosity rulings offer a reminder that franchise locations with small staff sizes may not qualify as employers under federal discrimination and retaliation statutes. This can provide an early defense for some franchisees. At the same time, franchisors may wish to ensure that franchise agreements do not inadvertently imply shared staffing or joint personnel structures across locations. Given the prevalence of joint-employer allegations in modern litigation, this decision illustrates the value of preserving corporate separateness and maintaining clear operational boundaries between franchisor and franchisee.
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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