March 17, 2026|Franchise Frontlines
March 17, 2026 | California Court of Appeal, Sixth District | Unpublished Opinion
Executive Summary
In an unpublished decision, the California Court of Appeal affirmed a trial court’s order granting a partial new trial on the issue of whether a parent company qualified as an employer or joint employer, despite a jury verdict imposing substantial liability. The case arose from a whistleblower retaliation and wrongful termination action brought by a cardiac technologist against his hospital employer and its parent entity. The plaintiff alleged that both entities functioned as his employer based on shared management, centralized human resources, and operational control. Defendants argued the parent company was not an employer and that any liability theory required proper jury instructions on integrated enterprise or similar doctrines. The trial court denied judgment notwithstanding the verdict but granted a limited new trial, finding that the jury had not been properly instructed on the legal framework governing parent company liability. The Court of Appeal affirmed, concluding that while substantial evidence could support liability, the absence of proper instructions warranted retrial on that discrete issue.
Relevant Background
The plaintiff worked for over a decade at a hospital operated by Community Hospital of the Monterey Peninsula (“CHOMP”), a nonprofit entity within a larger healthcare system overseen by its parent company, Montage Health. Over time, the plaintiff reported a series of concerns relating to billing practices and patient care issues within the department. According to the opinion, those reports were not well received by management and were followed by changes to his role, negative treatment, and ultimately termination.
At trial, the plaintiff advanced claims for whistleblower retaliation, wrongful termination, and breach of contract against both CHOMP and Montage. His theory as to Montage was that it functioned as his employer—either directly or as part of an integrated enterprise—based on overlapping leadership, centralized human resources, and involvement in key employment decisions, including his suspension and termination.
The evidence presented at trial reflected a closely connected operational structure. The entities shared executive leadership, including senior human resources and compliance personnel. Certain decisions affecting the plaintiff’s employment—such as his suspension, investigation, and termination—were reviewed or approved by individuals who held roles within the broader Montage organization. At the same time, defendants maintained that CHOMP and Montage were legally distinct and that the plaintiff had been employed solely by CHOMP.
The jury returned a significant verdict in favor of the plaintiff, including economic damages, noneconomic damages, and punitive damages against the parent entity. However, the jury was not instructed on the specific legal standards governing when a parent company may be deemed an employer under an integrated enterprise or similar theory.
Decision
The Court of Appeal affirmed the trial court’s decision to grant a limited new trial on the issue of Montage’s status as an employer or joint employer.
The court began by rejecting the argument that the plaintiff forfeited his claims against the parent company by failing to properly present jury instructions. Although the plaintiff did not ultimately secure a complete instruction on the integrated enterprise theory, the court found that the issue had been sufficiently raised and litigated at trial to avoid forfeiture.
Turning to the substance, the court confirmed that determining whether a parent company qualifies as an employer in this context requires application of established doctrines such as the integrated enterprise test. That framework focuses on factors including interrelation of operations, common management, centralized control of labor relations, and common ownership, with particular emphasis on which entity made final employment decisions.
Importantly, the court concluded that there was substantial evidence in the record from which a jury could find that the parent entity exercised sufficient control to be considered an employer. The evidence included shared executives, centralized human resources functions, and involvement by parent-level personnel in the plaintiff’s suspension and termination.
However, the court emphasized that the jury had not been properly instructed on how to evaluate that evidence under the governing legal framework. The absence of an instruction addressing integrated enterprise or similar joint employer principles constituted legal error. Given the conflicting evidence regarding the parent’s role, the court could not conclude that the instructional omission was harmless.
Accordingly, the court affirmed the trial court’s order granting a new trial limited to the issue of the parent company’s employer status and resulting liability, while leaving the remainder of the verdict intact.
The court also upheld the trial court’s denial of judgment notwithstanding the verdict, explaining that the existence of substantial evidence supporting a possible finding of employer status did not eliminate the need for proper legal instructions guiding the jury’s analysis.
Looking Forward
This decision provides a nuanced but important illustration of how courts evaluate parent company exposure in multi-entity employment structures, and it highlights risks that are directly relevant to franchisors and similarly structured systems.
First, the case underscores that plaintiffs will continue to rely on evidence of operational integration—such as shared leadership, centralized human resources, and involvement in employment decisions—to argue that a parent or affiliated entity functions as an employer. Even where corporate separateness exists on paper, overlapping roles and decision-making processes may be cited as evidence of control.
Second, the decision illustrates that the inquiry remains highly fact-specific and turns on control—particularly control over hiring, firing, discipline, and workplace conditions. The court’s analysis suggests that evidence of involvement in those areas may be sufficient to present a jury question, even if the ultimate determination remains contested.
At the same time, the case also demonstrates that liability is not dictated solely by the presence of such evidence. The legal framework applied to that evidence—whether through integrated enterprise, joint employer, or related doctrines—remains critical. Here, the parent entity faced a substantial verdict, yet still obtained a new trial because the jury was not properly instructed on how to evaluate the relationship between the entities.
For franchisors, this distinction is significant. Franchise systems often rely on centralized standards, shared branding, and varying degrees of operational oversight. This case suggests that while such features may be cited by plaintiffs as evidence of control, courts will continue to require a structured legal analysis before imposing liability. It also illustrates that litigation outcomes may hinge not only on the underlying facts, but on how those facts are presented to—and evaluated by—the trier of fact.
Finally, the decision reinforces the importance of maintaining clarity in both structure and implementation. Clearly delineated roles, consistent documentation of decision-making authority, and careful attention to how centralized functions are exercised may help mitigate the risk that affiliated entities are characterized as joint employers. At the same time, this case illustrates that even where such measures are in place, disputes over control and liability may remain fact-driven and subject to careful judicial scrutiny.
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.
