New York Sues Domino’s Pizza For Wage Theft

Domino’s Pizza and three of its franchises could be required to pay employees a lot more money if a newly filed New York lawsuit succeeds. The nation’s largest pizza delivery company and three of its New York franchisees underpaid workers at least $656,000 at 10 New York-based stores, alleged the Attorney General’s office on Tuesday.

New York Attorney General Eric Schneiderman filed the lawsuit charges against Domino’s itself after a high-profile trial at the National Labor Relations Board on claims that corporations are liable for various labor violations because of the degree of control it has over franchises. Thus, Schneiderman’s lawsuit alleges Domino’s should be legally deemed a joint employer of the workers at the 10 franchise locations because Domino’s played an active role in the hiring process including termination and discipline. Domino’s also closely monitored the job performance of its franchise employees.

“We’ve discovered that Domino’s headquarters was intensely involved in store operations and even caused many of these violations,” Schneiderman said in a statement obtained by CNBC.

Domino’s is responsible for oversight that includes attire, appearance, and grooming, including uniform restrictions. Domino’s Corporation required franchises to use their “PULSE” accounting system even though executives knew the system had under-calculated gross wages for years, reported USA Today.

Investigators found that Domino’s did not fix the system because management considered the matter a low priority, although PULSE was used nationwide by Domino’s. Schneiderman, whose legal jurisdiction is limited to New York, plans to flag the investigation findings so legal counterparts in other states can look into stores that could be underpaying employees as well.

Domino’s is Schneiderman’s latest investigation. His mission is to hold corporate and individual franchises responsible for the underpayment of low-income workers in New York.

“At some point, a company has to take responsibility for its actions and for its workers’ well-being,” Schneiderman said in a formal statement. “Under these circumstances, New York law — as well as basic human decency — holds Domino’s responsible for the alleged mistreatment of the workers who make and deliver the company’s pizzas, and it is incumbent upon Domino’s to fix the problems.”

When Domino’s was contacted for a comment, the corporate office released correspondents sent to Schneiderman’s office in March that included a proposal for paying restitution to the underpaid employees. The proposal also included measures to prevent future violations. However, Domino’s drew a distinction between it and its franchisees. The letter stated that Domino’s proposal was made in an effort to find a solution rather than “any direct or vicarious obligation to do so.”

“We were disappointed to learn that the Attorney General chose to file a lawsuit that disregards the nature of franchising and demeans the role of small business owners instead of focusing on solutions that could have actually helped the individuals those small businesses employ,” Domino’s spokesman Tim McIntyre said in a company statement.

McIntyre said franchisees are solely responsible for the hiring process including termination and payroll, not Domino’s Corporation. Domino’s operates around 12,500 stores in more than 80 countries, including the United States. According to company data, franchise owners, including in the United States, represents 97 percent of all Domino’s locations.

The alleged legal violations in New York stores varied but included:

  • Paying workers less than the legal minimum wage rate.
  • Failing to pay all overtime required by law.
  • Neglecting to reimburse workers fully for costs related to use of their motor vehicles or bicycles for deliveries.

The lawsuit wants an accountant to calculate how much restitution is owed to employees and a court finding that Domino’s is a joint employer with its franchise owners and that the pizza chain defrauded franchise owners and violated certain states laws. Schneiderman wants a stipulation that will allow access to the system in the future to ensure the company is in compliance.

The New York Attorney General’s Office previously settled similar cases with 12 Domino’s franchisees who collectively own 61 stores. They agreed to pay $1.5 million in restitution to date.

[Photo by Sunday Alamba/AP Images]