Workplace Issues

N.Y. Sues Domino’s for ‘Wage Theft’ at Franchises

The state says Domino's Pizza workers at some franchises were underpaid because a payroll system undercounted the hours they worked.
Matthew HellerMay 25, 2016

New York’s attorney general has accused Domino’s Pizza of “rampant wage theft” in a lawsuit that may test whether franchisors can be held liable for labor violations at their franchisee stores.

Attorney General Eric Schneiderman filed the suit earlier this week under the theory that Domino’s is the joint employer of workers at three of its New York franchisees because it exercises “significant authority and control” over employee relations at its franchises.

The workers were allegedly underpaid at least $565,000 and, according to Schneiderman, Domino’s helped cause wage-and-hour violations by encouraging the franchisees to use a payroll software system that undercounted the hours they worked. The payroll software, called PULSE, is part of a proprietary package for Domino’s developed by Servant Systems. The filing of the case followed a four-year investigation by the attorney general’s office.

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“Domino’s headquarters was intensely involved in store operations,” Schneiderman said in a news release. “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 pizza. Domino’s can, and must, fix this problem.”

The suit seeks, among other things, a finding that Domino’s is a joint employer of the workers at 10 franchise stores. The three franchisees are also named as defendants.

Corporations have traditionally enjoyed a shield from liability for the conduct of their franchisees. But as companies have increasingly used franchises to fill jobs, regulators have been challenging the idea that franchisees are independent entities.

As The Wall Street Journal reports, the Labor Department in January issued guidance that suggested more businesses should be classified as being joint employers of workers whose employment conditions they control.

Schneiderman’s suit also says Domino’s micromanaged employee relations at franchisee stores, playing a role in the hiring, firing, and discipline of workers and closely monitoring employee job performance.

A Domino’s spokesman said classifying Domino’s as a joint employer would “deprive our independent business owners of the opportunity to make their own employment decisions” and “impact the viability of the franchise model.”

But in court papers, the attorney general’s office said its suit does not seek to upend any franchise business model that is consistent with “franchisees independently controlling their employees.”

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