A new lawsuit filed by New York's Attorney General accuses Domino's of underpaying workers, failing to pay overtime, and not reimbursing delivery drivers for gas. In a press release issued Monday, Attorney General Eric Schneiderman said his office "found rampant wage violations at Domino's franchise stores. And, as our suit alleges, we've discovered that Domino's headquarters was intensely involved in store operations, and even caused many of these violations."
The suit centers on 10 Domino's locations owned by three different franchisees but goes after Domino's LLC, rather than the franchisees. Schneiderman alleges that Domino's LLC "micromanaged employee relations at its franchisee stores," and "played a role in the hiring, firing, and discipline of workers," and is therefore liable for the wage theft violations, as a joint employer of workers. New York State law defines joint employers as those with "control, or authority to control, employees in certain key ways."
According to the release, it is the first case in which the Attorney General has held a fast food corporation liable as a joint employer (a classification that McDonald's is currently battling in court). The specific violations listed in the suit include "subminimum wages; failure to pay all overtime required by law; abuse of the tip credit; and failure to fully reimburse employees for all expenses related to use of their cars or bicycles for deliveries."
Much of the case centers around the use of a software system called PULSE, which allegedly undercalculated gross wages but was utilized anyway. A multi-year investigation by Schneiderman's office found that Domino's allegedly "urged franchisees to use payroll reports from [PULSE], even though Domino's knew for years that PULSE under-calculated gross wages. Domino's typically made multiple updates to PULSE each year, but decided not to fix the flaws that caused underpayments to workers, deeming it a 'low priority.'"
The Buffalo News reports that the suit accuses the franchisees "of underpaying workers by at least $565,000." Schneiderman's office has already settled cases with 12 Domino's franchisees, who collectively own 61 stores. Those franchisees have agreed to pay $1.5 million as part of the settlement.
The fact that the chain's use of technology has now gotten it into hot water is somewhat ironic, considering its increased focus on tech in recent years. The company now offers a slew of ways to order pizza via web and social channels — a move it began making as early as six years ago, as part of a massive brand overhaul. Dennis Maloney, Domino's Vice President and Chief Digital Officer, has even referred to the the pizza chain as "an e-commerce company where the product is pizza."
When reached for comment, Domino's provided the following statement to Eater, along with a copy of a letter it sent to the Attorney General's office in March:
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.
We believe that every employee deserves to be treated fairly and paid what they are entitled to under the law. We also believe that franchising is a tremendous source of economic opportunity in this country in general and in New York State in particular. In fact, more than 90% of our franchisees started their careers as hourly workers in Domino's stores.
While those franchisees are solely responsible for the hiring, firing, and payment of their own employees, we had been working with the Attorney General's office for quite some time - more than 3 years - to see what we could do to help our franchisees understand and comply with some of the many complex wage and hour laws that apply to their employment decisions. We had even discussed funding a third-party system to make sure that franchisees did not inadvertently fail to pay their employees everything those employees are entitled to receive.
It's unfortunate that these steps were not enough, and that they Attorney General now wants the company to take steps that would not only deprive our independent business owners of the opportunity to make their own employment decisions, but could impact the viability of the franchise model, the many opportunities it offers to those looking to start their own businesses, and the millions of jobs those franchised businesses create.
We will continue to take those steps which we are permitted to take to foster our franchisees' compliance with the wage and hour laws, not because we are obligated to do so, but because we think it's the right thing to do. We look forward to the opportunity to respond to the Attorney General's allegations in court.