Lawsuit accuses Domino’s Pizza of rampant wage violations

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U.S. fast food giant Domino’s Pizza and three of its franchises could be required to pay employees a lot of dough if a newly filed New York lawsuit succeeds.

The nation’s largest pizza delivery company and three of its franchisees underpaid workers at least $565,000 at ten New York-based stores, the state’s state’s top legal official alleged in a court action set to be formally announced Tuesday.

Filed by New York Attorney General Eric Schneiderman, the lawsuit charges that Domino’s itself should be legally deemed a joint employer of workers at the 10 franchise locations because the company played an active role in hiring, firing and disciplining store staffers and closely monitored job performance.

The company’s oversight included requirements for employees, attire, appearance and grooming, including restrictions on the diameter of earrings and color of undershirts, an investigation by Schneiderman’s staff found.  

Domino’s urged franchise operators to use the company’s “PULSE” computer system even though executives knew the system had under-calculated gross wages for years, the investigation found. Domino’s decided not to fix the flaw, treating the issue as a “low priority,” the investigation also concluded.

The allegations mark the latest legal attack by Schneiderman’s office on companies suspected of underpaying low-wage workers, and his first effort to hold a corporate franchise legally responsible along with individual franchisees.  

“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.”

Asked for comment, Domino’s released copies of a March 18 letter to Schneiderman’s office that included a proposal for paying restitution to employees who were underpaid by the company’s franchises. The proposal also included measures to prevent future violations.

However, drawing a distinction between the company and its franchisees, the letter said Domino’s made the proposal in an effort to find solutions, “rather than because of 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.

 Ann Arbor, Michigan-based Domino’s is the world’s second-largest pizza restaurant chain, behind Pizza Hut. The company operates roughly 12,500 stores in more than 80 countries, including the U.S. According to the company’s data, franchise owners, including 850 in the U.S. account for 97% of all Domino’s locations.

The alleged legal violations at the New York stores varied, the lawsuit said, but included:

–Neglecting to reimburse workers fully for costs related to use of their motor vehicles or bicycles for deliveries.

The lawsuit seeks an accounting to calculate how much restitution is owed to workers at the locations and a court finding that Domino’s is a joint employer of workers at those stores. Additionally, the lawsuit seeks a finding that Domino’s defrauded franchise owners and violated state law, as well as appointment of a monitor to oversee the company’s future compliance.

The New York Attorney General’s office previously settled similar cases with 12 Domino’s franchisees who collectively own 61 stores. They have agreed to pay approximately $1.5 million to date, Schneiderman said.

Additionally, Schneiderman and the U.S. Department of Labor in October announced that four Papa John’s Pizza franchisees in New York would pay nearly $500,000 in back wages and damages to more than 250 workers who were improperly short-changed on pay day.

Lawsuit accuses Domino’s Pizza of rampant wage violations