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AG Lawsuit Alleges Domino’s Joint Employer with Franchisees in Stealing Worker Pay

Schneiderman announces Domino's lawsuit (Photo: New York AG Website)

NEW YORK – Attorney General Eric T. Schneiderman is going after Domino's Pizza with a vengeance, alleging the fast food company underpaid workers by over a half million dollars at ten franchise stores. The legal action takes aim at the pizza giant's role as joint employer with three franchisee abettors, targeting the company's computer system, PULSE, designed to allegedly steal money from store employees.

"At some point, a company has to take responsibility for its actions and for its workers' well-being," Schneiderman announced last week. He continued, "We've 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." But the Attorney General didn't stop there. He exclaimed, "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. Domino's can, and must, fix this problem."

The New York AG said a multi-year investigation revealed that Domino's Pizza allegedly urged franchisees to use payroll reports from the company's PULSE computer program, even though the company knew for years that the system 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."

On the "joint employer" issue, Schneiderman explained that Domino's purportedly micromanaged employee relations at its franchisee stores. The investigation found the franchisor played a role in the hiring, firing, and discipline of store workers, pushed an anti-union position on franchisees, and closely monitored employee job performance through onsite and electronic reviews.

New York law permits a finding that a company is a joint employer if it has control, or authority to control, employees in certain key ways, the AG office reported. As the lawsuit states, Domino's exerts such control by certain factors:

  • Directing franchisees to discipline and/or fire specific employees;  
  • Dictating staffing and scheduling requirements for franchisee stores, as well as store hours;
  • Imposing exacting requirements for attire, appearance, grooming and conduct of franchisee-owned store employees, including restrictions on the diameter of earrings, color of undershirts, and permissible tattoos (military only);
  • Enforcing those standards through an intensive inspection regime, in which one Domino's official told franchisee employees, "I'm the boss";
  • Pushing an anti-union policy upon its franchisees, including sending Domino's head of human resources to thwart a union campaign at a franchisee store; and
  • Requiring a franchisee purchasing stores from Domino's, as a condition of the sale, to largely keep the prior staff (previously Domino's direct employees) intact.

The lawsuit also includes fraud and franchise law claims, alleging the company knowingly sold PULSE, a flawed product, to franchisees and did not remedy its problems.

The wage and hour violations alleged at the stores vary, and they 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.

The three New York franchisees, also named in the lawsuit, are Anthony Maestri, Schueb Ahmed, and Matthew Denman.

In addition to finding Domino's as a joint employer for the workers at the 10 stores, the complaint seeks an accounting to determine the full amount of restitution owed to the employees, and a finding that Domino's defrauded its franchisees and violated state franchise law. It also asks the court for imposition of a monitor to ensure future compliance.

The Attorney General reported that it has settled cases with 12 Domino's franchisees, who collectively own 61 stores and who have agreed to pay approximately $1.5 million to date. The investigation uncovered internal documents produced by Domino's showing that over a two-year period, 78 percent of New York franchisees listed rates for at least some employees below the required minimum wage, and 86 percent listed rates below the required overtime rate.

Four-year investigation of Domino's wage theft

Schneiderman said the investigation examined how Domino's operates from top to bottom. "We took sworn testimony from independent franchise owners, from numerous very high-level corporate officials at Domino's headquarters. We spoke with many delivery workers, and we reviewed thousands of documents. What we uncovered was an appalling pattern of wage violations, stretching across all its franchises."

The AG told how he had secured more than $26 million since 2011 for almost 20,000 workers who were "cheated out of wages." Schneiderman further revealed that he has "pursued bad actors across the fast food industry, including settlements with Papa John's franchisees, and also a conviction, with a sentence including jail time of a Papa John's franchisee convicted of wage theft in the Bronx."

In his announcement last Thursday, Schneiderman said that they had already "busted" almost half of the stores in New York owned by Domino's franchisees, referring to the chain's behavior as "illegal conduct in denying hard-working workers their full wages." He said, "The deeply rooted problems of unfair wages at Domino's Pizza persist really like an epidemic without a cure across the company's stores."

Attorney General Schneiderman proclaimed, "Today, after almost four years of investigation, we can tell you why and we can tell you what the cure is. The lawsuit we filed today lays out in explicit detail how Domino's national headquarters exerts direct and specific control over the franchises we name in our lawsuit and others we have already settled with. Controls that lead to practices that systematically deny hundreds, actually thousands, of workers their fair wages."

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About Janet Sparks

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Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.