The Office of New York Attorney General Eric Schneiderman has announced a lawsuit holding Domino’s Pizza liable for, among other things, being part of a systematic wage theft scheme which resulted in workers being underpaid in ten of its New York City stores. The case is along similar lines as the potentially precedent-altering McDonald’s trial currently before the National Labor Relations Board (NLRB). Both deal with the degree of control the company exerts over its franchises.
Schneiderman’s office claims that Domino’s micromanaged activities at the franchisees, including forcing them to use a payroll system known as PULSE which intentionally under-calculated employee wages even though Domino’s was aware of the problem for multiple years.
Domino’s is being labeled a “joint employer” in the lawsuit along because the Schneiderman believes the parent company became too involved with employee relations at franchised stores. Since the NLRB’s decision in Browning-Ferris, contractors can be held responsible for the actions of their subcontractors if they are found to be “joint employers.” The classification is determined by the amount of control the contractor has over the subcontractor.
According to the AG’s office, the investigation leading to the lawsuit found that Domino’s played a role in the hiring, firing, and disciplining of workers; pushed an anti-union position on franchisees; and closely monitored employee job performance through onsite and electronic reviews. This amounted to a clear “joint employer” determination, the AG’s office argues:
• 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.
In a statement, Schneiderman said:
“At some point, a company has to take responsibility for its actions and for its workers’ well-being. 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. 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 lawsuit is not the first action the state of New York has taken against the nation’s second largest pizza chain. Schneiderman’s office has already settled cases with 12 Domino’s franchisees who collectively own 61 stores. They have agreed to pay approximately $1.5 million to date. Those investigations uncovered internal documents produced by Domino’s showing that 78% of New York franchisees listed rates below the required minimum wage. 86% listed rates below the required overtime rate.
Schneiderman, who has perhaps been the nation’s most notable wage theft watchdog, is clearly fed up:
“It’s time for Domino’s parent corporation to be held accountable. It’s time for Domino’s to step up to the plate, to stop hiding behind the franchise business model and to accept responsibility for the widespread harm they have inflicted upon working New Yorkers and the widespread fraud they have perpetrated and caused.”
