Did Domino's violate state and federal labor and wage laws?
The parent of Domino's Pizza and three franchisees operating 10 shops in New York were recently hit with a wage theft lawsuit by the New York Attorney General.
The suit claims that Domino's paid workers less than minimum wage, failed to pay overtime, took inappropriate tip credits, and failed to reimburse employees for using their cars or bicycles to make deliveries. In sum, the suit alleges that workers were deprived of at least $565,000 in wages and other compensation.
In a statement, Domino's head of investor relations said that the lawsuit "disregards the nature of franchising and demeans the roll of small business owners." The company contends it does not have a joint legal responsibility with the franchisees. In addition, a spokesman for the International Franchise Association said the Attorney General had a political agenda that coincides with other enforcement actions in the fast-food space.
The Attorney General reportedly relied on a "joint employer" legal theory in bringing the suit against Domino's and the franchisees. In short, the AG believes the company can also be held liable for wage theft even it did not hire or pay the aggrieved workers directly. The lawsuit alleges that Domino's controlled the franchisee's employment practices and pressured store owners to keep their shops union free. By controlling the economic and labor conditions in the workplace, Dominoes is also legally responsible for the labor law violations.
The key issue is Domino's use of its PULSE payroll computer system, which the company urged franchisees to use. The company had prior knowledge, for years in fact, that the system under calculated gross wages.
While some observers contend that the goal of these lawsuits is to undermine the franchising business model, employee advocates argue that wage theft is a growing problem in the franchise industry which comes in the form of off-the-clock work, illegal pay deductions and misclassification of workers.
Under the New York State Minimum Wage Act, employers in the state are currently required to pay employees a minimum of $9.00 per hour, as well as overtime pay after 40 hours per week at a rate of time and a half. At this juncture, it remains to be seen whether the Attorney General will prevail in its case against Domino's. In the meantime, employees who believe they are not being compensated fairly, or employers who are facing wage and hour claims, should engage the services of an experienced employment law attorney.