New York State attorney general Eric Schneiderman this week accused Domino’s Pizza Inc. and a trio of franchisees of wage theft, saying that the company’s software system under-calculated gross wages.
The three franchisees operate seven Domino’s locations and owe $567,000 in back wages and underpayments to workers, according to legal filings in New York. Schneiderman said in an announcement that the underpayments date back to 2011.
“At some point, a company has to take responsibility for its actions and for its workers’ well-being,” Schneiderman said in a statement. “We found rampant wage violations at Domino’s franchise stores. And, as our suit alleges, we’ve discovered Domino’s headquarters was intensely involved in store operations, and even caused many of these violations.”
Domino’s, however, argues that it made a “good faith effort” to address the problem, and to ensure that franchisees complied with wage and hour laws and that employees received restitution.
“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 an emailed statement.
Domino’s local attorney recommended a series of steps, including mandatory training and monitoring by a law firm and an independent monitor, paid for by the company.
The letter, from attorney Eric Corngold and provided by Domino’s, suggests that the company offered “a series of creative proposals to ensure that any underpaid franchisee employees receive restitution while also implementing procedures to prevent and address future violations.”
Schneiderman accused franchisor Domino’s Pizza Inc. of being complicit in the underpayment by urging operators to use the company’s PULSE computer system, even though the company knew the system under-calculated gross wages.
The attorney general said that Domino’s made multiple updates to the system every year, but did not fix flaws that caused underpayment.
The lawsuit argues that Domino’s is a “joint employer” of workers that the three franchisees employed because the company “micromanaged employee relations” at the franchised locations.
Domino’s exerts an “unusually high level of control over employee conditions at its franchisee stores and its role in causing the wage violations,” according to the lawsuit.
But Domino’s argues that it is not responsible for the employment practices of its operators.
“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 three 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,” McIntyre said.
The lawsuit against Domino’s and three franchisees follows settlements with 12 other franchisees that operate 61 locations and have agreed to pay $1.5 million to date.
Domino’s provided investigators with more than 175,000 pages of documents and more than 60 hours of testimony over the past three years.
Schneiderman said that over a two-year period, 78 percent of New York franchisees listed rates for at least some employees below the minimum wage, and 86 percent listed rates below required overtime pay.
Domino’s operates 54 company-owned locations in New York State, and has another 136 franchised units there.
The operators named in this week’s lawsuit include Anthony Maestri, who operates three New York locations, but had operated six units through November 2013; Schueb Ahmed, who operates two locations; and Matthew Denman, who also operates two locations.
The lawsuit seeks a finding that Domino’s is a joint employer of the workers in the locations in the lawsuit, as well as full restitution owed to the workers.
But Domino’s says that Schneiderman wants the company to take steps that would hurt operators’ ability to make their own employment decisions, and “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,” McIntyre said.