Domino's says N.Y. AG's lawsuit 'demeans' role of small business owners

By Dawn Brotherton | Jun 10, 2016

NEW YORK (Legal Newsline) — Domino’s Pizza says it has been working with the New York Attorney General’s Office for more than three years to ensure franchisee compliance with wage and hour laws but is disappointed that AG Eric Schneiderman ultimately decided to file a lawsuit against it.

Schneiderman announced on May 24 that his office is suing Domino’s Pizza Inc., Domino’s Pizza LLC and Domino’s Pizza Franchising LLC because their franchisees have allegedly underpaid workers more than $500,000 at 10 stores in New York. Also named as defendants are three franchisees. 

He claims that DPZ is a joint employer of these allegedly underpaid employees. Thus, DPZ should be liable for the underpaid wages, he says. DPZ asserts differently.

It is the first time Schneiderman has alleged that a fast food corporation is liable as a joint employer for labor violations at its franchise stores.

“(T)hose franchisees are solely responsible for the hiring, firing, and payment of their own employees, we (DPZ) 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,” said Jenny Fouracre, director of public relations for Domino's.

Fouracre told Legal Newsline in an email that the lawsuit “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.”

“We will continue to take those steps which we are permitted to take to foster our franchisees’ compliance with the wage and hour laws, not because we are obligated to do so, but because we think it’s the right thing to do.” Fouracre added.

She said DPZ looks forward to responding to the allegations in court.

Schneiderman is alleging Domino's "micromanaged" employee relations at franchisee stores. He also claims the company urged franchisees to use payroll reports from its system even though the company knew that system under-calculated gross wages.

“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,” Schneiderman said.

Schneiderman said the investigation found Domino's played a role in the hiring, firing and disciplinary actions of employees at franchisees' stores while also pushing an anti-union stance.

Fouracre also provided Legal Newsline with a copy of a letter sent by DPZ local counsel, Eric Corngold, to Schneiderman in March in which three measures to support franchisee compliance are proposed.

First, DPZ is willing to fund and require that the New York franchisees attend a legal compliance training covering the wage and hour laws. Even though DPZ itself would not conduct this training, it would be willing to work with Schneiderman's office to develop the training and to determine the frequency and format.

The second measure would require New York franchisees to become certified to ensure compliance with wage and hour laws. Again, DPZ would work with the office to determine the frequency this certification would be required.

Finally, DPZ would require the New York franchisees to be monitored. This monitoring could take the form of an attorney or group of attorneys to regularly review the franchisees' records and guide each franchisee to ensure compliance with the law.

Another option would be an independent monitor selected in consultation with the office.

DPZ maintains that the franchisor cannot pay restitution to the underpaid franchisee employees. In the settlement discussion letter, Corngold notes, “while it is not the purpose of this letter to debate the law, courts considering the responsibility of a franchisor like DPZ have overwhelmingly found that the franchisor is not liable for employment-related violations by its franchisees. See, e.g., Patterson v. Domino’s Pizza, LLC, 333, P.3d 723 (Cal. Sup. Ct. 2014.)”

That California Supreme Court decision found Domino's wasn't liable for alleged sexual harassment at a franchisee's store.

Schneiderman has already settled cases with 12 Domino’s franchisees, representing 61 stores. They have agreed to pay approximately $1.5 million to date.

Schneiderman says his investigation uncovered internal documents produced by Domino’s showing that over a two-year period, 78% of New York franchisees listed rates for at least some employees below the required minimum wage, and 86% listed rates below the required overtime rate.  

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