New York AG Sues Domino Pizza for Mistreating Workers

Written By: Robert Cox

NEW YORK, NY — It took 30 minutes or less for New York State Attorney General Eric T. Schneiderman to announce a lawsuit against Domino’s Pizza, Inc., Domino’s Pizza LLC and Domino’s Pizza Franchising LLC (collectively, “Domino’s”) and three Domino’s franchisees, alleging that they underpaid workers at least $565,000 at ten stores in New York. The lawsuit asserts that Domino’s is a joint employer of the workers at the 10 franchise locations, and is therefore responsible for underpaid wages to these workers. This is the first case in which the Attorney General has alleged that a fast food corporation is liable as a joint employer for labor violations at its franchise stores.

A multi-year investigation by Attorney General Schneiderman’s office revealed that Domino’s allegedly urged franchisees to use payroll reports from the company’s computer system (called “PULSE”), even though Domino’s knew for years that PULSE 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.”

The lawsuit also alleges that Domino’s is a joint employer because the company micromanaged employee relations at its franchisee stores. As the Attorney General’s investigation found, the company played a role in the hiring, firing, and discipline of workers; pushed an anti-union position on franchisees; and closely monitored employee job performance through onsite and electronic reviews.

“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,” said Attorney General Schneiderman. “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 Attorney General’s Office has already 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 Attorney General’s 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.

Domino’s is the world’s second largest pizza restaurant chain, and is the largest pizza delivery chain in the U.S. The company has 136 franchisee-owned stores in New York, along with 54 owned by Domino’s itself.

New York State law permits a finding that a company is a joint employer if it has control, or authority to control, employees in certain key ways. As alleged in the complaint, Domino’s exerts such control by:

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 franchisees named in today’s lawsuit are:

Anthony Maestri, who currently owns and operates three New York Domino’s stores, and until November 2013 owned and operated six. The six stores are or were located in New York and Westchester Counties.

Schueb Ahmed, who owns and operates two New York Domino’s stores located in Nassau and New York Counties.

Matthew Denman, who owns and operates two New York Domino’s stores in Montgomery County.

The lawsuit seeks, among other things, a finding that Domino’s is a joint employer of the workers at the 10 franchise stores named in the lawsuit; an accounting to determine the full amount of restitution owed to workers; a finding that Domino’s defrauded its franchisees and violated state franchise law; and imposition of a monitor to ensure future compliance.

Since 2011, the Attorney General has secured more than $26 million for almost 20,000 workers who were cheated out of wages. The Attorney General has also 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 owner convicted of wage theft in the Bronx.

The case is being handled by Assistant Attorney General Lawrence Reina; Section Chiefs Seth Kupferberg and Mayur Saxena; Assistant Attorneys General Justin Deabler, Claudia Henriquez, Kevin Lynch, and Haeya Yim; and Volunteer Assistant Attorney General Margot Finkel, with the assistance of Legal Assistant Yadira Filpo, and under the supervision of the Deputy Labor Bureau Chief ReNika Moore, Labor Bureau Chief Terri Gerstein, and Executive Deputy Attorney General for Social Justice Alvin Bragg.