The New York Attorney General recently filed a lawsuit against Domino’s Pizza, Inc. for wage theft. This lawsuit is noteworthy for many reasons but perhaps the most noteworthy is that Domino’s argues that it does not employ the workers whose wages were allegedly stolen. Instead, Domino’s claims that its franchise operators, who contract with Dominos, employ the workers. The New York Attorney General maintains that Domino’s and the franchises jointly employed the workers and, thus, Domino’s is responsible for the wage theft.
One of the reasons corporations like Domino’s use a franchise business model is to limit the liability of the corporation. This is perfectly legitimate if done correctly but the New York Attorney General argues that Domino’s exercised so much control over its franchises’ employees that Domino’s was also the employer of the workers and, as such, it is responsible for the alleged wage theft. A statement from the New York Attorney General’s Office claims that their “investigation found, [Domino’s] 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 the New York Attorney General. “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 New York Attorney General’s wage theft allegations center around a computer payroll system called “PULSE.” Domino’s allegedly urged its franchises to use PULSE even though Domino’s allegedly knew that PULSE under-calculated gross wages.
If the New York Attorney General prevails in this action, it could set a precedent that may change the way all corporations that use the franchise business model operate. Domino’s knows this and has highlighted that possibility in its media response to the lawsuit. “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 said. “We believe that every employee deserves to be treated fairly and paid what they are entitled to under the law. We also believe that franchising is a tremendous source of economic opportunity in this country in general and in New York State in particular.”