Last May, the Attorney General in New York State filed suit against Domino’s franchisees for underpaying their workers, and the state also included Domino’s corporate in the suit. This was controversial, since the corporate office insisted that paying restaurant employees was franchisees’ business. Now the case has been settled for $480,000, to be paid by three franchisees who own the ten restaurants that were part of the suit.
The idea that the corporate overlords of a franchised fast food business should take responsibility for its labor violations is a new one. In 2014, the National Labor Relations Board ruled for the first time that McDonald’s and the chain’s franchisees were joint employers, since the licensing company really exerts control over franchisee’s labor and pay practices.
That’s what NY AG Eric Schneiderman argued in the Domino’s cases: Domino’s corporate strongly encouraged franchisees to use its computer system that tracked employees’ time, and that system allegedly had a tendency to under-calculate workers’ gross pay.
THe franchisees and Domino’s were accused of violations of basic labor law, which included minimum wage and overtime requirements. The pay problems were especially bad for delivery drivers, who the state says did not receive full reimbursements when using their personal vehicles, and whose pay was calculated incorrectly based on the minimum tipped wage in New York state.
To settle the case, Domino’s will remain a defendant while the three franchisees have been dismissed, but the franchisees owe their then-employees a total of $480,000. Domino’s will remain as a defendant because there are apparently more wage violations across the state to deal with.
“My office will continue with our lawsuit against Domino’s Pizza to end the systemic violations of workers’ rights that have occurred in franchises across the State,” Schneiderman said in a statement. “We will not allow businesses to turn a blind eye to blatant violations that are cheating hard working New Yorkers out of a fair day’s pay.”