Domino's sued by N.Y. attorney general over alleged wage theft by franchisees

Tue May 24, 2016 5:19pm EDT
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By Daniel Wiessner

(Reuters) - The New York attorney general's office on Tuesday sued Domino's Pizza Inc (DPZ.N: Quote), claiming it is liable for wage theft by franchisees because the company used a computer system that it knew under-calculated workers' pay.

The lawsuit is the first by Attorney General Eric Schneiderman's office to claim a fast-food company is a "joint employer," meaning it is liable for labor violations by its franchisees. It is the latest such case by U.S. regulators against companies, including McDonald's Corp (MCD.N: Quote).

Domino's micromanaged workers at 10 stores owned by three franchisees in New York City and its suburbs, the lawsuit says, including ordering the disciplining or firing of specific workers and discouraging union organizing. The company and the franchisees were each named as defendants.

Employees at the restaurants were underpaid by $565,000 because of a faulty computer program Domino's refused to fix, the attorney general said.

"We’ve discovered that Domino’s headquarters was intensely involved in store operations and even caused many of these violations,” Schneiderman said in a statement.

Domino's spokesman Tim McIntyre said franchisees are solely responsible for hiring, firing and paying their employees. Nonetheless, he said, the company has worked with Schneiderman's office and franchisees to ensure employees are paid properly.

"The attorney general now wants the company to take steps that ... could impact the viability of the franchise model," he said.

Schneiderman's office since 2014 has settled cases with 12 other Domino's franchisees who had been accused of depriving workers of minimum wage and overtime pay.   Continued...

A man walks in front of a Domino's pizza restaurant in Hoboken, New Jersey July 8, 2015.  REUTERS/Eduardo Munoz