Eric Schneiderman for Attorney General

New York Attorney General Accuses Domino’s of Wage Theft in Lawsuit

May 27, 2016

As published in The New York Times on May 24, 2016.

The system, as outlined in a lawsuit filed by the New York State attorney general, was as simple as it was flawed.

A pizza is ordered from Domino’s. A pizza is made. A pizza is delivered.

The workers who assembled and delivered the pie clock their hours on a computer system, and those workers are then paid.

But for years, according to the lawsuit against the corporate franchiser that owns Domino’s Pizza, the computer system used by franchises across the state systematically undercounted hours worked by employees, shortchanging them hundreds of thousands of dollars.

The lawsuit, announced on Tuesday, was the latest salvo in a campaign by the attorney general, Eric T. Schneiderman, against what he says is a pattern of corporations shortchanging low-wage workers.

Since 2011, Mr. Schneiderman has secured more than $26 million for almost 20,000 workers who were bilked of wages.

But unlike past cases, this one directly targets the corporate franchiser. If the state wins, Mr. Schneiderman hopes the case sets a precedent that makes it harder for corporations that run franchise businesses to avoid responsibility for the actions taken by the stores under their corporate umbrella.

“Wage theft is an epidemic causing harm to low-wage workers struggling to support their families every single day,” Mr. Schneiderman said in a statement.

Across the country, lawsuits involving wage theft have been on the rise. Broadly defined, wage theft involves employers’ violating minimum-wage and overtime laws and not counting work hours, and management wrongfully taking employees’ tips.

The surge in lawsuits, according to labor advocates, is a reflection of the changing nature of the American workplace.

Increasingly, corporations are using franchises, subcontractors and temp companies to fill jobs. One result is fierce competition to fill jobs with people who will work for the lowest possible wages. And, in turn, corporate franchisers can insulate themselves from charges of wage violations by creating a degree of separation between the corporation and the employees.

The Labor Department, through its wage and hour division, has recovered more than $1 billion in unpaid wages across the country since 2010.

Still, even with both federal and state prosecutors focused on the issue, the abuses continue, labor advocates say.

In 2014, the New York State attorney general lodged a victory against 23 Domino’s Pizza outlets in New York for wage theft, securing $448,000 in restitution for workers.

That year, Domino’s also settled a class-action lawsuit brought by employees for $1.3 million for wage violations in New York.

That lawsuit accused a Domino’s franchisee, DPNY Inc., of a variety of unfair labor practices, including not giving a legally required lunch break, not paying for uniforms and paying a subminimum tip wage even when the workers did untipped work, like cleaning ovens and floors or distributing fliers.

But the new case being brought by Mr. Schneiderman seeks to hold the corporate franchiser, Domino’s Pizza L.L.C., responsible. It accuses the company of forcing franchisees to use a computer accounting system even though it was aware it was flawed.

“Domino’s corporate executives knew about the violations, denied responsibility and failed to take action,” he said. “For the first time, we will prove that the Domino’s corporate franchiser is legally responsible for rampant wage theft occurring at its stores.”

In a statement, Domino’s defended its conduct, saying that it had worked with the attorney general’s office for more than three years and calling the lawsuit baseless.

“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,” the company 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.”

In the course of a four-year investigation, the attorney general’s office obtained a sample of franchisee records entered into Domino’s own computer system.

“Those records showed that 78 percent of franchisees listed instances of subminimum wages, and 86 percent of franchisees listed instances of unlawfully low overtime rates,” according to Mr. Schneiderman’s office.