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Domino’s Pizza hit with wage theft lawsuit by state attorney general

New York’s top cop filed a lawsuit late Monday against one of the world’s largest pizza purveyors, accusing it and its franchisees of systemic wage theft by knowingly using a computer payroll system that underreports gross wages.

The lawsuit by state Attorney General Eric T. Schneiderman, the first to target a major fast-food chain over a pattern of labor misconduct by franchisees, accuses three Domino’s franchisees with 10 locations in downstate and eastern New York of underpaying workers by at least $565,000.

But more significantly, it seeks to hold Domino’s Pizza Inc., Domino’s Pizza LLC and Domino’s Pizza Franchise LLC responsible for mistreating their pizza bakers and delivery staff. It asserts that the parent company is a joint employer and therefore liable for wage violations.

Domino’s is the world’s No. 2 pizza restaurant chain, and the largest delivery chain in the United States. In New York, it owns 54 restaurants while its franchisees own another 136.

“At some point, a company has to take responsibility for its actions and for its workers’ well-being,” Schneiderman said in a press release announcing the lawsuit.

This is the third major lawsuit by Schneiderman involving Domino’s in the last three years. The state has settled cases with 12 franchisees who own 61 stores in all who agreed to pay $1.5 million in restitution to workers. That includes two franchisees in Western New York – Mark Gaisser, who operates a store in Batavia, paid $120,000, while Jeffrey Goodman, owner of an Amherst store on Transit Road, paid $50,000.

Domino’s officials, who say they have been cooperating with Schneiderman’s office for three years, criticized the state’s action. “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,” said spokesman Tim McIntyre, who provided The Buffalo News with a March 2016 letter that proposed compromise solutions.

The lawsuit, formally announced Tuesday morning, follows a multiyear probe by Schneiderman’s office that accuses Domino’s of underpaying workers by urging them to use faulty computer reports from the company’s PULSE payroll system, even though Domino’s “knew for years that PULSE undercalculated gross wages,” the lawsuit alleges.

Under state law, a company can be found to be a joint employer if it controls or can control employees in certain ways. In this case, the state claims that Domino’s micromanaged employee relations by getting involved in hiring, firing and discipline of specific workers, while also dictating the staffing, scheduling requirements and store hours of its franchisees. It also imposed specific mandates on employee dress, appearance, grooming and conduct, even detailing the diameter of earrings and what tattoos are allowed.

The lawsuit accuses Domino’s of wage-and-hour violations including paying subminimum wages, failure to pay all overtime, abuse of the tip credit and failure to fully reimburse employees for all expenses from using cars or bicycles for deliveries. It also alleges fraud and franchise law violations for knowingly selling its flawed payroll system without remedying its problems.