A new lawsuit filed by New York state prosecutors accuses Domino’s Pizza and three Domino’s franchisees of underpaying workers at 10 stores by at least $565,000. Meanwhile, Domino’s HQ contends it should not be a defendant because franchisees are responsible for handling issues of pay.

NY state Attorney General Eric Schneiderman has previously gone after local Domino’s franchisees for for failing to pay employees minimum wage, or firing workers who had complained about being underpaid, but this is the first time the AG has gone after the corporate office as a joint employer.

Schneiderman alleges that Domino’s urged franchisees to use the company’s PULSE computer system, in spite of evidence that PULSE, according to the complaint, under-calculated employees’ gross wages. In fact, says the AG, Domino’s deemed this particular issue with PULSE a “low priority” and chose to not fix it via software updates.

Additionally, the AG’s office contends that because Domino’s HQ exerts such a direct influence over franchisees that it qualifies as a joint employer. For example, the corporate office has told franchisees which employees should be disciplined or dismissed. It also imposes restrictions on attire and workplace appearance, leaving such decisions out of the hands of franchisees, and enforcing them through inspections.

This is similar to a 2014 decision by the National Labor Relations Board which concluded that McDonald’s could be considered a joint employer with franchisees.

The lawsuit involves franchisees primarily in the New York City area, though two are located upstate in Montgomery County.

The stores allegedly paid wages below the mandatory minimum levels; failed to pay all overtime required by state law; abused the so-called “tip credit,” which allows employers to pay lower wages to tipped employees; and failed to fully reimburse employees for all expenses related to use of their own cars or bicycles for deliveries.

“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 Attorney General Schneiderman. “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.”

In a statement emailed to Consumerist, Domino’s says it is “disappointed” by today’s lawsuit, which it claims “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 maintains that franchisees are solely responsible for the hiring, firing, and payment of their own employees, but acknowledges that it did cooperate with the AG’s investigation.

“We had even discussed funding a third-party system to make sure that franchisees did not inadvertently fail to pay their employees everything those employees are entitled to receive,” reads the statement.

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