Hunton Employment & Labor Perspectives

Last week, a federal judge in the Eastern District of Michigan granted Domino’s Pizza, Inc.’s motion to dismiss, holding that workers operating under the Domino’s brand must arbitrate their claims that the pizza chain made its franchises promise not to hire each other's employees, then misled the public to believe no such agreement existed.

The former Domino's employees sued in October of 2018, accusing the pizza chain of breaking federal antitrust laws with a nationwide no-poach agreement that kept franchises from hiring employees away from other Domino's-branded locations.  The no-hire provision at issue was allegedly included in every Domino’s franchise agreement from at least January 2013 to April 2018.  According to the complaint, employees ended up with suppressed wages and restricted career mobility as a result of the no-poach agreement.

Domino's previously attempted to get the lawsuit dismissed in May, but Judge Roberts ruled that the plaintiffs bringing the proposed class action had laid out plausible allegations, which is all a suit requires to survive a motion to dismiss.

In considering Domino’s most recent motion to dismiss, U.S. District Judge Victoria A. Roberts determined that both named plaintiffs in the proposed class action had signed contracts that contained clauses forcing them to resolve employment-related disputes through arbitration and could not continue in court.  One of the named plaintiffs, Harvey Blanton, had an explicit delegation clause written into his contract, while the other named plaintiff, Derek Piersing, signed a contract simply citing the rules of the American Arbitration Association (AAA).

Judge Roberts stated that "circuit courts are virtually united on the question of whether AAA rules are 'clear and unmistakable' evidence that questions of arbitrability are for the arbitrator."   She further acknowledged that circuit courts “routinely hold that incorporation of AAA rules into arbitration agreements is clear evidence of intent to delegate questions of arbitrability to the arbitrator."

In opposing Domino’s motion, the plaintiffs argued that Domino’s shouldn't be allowed to compel arbitration in reliance on the arbitration clauses because Domino’s hadn't actually signed their employment contracts.  The Court disagreed with plaintiffs and reasoned that the definition of the “Company” was sufficiently broad to determine that Domino’s was included in the plain language of the arbitration agreement, particularly given that the definition of the Company included franchisors.  Accordingly, even though Domino’s was a non-signatory to the agreement as the contracts were signed only by Domino's franchisees, the Court determined that Domino’s was able to seek to enforce the arbitration agreement nonetheless under equitable principles.

Domino's is one of several fast-food chains that have been hit with lawsuits accusing them of having illegal no-poach provisions as state and federal authorities begin going after these deals with renewed force.  In addition to facing litigation, Domino’s, along with the nearly dozen other restaurant chains, have eliminated such no-poach provisions.