Hunton Employment & Labor Perspectives

New York Attorney General Eric T. Schneiderman announced yesterday that he has filed a “wage theft” lawsuit against Domino’s Pizza Inc., and several of its New York area franchisees. The case is particularly notable in that Schneiderman is pursuing a joint employer liability theory, seeking to hold Domino’s liable for the alleged wage payment violations of its franchisees. This is the first time Schneiderman has pursued such a claim in a wage payment case, and the lawsuit potentially opens a new front in federal and state enforcement agency attempts to expand the definition of what it means to be a joint-employer.

The complaint alleges that Domino’s violated New York labor law by using a computer system, called PULSE, that under-calculated the wages earned by employees working for the franchisees. According to Schneiderman, Domino’s encouraged the franchisees to use the PULSE system and also had a “high level” of control over the operation of each franchised location. The suit seeks at least $565,000 in unpaid wages for employees at ten New York area locations.

Schneiderman’s lawsuit against Domino’s is the latest in a recent trend of aggressive government enforcement actions with respect to the issue of joint employer liability. As we reported previously on this blog, the National Labor Relations Board has led a federal push to expand the circumstances under which two companies can be found to be joint employers. Its landmark Browning-Ferris decision threatens to upend myriad third party business relationships and has even caused some in Congress to consider amending the National Labor Relations Act to return the joint employer standard to the more business-friendly precedent that existed before the August 2015 decision was issued. And the Department of Labor’s Wage & Hour Division issued an administrative guidance in January that likewise seeks to expand the possibility of joint employer liability under the Fair Labor Standards Act. Until yesterday, state agencies had not sought to duplicate the federal government’s enforcement agenda in noteworthy fashion. New York’s lawsuit against Domino’s could signal a new enforcement trend at the state level. The case reinforces the need for business owners to review closely their third party relationships with their outside counsel to identify and address potential joint employer risks.