New York Takes on Domino’s Pizza

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Earlier this week, the attorney general of New York filed a lawsuit against the pizza chain, alleging massive wage theft.

By Dwyer Gunn

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(Photo: Joe Raedle/Getty Images)

Earlier this week, New York Attorney General Eric T. Schneiderman filed a lawsuit against Domino’s Pizza (or, more accurately, the corporate franchiser that owns Domino’s), alleging that the company’s computer system has, for years, been systematically undercounting the hours that employees work, resulting in hundreds of thousands of dollars of wage theft. While individual Domino’s franchises have come under fire for wage theft and labor practices in New York before, this is the state’s first attempt to hold the corporate franchiser itself responsible. The lawsuit alleges that the corporate franchiser knew about the computer system’s flaws and still encouraged franchisees to use it.

“Domino’s corporate executives knew about the violations, denied responsibility and failed to take action,” Schneiderman told the New York Times in an email. “For the first time, we will prove that the Domino’s corporate franchiser is legally responsible for rampant wage theft occurring at its stores.”

Under Schneiderman’s leadership, New York has been particularly aggressive in going after wage theft cases — according to the Times, the state has collected $26 million on behalf of almost 20,000 workers. The Department of Labor’s Wage and Hour division, meanwhile, has chased down more than $1 billion in wages since 2010. A 2014 issue brief from the Economic Policy Institute, a liberal think tank, pointed out that the number of Fair Labor Standards Act cases increased from 5,302 in 2008 to 7,764 in 2013.

“Wage theft is costing workers more than $50 billion a year.”

But while there’s been an increase in wage theft cases in recent years, there’s some debate over whether wage theft itself is on the rise. Business groups have argued that the increase in cases represents a concerted effort by labor groups and advocates to educate workers about their rights and file such complaints, rather than an increase in the practice itself. Labor advocates and some regulators, on the other hand, argue that wage theft is, in fact, on the rise—a result of both a weak economy in which workers are too desperate to risk angering their employers by complaining about wage theft and a systematic decline in the budgets allocated to the government agencies tasked with investigating and prosecuting such cases. (And it’s not just New York: In 2014, Julie Su, California’s labor commissioner, told the Times that her agency “has found more wages being stolen from workers in California than any time in history.”)

The growing prevalence of contractors, sub-contractors, independent contractors, and franchises hasn’t helped. In 2010, a Department of Labor report on strategic enforcement of workplace regulations found that many companies in industries with lots of vulnerable workers rely heavily on contractors or franchises that directly employ and manage workers. “This ‘fissuring’ or splintering of employment increases the incentives for employers at lower levels of industry structures to violate workplace policies, including the FLSA,” the report concluded.

Regardless of whether wage theft is actually on the rise, there’s ample evidence that it’s rampant. While everyone from National Football League cheerleaders to high-tech hotshots has filed wage theft lawsuits in recent years, low-income workers—particularly immigrants—are especially vulnerable. A 2009 survey of vulnerable workers in Chicago, Los Angeles, and New York City found that 26 percent of low-wage workers were paid less than the minimum wage in the week before the survey, and more than two-thirds were subjected to some kind of pay-related violation. The authors of the study calculated that the average low-wage workers lost approximately $2,634 (on a total earnings base of only $17,616) due to “workplace violations.” The EPI pointed out that, if those number are representative of the larger economy, “wage theft is costing workers more than $50 billion a year.”

Low- and middle-income American workers don’t have much bargaining power these days, and government efforts to curb wage theft make a lot of sense in this economic climate. In March, two Democratic senators introduced a bill, the Wage Theft Prevention and Wage Recovery Act, that would expand wage theft protections and increase penalties (which are currently very minor) for violators.

There’s also another, perhaps simpler, solution. The Department of Labor’s Wage and Hour division, which is responsible for wage theft enforcement, is woefully underfunded. According to the department’s 2010 report, funding for its four regulatory agencies (Wage and Hour, OSHA, Mine Safety and Health Administration, and the Office of Federal Contract Compliance) has remained virtually unchanged since the late 1970s, yet these agencies are now responsible for a much larger number of workplaces and workers. The number of workplaces in the United States increased by 11 percent between 1998 and 2007 (to 7.71 million), while the number of paid workers increased 11.5 percent (to 120.6 million).

“The falling number of investigations and investigators means even well-known employers (to say nothing of the ‘garden variety’ workplace) face little chance of seeing an investigator,” Labor’s report concluded. “For example, the likelihood that one of the top twenty fast food restaurants (e.g., McDonald’s, Burger King, Subway) receives an investigation is about 0.008 in a given year…. But the more pernicious impact is that employers operate under an expectation where government investigators or other regulatory agents like unions are simply not seen as a matter of first order concern.”

The most recent budget for the Wage and Hour division requests an additional $50 million in funding, much of which would go toward beefing up the agency’s investigative and enforcement activities. In the face of an estimated $50 billion worth of wage theft, that could be money well spent.

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