Friday, April 22, 2016

New Lawsuit Asks Court to Find Joint Employment Relationship Between Pizza Franchisee and Franchisor

In a new collective and class action lawsuit filed in New York this month, the lead plaintiff, a former assistant store manager and customer service representative for one of the largest Domino’s Pizza franchisees in the city, contends that the franchisee for which he worked and the Domino’s franchisor should be held liable as joint employers for the franchisee’s alleged violations of the Fair Labor Standards Act (FLSA).  Kucher v. Domino’s Pizza, et al., Civil Case No. 1:16-cv-02492 (S.D.N.Y.).

In support of the joint employer argument, plaintiff makes two primary arguments.  First, he contends that the franchisor controls the work performed by franchisee employees in franchisee stores by: (1) performing routine inspections of the franchisee’s locations; (2) setting policies and procedures to be followed by franchisees; (3) controlling advertising; and (4) regulating employee behavior, such as by dictating employee uniforms. 

Second, he contends the franchisor exerts influence and “a high level of control and oversight” over its franchisees by: (1) identifying and selling store locations to franchisees; (2) assisting in the franchise purchase process by providing financing to prospective franchisees; (3) handling new store location and existing store renovation construction projects; (4) creating, designing, building and updating all training and development programs for its franchisees; (5) employing an operational support team that instructs franchisees how to run their stores; (6) providing instruction regarding food preparation and the implementation of bookkeeping, accounting, inventory and general operating procedures; (7) implementing a uniform and proprietary point-of-sale system used at most of the franchised locations; and (8) allowing franchisor administrators access to the point-of-sale system. 

Further, plaintiff alleges the franchisor: (1) has the right to access all computer data maintained by its franchisees; (2) requires franchisees to send profit and loss statements at the end of each fiscal year; and (3) maintains the right to audit the sales reports, financial records, and computer data of its franchisees, as well as terminate franchise agreements.  According to the plaintiff, based on the control allegedly asserted by the franchisor, it “is ultimately able to control how its franchises operate,” and should therefore be held jointly liable for the franchisee’s actions.

This lawsuit provides another example of how plaintiffs are following the lead set by the United States Department of Labor and the National Labor Relations Board with respect to attempting to destroy the legal barriers that separate franchisors from franchisees.  Franchisees across industries should keep a watchful eye on these types of cases to determine whether courts are receptive to the idea, and if so, what control factors they consider most persuasive in finding a joint employer relationship.