Case Update: SDNY Finds No Franchisor Liability in re Domino’s Pizza

The Southern District of New York Court ruled against the employees claim that both the Franchisor and the independent Franchisees were liable in a class action wage and hour claim In Re Domino’s Pizza.

Although the In Re Domino’s Pizza case does not control California courts decisions in wage and hour cases, the case is important because it is the first court to squarely address the issue of whether both franchisors and franchisees can be liable. Additionally, the New York District Court is generally quite influential, and the decision itself is thorough, clearly setting out it’s thought process and the law underpinning that thought process.

The Domino Court looked at formal control – finding that although Domino had visibility as to some information about employees scheduling, pay and records, it did not have the power to hire and fire, did not set shift schedules, and in general, provided only guidance, not control.

The Domino Court then looked at functional control – whether or not the franchisor exercised control over the business as a whole. The Court, after careful review of the facts balanced the lack of ownership of premises, equipment against the franchisor’s rights to inspect, provide corrective training and specify certain items and activity, and held that Domino’s rights were rights that allowed it exercise over brand standards, not control over the franchisee.

This case has implications wider than just the franchisee/franchisor context. The decision gives concrete items to analyze in the context of any claims of formal and functional control. Related companies should review their structure and activities in light of the In Re Domino’s case, to analyze their liability to wage and hour claims. People structuring their businesses should also keep this in mind. (2018 U.S. Dist. LEXIS 169607 S.D.N.Y., decided September 30, 2018 )