The Franchise Memorandum

In three consolidated actions, the U.S. District Court for the Southern District of New York  granted summary judgment in favor of franchisor Domino’s Pizza, Inc. and certain related entities (the “Domino’s defendants”), holding that they were not joint employers of current and former employees of several Domino’s Pizza franchisees and therefore could not be held liable for alleged wage violations under the Fair Labor Standards Act and the New York Labor Law. In re Domino’s Pizza, Inc., 2018 WL 475944 (S.D.N.Y. Sept. 30, 2018). To make this determination, the court considered whether the Domino’s defendants exercised formal or functional control over the franchisees’ employees. Although the parties acknowledged that the Domino’s defendants established certain standards and exercised oversight related to the operation of the franchised stores, the court found that the Domino’s defendants’ actions did not rise to the level of joint employer status.

In its analysis of whether the Domino’s defendants exercised formal control over the employees, the court considered whether the Domino’s defendants had the power to hire and fire the franchisees’ employees, supervised and controlled their schedules or conditions of employment, determined their compensation, or maintained employment records. The court found that the Domino’s defendants maintained policies that could impact the franchisees’ employment decisions, including background check requirements, dictating store operating hours and minimum staffing requirements, and mandating use of point‐of‐sale software used to set employee shifts and to store other employment information. However, the court concluded that Domino’s franchisees still maintained formal control over each facet of the employment relationships.

Further, in its consideration of whether the Domino’s defendants exercised functional control over the employees, the court considered factors including whether the Domino’s defendants provided the premises and equipment used by the employees and the degree to which the Domino’s defendants supervised the employees’ work. Although the Domino’s defendants maintained standards related to each store’s premises and equipment and enforced those standards through ongoing store inspections and audits, the court found that the standards were designed to ensure uniformity in the quality of the goods offered and to protect the brand image. Therefore, the court held that the Domino’s defendants also did not exercise functional control over the terms and conditions of employment.