Dive Brief:
- A Domino’s franchisee in Massachusetts is facing a potential class action lawsuit in the U.S. District Court for Massachusetts for allegedly paying workers less than the minimum wage, according to a complaint filed on Aug. 31.
- The franchise owner, Ben Halil Gozalici, paid delivery drivers who drove their own vehicles a mileage reimbursement rate below that set by the IRS “or any other reasonable approximation of the cost to own and operate a motor vehicle,” the complaint alleges.
- While Domino’s has seen increases in the number of drivers applying to work for the company compared to 2019, the chain’s delivery sales remain troubled, falling 3.5% year-over-year in the most recent quarter.
Dive Insight:
Domino’s has tried to improve the attractiveness of its pizza delivery work as weak driver retention contributes to lower delivery sales. The company is offering increased flexibility and the use of company-supplied electric cars in parts of its delivery fleet, but haven’t announced any specific strategies related to compensation. Domino’s is also trying to snag more delivery customers through a deal with Uber Eats; Domino’s drivers will still deliver those orders.
Domino’s operators have faced suits over reimbursement rate calculations dating to before the COVID-19 pandemic. In 2021, Iowa drivers sued a Domino’s franchisee over mileage reimbursements that were as low as 20 cents per mile, and drivers in North and South Carolina secured a $3 million settlement in a suit against a Domino’s franchisee who allegedly failed to reimburse workers. In Oct. 2022 a judge in Michigan approved a $1.95 million settlement in yet another mileage reimbursement suit. As recently as May 2023, a driver in Texas filed a similar suit.
Domino’s franchise disclosure document mentions driver reimbursement twice, once to note it as a variable cost, and once to warn that franchisees must obey “federal and state wage and hour and related laws, including laws that regulate mileage reimbursement paid to delivery drivers.”
The core of the most recent complaint is the allegation that the franchisee “paid their drivers a gross hourly wage at precisely, or at least very close to, the federal minimum wage, and because the delivery drivers incurred unreimbursed automobile expenses, the delivery drivers ‘kicked back’ to Defendants an amount sufficient to cause minimum wage violations.”
According to the complaint, the franchisee reimbursed drivers about 35 cents per mile, 19-23 cents per mile less than the reimbursement rate used by the IRS to estimate the “costs of operating an automobile for business, charitable, medical, or moving expense purposes,” during the time in which the plaintiff was employed.
Domino’s did not respond to a request for comment on the suits against its franchisees. Gozalici and the plaintiff’s attorneys did not respond to a request for comment.
