Lawsuit accuses Domino's Pizza of "Rampant Wage Violations"

ALBANY, N.Y. (CBS NEWS) -- New York's attorney general has sued Domino's Pizza Inc. (DPZ) and three franchisees, alleging they underpaid workers based on payroll reports generated by the parent company's computer system.

Attorney General Eric Schneiderman says his office has "uncovered rampant wage violations at Domino's franchise stores."

He says the company knew for years that its payroll computer system undercalculated gross wages yet it encouraged franchisees to use it.

The suit in state court alleges the three franchises and the company, as joint employers, underpaid workers at least $565,000 at 10 New York stores.

In a series of tweets, Schneiderman said the suit is the first to hold a corporation accountable for allegedly stealing employees pay at its stores.

Domino's says Schneiderman's suit "disregards the nature of franchising and demeans the role of small business owners." The Ann Arbor, Michigan-based company says it has worked with his office for three years trying to help franchises comply with wage laws.

The attorney general's suit also drew criticism from an industry trade group, the International Franchise Association, which dismissed Schneiderman's action as part of a backlash for failed efforts at unionizing fast-food workers.

"Franchisees, like all small businesses, are responsible for following federal and state laws regarding wages for the employees they directly hire - not brands such as Domino's," said President and CEO Robert Cresanti in a statement."This is a blatant attempt to payback special interests who have spent tens of millions of dollars attacking franchising as they have unsuccessfully sought to organize employees."

Domino's chief executive, Patrick Doyle, last year said the chain needed to pay more to remain competitive in a tightening labor market, following announcements from other low-paying employers that they'll hike wages.