Dunkin' Donuts Says Stores Skimped on Workers' Overtime Pay

The franchising arms of Dunkin' Donuts and Baskin-Robbins have sued a group of franchisees in a Massachusetts federal court for violating their franchise agreements by allegedly engaging in a scheme to deprive their employees of overtime wages.

Specifically, the franchisors say the defendants violated federal and state law when they used the identities of former employees in an effort to mask the overtime work performed by their current employees.

The suit names lead defendant Agawam Donuts Inc., 13 other corporations and six individuals. The defendants own about 50 Dunkin' Donuts and Baskin-Robbins stores in Massachusetts and Florida.

According to the complaint, filed in the U.S. District Court for the District of Massachusetts, the defendants had current employees who worked more than 40 hours per week use the names and Social Security numbers of former Dunkin' Donuts and Baskin-Robbins employees to disguise the fact that they were entitled to overtime wages.

In addition the defendants falsified employee time records by carrying overtime hours for their employees into the following week to avoid overtime pay, the suit says.

As a result of this "pervasive scheme," the defendants violated the Fair Labor Standards Act, the Identity Theft and Assumption Deterrence Act, and applicable state law, the complaint says.

The lawsuit also accuses the franchisees of committing tax fraud by failing to pay all federal and state payroll taxes due.

In addition they violated federal immigration and employment laws by knowingly hiring and employing people who were not authorized to work in the United States, the suit says.

Dunkin' Donuts and Baskin-Robbins say the defendants' failure to comply with the "obey all laws" provisions in their franchise agreements has effectively terminated the contracts.

The franchisors allege breach of contract, trademark and trade dress infringement, and unfair competition.

The suit alleges that the terminated franchisees' continued use of the Dunkin' Donuts and Baskin-Robbins trademarks and trade names is "being done knowingly and intentionally to cause confusion, or to cause mistake, or to deceive."

Dunkin' Donuts and Baskin-Robbins seek a declaratory judgment order stating that the defendants' conduct violates the franchise agreements and constitutes grounds for terminating the agreements.

They also ask the court to enjoin the franchisees from infringing the companies' trademarks, trade dress and trade names.

Further, they seek compensatory damages, punitive damages, interest, costs and attorney fees.

The "willful, intentional and malicious nature" of the defendants' conduct warrants punitive damages, the complaint says.

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