Business, Finance & Economics

Domino's boots workers, and blames bacteria


SAN JOSE, Costa Rica — In other parts of the world, Domino's Pizza recently announced new products, new restaurants and new ingredients to keep customers coming back.

But here in Costa Rica, the leading pizza delivery company went in the opposite direction, allegedly cooking up a lie about harmful bacteria found in its dough. Health authorities suspect that local Domino's managers concocted a bogus bacteria plot to send employees home early so they could quickly gut and shutter all nine of the company's restaurants in the greater San Jose area.

The surprise closures at the end of last month left 122 employees out of a job — with no advance warning or compensation.

Former employee Henry Acuna said he knew the story was fishy from the beginning.

"It was Friday, Jan. 30 when they (the managers) told us they were closing early at 6 in the evening, since supposedly in the production plant where they made the dough, they found a bacteria," said Acuna, 31, who delivered Domino's orders on a motorbike in the upscale suburb of Escazu on and off for about four years. "The next day, we found out they had taken all the equipment apart and taken it with them.

"I knew business was bad, but I didn't know they would close down the entire operation one day to the next," he said.

Bad press ensued, and within a week the pizza franchise's owner — the Mexican group Mozzarella — agreed to work out a compensation deal, saying they'd pay out more than $100,000 in three installments starting this month.

Domino's was just one of several companies — including manufacturer Sabila Industrial S.A., which is a subsidiary of U.S. biopharmaceutical company DelSite Inc., and a number of land developers — to swiftly close operations in Costa Rica this year.

This country ended 2008 with an unemployment rate of 4.9 percent. That figure marks the first increase in three years, and unemployment is likely to rise to nearly 8 percent by the end of 2009, according to economist Eric Vargas of the consulting firm Aldesa. Though the total is uncertain, hundreds of layoffs have made headlines here in January and February.

News of the struggle the construction sector underwent in 2008 emerged earlier this year, with the Construction Chamber reporting at least 15,000 job losses. The word recession has begun to permeate economic circles after the Central Bank announced dismal fourth quarter production figures, the third slow-growing quarter in a row.

Tourism companies, whose problems were compounded by the Jan. 8 earthquake, are also hurting. A recent poll of 66 businesses — including tour operators, hotels, travel agencies and car rental companies — showed that 60 percent reported a decline in reservations in the first quarter compared with the same period last year. Thirty percent said they laid off employees, five on average, from October through December 2008.

Like his counterparts worldwide (see World of Trouble), Costa Rican President Oscar Arias proposed measures — such as slashing state bank loan interest rates and reforming labor laws to enable employers to cut workers' hours, but not jobs — in an effort to stimulate growth and protect vulnerable citizens. But his "Plan Escudo," or shield plan, quickly came under fire from critics for falling short of outlining a clear roadmap toward recovery.

The director of the unemployment office at the San Jose Municipality, Viviana Sanchez, said as many as 40 job-seekers crammed into her office each day during the three hours the office was open. Meanwhile, the number of companies looking to hire is shrinking.

Domino's Pizza spokeswoman Jenny Fouracre said the company is "disappointed" with the closures in Costa Rica, but that Domino's is "working diligently to identify a new franchise owner for the business and are hoping to reopen our stores in Costa Rica soon."

Meanwhile, a Mozzarella company spokesman said the group is eager to make things right.

"The group's intention is to resolve the situation and correct certain mistakes it made at first (when closing down)," said Mozzarella spokesman Manuel de Freitas, who came on board with Mozzarella for the current negotiation period.

De Freitas said a 40 percent drop in sales over the last eight months — resulting in $2 million in losses — forced the company to make the decision to shut its establishments. Neither he nor Fouracre commented, however, on the alleged false plot regarding the harmful bacteria in Domino's dough.

Health authorities are still outraged. "(The bacteria) was an excuse to trick the employees, using the high credibility and seriousness of our institution for this unfortunate purpose," Health Minister Maria Luisa Avila said. "The owners should apologize to the ministry for using its good name."

Avila claimed there has never been a problem in her experience with harmful "bacteria" at Domino's here.

As for the former Domino's workers, Acuna said the Labor Ministry has been key to helping him and his coworkers win compensation. Before the closures, Acuna made 220,000 colones (about $395) per month plus overtime pay delivering pizzas.

Despite little unionization in private companies, Costa Ricans enjoy a relative degree of labor rights. "Whenever a company decides to close operations in Costa Rica, employees are entitled to receive some indemnity ruled by Costa Rican Labor Code," said Jose Luis Campos of law firm Batalla Abogados.

Workers are entitled to one to four weeks' notice, and as much as one month's severance pay, depending on the duration of an employee's time with the company, Campos added.

For Acuna's part, he says he wants this chapter to be over before he searches for new work. "I don't have a problem," he said. "I have a motorbike, so that's how I get around from here to there. But the other guys ... it's harder, nobody hardly has any money."