Fair Work reveals widespread non-compliance across Australian Pizza Hut stores

The Fair Work Ombudsman has revealed multiple cases of non-compliance with Australian workplace law across 24 Pizza Hut stores in Australia, mostly relating to underpayment and misclassification of delivery drivers.

The ombudsman began an investigation into Pizza Hut in November 2015 that focused primarily on delivery drivers. The Fair Work Ombudsman (FWO) has since issued three enforceable undertakings to three separate franchisees, with two of the franchisees found to be underpaying pizza delivery drivers.

Thirty-four Pizza Hut franchisees have been audited by the FWO since the investigation began, 32 of which had hired delivery drivers. Only 26 of the audits on franchisees that hire drivers have been completed, with inquiries ongoing into the remaining six.

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Out of the 26 completed audits, 24 of the franchisees were found to be non-compliant with workplace laws. The FWO is considering pursuing litigation regarding one franchisee, with claims the franchisee may have falsified pay slips and rosters.

There were three areas that the FWO found to involve issues with compliance:

Misclassification of workers

Seven of the 24 franchisees were found to be misclassifying delivery drivers as independent contractors rather than employees. Not being classified as an employee means workers miss out on entitlements such as annual leave, sick leave, and superannuation.

Employment lawyer with McDonald Murholme Bianca Mazzarella told SmartCompany workers classified as independent contractors are also not protected by provisions under the Fair Work Act, which only apply to employees.

“If an employee only works for one company, works set hours, represents to the public that they work for a particular company and cannot have a sub-contractor perform their work, then they should be classified as an employee,” Mazzarella says.

“Unfortunately businesses often ‘misclassify’ employees in an effort to avoid payment of employee entitlements. This also misleads employees in relation to what their rights and protections are.”

Underpayment and allowances

Across the 24 franchisees, the FWO determined a total of $12,086 in underpayments was owed to workers, stemming from incorrect minimum hourly rates, and no compensation for allowances.

“In some instances, drivers were paid as little as $5.70 per delivery while also being made to cover fuel and vehicle operating costs,” Fair Work Ombudsman Natalie James said in a statement.

The FWO mentions compliance issues around paying allowances like that for laundry. Mazzarella says laundry allowances are common, however, they vary from award to award.

“It varies and will differ based on if an employee is covered by a specific award or not. Allowances may include meal, clothing or travel allowances,” she says.

“However, if a sub-contractor is subject to a sham contracting arrangement they will often be unaware that an award may be applicable to them. “

Incorrect awards and pay increases

Finally, some of the underpayments uncovered by the FWO were found to be a consequence of an incorrect award being applied when paying workers. Additionally, some underpayments were a result of franchisees failing to increase pay rates in line with minimum wage decisions made by the Fair Work Commission.

Fair Work highlighted that many of the workers in delivery driver roles were vulnerable due to their age, with 32% of the 170 workers dealt with in the audit under the age of 24.

Mazzarella says businesses who do not comply with workplace requirements can “exploit young workers who are unaware of their rights and who may not have access to obtaining legal advice,” Mazzarella says.

“This can result in the company saving thousands of dollars (illegally) by underpaying workers.”

As a result of this audit, the FWO has taken a number of actions, including the three enforceable undertakings established in 2015. Alongside this, the Ombudsman will issue 11 compliance notices to franchisees, and recover the $12,086 in underpaid wages.

In a statement, Pizza Hut chief executive Lisa Ransom said Pizza Hut has been working “directly and proactively” with the FWO and its franchisees, and has implemented a number of measures to prevent further contraventions.

“We have engaged a third party payroll provider which our company-owned restaurants all utilise and have offered this opportunity to our franchisees to assist them in meeting employer obligations,” Ransom said.

“We have also worked diligently to reinforce to franchisees their obligations as employers, ensure all the appropriate tools are in place for them to calculate rates of pay, and facilitate access to the Fair Work Ombudsman online training tools.”

Ransom noted one of the franchisees the FWO took out an enforceable undertaking against, Romaro Holdings, is no longer a franchisee, with Pizza Hut taking on ownership of the store.

“We have been proactive in developing and finalising a compliance deed with Fair Work Ombudsman and greatly appreciate the support we have received from them. Pizza Hut does not tolerate non-compliance and is committed to ensuring all franchisees meet their legal obligations.”

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