Old Enterprise Agreements and Class Actions: Danger! Danger! Warning Warning!

Shanni Zoeller

In the last couple of weeks, a class action underpayment suit has been filed in the Federal Court against Domino’s Pizza. It alleges that Domino’s engaged in misleading and deceptive conduct when it advised many of its franchisee store owners to pay employees in line with enterprise agreements that did not cover either the franchisee business or its employees. It is alleged this has led to many employees being underpaid casual loading; penalty rates for public holidays, weekends and evenings; and other allowances, loadings and entitlements they should have received under the Fast Food Industry Award.

It is unclear whether advice to follow the (wrong) enterprise agreement was a misunderstanding of the scope of the enterprise agreement (easy enough to do), or a deliberate ploy to cut costs.

The claim alleges that this practice has been going on for several years, with thousands of past and current employees being impacted. The potential value of the underpayment claim is in the millions, and penalties for breaches of the Fair Work Act, if proven, could also be extensive.

As this case is in its infancy, it is envisaged that many more Domino’s employees are likely to join it, as it is simple and inexpensive to do so. The lawyers running the case have asked any Domino’s employees working between June 2013 to January 2018 to contact them with a view to being included in the claim.

Class actions, often funded by litigation funders, are a recent but thriving part of the employment law landscape. They significantly increase the risk of underpayment issues coming home to roost, because employees and ex-employees can join in at little cost and pursue claims which they were highly unlikely to litigate as individuals, with much enhanced bargaining power.

Underpayments arising from misapplied or outdated enterprise agreements are a fertile field for class actions. Enterprise agreements set minimum pay rates and, when made, must provide the employees with terms which are “better off overall.” However, enterprise agreements do not override the minimum wage rates under the applicable award: if award rates rise above the rates in an enterprise agreement, payments must at least match the award rate. Employers must be vigilant and address any such issue promptly.

Many franchisees employ employees who are migrants, visa holders or students who do not fully understand Australian workplace laws or the employment rights they have. Accordingly, they are at risk of being exploited. The Fair Work Act was amended in 2017, to give the Fair Work Ombudsman extensive investigation and prosecutorial powers to crack down on exploitative businesses, on behalf of “vulnerable workers.” In the case of franchising, the franchisor may become liable for the act of the franchisee, so the franchisor needs to conduct on-going due diligence audits or the like to ensure franchisees are compliant, and not relying on outdated pay information.

It is important that, if you identify a discrepancy in an employee’s wages that you immediately rectify it. Otherwise, you may be under the regulator’s microscope.

Out with the Old, in with the New: 1 July Changes

Many businesses should, if they haven’t already, be applying new wage rates for employees in their first pay runs of the new financial year. The National Minimum Wage is up 3% from last financial year, with this percentage increase also applying across the base rates of pay for employees covered by modern awards. If your business has an enterprise agreement, pay rates will also need to be checked to ensure that they still satisfy minimum award standards. Enterprise agreement rates are not “set and forget.”

Read a summary of other Employment Law Changes for the 2019/2020 financial year.

Another important change you need to be aware of are the next stage of penalty rate changes in modern awards covering the hospitality, fast food, restaurant, retail and pharmacy industries. These penalty rates impact the rates paid to permanent and casual employees who perform work on weekends and evenings during the week. A summary is provided below:

Hospitality Industry Award 2010

For permanent employees, the Sunday penalty rate is 150%, and the public holiday penalty rate being 225% for all work performed.

There are no changes to penalty rates for work performed by casual employees on a Sunday, with the public holiday penalty rate remaining at 250%. Please note minimum shift engagements may apply for work performed on a public holiday.

Fast Food Industry Award 2010

There are changes to Sunday penalty rates for Level 1 permanent and casual employees, only. For permanent Level 1 employees working on a Sunday, the penalty rate is 125%. For casual Level 1 employees, it is 150%.

For the Hospitality and Fast Food Awards, there will not be any further penalty rate reductions beyond this financial year.

Restaurant Industry Award 2010

Sunday penalty rates remain unchanged for permanent and casual employees.

General Retail Industry Award 2010

For permanent employees working in retail on a Sunday (excluding shift workers), the penalty rate has been reduced to 165% (from 180% in 1 July, 2018).

Pharmacy Industry Award 2010

For permanent employees working in a Pharmacy, the penalty rate has been reduced to 165% (from 180% in 1 July, 2018) for work performed on a Sunday between 7.00am and 9.00pm. Public holiday rates remain at 225%.

For casual employees, the penalty rate is 190% (reduced from 205% in 1 July, 2018) for work performed on a Sunday between 7.00am and 9.00pm, with public holiday penalty rates remaining at 250%.

For the General Retail and Pharmacy Awards, Sunday penalty rates will have a final reduction applying from 1 July, 2020.

If you are in doubt about what penalty rate should apply to an employee who works at a particular time of the day, or day of the week, our Employment Law team can assist you with your enquiry: