Underpaying staff, even if it’s done by a franchisee, won’t make your organisation immune to the very damaging and lasting effects of Fair Work disasters.

The price of Domino’s shares are about a quarter lower than what they were before revelations of worker exploitation, and Caltex has paid out a quarter of its huge worker compensation slush fund. Let these two case studies be a warning; penalties for non-compliance can have long lasting consequences.

Pizza breaches

Though many things contributed to Domino’s Pizza Enterprises (Australia) share price dip, it didn’t help that early last month it paid $10.9 million in one off legal and settlement costs.

Last September the Fair Work Ombudsman (FW) audited Domino’s and found underpayments, non-payments, unpaid delivery allowances, leave entitlement breaches, unsatisfactory record-keeping, as well as unauthorised deductions. Inspectors issued the pizza chain 17 formal cautions and four compliance notices. Of Domino’s 700 stores in Australia, the FWO found only four to be fully-compliant.

The Shop, Distributive and Allied Employees’ Association (SDA) negotiated an Enterprise Bargaining Agreement (EBA) which locked in full penalty rates and loadings and higher guaranteed hours. The EBA was voted on by union members (who make up 30 per cent of Domino’s workers), and 89 per cent were in favour of the EBA.

“In a workplace environment characterised by casualisation and underemployment, this is an important win for Domino’s part-time workers who now have access to a reliable weekly income,” SDA national secretary Gerard Dwyer says.

“This new agreement is unique in that it replaces 27 expired Domino’s agreements and unifies them into one, making it much simpler and easier for our Union to win better wages and working conditions for all Domino’s workers in the future.”

Caltex

In 2017 petroleum brand Caltex set up a $20 million repayment fund following raids across the country in 2016 found that there was systemic underpayment across its franchisees. The fund allows works to claim underpayments from as far back as 2015.

One year later the Fair Work Ombudsman (FWO) found Caltex had systemic non-compliance across 25 franchises. The FWC found underpayments of $9,329 for 26 employees in only one month. It found non-compliance of some form at 76 per cent of audited sites.

The FWO then launched a Federal Circuit Court action against two of the franchisees. One that was found to be falsifying wage documents for migrant records was fined just under $100,000.

Underpayment is so systemic that last year Caltex started transitioning away from a franchise model. In 2018, it spent about $20 million to bring 182 petrol stations back under its direct control. This February, they spent over $270 million to buy back shares to return more than 400 franchised stores to company ownership by next year.

Companies often think of workplace compliance issues as potential once-off payments. But as these two cases show, they can be much more. They can hurt your company’s share value or force you to change your business model.