Written by Workforce editor David Marin-Guzman.
Domino’s Pizza has been charging customers a 10% surcharge for Sundays despite not paying its workers weekend penalty rates and not paying delivery drivers any casual loading.
Workforce Daily can reveal that Domino’s drivers are caught in a murky mid-point between national minimum wage rates and the rates under the fast food modern award as a result of being covered by unofficial wage agreements with the Shop Distributive Allied Employees Association (SDA).
The SDA says it entered into the wage arrangements, which apply the award’s minimum base hourly rate but do not include its casual loading, travel allowance or penalty rates, after employer opposition over whether drivers were covered by the Fast Food Industry Award or were independent contractors.
Despite not paying penalty rates for Sundays, Domino’s has been charging customers a 10% surcharge for Sunday orders in the ACT and Regional NSW for at least the past six months.
A Domino spokesperson told Workforce the surcharge was “a trial” and “the result of having begun negotiations with the SDA for a new enterprise agreement (EA) which will include weekend penalty rates”.
“Upon completion of the new EA, a surcharge will assist franchisees to pay additional penalty rates to Domino’s employees at times such as on Sundays.”
New EA negotiation could be turning point
Such an agreement could mark a turning point in the complex and murky status of Domino’s drivers.
In 2009, Domino’s refused to recognise its drivers as part of its general 2010-12 enterprise agreement with the SDA.
Instead, it reached an arrangement with the SDA to make unofficial agreements on driver’s rates every year.
While adopting the fast food award’s base hourly rates for level 1 permanent employees, the casual driver rates do not include the award’s casual loadings, 41c per kilometre rate or any weekend or public holiday penalty rates.
Under the agreements, Domino’s franchisees also have the option to pay slightly lower hourly rates if they couple it with a $2.27 per delivery payment.
For 17-year-old ex-casual driver, Dylan*, who worked at an ACT Domino’s franchisee and used his own car, the agreement meant he was paid a flat rate of $10.46 an hour plus the per delivery rate. That included when he worked a Sunday shift from 4pm to 1am.
On top of that, Dylan’s employer regularly deducted 27c per delivery from his pay packet for insurance and he had to pay his own petrol costs.
If Dylan had no deliveries, his pay was increased by $1 an hour to $11.39 – the equivalent to what a permanent employee would be entitled to but well below what he would have been entitled to as a casual level 1 employee under the award.
Under the Fast Food Industry Award, a casual 17-year-old level 1 employee – which includes “delivery of meals” – is entitled to $14.24 an hour.
With weekend penalty rates, that comes to $17.09 on Saturday and $19.94 on Sundays.
The award also entitles drivers to a per kilometre travel allowance, which used to be 76c until last year when it was halved to 41c as the result of a deal reached between the SDA and Domino’s.
The award variation was based on the union accepting that data showed drivers typically used their own vehicles and so had lower depreciation costs.
Unofficial wage deals lack transparency
It is not clear what legal status the SDA-Domino’s annual wage agreements have. They do not appear to be voted up by workers as per EAs, submitted to a better off overall test, or submitted to procedures relating to award variations or individual flexibility arrangements.
Questions have also been raised over the transparency of the arrangement and the resulting complexity for young workers.
Dylan says his employer never showed him the SDA agreements and he was instead referred to the 2010-12 EA, which didn’t cover drivers.
SDA national secretary Gerard Dwyer has told Workforce the union communicates the wage rates to its members but did not do so for non-members. He said the arrangements could “perhaps be characterised as memorandum of understandings”.
A Domino’s spokesperson said driver rates were agreed to every year, that it provided the rates to the Fair Work Ombudsman (FWO) and the rates “comply with the legislative obligations under the Fair Work Act”.
The spokesperson said the rates were referred to FWO as part of the self-compliance deed it entered into after receiving underpayment complaints from delivery drivers.
“As part of that deed we are completely transparent and submit wage rates to the FWO to ensure compliance.”
Drivers still subject to 15-year-old EA?
Asked about the wage agreements, a FWO spokesperson told Workforce it had “no role in setting minimum wages for Domino’s employees”.
However, in answer to Workforce questions about the correct rates, FWO said casual Domino’s delivery drivers must receive the minimum base hourly rate for their work in the fast food award – referring to the rates for permanent employees ($18.99 for adults and $11.39 for 17-year-olds) and not the casual loaded rates.
A FWO spokesperson said “if the parties had not included a provision for a casual loading in a particular [enterprise] agreement they are under no legal obligation to pay one until such time as the agreement is varied or terminated”.
The only EA that covers Domino’s drivers is one agreed to by the SDA back in 2001. Despite expiring in 2004, the EA has not been terminated.
Under Fair Work transitional provisions, employees covered by agreement-based transitional instruments made before 2006, such as Domino’s 2001 EA, must be paid no less than the award’s minimum base rate of pay.
When Workforce questioned Dwyer about whether Domino’s drivers were still covered by the 15-year-old agreement, he said he was unsure about the EA’s legal status.
Workforce asked FWO whether it had done anything to make the Domino’s driver rates transparent to workers.
The agency’s spokesperson said “our website contains a wealth of information for workers, including rates of pay, but we do not tailor these to specific employers”.
Better to stay engaged than vacate the field: SDA
The SDA’s Dwyer (above) told Workforce the union’s arrangement with Domino’s had to be understood in the context of the complex history of delivery drivers.
“One of the key issues we’ve had to wrestle with is whether they are independent contractors or award free,” Dwyer said.
He said in the ‘90s fast food franchisees engaged drivers under independent contracts and some employers had threatened to take the union to the High Court if it challenged their status.
While there were some driver-specific awards, they only used the national minimum wage without extra casual loading. Other employers only wanted to pay piece rates without hourly rates.
The issue was further complicated with the onset of WorkChoices and the use of Australian Workplace Agreements, as well as the Labor government extending the expiry of the industry’s enterprise awards, Dwyer said.
In the 2010-12 EA talks with Domino’s, Dwyer said the parties had been in conflict over what the status of the drivers was, with Domino’s opposing their coverage by the modern award. The now expired EA only covers counter assistants and provides them a loaded base rate in place of weekend rates.
“Quite frankly we had to make choices back in 2012 about do we stay engaged,” Dwyer said, noting that its membership for drivers was “not large”.
“We had to make a decision – do we stay engaged or do we walk away.”
“But since the 7-Eleven case [involving systemic underpayment of workers] has emerged I think our position has been vindicated. When you vacate the field it’s Rafferty’s rules.”
He said the union’s objective was to get drivers covered by an instrument and it was a “great step forward” that Domino’s was indicating it was willing to “bury the hatchet” and include drivers on an EA.
Pizza Hut driver deal made room for loading
However, the SDA’s arrangement with Domino’s is different from that with its competitor Pizza Hut, where drivers are covered by its EA.
The 2010-12 Pizza Hut EA with SDA offers franchisees the option of either:
- paying adult drivers the equivalent of $654 a week plus $1.80 per delivery; or
- employing drivers as casuals without the casual loading but with a higher per delivery rate of $5.
In the pizza price wars between Dominos and Pizza Hut – with pizzas as low as $4.95 – Domino’s appears to have emerged as the winner.
It has experienced huge growth over the past year, with profit jumping 40% to $64m on the back of strong sales and fatter margins in Australia and New Zealand. It plans to open up to 200 stores over the next year.
Pizza Hut has not fared as well, remaining the “weak spot” of its parent company Yum Restaurants, which also owns KFC.
Indeed, Pizza Hut Australia is currently subject to a class action by its franchisees who have accused head office of breaching its duties by not allowing franchisees to make a profit when requiring them to cut pizza prices.
* Workforce has withheld Dylan’s full name.
(This story first ran in Workforce Daily, November 25, 2015)
Workforce is Australia’s longest-running weekly and daily industrial relations news & analysis service. Going strong since 1974, this independent news service delivers detailed news updates to IR and HR professionals nationally – straight into their inbox.
For a sample issue, click here.
For a FREE TRIAL, click here.