Employment Law Update: Fair Work terminates Domino’s Pizza Enterprise Agreements
Last week, the Fair Work Commission terminated more than two dozen enterprise agreements by Domino’s Pizza which allowed workers to be paid significantly below minimum award rates. The termination will apply from January 24th 2018, and will potentially affect more than 20,000 employees across 660 stores. As a consequence, shares in the company also dropped sharply from $1.36, or 2.9 per cent, to $45.23 after the decision was announced. This decision demonstrates the importance of ensuring that employment agreements comply with employment law obligations set out in the Fair Work Act 2009.
In 2001, Domino’s Pizza struck a pay deal with the Shop, Distributive and Allied Employees Association (SDA) which allowed employees to be paid under the award rates, and not receive Saturday penalty rates, weeknight penalty rates and “proper” casual loadings and Sunday loadings. In February 2017, the Fair Work Ombudsman began investigating Domino’s Pizza franchisees over allegations of underpayments and claims of workers forced to do unpaid overtime. Following this, the SDA applied to terminate expired agreements and sought to strike a new workplace agreement with the company that would pay at least the award. They admitted that the old agreements were “deficient” and applied to terminate agreements after having “long term concerns” about the pay and conditions that the workers were receiving.
The Fair Work Commission ruled that 27 expired agreements should be terminated. Senior Deputy President Hamberger allowed for a three-month delay to allow the company to pay workers through its new rostering system, after Domino’s promised to backpay workers.
This decision is the first termination of an SDA agreement with a major employer that comes after the landmark Coles decision last year. In the Coles case, the Fair Work Commission terminated an agreement between Coles and the SDA as it failed the “better off overall test” (BOOT). The expert evidence provided stated that more than half the workforce was paid less in wages than the award.
It is interesting to note that similar enterprise agreements still exist for some of Australia’s biggest companies, including Woolworths and McDonalds.
The law on Enterprise Agreements
An enterprise agreement is an agreement about permitted matters, which are:
- terms about the relationship between each employer and the employees covered by the agreement;
- terms about the relationship between each employer and any employee organisations who will be covered by the agreement;
- deductions from wages for any purpose authorised by an employee covered by the agreement;
- how the agreement will operate.
It is also critical to note that the rate of pay for an employee under an enterprise agreement cannot be less than the relevant rate of pay under the modern award that would apply to the employee or under a national minimum wage order.
The most common way for an enterprise agreement to be terminated is by application to the Fair Work Commission after the nominal expiry date of the agreement. If an application for termination is made, section 226 of the Fair Work Act provides the Commission must terminate the agreement if:
- It is not satisfied that it is not contrary to the public interest to do so, and
- It is considered appropriate to terminate the agreement.
In considering whether it is ‘appropriate’ to terminate the agreement, the Commission will take into account all the circumstances, including:
- the views of the employees, each employer, and each union (if any) covered by the agreement; and
- the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.
Checklist for employers
Employers must make sure that their enterprise agreement complies with the rules and obligations set out in the Fair Work Act. Employers should:
- Ensure the enterprise agreement passes the ‘Better Off Overall Test’ against comparable modern awards;
- Consider any new legislative reforms which may affect your employer obligations; and
- Pay attention to the nominal expiry date in agreements and plan re-negotiation strategies.
If you’re unsure whether your enterprise agreement complies with the relevant law, we recommend speaking to an experienced employment law solicitor.