Domino's Pizza workers losing millions in union deal without penalty rates

Nick Toscano, Ben Schneiders, Catie Low
July 5, 2016
The Age
Domino’s Pizza workers are missing out on penalty rates worth at least $32 million a year due to an old deal struck between the company and the shop assistants’ union.
Domino’s is the latest large Australian company to come under scrutiny for controversial deals struck with the Shop, Distributive and Allied Employees Association (SDA).
A Fairfax Media investigation has uncovered that the union’s agreements with Australia’s three biggest employers – Coles, McDonald’s and Woolworths – have resulted in hundreds of thousands of low-paid workers being denied penalty rates and higher casual loadings.
As a result, many of those workers are paid considerably less than the award – the basic wages safety net.
Retail analyst Michael Simotas of Deutsche Bank has warned of a wage bill blowout for Domino’s, which does not pay workers penalty rates for late-night or weekend shifts, once it is forced to renew its outdated workplace agreement with the SDA.
Mr Simotas has estimated that it will cost Domino’s an extra $32 million in wages and slash its overall profit by nearly 25 per cent.
“We believe penalty rates will need to be paid at some point, which could have a significant impact on [Domino’s] profitability,” he said.
He said the Domino’s staff agreement had been struck in 2009, before the introduction of the national award system, which set new minimum standards for the fast-food industry, including penalty rates.
Domino’s has continued to legally operate on the agreement, even though it has expired and pays overall rates now well below legal minimums.
All workplace agreements in Australia must pass the “better off overall test”, intended to ensure workers are paid more under the workplace agreement than the award.
In a recent landmark decision, the full bench of the Fair Work Commission found that a deal between Coles and the SDA failed that test.
The tribunal found some Coles workers faced “significant” underpayment from the deal, first revealed by Fairfax Media in 2015.
Part-time and casual workers, who make up 80 per cent of the Coles workforce, were especially hard hit. Coles has been estimated to have underpaid its workers by between $70 million to $100 million a year.
After the Coles decision investment analysts are now looking closely at deals struck between large retailers and fast food companies with the union.
They expect they will now have to pay penalty rates – potentially costing them hundreds of millions of dollars.
Mr Simotas said Domino’s was now “in need of a catch-up” on wages.
Domino’s Pizza chief Don Meij admitted the total cost of paying penalty rates was still unknown and could run even higher than Deutsche Bank’s estimates.
“We have known about this for years and we have been working towards this date, there is no surprise in it at all.
He said Domino’s could not start paying staff more ahead of an agreement because it would “set a precedent”.
“It’s very complicated … you can’t just pay out of award wages ahead of schedules because it unfortunately layers up and then we would have an inefficient agreement.”
Mr Meij blamed recent exposes by Fairfax Media of underpayment at Coles and McDonald’s for not being able to strike a deal with the union.
“We were very close to an agreement but with all the media around Coles and McDonald’s and all the different organisations that have been in the media with the SDA, that just stalled our agreement,” he said.
The SDA on Tuesday said it had been negotiating a new deal with Domino’s for “several months” – despite the agreement expiring in 2013 – and was confident of “reaching an agreement” that met the minimum legal standard.
Mr Simotas said it now appeared that a 21-year-old Domino’s worker was paid just $18.99 an hour and with no penalty rates at all – considerably lower than the award.
“[This] effectively means any employee is worse off under the agreement than he or she would be under the fast food modern award.”