Guzman y Gomez lashed over 'below-award' pay deal

David Marin-Guzman
November 7 2018
AFR
Guzman y Gomez’s wage bill is set to jump next week after it was revealed the Mexican fast food chain has not been paying penalty rates to hundreds of workers for the past six years.
A group of five employees succeeded in terminating the franchise’s long-expired enterprise agreement that allowed the underpayments across dozens of stores, and this week the Fair Work Commission shot down the business’s hopes to get a replacement agreement before the termination takes effect.
In scathing comments at a hearing on Tuesday, Fair Work commissioner Donna McKenna said she was “not in the least satisfied” GYG had explained to staff the effect of its new agreement, which she said reduced pay for some workers by between 10 per cent and 25 per cent.
“Indeed I consider certain of the information provided to employees was obfuscating, if not outright misleading,” she told the company.
About 538 staff across 31 stores will now revert to the fast food award on November 15 and get paid weekends and public holiday penalty rates for the first time, while part-time workers will get set days, hours, start and finish times.
The revelation of the below-award rates comes as GYG has boasted that its revenue is growing by 30 per cent year on year, transforming a loss-making business into one with a $200 million annual turnover.
Private equity firm TDM Growth Partners, which prides itself on investing in people and culture, also took a $44 million stake in the business in August to help drive expansion amid plans to potentially list the business on the ASX.
‘I can’t believe it’
GYG had been racing to get its new EA approved since May after five workers from a Werribee store in Melbourne’s West took action to end the franchise’s old 2012 agreement, which expired two years ago.
The old EA paid the workers flat rates of $20.22 an hour, just 14¢ above the minimum award rate, including on Saturdays and Sundays.
On public holidays, they received an extra $5 an hour compared to the award’s $45.50 rate based on 225 per cent penalty rates.
The EA covers GYG’s corporate restaurants but has extended into franchisees as GYG sells stores and employees transfer over to the new owners.
One worker, who spoke on condition of anonymity, said part-time staff covered by the EA were generally relegated to weekends and public holidays because of the lower rates.
“I first discovered [the underpayments] on January 1, New Year’s Day,” the worker said.
“One new employee [covered by the award] was working in the kitchen and that person was getting $45 an hour and I was working with more responsibility and getting $26. I can’t believe it, it’s really unfair.”
According to emails lodged with Fair Work, when the workers sought a meeting with management about their rates in March, their store manager responded that “there are no unfairness [sic]” and to stop talking about it.
“If you’re not happy with what we can provide you then it’s simple. There are better jobs out there and jobs that can provide you the hours/rates that you desire,” the manager said in an email.
When the workers, who are not represented by a union, applied to terminate the EA, GYG head office quickly intervened and tried to get them to delay any action until 2019.
Despite employee protests that it would be “totally unfair” not to end the EA immediately, Fair Work delayed termination of the agreement in June by five months to give GYG time to negotiate a new EA.
Chief in mind for the franchise was to get an EA that maintained flexibility for its part-time workforce by allowing stores to unilaterally change part-time rosters on a weekly basis, although with guarantees of minimum hours.
The new EA would cover 1688 workers, almost 60 per cent of GYG’s workforce, of which more than 1000 are from non-English speaking backgrounds.
‘Brings no credit to Guzman y Gomez’
When GYG applied to get the EA approved last month, Fair Work started raising a litany of concerns.
But by late Tuesday afternoon, following three days of hearings, GYG filed a surprise, last-minute notice to discontinue its application to approve the EA.
Before accepting the discontinuance, and despite interruptions and protests from GYG’s lawyers, commissioner McKenna went on to outline her lengthy reasons for why she would have rejected the EA anyway.
She said “there is nothing to suggest there was any bargaining” with employees and that GYG’s attempts to explained the effects of the EA to employees, many of them young, were “inadequate”.
The commissioner said that despite GYG promising workers their pay would not go backwards, the EA contained no such commitments.
The EA’s rates at 7¢ above the award minimum also did little to offset the lack of set rosters for part-timers, who she said were treated like “quasi casuals” but without the 25 per cent casual loading.
She also criticised GYG for not explaining that junior rates under the EA were 10 per cent worse than the restaurant award, which covered some staff.
“When you go into this process again … you need to tell these employees of what these agreements actually involve and not in a way that skirts over dips of 10 per cent and the like in wages,” she said.
“To tell employees they are going to be only slightly worse off when there’s something in the order of a 10 per cent differential at least for some categories of employees … it brings no credit to Guzman y Gomez.”
‘Business integrity questioned’
A GYG spokeswoman declined to comment about the financial impact on the business of reverting to the award.
However, she argued other similar EAs had been approved by the commission and said “we are not clear on why the terms of the proposed EA were seemingly not enough for the commission to approve in this instance”.
The company denied misleading staff and said it had had “every intention of honouring” its commitment that no worker would be paid less under the EA.
“This was not within the proposed EA however we offered to include that commitment during the hearings,” the spokeswoman said.
“Anyone who has dealt with GYG in business, as a customer, a franchisee or employee will know that integrity, honesty and truth are paramount to the core values of our brand and how we roll.
“To have our staff and our business integrity questioned simply shows the lack of time and effort taken to truly understand our business and how we work with our people, not against them.”
She said the company had not terminated the EA before because it was waiting on a pending Fair Work Commission ruling to introduce flexible part-time clauses in the fast food award.
She denied part-timers were 25 per cent worse off given they received paid annual leave and sick leave and were guaranteed nine minimum hours a week.