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The Activity identified that of the 34 franchisees:

  • two franchisees were compliant with the FW Act
  • two franchisees did not engage delivery drivers
  • six franchisee audits require further action before completion
  • 24 franchisees were non-compliant.

Of the 24 non-compliant franchisees the Activity found:

  • seven had misclassified delivery drivers as independent contractors
  • a total of $12,086 in underpayments was owed to employees, predominantly for underpayments of minimum hourly rates and allowances (eg. laundry)
  • some of the underpayments were a consequence of the franchisee applying the wrong industrial instrument or failing to increase rates in line with the Fair Work Commission minimum wage decisions each financial year.

The FWO has concerns about the records provided by one franchisee and is continuing its investigation into whether this franchisee has falsified pay slips and rosters.

In July 2009, Pizza Hut engaged the services of an employee relations advisory business to prepare pay summaries for a number of State-based industrial instruments which may have governed the terms and conditions of a franchisee’s work force. Once prepared, Pizza Hut’s practice was to forward the summaries to the franchisees.

Different industrial instruments could apply at different franchises. The pay summary documents prepared by the employee relations advisory business and relied upon by Pizza Hut franchisees did not contain any guidance about how a franchisee could determine the applicable industrial instrument which applied to its particular operation.

The Activity found:

  • Pizza Hut did not have any process or system in place to test whether its franchisees were following the pay summaries or applying the relevant industrial instrument correctly
  • pay summaries did not contain all relevant information, for instance, summaries for WA, TAS and NT did not make any reference to the applicable laundry allowance
  • Pizza Hut did not seek to test or determine whether its franchisees could remain profitable whilst complying with the relevant industrial instrument.

In April 2016, the FWO met with Pizza Hut’s National Human Resources Manager to outline some of the Activity’s preliminary findings and obtain copies of employment agreements. During this meeting FWO raised concerns about the misclassification of delivery drivers as independent contractors.

Despite these concerns being raised in April 2016, the FWO identified that in August 2016, some franchisees’ online job advertisements continued to make representations to prospective drivers that, if successful, they would be engaged on a purported independent contracting basis.

The Activity did not find sufficient evidence of Pizza Hut’s involvement in any contraventions arising within its network. However, the findings of this Activity put Pizza Hut and the new owner, Allegro Funds, as well as all franchisees, on notice of non-compliant practices in their business, and should they fail to address these practices, they are at risk of being held accountable as accessories under the FW Act in any subsequent contraventions committed by its franchisees.