A class action claim against Domino’s Pizza Enterprises by delivery drivers and store staff could cost Australia’s largest pizza chain as much as $240 million, according to Citigroup.
The claim was filed in the Federal Court on Monday by Phi Finney McDonald on behalf of staff employed by Domino’s franchisees between June 24, 2013, and January 23, 2018.
The statement of claim alleges Domino’s misled its franchisees by advising them to pay delivery drivers and in-store workers under a series of incorrect employment agreements when they should have been paid under the Fast Food Industry Award 2010.
The Domino’s agreements did not include certain entitlements, such as 25 per cent loading for casual workers, additional penalty rates for working after hours, on weekends and on public holidays, and a laundry allowance to assist with uniform cleaning.
While legal, the Domino’s agreements resulted in pay and conditions below the Fast Food Industry Award. The claim, which has been filed under consumer laws rather than employment laws, alleges Domino’s representations to franchisees were misleading and deceptive because the agreements did not bind franchisees to the rates of pay dictated by the agreements.
It also alleges the rates of pay for delivery drivers employed in franchised stores were not the same as those for drivers employed by stores owned and operated by Domino’s.
“Domino’s was correct by our analysis in paying its own employees at Domino’s-owned stores under the industrial agreements but [we allege] it was wrong to advise and enable [through a centralised payroll system] its franchisees to underpay employees,” Phi Finney McDonald’s principal lawyer, Brett Spiegel, told The Australian Financial Review.
Under the Fair Work Act if there is an award and an agreement and the award provides for better compensation than the agreement employees are by default generally covered by the award. “We think tens of thousands of employees are impacted and we’d hope would participate [but] it’s an open class action so the way it’s structured all Domino’s employees who are affected are part of the action,” he said.
Domino’s said on Tuesday it would defend the action. “Domino’s is of the view that those industrial agreements applied to its franchisees at all relevant times,” the company said.
Citigroup‘s head of research Craig Woolford said it was difficult to find a precedent for the claim but if it were successful it could cost Domino’s between $100 million and $240 million.
Citigroup estimated the cumulative store wages paid over the near-five-year period would have been between $1 billion and $1.2 billion and the difference between the award and the Domino’s agreement could have been between 10 per cent and 20 per cent, given it primarily related to late-night, weekends and driver allowances. “The value at risk if every employee, from every store, were party to the action would be $100 million to $240 million, plus any interest or other ancillary damages,” Mr Woolford said.
Domino’s shares fell $2.83 on Tuesday to a four-year low of $36.30, suggesting investors are factoring in a 100 per cent probability of a maximum payout.
Shares closed 1.65 per cent higher to $36.90 on Wednesday.