Pizza Hut franchise fined $216,700 for ‘sham’ contract
Franchise June 15, 2018 12:19 pm By Christine Caulfield | Melbourne

A Pizza Hut outlet on the Gold Coast has been hit with fines totalling $216,700 after it was found to have misclassified a delivery driver and falsified records to cover it up, the Fair Work Ombudsman said Friday.

Federal Circuit Court Justice Michael Jarrett issued a $36,700 fine against Queensland man Dong Zhao, who operates the Pizza Hut franchise at Upper Coomera. His company, Skyter Trade Pty Ltd, was fined another $180,000.

Zhao and his company admitted breaching sham contracting laws when it misrepresented to its delivery driver that he was an independent contractor, the Ombudsman said.

The driver, an Indian national in his 20s, was paid a flat rate of $16 an hour between November 2015 and May 2016. As an employee, he was entitled to receive at least $20.36 an hour, and twice that for overtime and public holidays under the Pizza Hut enterprise agreement.

He was also entitled to a per-delivery commission, superannuation and a uniform allowance. He has since been back paid in full.

Judge Jarrett found Zhao’s conduct was “serious” and “deliberate” because the franchise had received clear advice from Pizza Hut’s head office not to engage in independent contracting arrangements.

The Ombudsman brought the action after inspectors investigated Zhao’s Pizza Hut outlet in 2016 as part of a campaign that involved audits of more than 30 Pizza Hut outlets and identified “widespread non-compliance in the franchise network”.

In addition to engaging in sham contracting, Zhao and his company breached workplace laws by failing to produce employment records on request and by providing false records to the Ombudsman during its investigation.

Zhao had actively sought to mislead the Ombudsman, Judge Jarrett ruled.

“The failure to keep proper records and to provide pay slips to employees is an insidious practice that is only aggravated by the creation and provision of false documents designed to conceal the employer’s wrong doing,” Judge Jarrett said.

Fair Work Ombudsman Natalie James says the case sent a message that sham contracting is serious conduct and significant consequences apply.

“We treat sham contracting particularly seriously because it can result in employees being deprived of basic minimum wages and protections,” Ms James said.

The case is Fair Work Ombudsman v Skyter Trade Pty Ltd & Anor.

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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.