Australia: Pizza Hut pinged for employee underpayments

A recent Fair Work Ombudsman (FWO) investigation into fast food giant Pizza Hut has identified widespread non-compliance with the Fair Work Act 2009 (Cth).

What you need to know:

  • Following its audit, the FWO found that of the 32 Pizza Hut franchisees (Franchisees) audited, at least 24 were non-compliant.
  • Pizza Hut, whilst not involved in the actual non-compliance of its Franchisees, did not put adequate preventative measures in place.
  • There are a range of strategies that franchisors can utilise to prevent non-compliance on behalf of franchisees and/or limit liability in the event that non-compliance occurs.


The FWO has estimated that Pizza Hut employees are owed over $12,000 in underpayments resulting from Franchisees misclassifying employees and/or incorrectly applying modern award rates and/or failing to increase pay rates in line with the Fair Work Commission's annual minimum wage decisions.

As a result of the audit, FWO has issued three enforceable undertakings, 11 infringement notices, 11 compliance notices and 17 letters of caution, and it is considering pursuing further legal action against at least one Franchise.

Interestingly, Pizza Hut sought to extract itself from the underpayments made by Franchisees on the basis that it had:

  1. engaged the services of an employee relations advisory business in 2009 to preparen pay summaries for industrial instruments which may have governed the terms and conditions of the workforces of the Franchisees; and
  2. forwarded the payment summaries to the Franchisees.

However, the FWO did not consider that Pizza Hut could extract itself entirely from the underpayments on the basis that:

  • the payment summaries did not contain any guidance on how Franchisees could determine the applicable industrial instrument which applied to their respective workforces;
  • Pizza Hut failed to have any adequate systems or processes in place to test whether Franchisees were complying with the relevant industrial instruments and/or following the pay summaries; and

Pizza Hut did not take steps to test whether Franchisees could remain profitable whilst complying with the relevant industrial instrument.

The FWO was additionally concerned that despite it having raised concerns regarding the misclassification of delivery drivers as independent contractors with Pizza Hut in April 2016, some Franchisees continued to advertise delivery drivers as independent contractors in online job advertisements.

Whilst the FWO did not find sufficient evidence of Pizza Hut's involvement in any contraventions arising within Franchisees, it decided that the extent of the non-compliance was demonstrative of a pattern that Pizza Hut must address.


Now that Pizza Hut is on notice as to the non-compliant practices of its Franchisees, if it fails to adequately address the non-compliance identified, it is at risk of being held accountable as an accessory in any subsequent contraventions committed by its Franchisees. As such, moving forward, it will be imperative for Pizza Hut to gain a greater understanding of how its Franchisees are operating and exercising its leverage as head franchisor to ensure that the Franchisees are legislatively compliant.

Perhaps one of the biggest consequences of the above course of events is the damage to the entire Pizza Hut brand. It is likely to take some time – and much effort – before Pizza Hut can repair that.

What should franchisees do?

Franchisees should ensure that the pay and conditions of employees are in compliance with the National Employment Standards in the Fair Work Act 2009 (Cth) and the relevant industrial instrument. Further, where any non-compliance is identified, franchisees should ensure that it is immediately recited.

What should franchisors do?

While a franchisor cannot necessarily prevent all non-compliance instances on the behalf of franchisees, there are measures that can be put in place to make such instances less likely to occur and if they do, provide a level of protection to the franchisor in any FWO investigation.

One such strategy is assisting a franchisee with employment policies and processes from the outset to ensure that all franchisees are adequately set up and aware of their obligations as an employer.

One way we have seen franchisors do this is working with a law firm to develop a package of up-todate template contracts, policies and procedures and/or training for franchisees.

Another strategy is to regularly audit franchisees to ensure that they are complying with their obligations as an employer.

Although these precautionary steps involve some up-front investment, in the end, given the potential costs involved in legal action and penalties (not to mention brand damage) it would appear to be a worthwhile investment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Madgwicks is a member of Meritas, one of the world's largest law firm alliances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.