Burger giant McDonald’s will soon start paying out tens of millions of dollars in higher wages to its employees after it finally agreed to pay weekend penalty rates to its young workforce.
Maccas, one of Australia’s biggest employers, also faces a claim for back pay that, if successful, could be worth more than $200 million to its predominantly young and low-paid employees.
The multinational has been paying a majority of its workers less than the fast food award – the wages safety net – under a controversial deal it struck with the socially conservative shop assistants’ union in 2013.
Since then it has avoided paying Saturday and Sunday penalty rates in return for a small increase in the ordinary hourly rate. Young workers are currently paid as little as $8.64 an hour at McDonald’s, even if they work on Saturdays and Sundays.
An investigation by The Age and The Sydney Morning Herald in 2016 found that the workplace agreement with the Shop, Distributive and Allied Employees’ Association (SDA) paid some workers one-third less than the award and saved McDonald’s tens of millions of dollars in wages a year.
The deal was approved by the Fair Work Commission at the time, despite a legal requirement it only endorse agreements that ensure workers are paid above the minimum wage.
The investigation found similar underpayment across fast food and retail, including at Woolworths, KFC and Hungry Jacks, under deals struck between employers and the SDA.
In 2016, the full bench of the Fair Work Commission found that a deal involving Coles failed the “better off overall test” – the legal test that says workers must be paid more than the award.
Since then major employers including Woolworths, Domino’s and Coles have started to pay workers legal minimum penalty rates in a significant boost to their pay.
Now McDonald’s – the second largest private sector employer in Australia with about 105,000 workers – is set to be legally required to do the same.
McDonald’s is expected to brief its staff in the coming weeks over the new pay offer.
A McDonald’s spokeswoman said it has been negotiating a “strong” new agreement that includes weekend penalty rates and additional allowances. The company’s priority was now to see this agreement “in place”.
But the process is being challenged by a second union, the Retail and Fast Food Workers Union.
McDonald’s worker and retail union member, Xzavier Kelly, is seeking to terminate the McDonald’s agreement in the Fair Work Commission and return workers to the minimum standards of the award, saying they would be better off on award rates.
He is also seeking back pay for all McDonald’s workers not paid award penalty rates and other allowances for the two years since the old agreement expired.
The McDonald’s spokeswoman said they were “disappointed” by the back pay claim.
Mr Kelly, a 23-year-old university student, works casual shifts at a McDonald’s store in Melbourne’s eastern suburbs.
An analysis by his union found Mr Kelly was underpaid for every week he worked, sometimes by more than 10 per cent. It estimated he was underpaid as much as $2000 per year compared to the minimum rates of the award. He regularly works overnight shifts.
“I actually have no money in my bank account at the moment,’’ said Mr Kelly.
“I find it a juggle to make ends meet. To know I could have an extra $2000 a year if I was just paid the award minimum, I could have used that.’’
Retail and Fast Food Workers union secretary Josh Cullinan said that under the new proposed agreement McDonald’s had committed to paying penalty rates but had refused to pay back pay or to meet other claims such as compulsory working-with-children checks for managers and franchise owners.
He estimated workers at McDonald’s were more than $100 million a year worse off because the company had not paid penalty rates and other award conditions and allowances.
“McDonald’s and the SDA legalised their industrial scale wage theft by hoodwinking the Fair Work Commission into approving these disastrous deals,’’ he said.
The McDonald’s spokeswoman defended the existing agreement, saying it had been approved by staff and the Fair Work Commission.
But Mr Cullinan’s union has applied to the Fair Work Commission to end that deal, backdated to June 2017. If that argument was accepted, McDonald’s would be required to “back pay more than 70 per cent of McDonald’s workers, over $250 million”.
He also said that employers such as Bunnings, Hungry Jacks and McDonald’s were pushing to lock in current, lower penalty rates in four year agreements ahead of the possible election of a Labor government. If Labor wins government next week, Opposition Leader Bill Shorten has promised to reverse a 2017 Fair Work decision to cut penalty rates.
Mr Kelly said it was “surprising’’ McDonald’s workers had been denied award penalty rates.
“That’s why I’ve done this, to apply to terminate the agreement, I think crew should be paid what they legally should be.’’