Red Rooster caught paying staff chicken feed: $650,000 in underpayments

A Fair Work Ombudsman investigation has found more than 3000 Red Rooster employees have been underpaid close to $650,000.

The Ombudsman’s office today released the results of its proactive compliance deed with the fast food chain, which is owned by Quick Service Restaurant Holdings and employs more than 7000 people nationally.

Red Rooster entered into the deed with the employment watchdog in February 2012 after a number of complaints by Red Rooster franchise employees in 2011 led the Ombudsman to discover pay rates in the company’s employment agreement were below those contained in the Fast Food Industry Award 2010.

The Ombudsman previously proposed a compliance deed to Red Rooster after identifying a problem with the interpretation of its workplace agreement, the Red Rooster Agreement 2009, which was negotiated by the company with the Shop, Distributive and Allied Employees Association on behalf of most Red Rooster franchises.

As part of the compliance deed, Red Rooster audited the pay of 3140 franchise employees across 106 stores, finding the employees were underpaid a combined total of $645,253.

Audits of a further 23 franchise stores were not completed because the stores being placed in liquidation during the time period.

According to the Ombudsman’s report, 1206 employees have already been back paid $346,285, while Red Rooster is the process of back paying the remaining 1934 employees a total of $298,698.

While the deed originally specified the back payments were to be made by the end of September 2012, the Ombudsman said the timeframes have been extended in cases where the “trading conditions for some outlets have been tough due to a number of regional and economic influences”.

A spokesperson for Red Rooster told SmartCompany the company and its franchisees “immediately put in place a program to ensure any errors were rectified” as soon as they were advised of the audit findings. 

“We continue to work collaboratively with the Fair Work Ombudsman to ensure this matter is promptly finalised,” says the spokesperson. 

Fair Work Ombudsman Natalie James said in a statement the compliance deed has made a difference to thousands of young and casual workers.

“Many of the young people working in Red Rooster franchises would have had little, or no previous work experience, and little knowledge or their lawful entitlements,” said James.

Fair Work commended Red Rooster and its franchisees’ cooperation and said Red Rooster’s commitment to ensuring employees receive their correct entitlements “has been a great example of corporate leadership”.

TressCox partner Rachel Drew told SmartCompany a proactive compliance deed is one of the options available to the Fair Work Ombudsman when investigating a company’s compliance with workplace laws.

However, Drew says compliance deeds, which usually involve some form of audit of the company’s records, are not common.

“Usually the Fair Work Ombudsman’s choices are that a matter is worth prosecuting or the matter is worth issuing an infringement notice,” says Drew.

“A compliance deed is a parallel path to those actions. There may be an issue with employee entitlements but it is not sufficiently significant to prosecute or discovered through self-discovery by the employer.”

While the case involving Red Rooster was complex given concerns the company misinterpreted its own agreements with employees, Drew says the complexity of a case would not ordinarily lead to the Ombudsman opting not to prosecute a matter.

“The Fair Work Ombudsman doesn’t shy away from complicated matters,” says Drew.

Drew says it is very common for a master franchisor to enter into an industrial award that covers all of the company’s operations and equally as common for franchisees to “rely on the master franchisor for interpretation of the award”.