Fair Work Ombudsman to investigate McDonald’s over potential underpayment of workers

Fast-food giant McDonald’s has been referred to the Fair Work Ombudsman for allegedly underpaying some of its workers, after the industrial relations commissioner has thrown out an agreement which would cover the company’s 80,000 employees.

Commissioner Donna McKenna rejected a deal between the company and the Shop Distributive and Allied Employees Association, saying it fails a no-disadvantage test. The deal would have seen standardised conditions imposed in all states and territories, including rules for rostering, penalty rates and entitlements.

The no-disadvantage test states that employers may remove certain entitlements from work agreements but these must be offset by other benefits.

While McKenna wrote in her ruling that the agreement, which is 111 pages long, contains both advantages and disadvantages, it ultimately poses no net benefit for employees. She also suggested workers could have been underpaid, referring the matter to the Ombudsman.

“I have concluded the agreement would represent an emphatic diminution in overall terms and conditions for the employees who would be subject to its proposed operation,” she wrote in the judgement.

“The Agreement not only fails to satisfy the no disadvantage test, on various levels it significantly compromises industrial standards that would be expected for agreement-reliant employees – considering, in particular, that these employees are mostly young and mostly casually employed.”

Specifically, the judgement referred to situations that would have seen employees in New South Wales, Victoria and Queensland receive pay rises below minimum pay deals over the three-year period of the proposed agreement.

Additionally, the judgement also said wages in Tasmania were fair for junior employees, but three out of four employee categories were leveraged at percentages of a below-minimum base rate. Remarks were also included regarding the possibility of McDonald’s workers completing shifts with no breaks.

While McKenna wrote that developing a national agreement would be an “onerous task”, she said that “in so many instances where provisions can be compared, the Agreement appeared to displace, remove, omit or reduce conditions that would have applied under the reference instruments”.

“I propose also to direct that a copy of this decision be forwarded to the Fair Work Ombudsman, given the evidence suggesting the applicant or its licensees, or both, may have been underpaying some employees,” McKenna said.

The decision comes just after McDonald’s has posted solid sales growth for the 2009 calendar year, reporting $364 million in profit to the 12 months to December 31 on top of $898 million in sales revenue.

The Shop Distribute and Allied Employees Association has reportedly attacked the decision, saying the agreement satisfied the no-disadvantage test and that McKenna did not sufficiently understand the agreement.

McDonald’s and Workplace Relations minister Julie Gillard were both contacted for comment, but no reply was received before publication.