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Pizza Hut Outlet Caught Underpaying Driver With Sham Contract

Pizza Hut outlet caught underpaying driver with sham contract

A Gold Coast Pizza Hut outlet has been caught exploiting a driver through an illegal sham contracting arrangement.

The employer then created false records to cover up the wage theft.

In total, the scam cost the owner of the store more than $216,000 in penalties.

Pizza Hut outlet uses sham contract

The Federal Circuit Court penalised Dong Zhao, who owns and operates the Pizza Hut at Upper Coomera, $36,700.

The court also penalised his company, Skyter Trade Pty Ltd, a further $180,000.

Driver mis-classified as independent contractor

Zhao ordered the driver, an Indian man in his 20s, to provide an ABN.

He then treated the employee as an independent contractor, instead of an employee.

As a result of the arrangement, Zhao paid the driver a flat rate of $16 an hour, instead of $20.36 for ordinary hours, and up to $40.72 for overtime and public holiday work.

The underpayments happened between November 2015 and May 2016.

Zhao also failed to pay a required per-delivery entitlement, a uniform allowance in addition to superannuation.

Driver borrowed money to pay bills

Zhao admitted to the sham contracting, which Judge Michael Jarrett said resulted in severe financial hardship on the driver.

“According to the evidence, he was the sole breadwinner for he and his wife and was responsible for their daily living expenses, rent, groceries, and his wife’s tuition fees.

“Partly as a result of being underpaid, he needed to borrow about $1,500 from his cousin in Melbourne and about $20,000 from his father in India, which he says was culturally shameful and embarrassing.”

False records

Zhao also provided false records to Fair Work inspectors in 2016 to cover up the illegal sham contracting.

“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 wrongdoing,” Judge Jarrett said.

Sham contracting rips off workers

Miles Heffernan, Director of Litigation at IR Claims, says sham contracting is a common way employers avoid paying proper wages and entitlements.

“Employers engaging workers as independent contractor, don’t have to pay overtime, penalty rates, superannuation, and leave entitlements,” he said.

“It is a much cheaper way of doing business, however, it is also illegal.

“Employers who set hours and conditions of work, and who make workers wear branded uniforms or display company logos, are engaging those workers.

“Therefore, those employers should pay proper wages and entitlements.

“In this case, it is clear the driver did not run his own food delivery business, so he should have been paid as an employee of the pizza outlet.”

The Pizza Hut store at Upper Coomera on the Gold Coast.

Widespread underpayments in Pizza Hut outlets

A check of 34 Pizza Hut outlets by Fair Work found 28 franchisees non-compliant with workplace laws.

As a result, four received enforceable undertakings, while inspectors issued 11 others with compliance notices.

In court, Zhao claimed to be a victim of the ‘pizza wars’ – which resulted in heavy discounting and fierce competition in the industry.

He said he hadn’t made a profit since taking over the store in 2013.


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