Gall looks to take a slice out of Domino’s pizza

In the 13 April 2021 decision of an ongoing major class action for underpayment against a pizza chain franchisor, Domino’s, Gall v Domino’s Pizza Enterprises Ltd (No 2), the Federal Court rejected Domino’s application to have the pleadings filed on behalf of the workers struck out, and ordered costs against Domino’s.  To that end, the Court was required to determine whether, among other things, the Fair Work Act 2009 (Cth) (FW Act) operates in isolation to preclude a worker’s right to seek relief under the Australian Consumer Law (ACL) for employment related matters.

The Facts

The Applicant, Mr Riley Gall, was employed as a delivery driver by two of Domino’s franchisees from the period of October 2015 to March 2018.  On 24 June 2019, the Applicant commenced a class action, on behalf of himself and other delivery drivers and in-store workers, against Domino’s, the franchisor, for underpayment of wages under the FW Act and loss and damage under the ACL.  It is alleged that:

1. Domino’s represented to the franchisees that Applicant’s and other workers’ employment were governed by the terms and conditions of two enterprise agreements;
2. the workers were covered by the Fast Food Industry Award 2010 (Award) rather than the enterprise agreements;
3. the franchisees did not pay the workers  the correct rates of pay in accordance with the Award; and
4. Domino’s representations to the franchisees were misleading and deceptive, which resulted in loss and damage suffered by the workers.

Importantly, no claim has been made by the Applicant and other workers against their respective employers, the franchisees, directly.  This matter is unique as the Applicant and other employees have taken aim at the franchisor directly, despite it not being the entity employing the workers.

Whilst underpayment claims are ordinarily pursued under the FW Act, in this case the Applicant (and other workers) attempted to seek damages from the franchisor under section 236 of the ACL for alleged loss (being, the alleged underpayment) caused by misleading or deceptive conduct pursuant to a section 18 of the ACL (being, Domino’s representing to the franchisees regarding the pay rates and terms of conditions of employment applicable to the franchisees’ employees).

Domino’s sought to have the Applicant’s amended statement of claim struck out, based on grounds that, among other things, it was ambiguous, failed to plead material facts and disclosed no reasonable cause of action.  Domino’s also argued that given the FW Act sets out a comprehensive code for the enforcement and recovery of employee entitlements, the Applicant (and any other worker) is not able to claim a remedy for failure to pay the correct employment related entitlements through the ACL.

The Decision

The Court dismissed Domino’s application, finding that, among other things, there was a reasonable cause of action to be answered.

In dismissing the strike out application, the Court held that:

1. the proceeding is novel due to the questions raised regarding the causes of action and relief available and the interaction between the FW Act and the ACL;
2. it is reasonably arguable that a claim under the ACL is also available to the Applicant (and other workers);
3. the FW Act “does not state in terms that a person cannot commence an action under the ACL, against a person other than his or her employer, for such loss and damage”;
4. it is reasonably arguable that Parliament, in drafting the ACL, did not intend that the ACL’s operation should be limited by the operation of the FW Act; and
5. there is a reasonable basis to argue that the FW Act does not operate as an exclusive code such that is it not open to the Applicant to make a claim for loss and damage under the ACL.

Lessons for Franchisors and Employers

The matter is ongoing and will have to be monitored for future developments.  Whilst the merits of this case are yet to be determined, this decision creates a novel ability for franchisees’ employees to seek remedies from franchisors for employment related matters under the FW Act as well as the ACL.

The decision is also a timely reminder to employers generally (whether franchisors, franchisees or otherwise) to consider its business operations and ensure that employees are being engaged and paid under the applicable industrial instrument and paid in accordance with the industrial instrument.