While it may look like a David versus Goliath battle, the new Retail and Fast Food Workers Union (RFFWU) is likely to have some powerful backers keen to see it reduce the influence of the Shop Distributive and Allied Employees Association (SDA).

Enriched by a growing membership courtesy of cosy agreements with the larger retail chains, the SDA is arguably the most powerful union in terms of political influence.

Power in politics is about numbers and as the memberships of other unions have been falling, the SDA has been gaining ground and causing alarm in the Labor Party as much as within the union movement.

The RFFWU has been formed by a relatively small group led by Josh Cullinan, but the fledgling union will garner behind-the-scenes support from other unions keen to curb the power and influence of the SDA.

Evidence of the collaboration with other unions is the encouragement of the RFFWU to prospective members who are meatworkers, warehouse or distribution workers, head office staff, delivery drivers or United Voice sites to join alternate unions.

RFFWU is targeting more than one million fast food workers and employees on the shop floors of retail chains and independent stores and claims it already has membership drawn from the Wesfarmers, Woolworths, Super Retail Group, McDonalds and other fast food and convenience store chains.

Launching the new union on 21 November, Cullinan took direct aim at retail employers and the SDA, claiming workers had no-one in their corner, despite having more than $1 million taken from their pay packets every day.

Cullinan, who has assumed the position of secretary for the RFFWU, said the SDA had struck “shocking workplace deals” that collectively strip 500, 000 workers of more than $300 million each year.

The new union has fertile ground after the 7-Eleven wages scandals, involving underpaid international students working on limited work visas and the Fair Work Commission’s rejection of enterprise agreements the SDA struck with Coles, Woolworths and McDonalds, leaving thousands of employees financially worse off than under the retail award.

The Fair Work Commission’s decision was a reversal of an earlier endorsement of the SDA agreements covering penalty rate calculations.

The Fair Work Commission itself has generated criticism in the past year for apparently tipping off Caltex about an investigation into underpaid workers in the fuel retailer’s convenience stores, as well as its handling of the 7-Eleven scandal.

It is also noteworthy that the Commission seems to have a heavy hand when it comes to underpaid wages in small independent retail businesses but a more considerate position in respect of some retailers.

An example is a “high-end national clothing company” that escaped the usual naming and shaming back in July after shortchanging employees by $162,000 on penalty rates.

It is extraordinary that so many retailers are either ignorant of their obligations under retail awards or are taking a chance on not being found out for under-paying employees and, in convenience store and fast food chains, for exploiting foreign workers on visas.

Natalie James, the Fair Work Ombudsman, has revealed more than three quarters of wage fraud court actions involved foreign workers, most of whom were students on visas that allowed capped working hours.

Apart from 7-Eleven, the United Petroleum and Caltex convenience store chains have underpaid foreign workers. Other retail chains such as Yogurberry and Pizza Hut have also been found to have shortchanged employees.

While there are instances involving corporate retail chains, most of the examples of worker exploitation are in franchise systems, with the franchisors claiming they were not aware that employees were being underpaid.

The Sergeant Schultz ‘I know nothing’ defence was offered by 7-Eleven, despite systemic underpayment of wages, falsifying of records and intimidation of foreign students.

While most of the employment issues at 7-Eleven were aired in 2015, new allegations of a continuing failure by some franchisees to pay all entitlements emerged in August.

The Fair Work Ombudsman is also continuing legal action against some blatant examples of exploitation of foreign student employees in 7-Eleven franchises with a Vulture Street, Brisbane outlet operated by Avinash Pratap Singh facing charges in the Federal Circuit Court in February next year.

Caltex employee scandal

Caltex has apparently been more proactive in respect to franchisee compliance with award entitlements and conditions, but has recently also faced allegations of worker exploitation and could be hit with separate class actions brought by employees and franchisees.

In response to the allegations of worker exploitation, Caltex said in a statement that its 85 company-operated sites comply with all Australian laws, including those related to wages and conditions.

Caltex Australia said it does not tolerate any unlawful activity, including deliberate underpayment of workers, anywhere in its network and requires every one of its more than 300 franchisees to comply with the law.

“We conduct annual review and audit processes to ensure compliance with these laws and our franchise agreements,” Caltex said, also claiming it has a sustainable franchise business model which is very different from other franchisors.

Although the business model is the basis of a potential class action being considered by ACA Lawyers, Caltex claims its model “is structured so that there is never a need for franchisees not to meet all wage obligations”.

“Reports regarding another franchisor in 2015 prompted Caltex to conduct forensic independent investigations into our franchisees to determine whether any of them were breaching Australian workplace laws,” the company said in a statement.

“Caltex proactively contacted the Fair Work Ombudsman (FWO) in November 2015 regarding this investigation process and has continued to provide regular updates over the past 12 months.”

Caltex said it had reminded franchisees of their obligations and rejected the allegations that the company had been advised of specific franchise sites that were to be investigated by the Fair Work Ombudsman.

The company said it has conducted forensic investigations into 20 franchised sites operated by eight franchisees, is investigating more than 40 other sites and has terminated five franchisees over the past 12 months.

“There is no excuse for underpaying workers,” Caltex said.

If any further cases of fraudulent or deliberate misbehaviour are identified, whether through Caltex’s independent investigation process or as a result of the Fair Work Ombudsman auditing over coming weeks, we will not hesitate to terminate our agreement with the franchisee involved.”

The Fair Work Commission is currently examining Sunday penalty rates and is expected to issue a determination early in 2017.

The SDA is staunchly opposing reduced penalty rates on Sundays in a contradiction to the enterprise agreements it struck with large retail chains such as Coles, Woolworths and McDonalds.

The new RFFWU has made the defence of penalty rates its first industrial issue, despite joining the protracted Commission case late in the process.

The issue of employing foreign workers on student visas to skirt around award conditions and entitlements is also high on the agenda for both retail unions.

While the two unions stake out their industrial and political battlegrounds, the Fair Work Ombudsman is attempting to achieve compliance with workplace laws through partnerships agreements with retailers.

The compliance partnerships are a formal agreement covering training, self-auditing of pay and record keeping, dispute resolution and reviewing and monitoring supply chain and franchise relationships.

Retail companies that have established compliance partnerships with the Fair Work Ombudsman include Chemist Warehouse, JB Hi-Fi Group, Domino’s Pizza Enterprises, McDonalds, La Porchetta, Retail Zoo, Australian Fast Foods and Breadtop.

7-Eleven and United Petroleum have also been encouraged by the Fair Work Ombudsman to enter into the partnerships after the employment issues identified in their franchise outlets.

The compliance partnerships’ approach to addressing issues related to retail awards and enterprise agreements, combined with an expected crackdown on foreign workers employed on visas is likely to impact many larger chains as regulators push for greater accountability by franchisors for their networks and retailers for their supply chains.

Coles and Woolworths have both faced investigations by regulators over underpayments to trolley collection workers at their stores and are now likely to be scrutinised further following raids on fresh produce suppliers using illegal workers.

Most major retailers are unlikely to be enthusiastic about industrial and political turf wars between the SDA and the new RFFWU, but there is little doubt that Cullinan has a strong sales pitch for employees who believe the SDA was more focused on its political and social agendas than their entitlements.

The emergence of a rival union on the shopfloor and the revelations of widespread compliance issues in the industry will certainly make the SDA a little tougher for retailers to deal with in future.

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