Subway is under investigation by the Fair Work Ombudsman over employee underpayments and mistreatment of franchise owners. Subway’s franchise numbers have began to dwindle over the past 4 years, with 1 out of 10 franchises closing amid growing costs related to franchises.

Over two dozen current and former Subway employees have contacted a union affiliated group in Melbourne over the last 12 months revealing a range of issues. Employees complained of underpayment, the use of expired “Work Choice era” agreements, lack of penalty rates and physical and verbal bullying. This is after the Fair Work Ombudsman secured $65,438 in penalties in March 2019 against the former franchisee of two Subway outlets in Sydney for underpaying a worker by more than $16,000.

Contributing to the issue is the requirement franchisees to fund expensive overheads. These include renovations costing upwards of $200,000, costly equipment and fees for the latest technology. It is also alleged franchisees were required to foot a $10,000 fee for a loyalty app. Consequently, franchisees have attempted to cut overheads elsewhere within the business, notably employee wages.

Subway was heavily examined in parliament’s 2018 inquiry into the operation and effectiveness of the Franchising Code of Conduct. A former franchisee alleged he was required to pay $3000 for a new point of sale system and thermometers priced at $250 when there were much cheaper alternatives available.

Subway is not the only retailer grappling with underpayment issues. Wage theft has been uncovered at Michael Hill, Domino’s, Super Retail Group and Chatime over the past year, though most claimed it was a result of the complexity of modern awards.

A recent report by the Australian Payroll Association outlined that a third of payroll managers admitted to making employee payment or entitlement mistakes at least once a month, and claimed that the larger the business, the more likely mistakes are to occur.

In positive new for ACT employees, legislation was introduced in August 2019 to ensure workers are better able to access outstanding entitlements and wages by allowing fair work disputes to be heard more efficiently in the Magistrates Court.