Mike Treen is National Director of Unite Union.

Workers in the fast food industry have identified what has been dubbed “zero hour contracts” as the central problem they face. These are contracts that don’t guarantee any hours a week while workers are expected to work any shifts rostered within their “availability”. Managers have power to use and abuse the rostering system to reward and punish without any real means of holding them to account. This will be a tough battle but we are determined to win guaranteed hours in the 2015 collective agreement negotiations, with the power to increase the guaranteed hours with service.

These contracts are not a new phenomenon. They became entrenched in the 1990s during the dark days of the Employment Contracts Act. They affect literally hundreds of thousands of workers in fast food, cinemas, hotels, security, cleaning, hospitality, restaurants and retail. The Labour and Green Parties have both said that their MPs are going to sponsor a Bill to change the law to severely restrict the use of zero hour contracts. The Government is feeling a bit of pressure on the issue and has announced that it is doing a rethink on the issue. The fear is that it will only deal with the very worst abuses and leave the big fast food and cleaning and security companies alone.

Negotiations with all the big fast food companies (McDonald's, Burger King, Restaurant Brands) began in the first week of March and continued through to the end of the month when the collective agreements expired. We are already in dispute with Wendy’s as their agreement remains unresolved from 2014. We will need public support to win. The fast food industry is split between the foreign-owned McDonald's, Burger King (BK) and Domino's Pizza chains; the locally-owned businesses that pay for the right to market brand names in New Zealand like Wendy’s and Restaurant Brands, and then the home-grown brands like Hell's Pizza and Burger Fuel, which also have international ambitions.

We have been successful in negotiating collective employment agreements with McDonald's, Restaurant Brands, BK and Wendy’s. None of these companies welcomes Unite Union's presence. However the desire to protect their “brands” against their competitors and internationally has given the union some leverage at times to amplify the organising we have to do on the ground. It took a major national “SupersizeMyPay.Com” campaign from 2003 to 2006 to get these first agreements. Our targets were a major boost to the minimum wage, and an end to youth rates and to achieve “secure hours”. We have been able to make significant improvements but the industry remains dominated by start rates governed by the minimum wage and “zero hour contracts”. The issue of “secure hours” has proved the most difficult to solve. We tried to get the companies to promise not to hire new staff before offering shifts to existing staff but these clauses in our contracts have been almost impossible to enforce.

“End Zero Hour Contracts” Campaign

Deciding to take on the major companies in a campaign to end a practice that they have been happy using for several decades was not made lightly. We were convinced that, so long as managers had the power to use and abuse a worker’s rostered hours, we would always have an uphill battle in getting workers to assert their rights and have the confidence to join a union. We get story after story of workers losing shifts for demanding the right to a break, for taking sick leave, for being “too lippy”. Often the managers in this industry are too young and inexperienced to be able to make judgements devoid of favouritism.

At BK and McDonald's our membership has been kept at about 20-25% of staff. Internationally this is considered pretty good but we are convinced that we can do much better. For a variety of reasons, including being a publicly listed company without franchise stores, we have been able to get over 50% of staff at Restaurant Brands to join Unite. For our long-term future as a union we need to crack this issue. It is also why our first three claims for the 2015 negotiations need not cost the company anything. We want an end to zero hours. We know that these companies know exactly what labour they need from week to week. This is a science to them. They prefer to hire more staff than they actually need so they can use and abuse them at will. It is about power, not money. The second claim is a union notice board in every store. The third is a clear choice about whether they join the union when they start with a company. The big one is of course the end to zero hours.

Preparing A Campaign

We started preparing the campaign in the middle of 2014. How we represent the campaign and the slogans are important. We liked the use of “zero hour” terminology that has been used to describe these contracts in the UK. It was accurate and able to shock. But we needed to “brand” these fast food companies as zero hour employers. That was easy, of course, because the employment agreements almost boasted of this reality. We did a survey of fast food members and 1000 participated in the online survey. This was a fantastic result and reflected their deep concern. The results have been published here (https://unitenews.wordpress.com/2015/02/22/zero-hour-myths-exposed-by-fast-food-worker-survey/) and are a fascinating read. What is very clear is that workers want more hours and more secure hours.

We needed hard data for the campaign. Average age, how many with kids. Average hours worked. Changes from week to week. We started identifying “faces” for the campaign. We wanted members who represented the reality of the workforce, which included people with dependants, not just school students. We needed to explain that it is impossible to get a mortgage or other loans on these contracts. We wanted to point out that it was almost impossible to negotiate the interface with Working For Families which assumes regular permanent hours.

In November 2014 we visited all fast food employers and gave them a heads up on what we want from the negotiations in 2015. No one could claim to be surprised by the demand. On Dec 1-2 we had the Unite National Conference which formally launched the campaign. We had reps from other unions to endorse or be part of our campaign. We had three Opposition Party Leaders speak. We spent a month (mid January to mid February) engaging with members and doing surveys, discussing claims and getting worker volunteers for the campaign. We organised a national speaking tour with two young workers from the US fast food workers’ campaign. The workers and Unite officials were able to brief a meeting of Opposition MPs at Parliament on the campaign.

A national fast food workers’ conference on February 14 (https://www.youtube.com/watch?v=7GlYEXBt28g) determined to get rid of zero hour contracts in the industry. The conference signed off on the claims for the companies and nominated delegates for bargaining. We also had workers in Korea, Philippines, Hong Kong and Indonesia do actions in support of our campaign on that day! Materials were designed and ordered: T-shirts; badges, banners, placards. My theory is always to prepare for war. If it can be avoided all the better but, if it happens, then at least we are prepared.

Bargaining

During March we bargained with all the companies. Restaurant Brands came back with a proposal to end zero hours at KFC, Pizza Hut, Starbucks and Carl's Jr stores that seems likely to be accepted by members. Ballots are being held at McDonald's and Burger King to authorise strike action in support of our claims. The contracts have expired as of April 1. The companies deliberately delayed negotiations to increase pressure on Unite members to settle. McDonald's has said it will be paying non-union staff who are above the minimum wage the same equivalent as the 50 cents an hour increase that minimum wage workers got. But it has threatened to not pay union members the increase until we settle the agreement with it and that there is no guarantee of back pay. But the fact that one major company has settled means that the pressure can be focused on the hold-outs and we can isolate these companies in the court of public opinion.

But we are up against transnational giants with an anti-union ideological bias. To succeed we will still need a broader political and industrial campaign like “SupersizeMyPay.Com” to end zero hour contracts in the fast food industry. One positive side to the campaign so far is the almost universal opposition to these contracts. Campbell Live had two great reports (http://www.3news.co.nz/tvshows/campbelllive/kiwis-tied-to-zero-hour-contracts-speak-out-2015030220#axzz3TGGjOhlh and http://www.tv3.co.nz/CAMPBELL-LIVE-Tuesday-March-3-2015/tabid/3692/articleID/107770/MCat/2908/Default.aspx?ref=MustWatch) on the issue at the beginning of March, featuring  a few of the hundreds of workers who had contacted them with their own horror stories. Resisting Unite Union and their own staff is one thing but resisting us and Campbell Live and the almost unanimous public opinion of the country is another question altogether. With your help we can win. And when we win we will be winning for hundreds of thousands of workers across this nation joining a fight of millions around the world.

Postscript: Restaurant Brands Buckled

“Restaurant Brands, which owns the KFC, Pizza Hut, Carl's Jr and Starbucks chains, has committed to end zero hour contracts by July 2015 in a new collective agreement negotiated with Unite Union. Unite has 2,000 members at the chain and is recommending the new terms to members in a vote to be held over the next week or so. The Unite bargaining team was unanimous in its support for the proposal which promises staff at least 80% of the average hours will be guaranteed using a three month rolling average of hours worked up to a maximum of 32 hours a week. ’This is a gigantic step forward for workers in the fast food industry’, says Unite National Director Mike Treen. Unfortunately McDonald's, Burger King and Wendy's are still refusing to move meaningfully on the issue. Union members at all three chains have now voted in support of an industrial and public campaign to try and convince these companies that they have to end zero hour contracts also” (Unite press release, 8/4/15).

State Of The Fast Food Industry

A hospitality industry report, published by the Restaurant Association of New Zealand and the Auckland University of Technology in 2015, showed takeaway sales hit nearly $1.5 billion in 2014, up from $1.36 billion in 2011. Takeaway sales have steadily increased in the past five years, with figures showing the 2012 total was 25% higher than four years earlier. Restaurant Association Chief Executive, Marisa Bidois, said many Kiwis were choosing takeaways over restaurant meals to fit in with lower budgets.

McDonald’s

McDonald’s has 163 stores operating in New Zealand with 9,500 staff. 80% of stores are franchised. Sales were $216.6 million in calendar 2013, up 5.8% from $204.7 million a year earlier, according to the local unit’s Annual Report. Profit for the year barely budged at $30.7 million as the company opened new stores, spent more on raw materials and wages, and paid more tax. It looks like McDonald’s NZ has been using accounting tricks to avoid paying tax in New Zealand. In 2011 there was a special payment of $154 million that was paid for by borrowing the money from the Bank Mendes Gans NV, which manages a lot of the company’s international finance. The total loan was actually for $278m to both pay the dividend to the US and repay a “loan” from McDonald’s Australia of $123.567m. The dividend payment more than doubles McDonald’s NZ liabilities to $301.9m and “will similarly boost its tax deductible interest expense in coming years” (http://www.stuff.co.nz/business/8171241/McDonald’s-pulls-claim-95c-in-dollar-stays-in-NZ). In the last three years McDonald’s NZ has averaged around $200 million a year income. This is income from the 30 stores it owns directly and the fees from the 133 stores owned by franchisees.

The before tax profit declared for the three years was $146.562m. Tax paid was $46.95m – which would seem to be the correct company tax rate. The problem is that a huge amount of revenue is excluded from the profit by accounting mechanisms. The most important is payment for trademarks, etc. This equals $51.247m – more than the tax paid. The fees equal 8.5% of income which is significantly more that the 4-5% paid as trademark fees in the UK. In addition there was the $10.9m in accountancy fees and the over $20m in finance costs to related companies it had borrowed from.

Internationally McDonald’s has been accused of tax avoidance in Europe and other countries. In the UK the company claims (http://www.thefinancepages.co.uk/companies/starbucks-sales-tax-evasion-scandal/02604/) not to have made a profit for the last ten years. It relocated European headquarters to Switzerland in 2009 because of what a McDonald’s spokesperson called (http://www.dw.de/McDonald’s-becomes-latest-firm-to-follow-the-lure-of-low-tax-switzerland/a-4485927) Geneva’s “business friendly environment”.

The principal way transnationals avoid tax is by paying substantial royalties for use of the brand name to parent entities located in tax havens. A 2014 report calculated (http://thinkprogress.org/economy/2012/10/15/1013121/fast-food-tax-dodgers/?mobile=nc) that “the companies’ tax rates differed: Starbucks paid 31% in the US but just 13% overseas; Burger King also paid 13% on overseas income, while McDonald’s paid 20%”. Tax experts say the use of intellectual property or royalty fees has existed for decades “but spread after a US loophole opened up in the 1990s. The fees first appeared in McDonald’s UK accounts in 2007. The UK unit paid in 2011 paid ₤62 million, 4-5% of its turnover, in such fees” (http://www.reuters.com/article/2012/10/15/us-britain-starbucks-royalties-idUSBRE89E0F520121015).

McDonald’s overseas subsidiaries generate over $US17 billion a year in revenues. In Europe the fees are paid to their Swiss office where the effective tax rate is 2-12%. (ibid.). US and European unions, together with the charity War on Want, produced an in-depth report in February 2015 accusing McDonald's of avoiding as much as €1.2 billion in taxes. (http://www.newsweek.com/McDonald’s-accused-avoiding-eu12-billion-european-tax-309590). By using “loans” that are ultimately from itself, as well as paying exorbitant trademark fees for the intellectual property of making a hamburger, McDonald’s is transferring income made in New Zealand to its US masters without paying tax on it here. If it is legal it should be outlawed. If it’s not legal McDonald’s should be prosecuted.

Burger King

Burger King, with around 80 stores, is the second largest burger chain with around 2,600 staff. It was bought in 2011 by an international vulture fund called the Blackstone Group for $104 million. Blackstone is one of the largest private equity groups in the world with around $300 billion under management. BK claims to be losing money. The fast food chain made a net loss of $4.4 million in calendar 2013 on sales of $176 million, more than the $1.9 million 2012 loss, its first year under the ownership of the US private equity firm, according to financial statements for its holding company, Tango Holdings.

Antares Restaurant Group, the operating unit of Tango Holdings, which has the local franchise development rights for Burger King as well as some 80 stores, is the country's second largest burger chain by outlets after McDonald's Restaurants (NZ). It is common in these types of takeovers for the private equity company to load up the company it is taking over with debt – including from related parties – and then it can avoid tax liability and doesn't have much up front costs. After a bit of cost cutting it can sell for a capital gain and, of course, in New Zealand that is largely tax free. The management tried to take out the union in a concerted anti-union drive in 2012 and “convinced” almost half our 600 members to resign over a short period. We successfully pushed back and reached a settlement with the company. Membership has been restored to previous levels. Rumour has it that Blackstone isn't happy with its return on capital and may be looking to sell. I would welcome their exit.

Restaurant Brands

The NZX-listed Restaurant Brands operates a range of brands with just under 4,000 staff – KFC, Carl's Jr, Starbucks and Pizza Hutt. Their combined revenue in 2014 was $330.4 million producing an after tax net profit of $20 million. Royalties (presumably to the brand owners in the US) were $19.5 million. According to the Annual Report, despite increased sales, it reduced employee numbers by 22%, or more than 1,000 staff, from 2010 until 2014. Restaurant Brands has also promised the Chief Executive Officer a $1 million bonus if he can push the share price over $4. The company joined the burger market in 2012 and now has 18 Carl's Jr stores. The cut throat nature of the business was reflected in the fact that Forsgren Ltd, a smaller operator of the brand, was forced to sell its seven stores to Restaurant Brands after its much larger competitor was given the right to open stores under the Carl's Jr brand as well.

Wendy’s NZ

A much smaller operation. It has 21 stores and is owned by the Lendich family in West Auckland.

Burger Fuel

Burger Fuel listed on the NZAX in 2007 and has 40 locations in NZ. Most stores are franchised and the brand developer has dreams of being an international player and has opened stores in Australia, United Arab Emirates, Saudi Arabia, Egypt and Kuwait. It had sales of $9.9 million in the year to March 31, 2014.

Hell’s Pizza

Hell's Pizza is locally-owned by the founders of the company. It has 64 stores in NZ.

Domino's Pizza

Domino's Pizza, an Australian-owned brand, has 64 stores. 

Sky City Casino

Zero hour contracts are not confined to the fast food industry, of course. They are present in hotels, hospitality, cleaning, security, retail and other industries. Even the SkyCity Casino has some staff on zero hour contracts. Most staff are employed on part-time contracts with a minimum of eight hours a week. Even these contracts have the same ability to be used and abused as a zero hour contract. Workers have the barest minimum hours guaranteed but to have any sort of decent life they are dependent on the manager for the extra hours. Whole core departments like Table Games and Gaming Machines have been turned into departments with majority part-time staff. This is despite the fact that the company has a very precise knowledge of what labour is needed in what is a 24/7 business. The casino has also accessed WINZ subsidies for training table game dealers, which has been removed from a task undertaken after being employed, to one the prospective new staff must do unpaid before they are offered work!