Paid break settlement offers lessons for NZ franchises

As in New Zealand, Australian employees are entitled to paid 10 minute breaks for each four hours worked, in addition to longer unpaid rest breaks depending on hours worked. Australian franchisees of KFC and McDonald's have been battling claims from current and former employees who were allegedly 'systematically denied' their paid breaks between December 2017 and December 2023.

A class action was lodged in December 2023 on behalf of the employees of one multi-unit KFC franchisee which currently owns around 280 of Australia's 800 KFC outlets. A representative of the legal firm that brought that class action said that workers were suing for, "the value of lost breaks and for the loss of amenity and the stress placed on workers as a result of working in these pressure-cooker environments and not having proper breaks."

Last week the Australian Financial Review reported that claim and other claims against almost 80 KFC franchisees have now been settled subject to Federal Court approval, with 90,000 workers to share almost AU$29 million between them. The publication suggests that precedent has now been set for settlement of an even larger claim by up to 300,000 McDonald's employees in Australia for similar wage underpayment of paid break entitlements.

Recently introduced legal changes mean that intentional “wage theft” is also now a criminal offence in New Zealand. The Crimes (Theft by Employer) Amendment Act was officially enacted into law and came into effect on 14 March 2025. The new law means employers may be subject to criminal penalties of up to one year in prison and $30,000 if they deliberately underpay staff - as well as being liable for restitution of underpayments to the affected employees. 

Gibson Sheat Lawyers advised in June last year that, "where there is a genuine mistake made with payroll process then this will not be captured by the amendment, [but] employers should be careful about underpayment due to a lack of understanding about employees’ entitlements."