Are you next?: the implications of underpaying staff

The recent headlines involving celebrity chef George Calombaris and the MADE Group of Restaurants serves as a warning to employers about workplace compliance and the consequences of getting it wrong.

Fair Work Ombudsman Sandra Parker says “the Fair Work Ombudsman is cracking down on underpayments in the Fast Food, Restaurant and Café sector, and we urge employers to check if they are paying their staff correctly”.

The underpayments first made headlines in 2017 when representatives of MADE Establishment Pty Ltd notified the Fair Work Ombudsman (FWO) that they had identified non-compliance with the Restaurant Industry Award 2010 (Restaurant Award). This was after the MADE Group had taken a number of steps to address non-compliance including implementing a central human resources function, developing new systems and processes and back-paying (then) current employees.

Following the self-disclosure, the FWO investigated the MADE Group and also extended its investigation to a company which shared common shareholders and directors with the MADE Group of companies.

The warning

It appears that compliance issues were first raised in 2015 when the FWO sent a Letter of Caution to the directors of Press Club Restaurant & Bar Pty Ltd (a member of the MADE Group), indicating that the FWO had identified underpayments in respect of one employee of the Press Club. The FWO required Press Club to undertake annual reconciliations of all employees who were paid an annualised salary and rectify any underpayments that may have occurred.

Mr Calombaris, on behalf of the Press Club, responded to the FWO indicating that the Press Club would carry out reconciliations for each employee engaged on an annualised salary and rectify any identified shortfall. These reconciliations were not subsequently undertaken at the end of each year.

The $7.83 million result

The FWO investigation has resulted in MADE Establishment back-paying $7,832,953 in wages and superannuation to 515 current and former employees of the MADE Group. In addition, $16,371.49 has been paid to nine employees of Jimmy Grants.

The non-compliance took place between 2011 and 2017, as a result of employees not being paid at the correct classification level under the Restaurant Award (mostly casual employees), employees working hours that were not adequately compensated by annualised salaries during the period (once overtime and penalty rates were factored in) and the incorrect application of the Restaurant Award.

Not just the money

In addition to the back-payments, the MADE Group of companies faces ongoing regulatory scrutiny after entering into a Court Enforceable Undertaking (EU) with the FWO.

Among other things, the EU requires MADE Establishment to:

  • ensure that all persons within the MADE Group or Jimmy Grants who have responsibility for human resources, recruitment and payroll functions, or responsibility for on-site management have completed suitable and up to date training on compliance with applicable workplace laws and instruments;
  • provide the FWO with the training materials and training attendance records;
  • publish a written public apology on its social media and websites and in the Weekend Australian, Saturday Age, Saturday Herald Sun, Food & Beverage Industry News, Hospitality Magazine and Restaurant & Catering Magazine; and
  • make a contrition payment of $200,000.

Mr Calombaris also has personal obligations, with the EU requiring him to participate in at least seven speaking engagements that promote the need for compliance with workplace laws and the consequences of not doing so.

The lesson

It is critical that employers are aware of their obligations under workplace laws and instruments, particularly in respect of minimum payments and entitlements for employees under modern awards. Employers in the fast food, restaurant and café industries remain a top priority for the FWO.

Strategies for compliance include:

  • undertaking spot-checks on payments to employees (particularly where employees are paid annualised salaries);
  • training human resources and pay-roll staff on compliance;
  • staying up-to-date on changes to minimum entitlements, for example, increases to minimum wages; and
  • using the above suggestions to ensure there is a strong system is in place to monitor compliance.

Please contact our Employment + Workplace Relations team if you would like to discuss these strategies or potential non-compliance.