Happy New Year, Happy Penalty! Noodle bar and owner cop massive penalties for underpaying staff

While the rest of us were busy making our 2019 #newyearnewme resolutions, planning our next holiday and getting back into the swing of work (did Christmas really go that fast?), sole director and shareholder Ms Jing Qi Xia of “Xia Jing Qi Pty Ltd”, trading as “Ajisen Ramen” noodle restaurant (the restaurant) was awaiting judgment to be handed down from the Federal Circuit Court of Australia regarding the penalty to be imposed for underpaying a staff member.[i]

Ms Chen, a Chinese national on a subclass 462 working holiday visa, was employed between 31 May 2016 to 9 October 2016 as a casual “Food and Beverage Attendant Grade 2”, pursuant to the Restaurant Industry Award 2010 (Award).

Ms Chen was paid a flat hourly rate of $11.50 per hour, regardless of working a variety of weekdays, weekends and public holidays. For her final pay period in October 2016, she was paid a total of $179 for 45 hours of work, resulting in an hourly rate of $3.98.

As a result of an investigation by the Fair Work Ombudsman (FWO), the restaurant was required to rectify the underpayment to Ms Chen by paying her an amount of $9,616.95.

On 8 December 2017, the FWO commenced proceedings against both the restaurant and Ms Jing Qi Xia alleging seven contraventions of the Fair Work Act 2009 (Cth) (Act). The restaurant admitted to failing to pay Ms Chen the minimum hourly rate, casual adult rate, weekend and public holiday rates, failing to keep records and issue pay slips.

Pursuant to sub-s 546(1) of the Act, the Court may impose a penalty on the Respondents up to:

  • $324,000 for the restaurant; and
  • $64,800 for Ms Jing Qi Xia.

In considering the quantum of penalty, the Court noted that the parties had previously owned a 7-Eleven franchise and Ms Jing Qi Xia had received training from the head office in relation to payment of correct minimum wages, and therefore was well aware of the requirements under the Act and Award. The Court considered the breaches were deliberate.

Ms Chen was never provided with payslips, and received wages in clear money bags with her name on it, which made it extremely difficult for the investigator.

Ms Jing Qi Xia also falsely advised the Fair Work Inspector that Ms Chen was being paid $18.00 an hour and it wasn’t until the FWO independently uncovered the truth that there was an admisson to the underpayments.

The Court also considered that it was important that the case deter future misconduct from similar employers in the restaurant industry and employers of workers on working holiday visas.

Consequently, the Court imposed the following penalties:

  • $145,800 for the restaurant; and
  • $26,049.52 for Ms Jing Qi Xia.

The case serves as another useful reminder to employers that underpaying staff may attract hefty penalties, which may far exceed the total of any underpayment. It is advisable that employers review their payroll to ensure that they are correctly paying staff in accordance with the Act and any applicable Award or Enterprise Agreement.

If you require legal assistance in relation to wages and employment conditions, please contact the industrial relations team at Lynch Meyer Lawyers on 08 8223 7600.

[i] Fair Work Ombudsman v Xia Jing Qi Pty Ltd & Anor [2019] FCCA 84