Pizza shop fined for paying workers wrong kind of “dough”
Posted on June 26, 2014
The Federal Circuit Court fined a La Porchetta franchisee and his two companies more than $330,000 after it was found that 111 (mostly teen-aged) employees had been paid in pizza and soft drink instead of their correct wages.
An investigation by the Fair Work Ombudsman (FWO) in 2013 uncovered the extensive underpayments, which ranged from $3 to $25,358. In total, the affected employees were underpaid $258,000 over a four-year period. This shortfall was a result of the employer:
- failing to pay the correct minimum rates of pay;
- failing to pay casual loadings;
- failing to accrue annual and personal leave; and
- failing to pay untaken annual leave on termination.
The above entitlements are contained in civil penalty provisions of the Fair Work Act 2009 (the Act). This means that an underpayment will attract a maximum penalty of $51,000 for a corporation and $10,200 for an individual, per breach. The franchisee, Ruby Chand, argued that he believed he could offset these legal obligations by providing free or half-priced pizza and soft drinks to the employees.
Judge O’Sullivan, however, concluded that “such a practice belongs in the dark ages”.
His Honour went further, stating that:
“...the nature and extent of the conduct involved in this case includes the failure to provide a basic level of entitlements to what on any description would be described as vulnerable employees.”
The Court imposed a fine of $139,507.50 on each of Mr Chand’s two companies (which owned the franchises), and Mr Chand was personally fined $55,803 for his involvement in the underpayments. These amounts were ordered in addition to the back-payment of the underpaid wages.
Take Home Message For Employers
Employers must ensure that they are paying their employees the correct pay rate and entitlements. In the case of employees covered by an Award, this means that the base rate of pay and conditions prescribed therein must be honoured. Award-free employees’ minimum entitlements are dictated by the Act.
Further, while Mr Chand’s argument regarding the offsetting of entitlements may have seemed cheesy (sorry, we had to do it), it is possible for employers to offset or absorb certain entitlements if effected in accordance with the relevant Award or the Act.
Now is the perfect time to review your employees’ pay and conditions as the national minimum wage order comes into operation on 1 July. More specifically, from next week the national minimum wage will increase to $640.90 per week/$16.87 per hour, and modern award minimum wages will increase by 3% (rounded to the nearest 10 cents).
Please contact a member of Lynch Meyer’s Workplace Relations team if you require advice in relation to employee entitlements.
