You don't have to be a Masterchef to slip up!
Posted on August 02, 2019
The Fair Work Ombudsman (FWO) recently announced that celebrity Chef George Calombaris’ hospitality empire ‘MAdE Establishment Group’ would backpay $7.8 million in wages and superannuation, plus a $200,000 “contrition payment”. The announcement followed an investigation into underpayment of wages affecting approximately 500 employees over 6 years across the restaurant chain.
Calombaris was a director of the Group from 2008-2018 and will now be forced to use his high profile platform to voice the importance of compliance with workplace laws as part of an enforceable undertaking with the FWO.
Representatives of MAdE claimed that the complexity of the Hospitality Industry (General) Award 2010 contributed to the Group incorrectly classifying staff. However misinterpretation of an Award is no excuse for non-compliance, with the FWO finding that you if you can’t handle the heat, you should stay out of the kitchen.
The investigation revealed that many staff, particularly casual employees, had indeed been wrongly classified.
Importantly, it was also found that significant underpayments were the result of annualised salary arrangements being incorrectly applied, meaning the affected employees were not paid overtime and penalty rates. This is a common theme in underpayment of wages claims.
This case serves as a good reminder to employers to vigilantly comply with workplace laws. It also highlights the importance of having a properly drafted employment contract when purporting to pay an ‘over award’ annualised salary to absorb or ‘set-off’ Award entitlements.
Wage rates are governed by the National Employment Standards, Modern Awards, Enterprise Agreement or Workplace Determinations.
A failure to comply with the above is a civil penalty, which can be up to:
- $12,600 per contravention for an individual; and
- $63,000 per contravention for a company
The penalties are even greater for 'serious contraventions', which is where the underpayment is found to be part of a systematic pattern of conduct. In such cases the penalties are:
- $126,000 per contravention for an individual; and
- $630,000 per contravention for a company.
Also, even comparatively minimal underpayment claims can result in large penalties. For example, in a recent decision of Zhang v Duo Duo Rice Noodle Pty Ltd & Ors [2019] SAET 140, the employer was fined $150,000 for an underpayment of wages claim totalling $25,243.20. Each director was also ordered to pay a penalty of $40,000.
The above is a timely reminder given that as of 1 July 2019 the national minimum wage and the modern award minimum wages increased by 3%. Employers should review existing wages to confirm that they comply with the current rates.
Please contact the workplace relations team at Lynch Meyer Lawyers on 08 8223 7600 if you require assistance with reviewing wage rates or employment contacts.
