Subway Franchisee to Face Court over Alleged Underpayment of Employee

Wednesday 12 July 2017 @ 9.47 a.m. | Industrial Law | Legal Research | Trade & Commerce

The franchisee of two Subway outlets in Sydney is facing Court for allegedly short-changing a worker more than $16,000. The Fair Work Ombudsman (the Ombudsman) has commenced legal action in the Federal Circuit Court against Danmin “Irene” Zhang, who, with her husband, owns Subway franchise outlets at Artarmon and Stanmore, Sydney. Also facing Court is the company Ms Zhang and her husband operate, G & Z United Pty Ltd.

The Allegations

The Ombudsman alleges a Chinese national was underpaid a total of $16,345 for work performed across the Artarmon and Stanmore Subway outlets between October 2014 and April 2016, except for a four-month period where she returned to China.

The worker, a casual food and beverage attendant aged in her late 20s, was in Australia on a Skilled Nominated (subclass 190) visa at the time. Ombudsman inspectors investigated after she lodged a request for assistance.

It is alleged that Inspectors found she had been paid flat rates of $14 to $14.50 for all hours worked, leading to underpayment of her minimum hourly rates for ordinary hours, casual loadings and penalty rates for evening, weekend and public holiday work.

Conditions under the Award

Under the Fast Food Industry Award 2010, she was entitled to receive minimum rates of more than $18, plus casual loading, for ordinary hours and penalty rates of up to $52.22 on public holidays.

A special clothing allowance was allegedly also underpaid and laws relating to record-keeping, pay slips and requirements to inform employees about their terms of engagement and classification were allegedly contravened. The worker was back-paid in full earlier in 2017.

It is alleged the underpayment of the worker occurred despite Ms Zhang having received summaries of applicable minimum Award wage rates from the Independent Purchasing Company Australasia (IPCA), a company which works closely with the Subway franchisor to help ensure Subway franchisee outlets meet compliance and branding requirements.

It is alleged Ms Zhang and her company deliberately undercut the wage rates by a significant amount despite the summaries provided by IPCA being displayed on the walls of the Artarmon and Stanmore  Subway outlets.

Reaction from the Ombudsman

Fair Work Ombudsman Natalie James says legal action has been commenced because of the alleged blatant exploitation of a vulnerable overseas worker. G & Z United Pty Ltd faces penalties of up to $54,000 per contravention and Ms Zhang faces penalties of up to $10,800 per contravention.

Ms James says exploitation of workers in franchises continues to be a concern for the Ombudsman and she welcomed the Government’s proposed new laws relating to underpayments within franchise networks.

In April 2017, Ms James made a submission to a Senate Inquiry supporting the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (the Bill, currently in the Senate). She stated that the package of measures contained in the Bill will go some way to giving the Ombudsman the tools to combat the most serious worker exploitation. She also commented that in an environment where the public are demanding greater transparency and accountability by well-known franchise brands, it is crucial that franchise service networks are proactive in ensuring they have systems in place to promote and ensure compliance.

The Ombudsman remains keen to work with businesses that want to make a commitment to compliance with workplace laws part of their brand:

“With the Government proposing new laws to capture franchisors that fail to deal with exploitation of workers by their franchisees, the Fair Work Ombudsman’s door is always open.  We are always willing to work with any franchise ready to take action to show it takes compliance with workplace laws throughout its network seriously. Earlier this year [2017] Foodco, the owner of the Muffin Break and Jamaica Blue café brands, entered into a compliance partnership with my agency to help promote compliance across more than 300 locations and to protect the 3000 workers engaged by franchisees in its networks. Foodco’s brands did not have a significant history of non-compliance and its compliance partnership was a result of the company approaching my agency seeking assistance to prevent the exploitation of its workforce. We encourage other businesses to follow suit.”

Comment from the Franchise Advisory Centre

Jason Gehrke, Director at the Franchise Advisory Centre, said the allegations could be a case of “willful mischievousness”:

“The franchisee is accused of ignoring the advice of the third party engaged to assist the workplace around the correct rates of pay, to the extent where they had the rates on their walls and they still didn’t pay them.”

Despite third party advise being in place, he believes there can be some cases “where you can lead a horse to water but you can’t make it drink”. Mr Gehrke says he expects to see less and less of this alleged contravention from franchisees moving forward as the issue continues to gain traction and attention from the government with the introduction of the Bill into Parliament in 2017.

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Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Cth) – As published on TimeBase LawOne Service

Subway franchisee allegedly underpaid worker over $16,000 despite third-party advice on minimum rates –

Subway franchisee faces Court over alleged deliberate underpayment of Chinese worker – FairWork Media Release

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