Day Spa Operator Admits to Breaches of Workplace Laws

Thursday 25 July 2019 @ 2.12 p.m. | Industrial Law | Legal Research

In a recent  Media Release, the Fair Work Ombudsman (the “FWO”) has announced that a day spa operation has back-paid $65,939.87 to 13 employees after admitting he made unlawful deductions from their salary and under-paid penalty rates and annual leave entitlements in contravention of both the Fair Work Act 2009 (Cth) (the “FW Act”) and the Hair and Beauty Industry Award 2010. Sea One North Pty Ltd (trading as Endota Spa Sydney), is a franchisee of Endota (No 1) Pty Ltd, (trading as Endota Spa), which markets itself as Australia’s largest day spa and employs over 1,000 employees in over 100 spas. The affected employees were foreign nationals from various countries including Poland, Ireland, Britain and Japan.

Background

The FWO investigated Endota Spa Sydney after it received requests for assistance from two skilled 457 Visa holders, who alleged that the company was making unlawful deductions from their pay to cover visa-related costs.

During the investigation, Fair Work inspectors ("inspectors") found that between 1 May 2014 and 7 February 2018 the company made unlawful fortnightly deductions from the pay of 13 workers who were holding 457 Visas, totalling $58,025.

The Unlawful Deductions

Endota Spa Sydney and Chris Barbour (its director) deducted $250 per fortnight from the workers’ pay.  The deductions stopped once the costs of the workers’ visa sponsorship process had been reached, which could be as much as $7,000 for an individual worker.

This amount was withheld from the worker’s pay and Mr Barbour promised it would be repaid after they completed a specified employment term with Endota Spa Sydney. As disclosed in the Court-Enforceable Undertaking (the “EU”):

“… The deductions purported to operate as means of security in case the employee left suddenly. The Company would reimburse a percentage of the money periodically as the employment progressed. If the employee did leave suddenly, they would forfeit the balance held as security.”

According to the EU:

“… The Company has provided evidence and assurances to the FWO that, as at November 2017, it ceased its practice of making 457 Visa Deductions and is now compliant with s 324 of the FW Act [Fair Work Act 2009]”.

Investigation by FWO

Inspectors also recovered $7,914.87 in unpaid penalty rates and annual leave entitlements. The company has back-paid all workers in full for the unlawful deductions and under-payments, and has co-operated fully with FWO throughout the investigation process.

Sandra Parker, Fair Work Ombudsman said deducting pay from workers’ salary was only allowed in limited circumstances and must be principally for their benefit:

“Businesses can’t use deductions from workers’ salaries as a bargaining chip to keep them employed in the business. Endota Spa and Mr Barbour have acknowledged their conduct breached the law and we will keep a close eye on their conduct moving forward to ensure they’re meeting their obligations under workplace laws. This significant back-payment bill should also serve as a warning to all employers that it is not acceptable to underpay migrant workers, or make unlawful deductions. Employers who do this will get caught.”

The Enforceable Undertaking

The Media Release reports that Endota Spa Sydney and Chris Barbour have signed the EU with the FWO after admitting to the breaches. The company is compelled to implement audits across its six NSW spa centres to ensure employees are receiving their correct entitlements.

The company must also ensure all managers complete workplace relations training, and will also make a contrition payment of $10,000 to the Commonwealth Government’s Consolidated Revenue Fund. The EU will expire on 30 June 2021, unless it is breached.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

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