Fair Work Ombudsman Takes Coffee Club Franchisee To Court For Underpayment Of Wages

Friday 20 September 2019 @ 1.31 p.m. | Industrial Law | Legal Research

A recent media release from the Fair Work Ombudsman (the “Ombudsman”) has revealed the employment watchdog has commenced legal action in the Federal Circuit Court (the “Court”) against the operator of a Coffee Club outlet in Victoria, alleging two young workers were underpaid a total of more than $15,000 and that the company provided false records to Fair Work inspectors.

Edison Peng and his company JMSL Pty Ltd, which owns and operates the Coffee Club franchise outlet at the Westfield Geelong shopping centre, will face the Court in November 2019.

The Allegations

The Ombudsman alleges two young employees at the outlet were paid flat rates as low as $15 per hour, which resulted in underpayment of the junior hourly rates, casual loadings and penalty rates for weekend and public holiday work they were entitled to under the Restaurant Industry Award 2010, with the alleged underpayments totalling $15,412.

It is also alleged that between May 2016 and August 2017 one of the workers was underpaid $12,910 while, over a three-month period in 2018, another worker was underpaid $2,502.

The FWO Investigation

After being contacted by the two workers, Fair Work inspectors launched an investigation into the underpayment allegations. Mr Peng and his company (JMSL Pty Ltd) is also alleged to have also breached laws during the Ombudsman’s investigation by providing false and misleading records and pay slips to Fair Work inspectors, that overstated the rates the two employees were paid.

Fair Work Ombudsman Sandra Parker said:

“Enforcing compliance with workplace laws in the fast food, restaurant and cafe sector continues to be a priority for the Fair Work Ombudsman. Employers in this sector are on notice that they must pay all employees according to Australia’s lawful minimum pay rates. Employers should be aware that the Fair Work Ombudsman takes allegations of false and misleading records extremely seriously … Any employees with concerns about false records or pay slips should contact us for assistance.”

Potential Penalties for the Alleged Offences

The Ombudsman can seek penalties of up to $12,600 per contravention for Mr Peng  and up to $63,000 per contravention against JMSL Pty Ltd.

Most of the alleged underpayment has been rectified, and the Ombudsman says they are seeking court orders requiring Mr Peng and his company to pay the outstanding amount. The Ombudsman is also making recommendations that the court require Mr Peng to complete workplace relations training through the Fair Work website.

Previous Action against Franchisees

It is the second time in recent years the Ombudsman has taken legal action against a Coffee Club franchisee. In 2017, the Ombudsman secured more than $180,000 in penalties against a former Coffee Club café franchisee in Brisbane for contraventions which included requiring an overseas worker to pay back $18,000 of his wages through an unlawful cash-back payment.

Where to Next?

A directions hearing is set for 12 November 2019 before the Federal Circuit Court (Melbourne).

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