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The Latest Sting in Underpayments

The Federal Circuit Court of Australia has ordered Chatime Cinema, along with its two directors, to pay a total of $57,200 in penalties.

The case was brought by the Fair Work Ombudsman against Chatime Cinema, being a former Chatime bubble tea franchisee. The main arguments pushed by the Ombudsman were that Chatime Cinema had failed to pay employees minimum weekly wages, casual loading, public holiday entitlements and special clothing allowances. There were allegations that the two directors were accessories to these contraventions.

Chatime Cinema and its directors agreed that they had underpaid employees a total of $46,372.94.  This occurred as a result of employees being paid a flat rate between $13.00 and $18.55 per hour and $28.60 and $45.18 per hour on public holidays.

Vitiating Factors

In deciding the penalties to be awarded, the Court can have regard to a range of factors. In this case, the Court took into account the following:

  1. Chatime selling its business and using the funds to repay the company debts and staff wages;
  2. The directors apologising for the underpayments;
  3. The directors assisting with the Ombudsman’s investigation;
  4. The directors had relied on the assistance of the franchisor because of their inexperience; and
  5. There had not been previous contraventions.

In a climate where underpayments appear to be common, we have seen a shift in stricter penalties being imposed by the Courts. The higher penalties are likely to be ordered where the underpayments occurred over a prolonged period. For example, the Court has recently accepted the class action against Dominos which claims that it failed to pay its employees the correct rates during June 2013 and January 2018. That case involves the same award and industry as the Chatime Cinema case.

What you can Do

To ensue that you are paying your employees correctly, we urge you to immediately:

  1. Obtain advice as to the award coverage for your employees;
  2. Keep accurate records of employee hours and rates of pay;
  3. If you receive a complaint from an employee, immediately conduct an internal investigation;
  4. Consider whether your employees should be on salaries, rather than hourly wages.

If you need assistance with your company payments, please contact an experienced employment law team member at Taurus Legal Management on (03) 9481 2000 or at  info@tauruslawyers.com.au.

Posted by Taurus Legal Management