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Restaurant penalised over $525,000 for cooking the books

Submitted on Thursday, 7th December 2017

The Federal Court of Australia (FCA) has recently penalised a restaurant and three individuals a total of $396,848 for underpaying 85 employees $583,688.68 over a 16 month period.

A Chinese restaurant in New South Wales, was issued with a Notice to produce records and documents, by a Fair Work Ombudsman (FWO) Inspector in September 2014. In accordance with section 712 of the Fair Work Act 2009 (Cth) (FW Act), the Inspector requested, among other things, time and wage records for all employees for the period 1 August 2014 to 11 September 2014.

The sole shareholder and director of the restaurant directed the human resources manager and store manager, to create various documents, including time and wage records and pay slips for 28 employees.

Having reviewed the fabricated records the FWO issued a second Notice to produce original documents.

The FWO calculated during the period 6 July 2013 and 20 November 2014 85 employees were underpaid a total of $583,688.68.

The underpayment of entitlements to employees, comprising 40 floor staff, 40 kitchen staff and 5 cooks, included a failure to pay prescribed minimum adult and junior rates of pay, casual loadings, Saturday, Sunday and public holiday penalty rates, overtime rates, and superannuation contributions.

Upon comparison with the Restaurant Industry Award 2010 (Award), it was uncovered that a large number of employees, the majority of which were from non-English speaking backgrounds and working in Australia on visas, were paid as little as $10 per hour.

The FCA stated the records initially provided “were entirely reconstructed to give the appearance of compliance and were entirely different from the real records kept in the usual course of business”.

According to the FWO, the fabricated records “made a fictitious representation of the gross or net amounts paid to, the rate of remuneration paid to, the number of ordinary hours worked by and, in some cases, the number of overtime hours worked by the employees to which those records related”.

The conduct, which the FWO asserts “constituted a serious and systemic failure to afford employees even their minimum entitlements” under the FW Act and the Award, resulted in penalties being imposed. When assessing the penalties to impose the FCA noted “the underlying conduct was essentially criminal in nature, evidently designed to conceal underpayment”. The business was penalised $301,920, the sole shareholder and sole director was penalised $54,672 and the store manager was penalised $18,496.

Disregarding the HR manager’s argument she should be held less culpable as she was simply adhering to the boss’s directions, the FCA imposed a penalty of $21,760 for her role in the falsification of records and failing to ensure employees were receiving the appropriate wages.

In closing the FCA noted “the importance of ensuing compliance with the record keeping requirements under the FW Act is certainly made clear by this case. The decision of the Parliament to increase penalties for cases such as this appears entirely warranted”.

Understand your minimum obligations by attending our Know your award training course. The program will increase your knowledge of common clauses within modern awards, and assist in classifying your employees within the modern award system to ensure they receive the correct wages and entitlements.

Written by Benjamin Cirona

[2017] FCA 1301

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