In only the second case against a Franchisor since the implementation of the Protecting Vulnerable Workers Act changes to the Fair Work Act, Bakers Delight Franchisor is facing not only the prospect of paying staff of its Franchisees more than $640,000 in backpay because the Franchisee underpaid them, it is also facing company and owner penalties that can run into the millions as it is accused of failing to prevent its Franchisees from underpaying staff.
The Franchisor comissioned an audit on a Multi Site Operator Franchisee in Hobart who operated 3 stores. The Franchisor found non compliances and instructed the Franchisee to correct them.
“The reason the Fair Work Ombudsman is pursuing Bakers Delight for only half of the underpayments is that they are only pursuing them for the underpayments that occurred after 2019, after the Franchisor conducted the audit and identified the issues. Where the Franchisor fell down on this one is that the issues were identified, but they did not follow up with the Franchisee to ensure that the issues were corrected appropriately, so they, according to Fair Work, allowed the breaches to continue and are therefore responsible for paying for them”, explains ACAPMAs Elisha Radwanowski.
The Ombudsman alleges that Bakers Delight is liable for underpayments made after February 2019 because it “failed to take preventative action – and therefore it either knew or should reasonably have known further underpayments would occur”.
“The Franchisor is on the hook for more than just the underpayments with this one though, the Fair Work Ombudsman is pursuing penalties for all of the breaches as well. Each of the serious breaches comes with a penalty of up to $660,000 for the business and $133,200 for the owners, and each individual pay cycle that includes and underpayment is a breach for each individual worker that is underpaid. Given the magnitude of the underpayments at $1.25 million and the fact that some of the underpayments are as low as $74 the full quantum of penalties the Franchisor business and owners are facing is considerable”, continues Elisha.
Offences committed “knowingly” are considered “serious” under s557A of the Fair Work Act, and s539 provides for tenfold increase in penalties for serious contraventions.
The underpayments are primarily as a result of failing to provide employees with overtime payments listed in the expired enterprise agreement and failing to increase the base rate in line with the General Retail Award.
Speaking about the case Acting Ombudsman Kristen Hannah says the FWO “will use all laws and powers at our disposal to ensure franchisors are held to account when they fail to address non-compliance in their networks”.
“In this case, we allege Bakers Delight Holdings was aware many young workers at these three Hobart stores had been underpaid but failed to take reasonable steps to prevent further underpayments occurring.
“All business operators need to be aware that the FWO prioritises protection of vulnerable workers, including young workers.”
Learning for all businesses
Employment compliance is not something that can be put off for later. It is not something that will sort itself out. Nor is it something that is ‘someone else’s’ problem. All parties in the value and customer chain need to commit to compliance and then actually make the time to correct those minor non compliances that crop up from time to time, particularly in small and medium businesses where the responsible person is often working in the business”, continued Elisha.
“There is no excuse, all business, all sizes, all situation – everyone has been on notice for a long time now, there is nothing more important than getting employment compliance right. Paying staff properly, keeping appropriate records and maintaining compliant systems is the bare minimum, the licence to operate in business in Australia. This is not always easy, but it is necessary and required, and compliance being ‘too hard’ is no excuse”, concluded Elisha.
Here to Help
This article is general in nature and covers things to consider, implement and watch out for in your business. It is provided as general advice and you should seek further advice on your situation. ACAPMA Employment Professionals are available to assist ACAPMA members via email@example.com . ACAPMA membership is affordable at only $860inc GST per year for a single site and valuable with sites gaining HR advice support and representation as well as a raft of other benefits and discounts. Visit: https://acapma.com.au/membership/ to learn more or to apply for ACAPMA membership.
Elisha Radwanowski BCom(HRM&IR)
Executive Manager for Employment and Compliance