The operator of two Gloria Jeans coffee franchises has been fined $110,500 by the Federal Circuit Court for paying workers as little as $8 an hour.
Tsinman Fu and Ping Ostrovskih, the owners and operators of Gloria Jeans Caulfield, were each smacked with fines of $17,500 and $13,000 respectively, while their company, Primeage Pty Ltd, was hit with a further $80,000 penalty.
The Fair Work Ombudsman commenced legal action in April last year after investigations uncovered 22 casual employees had been paid flat rates of $8 to $10 an hour, with the underpayments totalling $83,566.
The majority of the workers were international students from non-English speaking backgrounds and a third of them were under 21 year of age. They were owed payments ranging from $219 to $17,103 each.
The investigation also revealed workplace laws relating to pay slips, meal breaks and employment records had been breached.
In labelling the pair’s actions as “deliberate”, Judge Grant Riethmuller found Fu and Ostrovskih had previously been found to have underpaid an employee’s entitlements through another company, Noval Enterprise Pty Ltd.
Riethmuller said as Gloria Jeans franchisees, the pair would have had access to information, advice and assistance in relation to human recourses from the franchisor. He also said Fu’s Bachelor of Business degree from Deakin University was evidence the business owner should have been aware of workplace laws.
“It appears to me that it is reasonable to draw an inference that a person who holds a Bachelor of Business degree would, either through training in the degree, or general knowledge given their obvious interest in the operation of businesses, be aware that there are minimum standards for employees, and of the necessity to ensure that those standards were identified and complied with,” said Riethmuller.
He said the restaurant and hospitality industry was “notorious for non-compliance” and said workers within the industry often felt unable to voice their concerns for fear of losing their jobs.
Maurice Blackburn employment lawyer Jenna Vardi told SmartCompany the need for a wider deterrent in the hospitality industry played a significant role in the judgement.
“The case makes it clear courts will impose significant penalties for underpayments of vulnerable workers and on the business operators themselves,” says Vardi.
Vardi says the Fair Work Ombudsman has pursued a number of cases against businesses that have underpaid vulnerable workers, such as young people and overseas workers, suggesting the area is a priority for the watchdog.
“People will always try to get away with things and rort the system, but the Fair Work Ombudsman has said it will continue to investigate and prosecute employers who do the wrong thing,” she says.
“This is a clear warning to keep on top of procedures and industrial instruments.”
In a statement issued to SmartCompany, Gloria Jeans said the company has “training programs and support systems in place to support Franchise Partners in their business operations”.
“Each Gloria Jean’s Coffees Franchise Partner is responsible for ensuring their business is compliant with employment law, the Fair Work Act and all relevant employment awards,” the company added.
SmartCompany contacted Gloria Jeans Caulfield but did not receive a response prior to publication.
Kirsten Robb is a former journalist at SmartCompany. Previously, she worked at News Corp as a property reporter for Leader Newspapers and the Herald Sun, and holds a Masters of Journalism at Melbourne University.
