Café operators fined over $110k for paying students $8/hr

A Gloria Jeans franchise's owner-operators have been penalised as a result of Fair Work action.
A Gloria Jeans franchise's owner-operators have been penalised as a result of Fair Work action.

The operators of a Melbourne café have been fined a total of $110,500 after paying young, foreign students as little as $8 an hour.

The owner-operators of the Gloria Jeans franchise at Caulfield have been penalised a total of $20,500.

The Federal Circuit Court has also imposed a further $80,000 penalty against their company, Primeage Pty Ltd.

The fines are the result of legal action by the Fair Work Ombudsman investigating a complaint from an employee.

Fair Work inspectors found that 22 casual employees at Gloria Jeans Caulfield had been paid flat rates of $8 to $10 an hour, leading to them being underpaid a total of $83,566 between July, 2011 and April, 2013.

Many of the underpaid workers were international students from non-English speaking backgrounds – a third of them aged under 21.

Individual underpayments ranged from $219 to $17,103.

The employees were back-paid only after the Fair Work Ombudsman commenced its legal proceedings.

Workplace laws relating to issuing of pay slips, providing meal breaks and keeping employment records were also breached.

Chequered history

In his judgment on the case, Judge Grant Riethmuller noted that inspectors had previously found that another company operated by owners had underpaid an employee's entitlements.

Judge Riethmuller said previous conduct would have ensured the owners were aware of their obligations and the seriousness of those obligations – and their failure to implement a proper pay system showed "at best a reckless disregard of the obligations".

The Court found the owners' actions with respect to the underpayments were deliberate, observing that a "conscious decision was made to reduce wages when the business was not producing a sufficient income".

Judge Riethmuller said the impact on the employees had been significant and general deterrence was important, with the restaurant and hospitality industry having been recognised as "notorious for non-compliance".

Worker dissatisfaction queried

The Court dismissed submissions from owners that the employees did not express any dissatisfaction in relation to their entitlements prior to the Fair Work Ombudsman's intervention.

"It is common for employees, particularly in industries where pay rates are low and workforces are largely casual, to be wary of expressing any dissatisfaction for fear that their employment will not continue," Judge Riethmuller said.

Fair Work Ombudsman Natalie James says the Agency made repeated requests for the employer to back-pay the employees before commencing legal action.

James said the Court's decision should send a message to others that blatantly underpaying minimum entitlements is a serious matter and would not be tolerated.

"We treat underpayments of young and overseas workers particularly seriously because they can be vulnerable if they are not fully aware of their workplace rights or are reluctant to complain," she said.

"Successful litigations such as this also benefit employers who are complying with workplace laws, because it helps them to compete on a level playing field."