Fair Work Ombudsman v Mamak Pty Ltd [2016] FCCA 2104: Restaurant Operators Penalised For Underpaying Staff
Tuesday 23 August 2016 @ 10.08 a.m. | Industrial Law | Legal Research
The operators of an inner Sydney restaurant who relied on informal market research to set their wage rates, have been penalised almost $300,000 for deliberately short-changing their employees and using false records to try to disguise the underpayments.
Background to the Case
The Fair Work Ombudsman took legal action after an investigation revealed that six employees – five of them visa-holders at the time from non-English speaking backgrounds – were collectively underpaid more than $87,000 when they received as little as $11 an hour between February 2012 and April 2015.
The three respondents were penalised $36,992, $35,360 and $35,360 respectively and their company, Mamak Pty Ltd, has been penalised a further $184,960.
Comment from the Judge
In handing down the penalties, Federal Circuit Court Judge Smith found that the Mamak Malaysian Restaurant on Goulburn Street Haymarket, Sydney - had deliberately ignored its workplace obligations “in order to maximise profit”.
Smith J said at para 52:
“That approach, of course, was taken at the cost of the employees, who, in reality, funded the success of the business.”
His Honour found that the underpayments stemmed from informal market research by the restaurant operators to see what other restaurants were paying their staff.
He also commented at paras 51-52:
“They discovered that there were three approaches – the first were the star-rated restaurants which paid according to the Award, the second were medium restaurants that followed the Award half the time and the third included small restaurants that just paid illegal rates. Mamak took the third approach.
The fact that there are many restaurants in the industry that do not comply with their legal obligations does not exculpate the respondents in any way. In my view, it does the opposite. The point here is that all of the respondents knew that there was an Award but deliberately chose to ignore it in order to maximise profit. That approach, of course, was taken at the cost of the employees, who in reality, funded the success of the business. Although they have now been repaid the amounts that they were owed, Mamak and the other respondents in turn had the benefit of that money over a number of years.”
His Honour said the fact that the underpaid employees did not complain to the restaurant about their wages and agreed to work under the conditions they were offered did not mitigate against the seriousness of the contraventions:
“Not only did the respondents know that the employees were being paid less than their legal entitlements, but they also knew that their records were not kept in accordance with the law.”
Claims of adverse media coverage
The respondents submitted [at para 62] that there was evidence that the publicity surrounding these proceedings had resulted in a downturn in business. The evidence was that, following a media release by the Ombudsman, Mamak experienced an immediate downturn of approximately 20% in the following month.
It was found that the evidence did not support the submission. Apart from temporal proximity, there is nothing to show that the media release had any direct negative impact on Mamak’s business.
Audit ordered by the Court
In addition to the financial penalties, Justice Smith also ordered Mamak Pty Ltd to commission a qualified professional to audit pay practices across all of its restaurants during 2017 and to rectify any underpayments identified.
Reaction from the Fair Work Ombudsman
Fair Work Ombudsman Natalie James, says the Agency is strongly committed to taking pro-active action to improve compliance in the hospitality industry. She says she is focussed on ensuring the Agency does more to ensure culturally and linguistically diverse business operators understand and comply with Australian workplace laws.
Ms James said:
“It is not okay for employers to arbitrarily determine low, flat rates of pay. Researching ‘black market’ wage rates in an industry is not the way to determine how to pay your staff. Minimum wage rates apply to everyone in Australia – including visa-holders – and they are not negotiable. While I understand there are cultural challenges and vastly different laws in other parts of the world, it is incumbent on all businesses operating in Australia to understand and apply Australian laws. To that end, the Fair Work Ombudsman is here to help with free advice and resources in a range of languages.”
Ms James said she was particularly pleased to see the Court taking the provision of false records to Fair Work Inspectors seriously, awarding close to the maximum penalties available under the current laws. She also noted the Government’s commitment to increasing these penalties in its election policies.
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Sources:
Malaysian restaurant operators penalised almost $300,000 after paying staff $11 an hour – fairwork.gov.au
Fair Work Ombudsman v Mamak Pty Ltd [2016] FCCA 2104 (19 August 2016)
