26 November 2024

The Fair Work Ombudsman has secured penalties totalling $132,840 against the Australian franchisor of the Chatime bubble tea chain and its managing director after underpayments of more than $160,000 of vulnerable employees at 19 stores across Sydney and Melbourne.

The Federal Circuit and Family Court has imposed a $120,960 penalty against Chatime Australia Pty Ltd, which is the franchisor of dozens of Chatime outlets around Australia and also directly owns and operates a number of Chatime outlets.

The Court has also imposed a $11,880 penalty against Chatime Australia managing director Chen ‘Charlley’ Zhao for his involvement in some of the underpayments.

Between August and December 2016, Chatime Australia paid employees at stores it directly operated flat rates as low as $7.59 to $24.30 per hour and adopted a practice of not paying Fast Food Industry Award entitlements such as loadings and penalty rates.

This resulted in 152 employees – including 41 junior workers aged below 21 and 95 visa holders – being underpaid a total of $162,533. Many of the visa holders were international students.

Fair Work Ombudsman Anna Booth said the substantial penalties send a clear message that franchisors and the individuals who manage them will be held accountable for breaching employees’ minimum entitlements.

“The conduct in this matter, by a franchisor of this size, is completely unacceptable. We expect franchisors to not only pay their own staff correctly but to take responsibility for ensuring that their franchisees comply with the law,” Ms Booth said.

“The large number of vulnerable employees underpaid in this matter was concerning. We treat cases involving underpayment of junior workers and visa holders particularly seriously.

“We also continue to prioritise compliance in the fast food, restaurants and cafes sector where a high proportion of vulnerable workers are employed,” Ms Booth said.

“Any workers, including visa holders, with concerns about their pay or entitlements should contact us.”

The FWO discovered the underpayments during proactive audits.

During these audits, Fair Work Inspectors found workers were underpaid the ordinary hourly rates, overtime rates, casual loadings, and penalty rates for weekend, night and public holiday work they were entitled to under the Fast Food Industry Award 2010.

Annual leave entitlements and minimum engagement pay were also underpaid.

Mr Zhao was involved in the underpayment of casual loadings and weekend penalty rates.

The underpaid workers worked at 10 Chatime outlets across Sydney in Bondi Junction, Chatswood, Wetherill Park and the CBD; and nine Chatime outlets across Melbourne, in Dandenong, Doncaster, Glen Waverley, Cheltenham and the CBD.

Individual underpayments ranged from $58 to $3,990. The underpayments have been rectified in full as a result of the FWO’s proactive audit.

In his judgment, Judge Nicholas Manousaridis rejected Chatime Australia’s submission that the contraventions should not fall into the category of being either “serious” or “substantial”, and found that the matter involved a large number of employees who were underpaid basic Award entitlements.

Judge Manousaridis found that the underpayments were the result of “ignorance and inattention” and that there was a need to send a message that employers who “fail to ensure” employees are paid their minimum entitlements will face “substantial penalties”.

In imposing the penalty against Mr Zhao, Judge Manousaridis found there was a need to deter other company managers from similar conduct.

“Penalties should be set to signal to persons who manage companies that they will be met with substantial penalties if, through their neglect, they permit companies they manage to contravene terms of an award or any other industrial laws or instruments that might apply,” Judge Manousaridis said.

The Fair Work Ombudsman filed 146 litigations against employers involving visa holder workers, and secured nearly $23 million in penalties in cases that have included visa holder workers, in the seven financial years to June 2024.

The FWO has resources for visa holders, who have the same workplace rights as all other workers. The Australian Government has introduced the Strengthening Reporting Protections Pilot and Workplace Justice Visa Pilot to strengthen protections for eligible visa holders experiencing workplace exploitation.

Employers and employees can visit www.fairwork.gov.au or call the Fair Work Infoline on 13 13 94 for free advice and assistance. An interpreter service is available on 13 14 50.

The FWO also has an online anonymous report tool, including options to report in languages other than English. Employees can also seek information from their employer or their union, if they are a union member.

The FWO has targeted resources to help both franchisors and franchisees ensure they are compliant with their legal obligations.

Small businesses can find targeted resources at the Small Business Showcase and information is available for employees and employers at our fast food, restaurants & cafés, young workers, and junior workers webpages.