Sushi restaurant penalised for ‘serious contraventions’ of workplace laws

In the recent decision of Fair Work Ombudsman v Delishesco Pty Ltd,[1] the Federal Circuit and Family Court has handed a Brisbane restaurant over $355,000 in penalties for ‘serious contraventions’ of the Fair Work Act 2009 (Cth) (Fair Work Act).

This is among the highest overall amounts of penalties secured by the Fair Work Ombudsman (FWO) under the provisions introduced by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth) (Vulnerable Workers Act).

Background

The respondents, Delishesco Pty Ltd and its sole director, operated a sushi restaurant in Brisbane. Despite having been formally cautioned for similar conduct previously, the respondents deliberately underpaid 34 employees and knowingly provided false records to the FWO during its investigation.  

The contraventions included failing to pay minimum hourly rates, casual loadings, allowances, overtime rates, and penalty rates under the Restaurant Industry Award 2010 and the Fair Work Act, as well as failing to provide employees with pay slips.

Most of the employees were foreign workers holding temporary visas and some were young workers aged between 19 and 21. Individual underpayments ranged from $92 to $9,588 and the respondents back paid the outstanding entitlements only after the FWO commenced legal action.

‘Serious contraventions’ of the Fair Work Act

The Vulnerable Workers Act came into effect in September 2017, increasing the penalties available under the Fair Work Act for ‘serious contraventions’ of workplace laws and breaches of record-keeping obligations, and strengthening the FWO’s investigative powers.

Under these provisions, a ‘serious contravention’ occurs when:

• an individual or business knowingly contravenes an obligation under a workplace law; and
• this contravention was part of a systematic pattern of conduct relating to one or more persons.[2]

The maximum penalties for serious contraventions are currently $133,200 per contravention for an individual and $666,000 per contravention for a company, ten-times the maximum penalties that would normally apply for contraventions of workplace laws.

‘Deterrence looms large’

The Court found that eight of the contraventions were ‘serious contraventions’ as the respondents had knowingly underpaid the employees as part of a systematic pattern of conduct. The respondent’s disregard for the FWO’s previous warnings demonstrated the deliberate nature of the conduct.

Judge Vasta observed that the employees were ‘apt to being exploited because of their unfamiliarity with the English language and Australian industrial law’, and that ‘to provide false material’ to the FWO was ‘an extremely serious aspect of the conduct’.[3]

The Court imposed penalties of $305,000 against Delishesco Pty Ltd and $50,000 against the sole director, holding that ‘deterrence looms large’ in such a case since ‘the fact that the legislature has enacted such severe maximum penalties demonstrates the serious nature of these contraventions’.[4]

Compliance is key

The decision serves as a warning to businesses that operate in industries with a high proportion of junior or migrant employees to ensure they are compliant with all the requirements of the relevant modern award and the Fair Work Act, including record keeping obligations.

Further, the FWO’s 2022-23 compliance and enforcement strategy targets fast food, restaurants, and cafes as a priority sector, with enforcement strategies including:

• undertaking targeted proactive compliance and education work
• responding to requests for assistance, emerging issues reported through the media (or other sources) and self-reported non-compliance
• implementing new funding measures

Employers should consider seeking support with proactive compliance activity and regulator engagement including:

Pro-active wage compliance audits

The value of proactive audits is tangible. Undertaking a compliance audit will provide insights into how effectively a business’s rostering, time attendance and payroll systems are functioning and highlight areas for improvement in these important compliance tools and safeguards.

Reviewing record keeping protocols

Employers are obliged to make and keep accurate and complete employee records including time attendance data and pay slips.[5] These records must be kept for seven years, and it is best practice to keep these and all other relevant documents, such as employment contracts, in a secure file for each employee.

Seeking support when the regulator calls

If an employer receives any kind of notice from the FWO in relation to wage compliance, it is strongly recommended that they seek legal advice immediately.

[1] Fair Work Ombudsman v Delishesco Pty Ltd [2022] FCC 471 (17 June 2022) (‘Delishesco’).

[2] Fair Work Act 2009 (Cth), s 557A (‘Fair Work Act’).

[3] Delishesco (n 1) [44], [50].

[4] Delishesco (n 1) [43].

[5] Fair Work Act, ss 535-536; Fair Work Regulations 2009 (Cth) regs 3.44, 3.46.