Employer fined for underpayment and record-keeping failures

The Federal Court of Australia heard that 85 Degrees Coffee Australia, which operates several retail stores and factories, hired eight employees as ‘student interns’, after its parent company arranged for a Taiwanese university’s students to gain work experience.

The Fair Work Ombudsman (FWO) alleged that between July 2016 and June 2017, the employees were underpaid amounts ranging from $50,213 to $58,249 each and failed to keep employment records.

The records that the employer failed to make and keep for seven years included:

• a record that specified whether the employees were employed on a full-time, part-time, or casual basis
• a record of the number of hours of overtime worked by each employee
• a record that specified the employee’s name, the name of their employer, and the date which employment began
• a record that specified the gross and net amounts paid to the employee, including any bonuses paid
• a record that specified any leave that the employee took and the balance of their entitlement to any leave from time to time.

The employer also failed to provide employees a pay slip within one working day of being paid and provide a copy of the Fair Work Information Statement.

The employer failed to pay the correct penalty rates for overtime, weekend work and public holidays under the General Retail Industry Award 2010 (which was in effect at the time).

A year earlier, the company had entered into an enforceable undertaking (which is a written agreement between the FWO and an employer who has not followed an Australian workplace law), over the same issue of failing to pay minimum wages and entitlements and keep records and issue payslips.

After initially denying responsibility by shifting the blame to their parent company in Taiwan, the employer paid each employee their outstanding entitlements, excluding superannuation, in January 2021, totalling $429,393.

FWO claim

The FWO claimed that employers in general need to be deterred from gaining a competitive advantage by significantly underpaying staff and discouraged from exploiting overseas workers. The FWO also argued that the employer had breached their obligations under the Fair Work Act 2009 (Cth) (FW Act) in the past and had received advice about employee entitlements following a National Retail Association audit.

Employer claims ignorance

The employer told the Court that the issue arose due to a ‘disconnect between the requirements of Taiwanese law and Australian law’ rather than ‘an attempt at profit maximisation and tax minimisation.’

Outcome

The Judge rejected the employer’s plea of ignorance, particularly considering the previous enforceable undertaking.

The employer was fined $475,000 for failing to:

• record employment details and entitlements;
• issue payslips within one working day of paying employees; and
• pay the employees minimum award rates, including penalty and overtime rates, and superannuation.

This is the FWO’s second-largest court penalty against a single company. FWO Sandra Parker said that this case “sends a clear message that the exploitative conduct we have seen in this matter will not be tolerated in any Australian workplace.”

Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2022] FCA 1317

Lesson for employers

This decision serves as a reminder to employers of the importance of complying with their obligations under the FW Act to provide payslips and maintain accurate employment records.

The FW Act and Fair Work Regulations require that certain information needs to be kept for each employee. A list of records and information that an employer must keep can be found on the FWO website: Record-keeping - Fair Work Ombudsman

Employers can also confirm that their employees are receiving the correct pay rates by reviewing the relevant award on the FWO website: List of awards - Fair Work Ombudsman