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October 2019 HRM magazine 37
Recent troubles in the
show underpayment can
BY KARL ROZENBERGS, PARTNER , AND
MELINDA BELL, SPECIAL COUNSEL,
HALL & WILCOX
asterChef judge George Calombaris’s
$7.8 million in underpayments put
wage theft back in the spotlight, and
the subsequent penalties extended far beyond
However, as Calombaris found out, it is not
only the corporate employer who is at financial
risk in situations of non-compliance. Individuals
involved in a contravention, including directors,
HR managers and professional advisers, can
also be personally penalised if they have been
‘knowingly involved’ in a contravention.
A recent report from the Australian Payroll
Association shows payment errors are quite
common. One in three Australian organisations
admitted to making payment mistakes every
single pay run. The report suggests CFOs and
CEOs rarely know about these errors and says
employees are alerting managers to them in 45
per cent of organisations.
The very public case of MADE
Establishment, of which Calombaris is founding
shareholder and a former director, had issues
dating back to 2015 when the Fair Work
Ombudsman (FWO) issued the company with a
letter of caution concerning the underpayment
of one of its employees.
Two years later, MADE self-reported to the
FWO after identifying failures to correctly
pay its employees from 2011-2017. The FWO
commenced an investigation into some of
MADE’s group of companies and extended its
investigation to include restaurants operated by
Jimmy Grants Pty Ltd, as it and MADE have
common shareholders and directors.
The investigation uncovered underpayment
totalling $7,832,953 for 515 former and
cu rrent employees at MADE restaurants, and
$16,371 for nine employees at Jimmy Grants.
The underpayments resulted from either
paying employees annualised salaries and
failing to ensure they were above minimum
requirements once overtime and penalty rates
were determined, or not paying employees
(particularly casual staff) at the correct
classification under the Restaurant Industry
In addition to $7.83 million in back-payment,
the FWO’s Enforceable Undertaking (EU)
requires MADE to pay a $200,000 contrition
payment. MADE must self-fund ex ternal
auditors to check workers’ pay and conditions.
They are also required to fund public written
apologies on social media, their website and in
prominent positions in the media.
Calombaris also has personal obligations
under the EU, including seven public speaking
engagements to educate the restau rant industry
about workplace law compliance. The speeches
must be “communicated in a manner that is
consistent with George Calombaris’s usual
language and style”.
Implications for employers
While navigating employment laws and
industrial instruments can be trying, the MADE
example demonstrates how important it is for
employers to understand their obligations and
put measu res in place to prevent breaches. The
following is recommended for organisations:
• Ensure you have robust systems and
processes in place to monitor compliance
with applicable legislation and industrial
instruments, such as modern awards.
• Consider regular audits, particularly if
operating a franchise or like model.
• Have processes in place to update HR and
payroll systems to ensu re wages, allowances
and superannuation are updated in line with
legal requirements (such as annual minimum
• Regularly (and at least yearly) conduct
reconciliations to ensure annualised salaries
are sufficient to compensate for minimum
entitlements under applicable awards and
make payments for any shortfalls detected.
• Ensure all employees with responsibilities for
HR and payroll are properly trained.
Other than costing a company its reputation,
underpayments or non-compliance can cost
organisations up to $63,000 for minor breaches
and up to $630,000 for serious contraventions.
With the potential for criminal penalties on
the table, it’s worth taking the time to ensu re
your business is compliant. Your name, bank
balance and potentially your freedom could be
on the line if you don’t. •••
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19/9/19 4:34 pm
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