Restaurants and cafes are being targeted: who will be the next victim?

Restaurants and cafes are being targeted: who will be the next victim?

The Fair Work Ombudsman is targeting restaurants and cafes after uncovering widespread wage underpayments in the industry. And the fines are massive. For example, just this month a burger restaurant in Melbourne (Burger Buzz) was fined more than $300,000 for underpayment of wages, which excludes the cost of repaying the underpaid wages.

In April 2018, a number of media outlets were reporting on wage underpayments at the Vue Group, which includes Vue De Monde, one of Melbourne’s most prestigious restaurants. Six former staff members claim they were regularly required to work 50 or more hours per week but they were only paid for 38 hours. There is an expectation, for salaried staff, that they work “reasonable additional hours” above their ordinary hours of 38 per week. Their salaries are set up to compensate them for this (i.e. with no additional overtime payments) and this is a common and acceptable practice.

But the idea of a salary is that employees are generally paid well above the applicable Award (in the case of the Vue Group, apparently, salaries were 25% above the award), so that any additional work hours (above 38 hours per week) are compensated by their above Award salary. But this is not the case where salaries are close to the Award and also where there is an expectation that week-in-week-out employees are working 50 or more hours per week. The questions that need to be asked are: do the additional payments (above the Award) cover all the over-time being worked? And, does an expectation to work in excess of 50 hours per week, constitute “reasonable additional hours”?

Sure, there’s always going to be peaks, emergencies, and unexpected problems (such as staff not turning up for their shifts), where it’s reasonable to expect employees to work extra hours. But that’s different to an ongoing expectation that employees will work 50+ hours per week, every week, with no additional compensation, and with salaries only 25% above the award.

The claims of underpayments at the Vue Group follow on from George Colombaris’s restaurant group having to pay more than $2.6 million to reimburse staff for underpayments.

It’s not just these larger restaurant groups that are being fined. Almost every week the media is reporting on underpayments of wages in various restaurants and cafes. And these businesses are paying a massive price, in fines, and from lost business resulting from the bad publicity.

The risks facing the hospitality industry
Right now, anybody operating a restaurant or café is a target. Fines for underpayment of wages have increased dramatically, as you can read about here, and this industry is being targeted by the Fair Work Ombudsman, by unions, and by State governments. 

In the last two years, restaurants, cafés and takeaway food outlets accounted for 29 per cent of the Fair Work Ombudsman’s prosecutions. While hospitality industry workers make up 7.2 per cent of the labour market, they account for more than 25 per cent of the underpaid workers uncovered by the Fair Work Ombudsman. It seems the Fair Work Ombudsman can’t keep up with all the breaches, so now there is pressure on governments to do more. Following on from a union campaign, endless media stories naming and shaming restaurant and café owners, and growing community anger, there is growing pressure on the government to do more. In Victoria, the Andrews government is planning to introduce laws targeting employers who underpay wages, with jail terms of up to 10 years.

But they agreed to the lower rates!
A café in Melbourne was recently in the media for underpaying its workers. The employees had signed a piece of paper by which they agreed they would not receive penalty rates on weekends. The owner was under the impression that because the employees had signed the piece of paper, it was ok. It’s important that business owners understand that you can’t pay an employee below the Award, regardless of what they sign.

July Award changes: an opportunity to get your house in order
From the first full pay period in July, pay rates for all Awards will increase. At the same time, penalty rates for Sundays and Public Holidays in some Awards will reduce, including the:

  • Restaurant Industry Award 2010;
  • Hospitality Industry (General) Award 2010; and
  • Fast Food Industry Award 2010.

With the changes to pay rates from July, it’s a good time to review your employee pay rates and employment contracts to make sure you are compliant with employment laws.

Why have employment contracts? Here’s 10 reasons.

There’s a fast and affordable way to ensure your business is compliant
We can advise on pay rates and work with you to develop a strategy to ensure your ongoing compliance with  employment laws. It’s piece of mind. This could include implementing new contracts of employment for your employees, if required. We organise letter templates and employment contract documents for each type of employment (casual, permanent part-time, and full-time). Your business can then use these templates ongoing. Alternatively, you can call on Girardi HR to personalise each of your contracts, at a low cost.

After set up of the templates, we have a number of clients that engage our services to put together employment contracts for new employees, to confirm promotions, and following pay reviews.

You might be surprised to find out how affordable it is to ensure you are complying with employment laws.

To arrange a free, confidential discussion and quote, contact us at or call 0421 085 546.

John Girardi

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