FWO Surprise Audits On Melbourne Hospitality Businesses

Published August 02, 2019 (last updated July 29, 2020) -

Since the George Calombaris $7.8 million underpayment scandal news broke, hospitality employers around Australia have been put on notice to be vigilant around how they pay their staff.

The Fair Work Ombudsman (FWO) inspectors conducted surprise audits on several bars in Melbourne’s popular Chapel Street district this week to check the businesses were complying with Australia’s workplace laws.

The bars included: Electric, Holy Grail, Wonderland, Lucky Liquor, La La Land (Windsor), Jane Do Bar.

The FWO undertook the audits in response to allegations that workers at the venues are being underpaid hourly wages, denied workplace entitlements such as overtime and penalty rates, and being paid cash-in-hand off the books. The allegations came from approximately 20 enquiries, six anonymous reports and other complaints made about the La La Bar Group.

As part of the audits, Fair Work Inspectors interviewed staff and management of the bars, and reviewed documents including staff pay slips, rosters and employment records.

FWO Sandra Parker said the audits would help determine if there are workplace issues within the La La Bar Group that need addressing.

“The intelligence we have received about potentially unlawful treatment of staff at the La La Bar Group is concerning which is why we have taken this action,” Ms Parker said.

Senior Employment Relations Adviser at Employsure, Michael Wilkinson, said the heat was on the hospitality sector to ensure they are paying their staff correctly.

“While systematic underpayment is a serious matter, it’s honest errors and a lack of understanding of entitlements that puts smaller hospitality businesses at risk,” Wilkinson said. “Yet ignorance is not an excuse in the eyes of the FWO, which will pursue cases of underpayment in an attempt to reclaim any unpaid wages.

“It’s no secret that we have one of the most complex workplace relations systems in the world, and hospitality employers are especially prone to making wage errors,” he said. “Between casuals, part-time and full-time workers, along with rising minimum wages, various penalty rates and Award entitlements, it’s a merry-go-round and they can find it hard to navigate.”

He noted that 30 per cent of calls from clients in the hospitality sector relate to basic employee entitlements, adding that it is clearly an area where they struggle. He also noted that FWO will be targeting fast-food, restaurants and cafes as part of its compliance and enforcement action over the coming 12 months, which he says is a cautionary tale for all employers in the sector.

Ms Parker confirmed the hospitality sector was in the FWO sights:

“Targeting underpayments in the hospitality sector is a priority for the FWO. We regularly conduct surprise audits as part of our investigations to help us get to the bottom of serious allegations.”

“We will carefully review the evidence we have gathered, including during last night’s audits, to determine if there are any breaches of Australia’s workplace laws.”

“If we do uncover breaches, we will work to recover any entitlements owed to staff and also consider what enforcement action is necessary,” Ms Parker said.

The broader hospitality industry, including restaurants, fast food outlets and cafes, was again over-represented in contacts to the FWO last financial year, with 18 per cent of workplace disputes recorded, a third of court actions and almost 40 per cent of all anonymous reports, despite representing just seven per cent of the workforce. More than $4 million was recovered by the FWO for workers from fast food, restaurant and café businesses.

From his experience working with small and medium sized businesses at Employsure, Mr Wilkinson says, the hospitality industry is facing some of its toughest times.

“In the past decade, wages are up by 36 per cent. Rent, historically increases 3-5 per cent yearly, but now rent in popular districts are up by an average of 35-60 per cent per year. Food and beverage costs continue to rise. Competition is fierce with the app-based food delivery entrants, with the added costs of commissions taken from revenue before any other wages and costs are paid. On top of this, all the other costs of doing business, like insurance, advertising, internet and technology solutions also go up each year.

“Yet, in the same period, CPI is up only 21 per cent and the price of a cup of coffee has barely risen.

“A decade ago, restaurants enjoyed an average of 15 per cent profit margins. Now they are lucky to make between 2-5 per cent, with many just breaking even or worse, forced to close.

“It’s a tough time for the hospitality and food sector around the country,” he said.

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