Underpayment in the hospitality industry makes headlines

By 19 April, 2021 No Comments

The hospitality industry has again been in the news with another billion-dollar hospitality empire, Merivale run by Justin Hemmes, being slammed with a class action for alleged ‘systemic wage theft’ of up to $126 million.

The alleged underpayment relates to:

  • full-time salaried employees, mostly chefs and managers, who were rostered to work an average of 55 hours, and often more, without any additional pay; and
  • whether Merivale’s 2009 collective agreement was validly approved and therefore whether that agreement or the Hospitality Industry (General) Award 2010 applied to Merivale’s staff.

Last week, the Federal Court found that that the 2009 collective agreement was not validly approved and therefore could not have applied to Merivale’s employees. As a result, Merivale must now convince the Court that it should exercise its discretion to order that the Hospitality Industry (General) Award 2010 should not apply to its staff or that Merivale should not have to backpay its staff at award rates.

This decision comes on the back of the Fair Work Ombudsman (FWO) continuing to target hospitality businesses for compliance due to the industry’s low margins, high competition and workforce made up of vulnerable workers including young people and visa holders.

A recent FWO audit of Tasmanian hospitality businesses found that  almost 80% of hospitality businesses had failed to comply with workplace laws. Of that 80%, 32 businesses had underpaid their workers by failing to pay minimum wages or to pay the casual loading. In response to the breaches, the FWO has recovered $582,450 in wages for 376 underpaid workers and issued infringement notices resulting in $30,030 fines to be paid.

The focus on hospitality is also reflected in the FWO’s prosecution records, with approximately 50 percent the FWO’s 2020 litigations being against on hospitality businesses.

What can I do?

Given the increased scrutiny on hospitality businesses, compliance must be a priority for hospitality businesses.

Whilst there will always be extreme examples, the vast majority of underpayments are the result of an employer not properly understanding their obligations in what is a complex system and/or not having the right systems in place rather than any intentional ‘wage theft’.

It is important to keep in mind that:

  • breaches of the Fair Work Act 2009 (Cth) including breaches of a modern award not only expose your business to liability for back payment of any unpaid wages but also penalties of up to $63,000 per breach for a company and $13,320 per breach for an individual; and
  • it is unlawful for an employer to take action against an employee (e.g. sack them) because they have made a complaint about their wages under the general protections provisions of the Fair Work Act 2009 (Cth).

Employers should:

  • identify and understand which modern award(s) , including the Restaurant Industry Award 2010 or the Hospitality Industry (General) Award 2010, apply to your employees;
  • keep up to date with recent wages increases and other changes to the award(s) that apply to their business;
  • review your employees’ positions against the classifications in any applicable award to ensure staff are being paid at the right level;
  • ensure employment contracts are up to date and tailored to your business’ needs and the applicable modern award; and
  • ensure the business keeps timesheets, pay records and conduct reconciliations to monitor its compliance and pick up any administrative errors early on.

If you are an employee and you suspect that you have been underpaid you should:

  • be aware of what award applies to your role, what classification your role falls within under that award and what pay level you should receive;
  • calculate how much you think have been underpaid;
  • raise your concerns with your manager in a straight forward and unemotional way;
  • give your employer your calculations so they can understand why you think you may have been underpaid;
  • keep a file note of your conversations and follow up any verbal discussion in email;
  • keep copies your payslips, timesheets and any other record of your hours; and
  • seek assistance from the FWO about the minimum pay rates that would apply to you and your options for recovering an underpayment.

If you’d like further assistance, reach out to Aaron McDonald at WA Good Food Guide Business Sponsor, Pragma Lawyers on or 0401 919 456.