A bar in Sydney and its former director have been fined a combined $97,000 following legal action for convincing an overseas worker to pay back some of her unpaid wages as part of a cash-back scheme.
Bar Coluzzi in Darlinghurst had sponsored an Italian worker on a 457 skilled visa to work 40 hours a week as a chef for the business under a full-time contract of $56,000 per annum, excluding superannuation.
However, the Fair Work Ombudsman found the worker was actually working 54 hours a week and Robit Nominees Pty Ltd, the bar’s parent company, had asked the worker to pay $13,952 back to the business during her employment between August 2014 and November 2015.
Each week, the worker was told she needed to pay back $218 in cash because the business could not afford to pay the worker’s salary in addition to tax and super contributions.
In addition to the cash-back scheme, the Fair Work Ombudsman also found the business had underpaid the worker’s annual leave entitlements, penalty rates and overtime. Ultimately, the Fair Work Ombudsman claimed the worker was underpaid $39,686 in wages and commenced legal action.
The Federal Circuit Court found the business was indeed underpaying the worker and had breached Subsection 325(1) of the Fair Work Act, which says “an employer must not directly or indirectly require an employee to spend any part of an amount payable to the employee in relation to the performance of work if the requirement is unreasonable in the circumstances”.
“The manner in which the weekly repayments were paid suggested it was a scheme established to create the false impression that [the worker] was being paid her lawful entitlements,” said Judge Nicholas Manousaridis in the court documents.
“The scheme was implemented in relation to an employee who was vulnerable because she relied on Robit Nominees to remain in Australia.”
Robit Nominees paid the worker her full entitlements 12 months after she resigned and cooperated with the Fair Work Ombudsman’s investigation. By admitting liability, a 10% discount was applied the penalties handed down by the court, which ordered the business to pay $87,345. The former director was fined an additional $9,720.
In a statement, acting Fair Work Ombudsman Kristen Hannah said cash-back schemes of this nature should be an immediate cause for concern.
“We treat very seriously cases where employers take advantage of the power imbalance they have over vulnerable migrant workers by cheating the workers out of their basic, lawful minimum entitlements,” Hannah said.
“It is hard to see a legitimate reason why an employer would require employees to be regularly paying back significant parts of their wage, and I am concerned that cash-back schemes are being utilised by unscrupulous operators in an attempt to get around record keeping laws and disguise serious underpayment of wages.”
Since the court case commenced, Robit Nominees has been placed in liquidation and Bar Coluzzi has been purchased by a new owner. SmartCompany was unable to contact Robit Nominees or the former director for comment prior to publication.
Cash-back schemes are designed to deceive
Andrew Jewell, principal lawyer at employment law firm McDonald Murholme, tells SmartCompany cash-back schemes are intended to trick workers out of their entitlements and are generally illegal.
“It is very difficult to conceive of a cash-back scheme that is legitimate or legal because such schemes by their nature intend to deceive. Even if the employee is ultimately receiving the minimum wage, the Department of Immigration and/or the Australian Taxation Office are being deceived, which is not lawful,” he says.
Jewell says visa workers are beginning to speak up more and more about their working conditions, which in turn allows the Fair Work Ombudsman to take action against businesses breaching employment law. For SMEs, the lesson is to ensure workers are being paid their correct wages as covered by their industry awards.
“In our experience there has not been a growth in exploitation but rather a growth in the reporting of exploitation and enforcement proceedings. Migrant workers are particularly vulnerable to underpayment due to their uncertain visa status,” Jewell says.
“The key learning for any employer is that it is important to be aware of legal obligations and to comply with those obligations because the fines for non-compliance are significant.”