Restaurants served a $334,818 fine for paying staff in pizza and soft drink

The operators of two Melbourne restaurants have been fined a total of $334,818 for paying their teenage employees with pizza and soft drink, instead of their correct wage.

An investigation and litigation by the Fair Work Ombudsman found the operators of the La Porchetta restaurants in Melbourne’s south east had underpaid 111 employees, most of whom were teenagers, a total of $258,000 between 2009 and 2012.

The fine follows a string of recent penalties sought by the Fair Work Ombudsman, including a Perth restaurant fined $42,000 for underpaying its workers.

Bound for Glory Enterprises and Zillion Zenith International, which operate the La Porchetta franchise outlets in Pakenham and Berwick, have each been fined $139,507.50, while the owner of both franchises, Ruby Chand, has been penalised a further $55,803.

The Fair Work Ombudsman began investigating the La Porchetta franchises after receiving a single complaint from a parent of one young staff member.

It subsequently found that 59 employees at Pakenham had been underpaid a total of $130,195 and 52 employees at Berwick had been short-changed $127,824.

In handing down his decision in the Federal Circuit Court, Judge John O’Sullivan said “such a practice belongs in the dark ages”.  

“The contraventions themselves and the conduct of the respondents fundamentally hamstrung the ability to confirm the affected employees’ entitlements during the investigation, [and] the co-operation was less than forthcoming,” O’Sullivan said.

“In that sense I am not convinced the respondents are genuinely remorseful,” he said.

O’Sullivan noted Chand’s companies had been required to back-pay underpaid employees in 2007, 2008 and 2009, and were warned by Fair Work inspectors of the need to pay employees their full lawful entitlements.

The court heard Chand had claimed the employees were given half-priced pizza and soft drink, which was ‘offset’ against their wages and entitlements.

Other breaches included employees being paid flat hourly rates below the minimum they were entitled to, apprentices and trainees not paid for the minimum number of hours they were employed to work, and underpayment of leave entitlements.

La Porchetta said in a statement to SmartCompany it expects all its restaurants to pay their staff correctly and be compliant with the Fair Work Act.

“While we know it is difficult for all small businesses to keep up with the changes, we make every effort to support our restaurants to be fully compliant and are confident that our franchisees are committed to meeting or exceeding their obligations under the Fair Work Act,” said La Porchetta CEO Sara Pantaleo.

“We wish the staff of Berwick and Pakenham well and we are sorry if they had a negative experience working for these restaurants,” said Pantaleo.

Employment lawyer Peter Vitale told SmartCompany it was illegal to subsidise wages with food, drinks or products.

“The act specifically requires that people’s money requirements are met with money,” says Vitale.

However, Vitale says “there does need to be some scope for recognition of noncash benefits and that needs to be carefully monitored, especially in circumstance where the non-monetary compensation is token and clearly insufficient”.

Vitale says companies who wish to go down the path of paying staff with non-monetary compensation should seek legal advice before they do so.

“Because if the reason for doing so is an attempt to save on wages, there may be other lawful ways of doing it, such as entering enterprise agreements with appropriate adjusted pay rates,” he says.