Australian franchise operators warned after swimming school admits to $1.4 million in staff underpayments

A franchise operator and its 12 franchisees have pledged to overhaul their practices after revelations the operation had underpaid staff by $1.4 million over six years.

In 2015, staff at Paul Sadler Swimland in Essendon raised concerns about underpayments, leading to a widespread review of the company’s franchise network.

The Fair Work Commission says it was revealed that pay arrangements at the swimming lessons operator breached the Fitness Industry Award 2010, as well as breaching enterprise bargaining agreements that the franchisees had signed on to in 2013.

The result was that 1308 staff were underpaid $1,425,477 between 2010 and 2016, with workers being individually underpaid between three cents and $14,891.

The franchisor reported the underpayments to the Fair Work Ombudsman in 2016, having already calculated what was owed.

The organisation has now entered into a two-year enforceable undertaking with the ombudsman’s office, involving a number of requirements including having all managerial staff complete training in workplace law.

The organisation also repaid staff an extra $71,000, or five percent, on the value of the amount they were underpaid. The enforceable undertaking also sees the organisation donate $25,000 each to charities The Smith Family and Western Chances.

Under the arrangement, Paul Sadler Swimland franchises must open their books to external auditors for the next two years to check for irregularities, as well as publishing notices at their sites and online to acknowledge the breaches and an apology.

In a statement, the company said it had attempted to track former staff members down via email, letter and social media in order to rectify any underpayments uncovered.

“We respect and value our people and are sorry for the impact this has had on them. We are an organisation that believes in treating employees fairly and the correct payments have now been made to all staff affected who we have been able to contact,” chief operating officer Mark Cecil said in a statement.

“We have invested in installing a new fully automated system for roster, payroll and employee management to ensure this mistake doesn’t happen again.”

The company must also maintain and monitor a dedicated email address for former and current employees to send through questions about their pay and conditions.

Acting Fair Work Ombudsman Kristen Hannah says while the underpayments were not found to be deliberate, the situation should serve as a warning to all franchise operators.

“This has been a significant, expensive wake-up call for Swimland and serves as a clear reminder to those in franchise networks that all are responsible for ensuring workers entitlements’ are met,” she said in a statement this week.

“Breaching the terms of an EU is grounds for litigation and the community can be assured that we will be monitoring Swimland closely to ensure it complies with the terms of the undertakings,” she said.

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