Gloria Jean’s franchisee hauled into court over $83,000 in underpayments

The operators of a Melbourne Gloria Jean’s franchise are facing court over allegations they paid employees as little as $8 an hour.

The café, located in Caulfield, and its company directors Tsinam Fu and Ping Ostrovskih are alleged to have underpaid 22 employees, many of them international students, a total of $83,000.

A third of the employees were also aged under 21 and many came from non-English speaking backgrounds.

The court action has been brought forth by the Fair Work Ombudsman.

TressCox Lawyers partner Rachel Drew told SmartCompany it’s unusual for a franchise from a “sophisticated” system like Gloria Jean’s to have been non-compliant.

“It would surprise me greatly if there wasn’t support available to a franchisee to at least be able to access information about rates of pay, if not training and specific guidance,” she says.

“Most franchises have some level of industrial support. Cases like this can affect the franchise brand if they become known as a franchise which does not pay their staff correctly. It’s important to the brand that franchisees undergo compliance training.”

Gloria Jean’s Victoria state manager Glenn Hindson told SmartCompany Gloria Jean’s is reviewing the incident and “will take action if a breach of law is demonstrated”.

“Gloria Jean’s Coffees has training programs and systems in place to support franchise partners in running their businesses, however each franchise partner is responsible to ensure that their business complies with all applicable laws under the franchise agreement, which includes compliance with employment law.”

It is alleged casual employees were underpaid a total of $83,566 between July 2011 and April 2013. They are said to have been paid flat rates of $8 to $10 an hour.

The FWO claims this was a result of underpayment of minimum hourly rates, weekend and public holiday penalty rates, casual loading and minimum shift pay and a clothing allowance.

The Gloria Jean’s café is also alleged to have breached payslip and employment record compliance.

Individual amounts owing to the employees range from a low $45 up to $17,103, Court documents allege.

Fu and Ostrovskih’s company Primeage faces a $51,000 penalty per breach of workplace laws, while individually they could be charged up to $10,200 per breach.

Drew says if the pair is found guilty, the judge will consider whether or not the underpayments were deliberate in his judgment. 

“The court will investigate how the underpayments came about… Penalties change as to the culpability of the employer and what steps were taken to pay the correct rate,” she says.

“If someone was appointed to the task of investigating the rates, but didn’t understand them, the penalty will be different to if someone deliberately ignored minimum rates.”

But she says in the court’s experience no one is completely ignorant of pay rates.

“I’m sure businesses will continue to say they didn’t know, but the court’s perspective is no one can be completely ignorant of minimum rates of pay. So this excuse is just not accepted by the court.”