This Just In: Exploitation was an “aggravating factor”: $220,000 fines in café underpayments case

Written by Justin Pen, Solicitor, Marrickville Legal Centre

The Federal Circuit Court of Australia has signalled a potential shift in its attitude towards employers found to have underpaid foreign nationals and young workers, following a significant judgment in which civil penalties of over $220,000 were imposed on a Melbourne-based café business and the café’s directors for breaches of the federal employment laws that affected almost 100 of its employees over a 16-month period.

In doing so, the Court made forceful comments regarding the fundamental vulnerability of foreign nationals and young workers, remarking that such workers could be “susceptible to exploitation” because of their lack of social support, residency precarity, and limited experience with workplace practices.

In Fair Work Ombudsman v Malevi Pty Ltd & Ors [2020] FCCA 2875, Judge Kendall imposed penalties of about $169,500 on a café business for underpaying vulnerable workers – failing to pay casual loading, penalty rates, and overtime rates to about 98 of its employees, and for cutting a casual worker’s shifts when he raised complaints about his pay rates.

Judge Kendall also imposed personal penalties of $33,900 and $29,000 on the cafe business’s directors for their involvement in the café’s breaches of the Fair Work Act 2009 (Cth).

Observing that most of the workers employed by the café were under 25 years of age and that “some were foreign nationals in Australia on visas”, Judge Kendall stated that “[a]n extra penalty applies for underpaying vulnerable workers, because their exploitation is an aggravating circumstance.”

Further, Judge Kendall stated that foreign nationals and young workers were “prima facie [on their face]… susceptible to exploitation”:

“[Foreign nationals] are in a somewhat tenuous position, often with less social support than most Australian citizens and where misunderstanding their rights and obligations can lead to them being deported. This prima facie makes them susceptible to exploitation in the workplace. Similarly, young workers often do not have the experience or financial strength to enable them to take a stand against unfair work practices. This prima facie makes them susceptible to exploitation.

Judge Kendall also rejected the café’s submission that, because the hospitality sector was run largely by young workers and foreign nationals, the café should not be punished for the composition of its workforce. In turn, Judge Kendall stated:

“Young people and foreign nationals frequently work in the hospitality sector because they are vulnerable, and can be persuaded to work for under award wages and can thus be exploited. One does not see a lot of 40 year old, male, Australian citizens working as employees in hospitality, because, in general, 40 year old, male, Australian citizens are not so gullible, desperate or otherwise as susceptible to exploitation as young people and foreign nationals.”

The café was also lashed by the Court for suggesting that its failure to pay casual loading to about 49 workers resulted in “modest” underpayments. In response, Judge Kendall commented that:
“… If the 49 people who were each underpaid $177 should have been paid $19.53 per hour, they have each worked for about nine hours for free. Including all 49 of them, the respondents would have received about 441 hours of free labour.”

Further, Judge Kendall stated:

“A loss of $177 per employee probably seems very little to the [café directors], who, on their own admission, were in a financial position to spend $2.2 million to buy the business. However, it is presumably a significant amount of money for people who have to wait on tables and prepare food in a fairly basic café to be able to put food on their own tables.”

The significant penalties imposed by the Court and the striking remarks of Judge Kendall in this case indicate that those who engage in the exploitation of migrants and temporary visa holders are likely to face serious consequences for their actions.

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