Audit reveals Degani Bakery and Café underpayment issues

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Inside Franchise Business: Audit reveals Degani Bakery and Café underpayment issuesThe Fair Work Ombudsman has today released the findings of a report into compliance activity at 15 Degani Bakery and Café outlets.

The activity was in response to a “high number of requests for assistance from workers alleging underpayment by the Degani Bakery and Café (Degani) service network”.

Audits into the network found a number of serious breaches of the Fair Work Act 2009, with only one of the audited stores meeting compliance regulations.

However results indicated non-compliance was more prevalent within stores operating under a licensee agreement, as opposed to franchises.

Sandra Parker, Fair Work Ombudsman said the most common issue identified by inspectors was under or non-payment of penalty rates, as well as underpayment of base rate.

“We uncovered issues with record-keeping at several Degani outlets that hindered our ability to determine exactly how much back-pay the employees were owed,” Parker said.

“Unfortunately, Degani’s failure to meet basic workplace requirements is common throughout the hospitality industry.”

According to the FWO report, of the stores audited, the activity found;

  • Eight were non-compliant with record-keeping,
  • Nine were non-compliant with weekend and public holiday penalty rates,
  • Eight were non-compliant with base rate of pay,
  • One provided false or misleading records,
  • One failed to comply with Notice to Produce records.

As a result, the FWO issued five infringement notices, equating to a total of $5400 in penalties for a range of record making and record-keeping breaches, eight compliance notices and ten formal cautions.

According to the report, “more than $44,000 was recovered for 86 employees through the audit”, with one store owing $12,500 to 15 employees over a two-month period.

Recent updates to the Commonwealth’s franchisor liability laws have given the FWO the power to specifically hold franchisors accountable for wage underpayments in their business.

Additionally, the updates require franchisors to use their influence or control to take reasonable steps to create systems and cultural settings designed to prevent non-compliance with work laws.

“Recent law changes mean franchisors can now be held liable for workplace breaches by businesses in their networks,” Parker said.

“This report reinforces the need for industry-wide cultural change and hospitality leaders should work with the FWO to support compliance.”

In February, the FWO commenced court action against a Degani outlet in Greensborough for allegedly using false records to conceal more than $12,000 in underpayments to workers. The matter remains before the court with a hearing scheduled for 1 October.

The network operates over 70 sites throughout Victoria, Queensland, New South Wales and Western Australia, with the majority of outlets in Victoria.

Nick Hall

Nick is business journalist at Octomedia, working on View More...
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