Chatime reacts to underpayment claims

By Sarah Stowe | 01 May 2019 View comments

Chatime has hit the headlines for alleged underpayment of staff amounting to a massive $10 million owed to employees. According to a report in the The Age and The Sydney Morning Herald alleged underpayment has been rife since 2009 in both corporate and franchised stores.

Many of the underpaid workers are foreign students on visas from China and Taiwan, the report indicated.

Inside Franchise Business contacted Chatime for a comment on the underpayment and received a statement in response.

What Chatime said

“We have worked tirelessly over the past number of years to get it right and do what it is right. We have taken a number of proactive steps to work co-operatively and transparently with employees to remedy any concerns and we will unreservedly apologise if or when we get it wrong,” the statement reads.

It pinpoints actions the bubble tea chain has taken including national roadshows to educate franchisees on tax and Modern Award compliance, recruiting an HR specialist, updating terms and conditions of employment for fast food employees to ensure Award compliance.

The business has also introduced a rostering, time and attendance system that gives the franchisor oversight into franchisee compliance.

Chatime’s statement points to the role employees pay in the company’s success.

“We strive to be an employer of choice and uphold our values of being a fair, open and transparent business playing by the rules and being a good corporate citizen,” the statement reads.  “We recognise that underpayments are a serious issue impacting the franchise industry. As a responsible employer in Australia, we are committed to paying our people correctly and if underpayments are identified, we are committed to rectifying those underpayments.”

The statement adds that systems and payroll capabilities had not kept pace with the brand’s growth nor the complexities of the Australian regulatory environment.

Fair Work Ombudsman investigation

The report in The Age and The Sydney Morning Herald suggests Chatime last year had received a formal complaint from the Fair Work Ombudsman. This followed an audit of its company-owned stores which revealed 150 workers had been underpaid from August to December 2016.

While Chatime was instructed to back-pay workers an estimated $176,449, according to the media report, there were no penalties imposed by the FWO.  The findings were also not made public.

But earlier in April the regulator started legal action against a former Chatime franchisee in Sydney, which it alleges underpaid 17 workers more than $46,000.

The Taiwanese company’s Australian subsidiary, Infinite Plus, is apparently under investigation by the Fair Work Ombudsman (FWO). The FWO told Inside Retail it could not comment further on the matter at this stage.

However, a spokesperson for the FWO said it is investigating the rapid establishment and expansion of overseas franchise chains operating in Australia.

“These businesses often implement operating models and workplace practices associated with their countries of origin,” the spokesperson told Inside Retail.

The key shareholders of Infinite Plus, Charlley Zhao and Iris Qian, are also directors and key shareholders of Bakery Venture. It was confirmed this business was investigated last year by the FWO.

The Ombudsman secured $350,000 in back-pay for employees and former staff of Bakery Venture, trading as Dough Collective. The company went into liquidation during the investigation.