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Underpaying restaurant avoids ‘crushing’ penalty

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A Fair Work Ombudsman’s (FWO) submission for a ‘maximum penalty’ on a company that underpaid a Chinese employee on a s 457 visa has been rejected by the Federal Circuit Court, finding that to do so would be ‘crushing’ for the business.

The FWO sought $286,000 on ECFF Pty Ltd (ECFF) and $55,000 on each of its husband and wife directors. However, the court ultimately fined ECFF $70,000 and each director $15,000, taking into account the financial impact of the business alongside other mitigating factors. 

Xuli Wang was employed as a chef in the take away food business of the husband and wife between March 2008 and December 2011. During this period he was not paid the minimum hourly rate of pay, did not receive penalty rates for evening, weekend and public holiday work, and was given no overtime rates or annual leave loading.

In addition to underpaying the employee $86,118.09 during the period of approximately three years and nine months, the company also kept and made use of false and misleading records of his hours of work. 

The court took into account the company’s size and ‘modest’ profit margin in deciding that the penalties proposed by the FWO would ‘crush’ the business. Despite the need for courts to deter restaurant owners from engaging in similar conduct, it was held that the imposition of a civil penalty should not operate so as to make a mere scapegoat of the wrongdoer. Rather, the court imposed a penalty that was considered to be ‘meaningful, but not crushing’.

This case serves as a reminder that aggregate penalties need to be appropriate and proportionate to the circumstances of the case and cannot serve to be merely oppressive.

For more information in relation to the topic covered by this article, please contact our Employment Law and Workplace Safety team by email workplace@mst.com.au or by telephone on +613 8540 0200.