The Federal Circuit Court recently handed down penalties totalling almost $200,000 to a sushi outlet, its sole director and their accountant for failing to pay three employees the minimum rates required by the Fast Food Industry Award 2010 (Fast Food Award) [1].

Facts

Kjoo Pty Ltd (Kjoo) operates a sushi store in New South Wales. Mr Kwon is the sole director.

Kjoo engaged three South Korean workers under 417 (working holiday) visas. The workers were students of the Busan Institute of Science and Technology in Korea (Busan Institute). Mr Kwon entered into an “Internship Agreement” with the Busan Institute, allowing the employees to work with Kjoo and gain experience in Australia. The employees each entered into a written employment agreement with Kjoo and were paid between $12 and $13.50 per hour, in cash, to work in the sushi shop. Each employee was working four to six days per week, averaging over 38 hours of work each week.

It was found that Mr Kwon, with the assistance of his accountant Mr Ok Gyu Lim, also submitted false PAYG Payment summaries to the Fair Work Ombudsman.

Findings

Kjoo, Mr Kwon and Mr Lim admitted their involvement in the contraventions. The court found that the underpayment was a “deliberate, intentional and informed decision”, to “gain a financial advantage for its business”[2]. The creation of the falsified PAYG documents was held to constitute “the highest level of dishonesty” [3].

The relevant minimum base hourly rate for the workers under the Fast Food Award was approximately $16.00 to $19.00 (excluding other separate amounts, such as loadings and penalty rates). The total underpayment amount for the three employees totalled $51,025.84 overall, including unpaid loading and penalty rates.

The employer back-paid the outstanding amounts to the employees [4]. In addition, the Court imposed a penalty of $161,760 on Kjoo. The penalties imposed on Mr Kwon and Mr Lim were $32,352 and $4,608.00 respectively.

Lessons for employers

The significant penalties in this case are a timely reminder for employers to:

  • ensure they are aware of the applicable awards and the minimum obligations under those awards;
  • not ignore issues/complaints about minimum award entitlements, if they arise;
  • ensure compliance with record-keeping and pay slip requirements; and
  • obtain advice if necessary, particularly in relation to internship arrangements and vocational placements.