Masterchef alum George Calombaris has been ordered to repay $7.8 million to underpaid employees. A lot of these unpaid wages have been due to the failure of Calombaris’ company, MAdE, to pay overtime and penalty rates. In addition to this, Calombaris will pay a fine of $200,000 for breaching national employment rules. This is symptomatic of a larger problem in the hospitality space, where missed penalty rates and overtime payments can easily run into the millions. Further, it’s common for employees not to receive their due payslips and be paid in cash. So what are the rules relating firstly, to penalty rates, but also reimbursing employees for lost wages?
In this article, we’ll explain how penalty rates and lost wages work – and we’ll also explain why this is a surprisingly common occurrence.
Penalty rates
In many industries, penalty rates apply during the following times:
- Late at night and/or early in the morning
- Weekends
- Public holidays
- Overtime
The purpose of penalty rates are to compensate employees for working outside the usual nine to five hours on weekdays. In the hospitality industry, penalty rates kick in from 7pm, and increase on Saturday evenings. Penalty rates also increase on Sundays for industries such as the retail sector. In an industry such as hospitality, it’s understandable that employees will often have to work overtime, or hours outside what they usually would. This can be to cover for sick employees or to meet customer demand.
By contrast, many other industries do not have penalty rates as the hours worked are usually ‘ordinary work hours’. This is exactly where the MAdE establishment went wrong – by devising the pay of their employees based on annual salaries (and possibly employment contracts) rather than a proper calculation of the hours actually worked. No matter what an employment contract says, it must still adhere to the national minimum rates of pay.
Consequences for unpaid wages
It is illegal to not properly pay employees for the work that they do. Employers who underpay employees often have to pay back these wages. In fact from 2017 to 2018, the Fair Work Ombudsman recovered $30 million in unpaid wages. Employers can also face hefty fines for not paying employees properly. Calombaris was fined $200,000 – but there are calls for this penalty to be much higher.
Simple omission or criminal offence?
Although employers can face heavy fines for not paying their employees properly, there have been calls to criminalise this. Similarly, the State Government in Victoria has proposed to criminalise wage theft. Beyond heavy fines, they also intend to introduce jail sentences for employers who are guilty of this. Many employers who engage in this often have to pay fines which are only a fraction of the wages that weren’t paid.
It’s surprising how wide-spread underpayment in the hospitality industry is. This is particularly where it concerns employees who are employed on a permanent basis, but don’t have their overtime entitlements added to their pay packet. Employers need to ensure that employees are not only paid their hourly rate, but any additional penalty rates. If you’re an employer and you’re not sure whether these rates apply, it is worth getting in touch with an employment lawyer.
