Legal proceedings have commenced against the franchisor of the 85 Degrees cafe chain, lodged by Fair Work Ombudsman, relating to alleged underpayments by franchisees.
The case is a landmark in that it represents the first time the FWO has commenced proceedings against a master franchisor rather than individual franchisees who are employing staff and underpaying them.
The franchisor – 85 Degrees Coffee Australia – operates cafe outlets under the same name across NSW and the ACT.
Although the franchisor “did not directly underpay” its workers, Fair Work Ombudsman (FWO) argues that it is “legally liable” for the alleged underpayment contraventions because it “should reasonably have known its franchisees would underpay the workers or commit similar contraventions”.
Between January 1 and December 31, 2019, nine workers were allegedly underpaid minimum rates, overtime entitlements, annual leave entitlements, penalty rates for weekend, public holiday and evening work. Individual underpayments ranged from $239 to $15,198.
The FWO discovered the alleged underpayments, pay slips, and record-keeping breaches when it conducted proactive audits.
Fair Work Ombudsman Sandra Parker said the lawsuit highlighted that “franchisors could be held accountable” if they did not take necessary action to prevent violations in their networks.
“In this case, we allege 85 Degrees – who had been on notice for many years about compliance issues – should reasonably have known some of its franchisees would underpay their workers and breach record-keeping and pay slip requirements.”
The FWO alleges that the franchisor is liable as it was aware of its franchisees’ financial circumstances and of their limited English knowledge and awareness of workplace laws. The franchisor faces penalties of up to $63,000 per contravention.
Parker said FWO would “prioritise” the protection of vulnerable workers and encouraged affected workers with pay or entitlement concerns to come forward.
The Franchise Council of Australia said it did not wish to comment on ongoing legal cases involving individual non-member businesses.
Last November, where an investigation by FWO exposed that 85 Degrees cafe exploited eight Taiwanese students under the guise of a “purported internship” arrangement and underpaid them between $50,213 and $58,248 each over a period of just under 12 months.
