Fine Dining Room or Dining Room Fined?

7 October 2019
Ian Dixon, Partner, Melbourne

At the moment, we have a perfect storm of Australian culture and the economy making for headlines. There is an extensive focus on food and fine dining spilling over to reality television shows and the cult of the celebrity chef generating pages of newspapers, magazines and hours of television. This has also involved a competitive restaurant/café/” gastro pub” society in a slowing or quiet economy, and there now apparently seems to be a widespread underpayment of workers across that economy but very publically in the hospitality sector.

How is it that we have gone in the past few years from: “Who’s’ Kitchen Rules?’ to “Show Me The Money”?

Note that George Calombaris is not alone. Neil Perry, Shannon Bennett and Heston Blumenthal have all had concerns raised about their restaurants (which are to be ultimately determined). Nor is the hospitality industry on its own, with Michael Hill (jeweller), 7-Eleven (fast food franchise), Bunnings (major hardware retailer) and Sunglass Hut representing as a diverse a group of employers as you could imagine. Where once it might have been accepted that small businesses or new sole traders didn’t know how to calculate or pay their employees, these are multi-million dollar businesses employing many people.

The problem arises from a number of causes. This can range from simply the incorrect “classification” of the role of the employee against the roles and bare minimum conditions set out in the Australian Modern Awards produced as far back as 2010, which regulate the minimum rates, hours, shifts, penalties, overtimes, etc. for industries and occupations. In addition to an incorrect classification, there may be an incorrect application of those industrial instruments (which may include a further Enterprise Agreement negotiated with the employees or with the union on their behalf) to the work that is being undertaken within the restaurant or the kitchen or the convention centre relating to hours and shifts, excess hours being overtime or weekend and public holiday work. It is not an easy regulatory landscape. It does require knowledge and attention.

Further, to use a bad pun and to add spice to the mix, there are often changes in the roles that people do, or some degree of overlap in their responsibilities, or extra time and hours required with major events or unexpected demand. In addition, an inability or a failure to review the work environment, say 6 monthly or annually, can allow problems to arise. This can be because there is an inability to get around to it, or it can be an unconscious thought that everything seems to be going well, no-one is complaining at that time and money is being made.

In many cases, poor record keeping is involved. Staff under pressure to work do not properly sign in or sign off, or do not have any automated method of registering their attendance. Management, for example, after working a month of 14 hour days may not be in the best state of mind to ensure that the hours each person has worked or the breaks they take have been properly recorded. In many cases, simply standard hours are put in by both the management and the employee, which are not a true reflection of what is happening in the workplace.

Even if an employer tries to avoid this significant burden of time, hours, overtime, public holiday and weekend penalty rates etc., and endeavours to estimate an “all-up” annualised salary, what can happen, as is happening, is that the estimated annual salary may not be enough to cover the amount the employee is entitled to based on their work history. Minimum rates increase under the industrial relations system. This is slowly, to be sure, but wages and salaries may not be reviewed nor increased for some time. More likely, the demands of the business and the natural willingness of the staff to work for the enterprise means that the end result can be in excess of the estimate.

Again, there is the obligation and the necessity to keep good records even with this annualised approach. It must be demonstrated that the figure is sufficient to meet the obligation owing to the employees, and if in all these cases, such records are not at least a genuine attempt or even a proper record, then there is a recipe for disaster.

And why does the disaster arise? One reason is that while the Sous Chef will work with a Celebrity Chef anytime, anywhere, at any rate and do anything for 5 to 7 years to be trained and to make a name for themselves, what happens when they can’t take the Chef’s behaviour or the demands of the business any longer? They have a final disagreement and are marched out of the restaurant without their own fame, name or ability to have their own restaurant. Years of angry re-examination of working practices may result in a report to the Fair Work Ombudsman who will investigate the complaint and a claim for monies not paid.

Further, the experience of having a Celebrity Chef’s name on your CV and learning much under a pressurised environment may apply to only some of the staff. Many in a restaurant or hospitality area in the pressurised ranks down to the dishwasher and everyone in between, are working the same long, stressed and unsociable hours, dealing with the demands of perfectionism in the kitchen and the critical examination by the public without the chance of that benefit. It has all the ingredients for an inhospitable working environment.

It was often only when a relationship became unhappy and at an end that there may be a risk of a claim which perhaps could be dealt with individually. Now, there is a greater willingness to challenge the working practices or work environment either directly or as a whistle-blower. Additionally, the Fair Work Ombudsman may simply target an industry for suspected underpayment or to educate and ensure compliance.

Any adverse results can be significant, both financially and reputationally. The recent press has been full of the back payment figures: George Calombaris – $7 million, Michael Hill – $25 million, Sunglass Hut – $2.5 million. “Contrition” payments sought by the Fair Work Ombudsman are an additional hundreds of thousands of dollars. Also sought are undertakings as to future behaviour, to be confirmed by expensive regular audits.

The difficulties are not unsolvable. Hospitality is sometimes glamourous, certainly public facing, sometimes high profile and perhaps transient as to fame and reputation. By contrast, the best approach is for the backroom is to be detailed, up to date, and methodical in the implementation of the underlying employment arrangements and their review. While that may sound simple in summary, it is as difficult to put together the component parts and ensure ongoing regulatory compliance and employment success, as it is to produce the signature dish of the restaurant. If attention was focused on all of the logistical, legal and technical responsibilities of the workplace as it is focused on the output of the kitchen, it would only be an inadvertent or minor error of calculation in the future, which is a far cry from being accused of “wage exploitation”.

However, when all that compliance is being undertaken, one question may arise:

“Does the price of the main course double from $38 to $76 to cater for all this?

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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