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Chatime franchisor faces court for alleged wage theft

Adam Zuchetti
Adam Zuchetti
19 December 2019 2 minute readShare
Chatime

Much of Fair Work’s compliance action in recent years has focused on franchisees, but the franchisor of iced tea chain Chatime will front court next month over underpayment allegations.

The Fair Work Ombudsman (FWO) announced on Wednesday (18 December) that it has launched legal action against Chatime Australia Pty Ltd and its managing director Chen “Charlley” Zhao over allegations that company-owned stores underpaid employees to the tune of $169,320.

It said the underpayments affected a total of 152 employees — 92 of whom were visa holders — after they were paid flat hourly rates of as low as $7.59.

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The business also stands accused of not paying other award entitlements such as penalty rates, annual leave and casual loadings.

“It is alleged that this occurred despite Chatime Australia’s former chief financial officer having previously provided Mr Zhao with information on minimum award rates and highlighted to him that Chatime Australia was ‘only partially complying’ with the award,” the workplace regulator said.

 

“It is [also] alleged that employees were underpaid the ordinary hourly rates, overtime rates, casual loadings and penalty rates for weekend, night and public holiday work they were entitled to under the Fast Food Industry Award.”

Alleged underpayments occurred at 10 Chatime outlets in Sydney and nine in Melbourne. Chatime’s website states that it has “over 120 Chatime” outlets across Australia, but the business was founded in Taiwan in 2005.

The underpayments, which ranged from $58 to $3,990 for each affected employee, have been repaid in full, the ombudsman said.

Nevertheless, Chatime Australia faces penalties of up to $54,000 for every breach, while Mr Zhao could personally see fines of up to $10,800 per breach, if they are found guilty of the alleged workplace law contraventions.

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“It is particularly disappointing to be making allegations of significant underpayments against a franchisor of this size. We expect franchisors to not only pay their own staff correctly but to take responsibility for ensuring that their franchisees comply with the law,” Ombudsman Sandra Parker said.

It follows audits of a number of fast food franchises, including Chatime as well as Gong Cha, Hot Star Chicken, PappaRich, Sushi Izu, Nene Chicken and The Sushi 79, which the ombudsman said recouped $731,648 in underpaid wages and entitlements for 780 employees. The FWO noted that six of the seven chains were established outside of Australia, including five in Asia.

“Enforcing workplace laws in the fast food sector and in franchise networks more generally continues to be [a priority] for the Fair Work Ombudsman,” Ms Parker said.

She added: “All workers in Australia have the same rights, regardless of their visa status, and we encourage anyone with concerns about their pay to contact the Fair Work Ombudsman.”

'Working tirelessly with the Ombudsman'

 

Chatime Australia subsequently issued a statement responding to the Ombudsman's concerns, stating that despite the legal action, it had worked tirelessly with the ombudsman.

Chatime Australia is aware of the commencement of legal proceedings by the Fair Work Ombudsman. Chatime Australia has work worked tirelessly with the FWO over the past number of years and will continue to do so, to resolve the underpayments issues,” it said.

In the continued spirit of our proactive approach to resolution, Chatime will continue to work closely with the FWO who has formally acknowledged that Chatime has co−operated with the FWO's investigation and that Chatime has promptly rectified the underpayments.

The business also acknowledged that underpayments are a serious issue impacting the franchise industry.

As a responsible employer in Australia, we are committed to paying our people correctly and when underpayments were identified, we rectified those underpayments.

At Chatime we see our employees as family and recognise they are the key to our success. We strive to be an employer of choice and uphold our values of being a fair, open and transparent business playing by the rules and being a good corporate citizen.

Chatime franchisor faces court for alleged wage theft
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016. 

The two-time Publish Awards finalist has an extensive journalistic career across business, property and finance, including a four-year stint in the UK. Email Adam at [email protected]

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