Chatime bubble tea faces penalties after $160k in underpayments

The Fair Work Ombudsman has secured penalties totalling $132,840 against the Australian franchisor of the Chatime bubble tea chain.

Chatime bubble tea and its managing director have found themselves in hot water after an investigation by the FWO. A $120,960 penalty was imposed against Chatime Australia, which is the franchisor of dozens of Chatime outlets around Australia and also directly owns and operates a number of Chatime outlets.

An $11,880 penalty was imposed on Chen “Charlley” Zhao, the managing director of the company, for his involvement in some of the underpayments.

Fair Work Ombudsman Anna Booth said the substantial penalties send a clear message that franchisors and their directors will be held accountable for breaching employees’ minimum entitlements.

“The conduct in this matter, by a franchisor of this size, is completely unacceptable. We expect franchisors to not only pay their own staff correctly but to take responsibility for ensuring that their franchisees comply with the law,” said Booth.

It was found that between August and December 2016, Chatime Australia paid employees at stores it directly operated flat rates as low as $7.59 to $24.30 per hour. It was also found that they adopted a practice of not paying Fast Food Industry Award entitlements such as loadings and penalty rates.

From this, 152 employees – including 41 junior workers aged below 21, and 95 visa holders – were underpaid a total of $162,533. Of the 95 visa holders, a vast majority of them were international students.

These underpaid workers operated at a number of locations, including 10 Chatime outlets across Sydney in Bondi Junction, Chatswood, Wetherill Park and the CBD, and nine Chatime outlets across Melbourne, in Dandenong, Doncaster, Glen Waverley, Cheltenham and the CBD.

“The large number of vulnerable employees underpaid in this matter was concerning. We treat cases involving underpayment of junior workers and visa holders particularly seriously,” Booth said.

“We also continue to prioritise compliance in the fast food, restaurants and cafes sector where a high proportion of vulnerable workers are employed.”

The underpayments were discovered during proactive audits.

During these audits, Fair Work inspectors found workers were underpaid the ordinary hourly rates, overtime rates, casual loadings, and penalty rates for weekend, night and public holiday work they were entitled to. Along with this, annual leave entitlements and minimum engagement pay were also underpaid.

The FWO claimed that the managing director, Zhao, was directly involved in the underpayment of casual loadings and weekend penalty rates. Individual underpayments ranged from $58 to $3,990, with each being rectified.

“Penalties should be set to signal to persons who manage companies that they will be met with substantial penalties if, through their neglect, they permit companies they manage to contravene terms of an award or any other industrial laws or instruments that might apply,” said Judge Nicholas Manousaridis, who oversaw the case.