George Calombaris “devastated”, repays workers $2.6 million after “poor processes” lead to underpayment - SmartCompany

By Alan J. McDonald

George Calombaris repays $2.6 million to over 150 employees after a systematic underpayment. McDonald Murholme Principal Lawyer, Andrew Jewell talks to SmartCompany about the magnitude of the case creating awareness for employees who may be underpaid.

See the article below for further details.

George Calombaris “devastated”, repays workers $2.6 million after “poor processes” lead to underpayment

The restaurant group run by Masterchef judge George Calombaris has repaid $2.6 million to more than 150 employees this week after an external audit found systematic underpayment at the business, in what one legal expert describes as a “massive’ case.

On Monday afternoon MAdE Establishment, which is run by four directors including Calombaris, emailed staff to inform them that 162 current and former employees had been paid a total of $2.6 million in back pay.

An audit by professional services firm KPMG had found significant problems with on-boarding and payroll at the group, which had seen “historically poor processes” result in the underpayment of some employees, and the overpayment of others, the company said.

The MAdE group operates a number of eateries in Melbourne, including The Press Club, Hellenic Republic and Gazi. However, the underpayments do not affect staff employed at one of the new venues in the group, Jimmy Grants.

Concerns over correct payment of award wages at the restaurants were first raised with the business by the Fair Work Ombudsman in 2015, but the group acknowledges these were not acted upon until KPMG was approached to conduct an audit this year.

“We are extremely sorry that we have let our loyal team members down, and have worked incredibly hard to rectify what is a completely unacceptable situation”, the company said in the letter to staff.

Calombaris said in the same letter he is sorry the business had “messed up” and said he was “devastated by what has happened”.

The celebrity chef noted the speed with which the business had grown and said that over this time, internal systems for payment had let the business down as it had grown.

“I am truly sorry for the impact this has had on our incredibly hardworking, talented and dedicated team,” he said.

The MAdE Group informed SmartCompany this morning the moves made to rectify the underpayments are completely voluntary, and there is no formal investigation or enforceable undertaking in place with the Fair Work Ombudsman in relation to the matter. The company said it had informed the Ombudsman of its decision to process the underpayments and will continue to work with the Ombudsman “collaboratively” throughout the process.

It has also called for former employees to contact the business in relation to the underpayments.

This is the “largest case I’ve heard of”

Andrew Jewell, principal at employment law firm McDonald Murholme, told SmartCompany this case is “massive” when it comes to the scale and scope of underpayments.

“It’s one of the largest I’ve heard of, anecdotally,” he says.

However, he says there are significant takeaways for smaller operators about the way it has been handled. Jewell says getting out on the front foot and publicly rectifying this issue is a good thing for both employees and businesses, because it highlights companies doing the right thing and raises awareness of payment issues.

“These guys are doing everything they can to rectify the issue. As more of these stories become public, it’s also going to increase the awareness of employees,” Jewell says.

The Fair Work Ombudsman has its eye on the hospitality sector, Jewell says, where some workers may be reluctant to raise issues of underpayment because of the traditionally long hours and prestige of some brands in the sector.

“Depending on where you work, the prestige of the job might mean you don’t raise it,” he says.

However, businesses should keep in mind that just because their employees are not raising issues, it doesn’t mean they are satisfied, and any issues of non-compliance will need resolution in the end. As you grow, it’s important to review processes to make sure systems still work for the number of staff and complex businesses on your books, Jewell believes.

“The key for a business would be to watch when you grow, and they had obviously grown at some stage and made the choice not to review sooner,” he says.

“Just because an employee is saying nothing for a period of time, doesn’t mean that things are fine.”

Jewell says this case is also a good reminder that even when businesses do everything they can to resolve issues, it’s a very expensive process if you get things wrong and then have to go back and revise them down the line.

“I was astounded to see the actual dollar figure here, though when you break it down over employees, it’s not so much. But because it’s such a big business, the audit [by KPMG] would have been a big investment from them,” Jewell says.

Reference: “George Calombaris “devastated”, repays workers $2.6 million after “poor processes” lead to underpayment, Smart Company”, 4^th April 2017.