Sushi Kuni restaurant director and operating company fined $136,000 for “deliberate and calculated” employee underpayment - SmartCompany

By Alan J. McDonald

The former operator of two Sushi Kuni outlets in QLD and NSW have been personally fined for the underpayment of five employees in 2015. McDonald Murholme Principal discusses the impact that the actions of an employer may have on any penalty awarded by the Fair Work Ombudsman.

See below article for further details.

Sushi Kuni restaurant director and operating company fined $136,000 for “deliberate and calculated” employee underpayment – SmartCompany

The former operator of two Sushi Kuni sushi outlets in Brisbane and northern New South Wales has been personally fined $36,250 in the Federal Circuit Court for the underpayment of five employees back in 2015.

The company that operated the two outlets has also been stung with $100,000 in penalties as a result of action taken by the Fair Work Ombudsman after a proactive audit of the outlet in Ballina, NSW. Fair Work inspectors subsequently uncovered underpayments at the second store, located in Redcliffe in Brisbane.

The court heard the employees had received flat rate payments of $10 to $13.33 for 10-12 hour shifts, which resulted in them being underpaid more than $29,000 in the space of seven months. As well as receiving penalties, the businesses’ director Dai Il Kang and his company, EJ Group International Pty Ltd, have been ordered to backpay the employees.

The Fair Work Ombudsman says these underpayments continued to occur despite it notifying Kang of his payment obligations and putting him on notice during the audit of the Ballina outlet.

According to the court’s judgment, Kang reportedly told Fair Work inspectors he was underpaying employees due to the business not making “much money” and said, “If I had to pay the amount to Australian award I’d rather close my business”.

The Fair Work Ombudsman also claims inspectors were provided with false time and wage records, which incorrectly displayed the amount employees were being paid, and that Kang and the company knew these records were false.

Judge Michael Jarrett criticised Kang’s conduct, saying, “there can be no doubt that Mr Kang’s actions that led to Ballina One’s contraventions were deliberate and calculated”.

“Although Mr Kang argued during the investigation by the Fair Work Ombudsman into these contraventions that they were due to his inexperience operating a business and that they occurred due to the financial pressures faced by restaurants having to pay “government rates”, he did not press those arguments before me,” Jarrett said in the judgment.

“In any event, the argument carries no weight because Mr Kang was completely aware of the obligation that Ballina One was under to pay its employees properly and to meet its other obligations to them as an employer.”

Employment lawyer and principal at McDonald Murholme believes this case reflects the discretionary nature of court-imposed penalties, with the conduct of a director or company a key factor in the court’s decision.

“For a penalty of this size the courts would have to be quite critical of the conduct of the director and the business itself,” Jewell told SmartCompany.

“When a business has inadvertently breached the Fair Work Act, while they’re still liable to pay a penalty, the court might go easy on someone if it was unintentional.”

Fair Work sending a “very strong message”

Jewell also notes the size of the penalty in comparison to the amount of underpayment indicates the Fair Work Ombudsman is sending a “very strong message” and was putting the pressure on employers to ensure their conduct is up to scratch.

In a statement, Fair Work Ombudsman Natalie James said her office is making it clear that pay obligations of employers are “not negotiable”.

“I understand there are cultural challenges and vastly different laws in other parts of the world, but it is incumbent on all businesses operating in Australia to understand and apply Australian laws,” she said.

Judge Jarrett also noted that the Ballina Sushi Kuni outlet was sold in April 2016 and that Kang withdrew $165,670 from the account of Ballina One Sushi Pty Ltd, the company he operated the outlet through. The Fair Work Ombudsman reports the company was then placed into administration in July 2016, five weeks after it informed the business of its obligations to backpay employees.

According to court documents, Kang is no longer operating the Redcliffe store.

Despite the action taken against Kang and his company, the employees are yet to be paid back, with Judge Jarrett noting on May 18, “no action has been taken to express that regret to the employees concerned”.

Jewell believes cases such as this one should serve as a reminder to SME owners to cooperate with the Fair Work Ombudsman whenever possible, and actively seek help if they believe contraventions to have occurred.

“The FWO encourages businesses to come forward and ask questions and seek help as soon as they’re aware of any mistakes, and try to remedy them,” he says.

“If a business goes to the FWO around a problem and it does go to the courts, they’re going to view that in a very different light compared to them having to prosecute someone to get money back for employees.”

“These significant penalties are really sending that message to businesses. Go to the Ombudsman and work out what you did wrong, and they’re likely to look upon your conduct more favourably.”

SmartCompany contacted Sushi Kuni but did not receive a response prior to publication. SmartCompany was unable to contact Kang prior to publication.

Reference: ‘Sushi Kuni restaurant director and operating company fined $136,000 for “deliberate and calculated” employee underpayment’, SmartCompany, 29^th May 2017.